General Information

The following is a brief description of these issuances and the resulting impact on our capital structure:

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, 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 2020 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. 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 2020 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 2020 Plan, which may be payable in cash, stock or other property. For issued and outstanding shares of restricted stock, participants 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 2020 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.

Limitations on Awards

The 2020 Plan provides certain limitations on the amount of awards. No participant in any one fiscal year may be granted (a) options or stock appreciation rights of more than 250,000 shares of our common stock, or (b) restricted stock or restricted stock units that are denominated in more than 250,000 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 250,000 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 2020 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 2020 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 2020 Plan are generally subject to special provisions upon the occurrence of a change in control transaction of the kind described in the 2020 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, 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 2020 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.

U.S. Federal Tax Consequences

The brief discussion of tax consequences set forth below is not intended to be a complete statement of the United States (“U.S.”) federal tax consequences as they relate to awards under the 2020 Plan or of disposing of shares of our common stock received under the 2020 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 2020 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 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 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 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 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 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 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 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 2020 Plan and the awards granted under the 2020 Plan are intended to conform to or be exempt from the requirements of Section 409A of the Code.

Non-U.S. Participants 

We expect that employees, consultants, and directors who provide services to our company outside of the U.S. will receive awards under the 2020 Plan. In order to comply with the laws in countries other than the U.S. in which we (either directly or through subsidiaries) operate or have employees, consultants, directors, or in order to comply with the requirements of any foreign securities exchange, the Board shall have the power and authority to: (a) determine which of our subsidiaries will be covered by the 2020 Plan; (b) determine which employees, consultants, or directors outside the U.S. will be eligible to participate in the 2020 Plan; (c) modify the terms and conditions of any award granted to employees, consultants, or directors outside the U.S. to comply with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable; and (e) take any action, before or after an award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals or listing requirements of any such foreign securities exchange.

PROPOSAL 5 — TO APPROVE, FOR PURPOSES OF COMPLYING WITH

NASDAQ LISTING RULE 5635(D), THE ISSUANCE OF SHARES OF COMMON STOCK UNDERLYING SERIES C-1 5% CONVERTIBLE PREFERRED STOCK

AND SERIES C-2 5% CONVERTIBLE PREFERRED STOCK.

Background and Description of the Private Placement

On August 5, 2020, Neonode entered into a securities purchase agreement (the “Securities Purchase Agreement”) with institutional and accredited investors as part of a private placement (the “Private Placement”).

On August 7, 2020, pursuant to the Securities Purchase Agreement, Neonode issued a total of 1,611,845 shares of common stock (the “Common Shares”) at a price of $6.50 per Common Share, and a total of 3,415 shares with a conversion price of $6.50 per share and a stated value of $1,000 of Series C-1 convertible preferred stock (the “Series C-1 Preferred Stock”) and Series C-2 convertible preferred stock (the “Series C-2 Preferred Stock”), for an aggregate purchase price of $13.9 million in gross proceeds.

The shares of Series C-1 Preferred Stock and Series C-2 Preferred Stock are substantially the same, except the conversion of the Series C-2 Preferred Stock requires additional shareholder approval, as set forth in Proposal 6 of this proxy statement. Ulf Rosberg and Peter Lindell, directors of Neonode, and Urban Forssell, the Chief Executive Officer of Neonode (together, the “Insiders”) purchased an aggregate of $3.05 million of the Series C-2 Preferred Stock pursuant to the Securities Purchase Agreement.

Further, pursuant to the Securities Purchase Agreement, Neonode agreed to issue an additional 1,034 shares of Series C-2 Preferred Stock to Ulf Rosberg and Peter Lindell to repay an aggregate of $1.03 million of outstanding indebtedness, including principal, fees, and interest, owed to them under loan agreements dated June 17, 2020, as described under “Review, Approval or Ratification of Transactions with Related Persons” in the Certain Relationships and Related Transactions, and Director Independence section below.

On August 6, 2020, in connection with the Private Placement, Neonode designated (i) 365 shares of its authorized and unissued preferred stock as Series C-1 Preferred Stock by filing a Series C-1 Certificate of Designation of Preferences, Rights and Limitations (the “Series C-1 Certificate of Designation”) with the Secretary of State of the State of Delaware and (ii) 4,084 shares of its authorized and unissued preferred stock as Series C-2 Preferred Stock by filing a Series C-2 Certificate of Designation of Preferences, Rights and Limitations (the “Series C-2 Certificate of Designation”) with the Secretary of State of the State of Delaware.

The Series C-1 Preferred Stock and Series C-2 Preferred Stock (together, the “Preferred Stock”) are convertible into 684,378 shares of Neonode common stock, subject to adjustment and limitations as provided in the Series C-1 Certificate of Designation and the Series C-2 Certificate of Designation. The Series C-1 Preferred Stock and the Series C-2 Preferred Stock have no voting rights, however, under certain circumstances provided therein, our company may not alter, change or amend the Series C-1 Certificate of Designation and Series C-2 Certificate of Designation without the affirmative vote of a majority of the then outstanding Series C-1 Preferred Stock and Series C-2 Preferred Stock, respectively. The holders of the Preferred Stock are entitled to receive dividends at the rate per share of 5% per annum, payable quarterly and on the conversion date. In the event of any liquidation, dissolution or winding-up of our company, the holders of the Preferred Stock will participate pari passu with the holders of our currently outstanding common stock, excepton an as-converted basis.

Copies of the Series C-1 Certificate of Designation, the Series C-2 Certificate of Designation, and the Securities Purchase Agreement are filed as Exhibit 3.1.C.1, Exhibit 3.1.C.2, and Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on August 10, 2020. The foregoing summaries of each of the transaction documents, including the Preferred Stock, are qualified in their entirety by reference to such documents. 

Reasons for effects incidentalthe Financing

As of March 31, 2020, our cash balance was approximately $1.2 million. Based upon a review of our financial condition, the Board determined that it was advisable to future increasesraise additional funds to support our continuing operations and to provide working capital for general corporate purposes.

We believe that the Private Placement, which yielded gross proceeds of approximately $13.9 million as well as the repayment of $1.03 million of outstanding indebtedness owed to Mr. Rosberg and Mr. Lindell, was advisable in light of our cash balance and funding requirements. We also believe that the terms were reasonable in light of market conditions and the size and type of the financing. In addition, at the time of the financing, the Board considered alternatives to the transaction, none of which, in the opinion of the Board, would have resulted in aggregate terms equivalent to, or more favorable than, the terms obtained in the financing.

Effect of Issuance of Additional Shares of Common Stock

If this Proposal 5 is approved by shareholders, the Series C-1 Preferred Stock will automatically convert into shares of our common stock. In addition, if Proposal 6 as set forth in the proxy statement is approved by shareholders, the Series C-2 Preferred Stock also will automatically convert into shares of our common stock. Upon such conversion, our company will issue an aggregate of 56,154 shares of our common stock underlying the Series C-1 Preferred Stock and an aggregate of 628,224 shares of our common stock underlying the Series C-2 Preferred Stock. Such conversion would result in an increase in the number of shares of our common stock outstanding, such asand our stockholders will incur dilution of their percentage ownership upon the earnings per share and voting rightsautomatic conversion of the Preferred Stock.

Adoption of this Proposal 5 in not contingent upon adoption of Proposal 6 below. In the event Proposal 5 is approved by shareholders but Proposal 6 is not approved by shareholders, then only the Series C-1 Preferred Stock will automatically convert into shares of our current holders of common stock. In addition, the number of authorizedevent Proposal 6 is approved by shareholders but Proposal 5 is not approved by shareholders, then neither the Series C-1 Preferred Stock nor Series C-2 Preferred Stock will automatically convert into shares of our preferredcommon stock will not be affectedunless and until such shareholder approval is obtained. The conversion of Series C-1 Preferred Stock requires only the shareholder approval in this Proposal 5. The conversion of Series C-2 Preferred Stock requires the shareholder approval in this Proposal 5 and the additional shareholder approval in Proposal 6.

Proposal to Approve Issuance of Additional Shares of Common Stock

Nasdaq Listing Rule 5635(d) requires our company to obtain stockholder approval prior to the issuance of securities in connection with a transaction, other than a public offering, involving the sale, issuance or potential issuance by the adoption of this proposed amendment.  The number of sharesus of our preferredcommon stock will be maintained at 2,000,000.  If(or securities convertible into or exercisable for our common stock) equal to 20% or more of our common stock outstanding before the amendmentissuance for less than the “Minimum Price”. Minimum Price means a price that is adopted, it will become effective upon the filinglower of: (i) the closing price (as reflected on Nasdaq.com) immediately preceding the signing of the amended and restated Certificate of Incorporation withbinding agreement; or (ii) the Secretary of Stateaverage closing price of the State of Delaware.

Conversion of the Series AC-1 Preferred Stock into common stock would not affect the rights of the holders of our currently outstanding common stock, except for effects incidental to future increasesand Series C-2 Preferred Stock will result in an increase in the number of shares of our common stock outstanding, suchand, as dilutiona result, our current stockholders will own a smaller percentage of the earnings per share and voting rightsoutstanding shares of our currentcommon stock and will experience a reduction in the percentage interests in voting power. Further, the issuance or resale of our common stock issued to the holders of Preferred Stock could cause the market price of our common stock to decline.

Consequences of Not Approving This Proposal

If our stockholders do not approve this proposal, the Preferred Stock will not be convertible into shares of our common stock. SeeIf we do not obtain shareholder approval at the description above in2020 Annual Meeting, we have agreed under the section entitled "ConsequencesSecurities Purchase Agreement to call a meeting of Shareholder Approval."  Ifstockholders every four months thereafter to seek shareholder approval until obtained. In addition, until conversion is approved by shareholders, the amendment is adopted, it will become effective upon the filingholders of the amended and restated Certificate of Incorporation with the Secretary of State of the State of Delaware.

Required Vote and Recommendation

Approval of common stock, andProposal 5 requires the affirmative vote of a majority of the votes of the holders of shares of our common 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 5 unless contrary instructions are indicated in the proxy.

Nasdaq Listing Rule 5635 and IM-5635-2 thereto provide that the purchasers in the Private Placement should not be entitled to vote the Common Shares they acquired in the Private Placement for approval of any shares issued or issuable as a result of the Private Placement. The purchasers agreed not to do so pursuant to the Private Placement. In addition, the record date of this 2020 Annual Meeting precedes the issuance date of such Common Shares.

In accordance with the Securities Purchase Agreement, the directors and executive officers of Neonode have agreed to vote their shares of common stock in favor of this proposal.

The Board of Directors recommends that you vote “FOR”
the approval of the issuance of shares of common stock underlying

Series AC-1 Convertible Preferred Stock have one vote for each shareand Series C-2 Convertible Preferred Stock.

PROPOSAL 6 — TO APPROVE, FOR PURPOSES OF COMPLYING WITH

NASDAQ LISTING RULE 5635(C), THE ISSUANCE OF SHARES OF COMMON STOCK UNDERLYING SERIES C-2 CONVERTIBLE PREFERRED STOCK

TO OUR DIRECTORS AND CHIEF EXECUTIVE OFFICER

Background and Description of Series A Preferred Stock held by them.

As described above in Proposal 5 of this proxy statement, Neonode entered into a Securities Purchase Agreement on August 5, 2020 with institutional and accredited investors as part of a Private Placement.

The investors in the Private Placement included two of our directors, Ulf Rosberg and Peter Lindell (the “Directors”), and our Chief Executive Officer, Urban Forssell (together, the “Insiders”). Of the $13.9 in gross proceeds to Neonode, the Insiders invested an aggregate of $3.05 million representing 22% of the Private Placement. In addition, the Directors agreed to apply $1.03 million of outstanding indebtedness our company owed them, as described below, in furtherance of the Private Placement.

Pursuant to the Securities Purchase Agreement, the Insiders were issued Series C-2 Preferred Stock for their investment and loan repayment. Specifically, Mr. Rosberg and Mr. Lindell each acquired 1,716.729 shares of Series C-2 Preferred Stock convertible into 264,112 shares of common stock, and Mr. Forssell acquired 650 shares of Series C-2 Preferred Stock convertible into 100,000 shares of common stock. The conversion price of the Series C-2 Preferred Stock is $6.50, which is the same as the $6.50 conversion price of Series C-1 Preferred Stock issued to non-Insiders and the same $6.50 price per share of common stock issued to non-Insiders in the Private Placement.

As described above in Proposal 5 of this proxy statement, the Series C-2 Preferred Stock is substantially the same as the Series C-1 Preferred Stock. Prior to its conversion, however, the Series C-2 Preferred Stock requires the additional shareholder approval being sought in this Proposal 6.

Reasons for the Issuance

As of March 31, 2020, our cash balance was approximately $1.2 million. Based upon a review of our financial condition, the Board determined that it was advisable to raise additional funds to support our continuing operations and to provide working capital for general corporate purposes.

In support of our company, on June 17, 2020, affiliates of each of the Directors (citizens of Sweden) entered into short-term loan agreement facilities with our operating subsidiary (organized in Sweden) to provide 16,145,000 SEK (Swedish Krona), which is approximately $1.7 million in U.S. Dollars. In the aggregate, the Directors committed $3.4 million to Neonode to continue operations and repay our liabilities in the ordinary course of business. Refer to our Current Report on Form 8-K filed on June 22, 2020 for more information about the loan agreements.

As of the date of Private Placement, due to drawdowns and interest, the outstanding amount under the loan agreements owed to the Directors was $1.03 million.

The terms of the Refinancing Agreementsloan agreements provided that the facilities would terminate and repayment would become due upon the earlier of a capital raise by Neonode or December 31, 2020. Accordingly, the Private Placement resulted in termination of the loan agreements.

We believe that the Private Placement, which yielded gross proceeds of approximately $13.9 million as well as the repayment of $1.03 million of outstanding indebtedness owed to the Directors, was advisable in light of our company’s cash balance and funding requirements. We also believe that the terms were reasonable in light of market conditions and the Certificate of Designations, any modificationsize and type of the financing. In addition, at the time of the financing, the Board considered alternatives to the transaction, none of which, in the opinion of the Board, would have resulted in aggregate terms equivalent to, or more favorable than, the terms obtained in the financing.

The purchases by the Insiders in the Private Placement represented approximately 27% of the aggregate $14.93 million, consisting of $13.9 in gross proceeds and the $1.03 in loan repayment, of securities issued pursuant to the Securities Purchase Agreement. Accordingly, more than 70% of the purchasers in the Private Placement were non-Insiders. Further, three of the non-Insider purchasers each invested more in the Private Placement than any one of the Insiders.

In the Private Placement, Mr. Rosberg and Mr. Lindell each acquired $1.7 million of Series C-2 Preferred Stock. This participation amount corresponded to the initial $1.7 million commitment they each made to our company in the June 17, 2020 loan agreements. The provisions of the loan agreements did not provide for conversion rate forinto a subsequent capital raise. Mr. Rosberg and Mr. Lindell, however, agreed to continue and carryover their prior financing commitment by participating in the Private Placement at the same level as in the loan agreements.

In addition to serving as directors of Neonode, Mr. Rosberg and Mr. Lindell are each the two largest holders of common stock of Neonode. Prior to the Private Placement, Mr. Rosberg and Mr. Lindell beneficially owned 17.3% and 16.7%, respectively, of the outstanding shares of our common stock. As a result of the Private Placement and assuming full conversion of the Preferred Stock, Mr. Rosberg and Mr. Lindell will beneficially own 15.8% and 15.3%, respectively of the shares of preferredour common stock, intowhich represents a decrease of approximately 1% each in their percentage beneficial ownership. Mr. Rosberg and Mr. Lindell will continue to be the two largest holders of common stock of Neonode.

Prior to the Private Placement, Mr. Forssell did not beneficially own any shares of our common stock. Our company’s equity compensation plan expired by its terms less than four months after Mr. Forssell became Chief Executive Officer. The Board believes it is important for the Chief Executive Officer to have an equity ownership position in our company. Participation in the Private Placement enabled Mr. Forssell to gain such equity ownership by means of a single acquisition and with the approval of the Board. As a result of the Private Placement and assuming full conversion of the Preferred Stock, Mr. Forssell will beneficially own 0.9% of the shares of our common stock.

The Board believes that the participation of the Insiders was an important factor for our company to raise capital. The terms of the Private Placement, including the price per share, were determined with the involvement of non-Insiders representing more than 70% of the investment proceeds. Feedback to the Board from potential investors and placement agents suggested that it would be positive if the Insiders – as the two largest holders of our common stock and the Chief Executive Officer –participated in the capital raise as a signal of their commitment to our company. By maintaining their approximate percentage ownership of common stock, in the cases of Mr. Rosberg and Mr. Lindell, and by initiating ownership of common stock, in the case of Mr. Forssell, the Insiders acted in support of the investment of new capital to our company through the Private Placement.

Although the Insiders could have purchased shares of common stock at the market price on Nasdaq, participation in the Private Placement enabled their investment to directly benefit our company’s cash balance and funding requirements. Also, acquisitions of common stock by Insiders through open market purchasers is subjectgenerally not accompanied by the same degree of disclosure and negotiations associated with a direct investment by non-Insiders, such as in connection with the Private Placement. Further, consistent with Nasdaq listing rules, the Board and the Insiders were aware that shareholders would have an opportunity to stockholder approval.

For the reasons set forth above, the Board approved the participation of one-to-480.63,Mr. Rosberg, Mr. Lindell, and Mr. Forssell in the Private Placement and we would need to issue approximately 420,109,052 shares of authorized common stock.

Effect of Issuance of Additional Shares of Common Stock

If this Proposal 6 is approved by shareholders, and if Proposal 5 set forth above in this proxy statement also is approved by shareholders, the Series C-2 Preferred Stock will automatically convert into 480.63 shares of common stock  In addition, failure to approve the increased conversion rate for the Series A Preferred Stock could adversely affect future financing plans, which could adversely affect our ability to fund our operations going forward.  Absent shareholder approval, we may have difficulty raising additional funds to meet our obligations, and, even if we are able to raise additional funds, the terms of such financing may not be favorable to us.

Adoption of this Proposal 6 in not contingent upon adoption of Proposal 5 above. In the event Proposal 5 is approved by shareholders but Proposal 6 is not approved by shareholders, then the Series C-2 Preferred Stock will not be convertible into shares of our current holders of common stock.  Seestock unless and until such additional shareholder approval is obtained. In the description above inevent Proposal 6 is approved by shareholders but Proposal 5 is not approved by shareholders, then the section entitled "Consequences of Shareholder Approval."  If the amendment is adopted, itSeries C-2 Preferred Stock will become effective upon the filing of the amended and restated Certificate of Incorporation with the Secretary of State of the State of Delaware.

Proposal to Approve Issuance of Additional Shares of Common Stock

Nasdaq Listing Rule 5635(c) requires us to obtain stockholder approval with respect to certain non-public offerings involving the sale, issuance or potential issuance by Neonode of equity compensation. For this purpose, “equity compensation” includes shares of common stock (including securities convertible into or exercisable for common stock) issued to our officers, directors, employees or consultants at a discount to the market price of the shares of common stock, and “market value” is the closing bid price immediately preceding the time that Neonode enters into a binding agreement with such officer, director, employee or consultant to issue the equity compensation.

At the time of entering into the Securities Purchase Agreement on August 5, 2020, the market value of Neonode common stock was $8.62 per share, which was the closing price on August 4, 2020. As such, the conversion price of Series C-2 Preferred Stock, as well as purchase price of common stock and conversion price of Series C-1 Preferred Stock, in the Private Placement was below the market value for purposes of the “equity compensation” provisions of Nasdaq Listing Rule 5635(c). Accordingly, we are seeking shareholder approval for the issuance of common stock underlying Series C-2 Preferred Stock as set forth in this Proposal 6.

Conversion of the Series BC-2 Preferred Stock will result in an increase in the number of shares of our common stock outstanding, and, as a result, our current stockholders will own a smaller percentage of outstanding shares of our common stock and will experience a significant reduction in the percentage interests in voting power. Further, the issuance or resale of our common stock issued to the holders of Series C-2 Preferred Stock could cause the market price of our common stock to decline.

Consequences of Not Approving This Proposal

If our stockholders do not approve this proposal, the Series C-2 Preferred Stock will not be convertible into shares of our common stock. If we do not obtain shareholder approval at the 2020 Annual Meeting, the Board may seek shareholder approval at a future meeting. In addition, until conversion is approved by shareholders, the holders of the Series C-2 Preferred Stock are set forth in our Certificate of Designations, filed withentitled to receive dividends at the Secretary of State of Delaware on December 30, 2008.  On January 13, 2009, we filed with the Delaware Secretary of State a Certificate of Increase of Designation which increased the amount of designated Series B Preferred Stock from 100,934 to 102,690.  On January 29, 2009, we filed with the Delaware Secretary of State a second Certificate of Increase of Designation which increased the amount of designated Series B Preferred Stock from 102,690 to 108,850.  According to the Certificate of Designations, eachrate per share of Series B Preferred Stock is currently convertible into one (1) share5% per annum, payable quarterly and on the conversion date.

Required Vote and Recommendation

Approval of common stock, andProposal 6 requires the affirmative vote of a majority of the votes of the holders of shares of Series B Preferred Stockour common 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 one vote for each share of Series B Preferred Stock held by them.

The Board of Directors deems it in recommends that you vote “FOR”
the best interests of our stockholders and the Company to increase the conversion rateapproval of the Series B Preferred Shares such that each share of Series B Preferred Stock, which is currently convertible into 1 share of common stock, shall be convertible into 132.07 shares of common stock.

The name of the corporation (the “Corporation”) is Neonode Inc. and its original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on September 4, 1997.

The Board of which 899,081 shares have been designated as Series A Preferred Stock and 108,850 shares have been designated as Series B Preferred Stock, andDirectors has adopted, subject to receiving the Corporation wishesapproval of our stockholders, an amendment to the Certificate of Incorporation to increase the number of authorized sharesnumber of common stock to 698,000,000 shares.

If approved by stockholders, the Common Stock Amendment would replace Section A of IncorporationArticle IV of the Corporation restates and integrates and further amends the Certificate of Incorporation ofwith the Corporation, so as to read in its entirety as follows:

This corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock"“Common Stock” and "Preferred“Preferred Stock."” The total number of shares which the corporation is authorized to issue is Seven HundredTwenty-Six Million (700,000,000)(26,000,000) shares, of which Six Hundred Ninety-EightTwenty-Five Million (698,000,000)(25,000,000) shares will be Common Stock, par value $0.001 per share, and TwoOne Million (2,000,000)(1,000,000) shares will be Preferred Stock, par value $0.001 per share, of which 899,081444,541 shares shall be designated as Series A Preferred Stock and 108,85054,425 shares shall be designated as Series B Preferred Stock.

The Common Stock Amendment will not affect the qualifications, limitations and restrictionsnumber of authorized shares of preferred stock, par value $0.001 per share, of our company. The Common Stock Amendment will not alter, change, or amend the Series AC-1 Preferred Stock and theor Series BC-2 Preferred Stock, arewhich have been separately designated as follows:

Purpose and Effects of Approving the Amendment to the Certificate of Incorporation

As of August 10, 2020, of the 15,000,000 shares of common stock currently authorized by the Certificate of Incorporation, approximately 10.8 million shares are issued and outstanding, approximately 1.0 million shares are reserved for issuance upon conversion of preferred stock, approximately 0.4 million shares are reserved for issuance upon exercise of outstanding warrants, and approximately 0.8 million shares are reserved for issuance in connection with employee benefit plans. Accordingly, approximately 13,000,000 of the authorized shares of common stock of our company are outstanding or reserved for issuance.

The Board of Directors believes it is in the best interests of our company and our stockholders to increase our authorized shares of common stock in order to have additional shares available for use as the Board deems appropriate or necessary. In making this determination, the Board considered, among other things, our historical share issuances, recent practices at other public companies, and a recommendation from our management. As such, the primary purpose of the Common Stock Amendment is to provide our company with greater flexibility with respect to managing its common stock in connection with such corporate purposes as may, from time to time, be considered advisable by the Board. These corporate purposes could include, without limitation, financing activities, public or private offerings, stock dividends or splits, conversions of convertible securities, issuance of options and restricted stock awards pursuant to our employee benefits plans, establishing a strategic relationship with a corporate partner and acquisition transactions. The Board has determined that having an increased number of authorized but unissued shares of common stock would allow us to take prompt action with respect to corporate opportunities that develop, without the delay and expense of convening a special meeting of stockholders for the purpose of approving an increase in our capitalization. The Board will determine whether, when and on what terms the issuance of shares of common stock may be advisable in connection with any of the foregoing purposes.

Other than shares reserved for issuance under outstanding warrants, our existing equity compensation plans and upon conversion of outstanding preferred stock, we do not currently have any other arrangements, agreements or understandings that would require the issuance of additional shares of common stock.

Adoption of Proposal 4, Proposal 5, and Proposal 6 as set forth in this proxy statement is not contingent upon adoption of this Proposal 7. A sufficient number of shares of common stock has been reserved for issuance under the Certificate of Incorporation, as currently in effect, to satisfy grants under the 2020 Plan and conversion of the currently outstanding Preferred Stock.

The Common Stock Amendment will not have any immediate effect on the rights of existing stockholders. Although at present the Board has no other plans to issue the additional shares of common stock, the Board believes it would be prudent and advisable to have those shares available to provide additional flexibility regarding the potential use of shares of common stock for business and financial purposes in the future. The Board will have the authority to issue authorized common stock without requiring future stockholder approval of such issuances, except as may be required by applicable law or Nasdaq rules. Future issuances of common stock or securities convertible into or exchangeable for common stock could have a dilutive effect on our earnings per share, book value per share and the voting power and interest of current stockholders.

The Board has not proposed the Common Stock Amendment with the intention of discouraging tender offers or takeover attempts of Neonode. However, the availability of additional authorized shares for issuance could, under certain circumstances, discourage or make more difficult efforts to obtain control of our company. This proposal is not being presented with the intent that it be used to prevent or discourage any acquisition attempt, but nothing would prevent the Board from taking any appropriate actions not inconsistent with its fiduciary duties.

Under Delaware law, stockholders are not entitled to appraisal rights with respect to the Common Stock Amendment and we will not independently provide our stockholders with any such right.

Required Vote

Approval of the Common Stock Amendment requires the affirmative vote of a majority of the outstanding shares of common stock, present in person or by proxy and entitled to vote at the meeting. Abstentions and broker non-votes will have the same effect as votes against this proposal. Properly executed and unrevoked proxies will be voted “FOR” Proposal 7 unless contrary instructions are indicated in the proxy.

The Board of Directors recommends that you vote “FOR” the approval of
the amendment to the Certificate of Incorporation to increase our authorized shares of common stock.

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 must be approved by disinterested members of the Board of Directors where the amount exceeds the lesser of $120,000 or one percent of the average of our company’s total assets at year-end for the last two completed fiscal years.

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 2018, except as noted below, there have been no related person transactions, and there are no such transactions currently proposed, in respect of our company within the scope of Items 404(a) and 404(d) of Regulation S-K as promulgated by the SEC. Neonode does not have a parent company.

On December 20, 2018, we entered into a Share Purchase Agreement with investors as part of a private placement pursuant to which we issued a total of 2,940,767 shares of our common stock at a price of $1.60 per share for an aggregate of $4.7 million in gross proceeds. The investors include entities affiliated with Neonode directors, Ulf Rosberg and Andreas Bunge, members of management, including then Chief Executive Officer Håkan Persson and then Chief Financial Officer Lars Lindqvist, and more-than-five-percent-owner and now Neonode director Peter Lindell. Specifically, as individual beneficial owners, Mr. Rosberg purchased 1,138,796 shares, Mr. Bunge purchased 29,000 shares, Mr. Persson purchased 34,375 shares, Mr. Lindqvist purchased 4,375 shares, and Mr. Lindell purchased 1,117,783 shares.

On June 17, 2020, Neonode Technologies AB (the “Borrower”), a corporation organized in Sweden and a wholly-owned subsidiary of the registrant Neonode Inc. (“Neonode”), entered into short-term loan facilities (the “Loan Agreements”) with UMR Invest AB and Cidro Holding AB (each, a “Lender”). UMR Invest AB is an affiliate of Ulf Rosberg and Cidro Holding AB is an affiliate of Peter Lindell. Mr. Rosberg and Mr. Lindell are directors of Neonode and each is a beneficial owner of more 5% of our common stock. Pursuant to the Loan Agreements, each Lender made 16,145,000 SEK (Swedish Krona), which is approximately $1.7 million in U.S. Dollars, principal amount available to the Borrower. Any drawdown of the aggregate available 32,290,000 SEK, which is approximately $3.4 million, was to be used by Neonode for working capital to continue operations and to repay liabilities in the ordinary course of business. Subsequent to entering into the Loan Agreements, the Borrower made an initial drawdown of an aggregate of approximately $1.0 million. Each of the Loan Agreements provided for a credit fee of 0.75% per annum, calculated on a daily basis from the date of the Loan Agreement, and Planany outstanding amount incurred interest at a fixed rate of Merger effecting3.25% per annum, calculated on a daily basis from the mergerdrawdown date. Drawdowns under the Loan Agreements were unavailable upon the earlier to occur of the execution of capital raise by Neonode or December 31, 2020. The Loan Agreements provided that if Neonode carried out a capital raise before December 31, 2020, any outstanding amount under the Loan Agreements, including any credit fee and interest, became payable as soon as practicably possible after such capital raise. Drawdowns and repayments were in equal amounts between each of the corporationLoan Agreements. The Loan Agreements were subject to other customary provisions and SBE,governed by Swedish law. Copies of the Loan Agreements are filed as Exhibits 10.1 and 10.2 to our Current Report on Form 8-K filed with the SEC on June 22, 2020. The foregoing summaries of the Loan Agreements are qualified in their entirety by reference to such documents.

On August 5, 2020, we entered into a Securities Purchase Agreement with investors, including Mr. Rosberg, Mr. Lindell, and our current Chief Executive Officer Urban Forssell. Refer to Proposal 6 in this proxy statement for more information the transaction with such directors and executive officer. As a result of and pursuant to the Securities Purchase Agreement, the principal, fees, and interest owed under the Loan Agreements was repaid and the Loan Agreements terminated in accordance with their terms.

Director Independence

The Board of Directors has determined that, except for Mr. Lindqvist, each of the members of the Board is an independent director within the meaning of the applicable Nasdaq Stock Market rules. The Board is composed of a majority of independent directors

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Beneficial Ownership Table

The following table presents certain information regarding the beneficial ownership of shares of our common stock by: (i) each director; (ii) each of the named executive officers, as identified under “Summary Compensation Table” in the Executive Compensation section above; (iii) all of our current directors and executive officers as a group; and (iv) principal stockholders known by us to be beneficial owners of more than five percent of common stock.

Percentage ownership is based on 9,171,154 shares of our common stock as of August 6, 2020. 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 August 6, 2020 are considered outstanding; however, these shares are not considered outstanding when computing the percentage ownership of any other person.

Except as otherwise noted below, the address for each person or entity listed in the table is c/o Neonode Inc., Storgatan 23C, 114 55, Stockholm Sweden.

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, 2019:

ADDITIONAL INFORMATION

Annual Report

On March 11, 2020, we filed with the SEC our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. 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 Californiapaper 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 fiscal year ended December 31, 2019. Requests should be directed to our corporation secretary at our principal executive office at Storgatan 23C, 114 55 Stockholm, Sweden.

Forward-Looking Statements

This proxy statement contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include, but are not limited to, statements relating to expectations, and future performance or future events. These statements are based on current assumptions, expectations and information available to our company’s management and involve a number of known and unknown risks, uncertainties and other factors that may cause our company’s actual results, levels of activity, performance or achievements to be materially different from any expressed or implied by these forward-looking statements.

These risks, uncertainties, and factors are discussed under “Risk Factors” and elsewhere in our public filings with the SEC from time to time, including our annual report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K. You are advised to carefully consider these various risks, uncertainties and other factors. Although our company’s management believes that the forward-looking statements contained in this proxy statement are reasonable, it can give no actionassurance that its expectations will be takenfulfilled. Forward-looking statements are made as of today’s date, and we undertake no duty to update or revise them.

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 the 2021 Annual Meeting of Stockholders, proposals must be received by us no later than April 22, 2021 and otherwise must comply with SEC rules governing inclusion of such proposals. Any proposal received after April 22, 2021 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 our corporation secretary 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 our corporation secretary at our principal executive offices at Storgatan 23C, 114 55 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 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.

Directions to Annual Meeting Location

All of our stockholders of record as of the close of business on August 6, 2020 may attend the 2020 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.

If you do attend the 2020 Annual Meeting at our office in Stockholm, most people will find it easiest to take the train or a taxi from the Stockholm Arlanda Airport. The train (the Arlanda express) takes approximately twenty minutes to the central station, and from there take a taxi to our office. If you want to take the subway, the nearest station is Östermalmstorg. The address of our office where the 2020 Annual Meeting will be held is Storgatan 23C (Östermalmstorg).

Other Matters

The Board of Directors of our company knows of no matters to be presented for stockholder action at the 2020 Annual Meeting other than as set forth in this proxy statement. However, other matters may properly come before the 2020 Annual Meeting or any adjournment or postponement thereof. In the event that other matters properly come before the 2020 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).

Appendix A

NEONODE INC.
2020 STOCK INCENTIVE PLAN

1.  Establishment, Purpose and Term of Plan.

1.1  Establishment. The Plan is hereby established effective as of July 6, 2020.

1.2  Purpose. The purpose of the Plan is to 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. 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 corporation except atCompany.

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 annualOption, Stock Appreciation Right, Stock Bonus, Restricted Stock, or special meeting of stockholders called in accordance withRestricted Stock Units granted under the Bylaws.

(e)  “Award Agreement” means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions of the stockholders ofAward granted to the corporation may be called, for any purpose or purposes, by (A) the Chairman ofParticipant.

(f)  “Board” means the Board of Directors (B)of the Chief Executive Officer,Company. If one or (C)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 Directorsemployment 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 resolution adoptedParticipating Company.

(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 numbergross fair market value equal to or more than fifty percent (50%) of authorized directors (whetherthe 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.

(m)  “Director” means a member of the Board.

(n)  “Disability” means a permanent and total disability within the meaning of Section 22(e)(3) of the Code. 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 there existthe individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, vacanciesnotwithstanding 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)   “Exchange Program” shall mean a program under which (i) outstanding Awards are surrendered or cancelled in previously authorized directorshipsexchange for Awards of the same type (which may have higher or lower exercise prices and different terms), Awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial institution or other person or entity selected by the Committee, and/or (iii) the exercise price of an outstanding Award is reduced or increased. The Committee will determine the terms and conditions of any Exchange Program in its sole discretion.

(q)  “Exercise Price” means the price at which a Share may be purchased by a Participant pursuant to the exercise of an Option or SAR.

(r)  “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.

(iii) The Board also may adopt a different methodology for determining fair market value with respect to any Award if a different methodology is necessary or advisable to secure any intended favorable tax, legal or other treatment for the particular Award (for example, and without limitation, the Board may provide that fair market value for purposes of one or more awards will be based on an average of closing prices (or the average of high and low daily trading prices) for a specified period preceding the relevant date).

(s)  “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.

(t)  “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).

(u)  “Insider” means an Officer, a Director or other person whose transactions in Stock are subject to Section 16 of the Exchange Act.

(v)  “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.

(w)  “Nonemployee Director” means a Director who is not an employee of the Company.

(x)  “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.

(y)  “Officer” means any person designated by the Board as an executive officer of the Company.

(z)  “Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.

(aa)   “Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.

(bb)   “Participant” means any eligible person who has been granted one or more Awards.

(cc)   “Participating Company” means the Company or any Parent Corporation or Subsidiary.

(dd)   “Participating Company Group” means, at any point in time, all entities collectively which are then Participating Companies.

(ee)   “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.

(ff)   “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.

(gg)   “Plan” means the Neonode Inc. 2020 Stock Incentive Plan, as amended.

(hh)   “Restricted Stock Award” means an Award of restricted stock granted pursuant to Section 8.

(ii)   “Restricted Stock Unit Award” means an Award of a right to receive Stock on a future date granted pursuant to Section 9.

(jj)   “Rule 16b-3” means Rule 16b-3 promulgated under the 1934 Act, and any future regulation amending, supplementing or superseding such regulation.

(kk)   “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.

(ll)   “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 resolutionleave 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 presentedguaranteed 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.

(mm)   “Stock” means a share of common stock of the Company, as adjusted from time to time in accordance with Section 4.3.

(nn)   “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.

(oo)   “Stock Bonus” means an Award granted pursuant to Section 7.

(pp)   “Subsidiary” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code, or entity in which the Company has a direct or indirect equity interest which is so designated by the Committee.

(qq)   “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.

(rr)   “U.S.” means the United States.

(ss)   “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 for adoption) or (D)are “non-employee directors” under Rule 16b-3. Additionally, to the extent required by Applicable Laws, each of the individuals constituting the Committee shall be an “independent director”. Notwithstanding the foregoing, any action taken by the holdersCommittee shall be valid and effective, whether or not members of the Committee at the time of such action are later determined not to have satisfied the requirements for membership set forth in this Subsection.

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) institute and determine the terms and conditions of an Exchange Program, (f) adopt rules for the administration, interpretation and application of the Plan as are consistent therewith, and (g) 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. 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.

3.5   Non-U.S. Holders. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in countries other than the U.S. in which the Company and its Subsidiaries operate or have Employees, Consultants, or Directors or in order to comply with the requirements of any foreign securities exchange, the Committee, in its sole discretion, shall have the power and authority to: (a) determine which Subsidiaries shall be covered by the Plan; (b) determine which Employees, Consultants, or Directors outside the U.S. are eligible to participate in the Plan; (c) modify the terms and conditions of any Award granted to an Employee, Consultant, or Director outside the U.S. to comply with applicable foreign laws or listing requirements of any such foreign securities exchange; (d) establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or modifications shall be attached to the Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Sections 4.1, 6.1, 7.1, 8.1 and 9.1; and (e) take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local governmental regulatory exemptions or approvals or listing requirements of any such foreign securities exchange. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate Applicable Law. For purposes of the Plan, all references to foreign laws, rules, regulations or taxes shall be references to the laws, rules, regulations and taxes of any applicable jurisdiction other than the U.S. or a political subdivision thereof.

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 Seven Hundred Fifty Thousand (750,000) 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 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, or shares subject to Awards are surrendered or cancelled pursuant to an Exchange Program, 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 Two Hundred Fifty Thousand (250,000) 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 Two Hundred Fifty Thousand (250,000) 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.

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 entitledbeing 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 casttime 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 lesspermit 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 sixty-sixsix (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 two thirds percent (66-2/3%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 Seven Hundred Fifty Thousand (750,000) 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 votesshares 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.

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 meeting,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 13 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.

7.1  Stock Bonus Limitations. No Participant shall be granted a Stock Bonus covering more than a total of Two Hundred Fifty Thousand (250,000) 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 Two Hundred Fifty Thousand (250,000) 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 Two Hundred Fifty Thousand (250,000) 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 Two Hundred Fifty Thousand (250,000) 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 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 Two Hundred Fifty Thousand (250,000) 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 Two Hundred Fifty Thousand (250,000) 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 held atestablished 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 made (a) in cash, by check or in cash equivalent, (b) by such place,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 date,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.

10.  Performance-Based Awards

10.1  General.  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.

10.2  Procedures. The Committee shall, 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).

10.3  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 for a Performance Period only if the Performance Goals for such period are achieved. The Committee will have the right to (i) 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, (ii) 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 (iii) 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.

11.  Change in Control.

11.1  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 Subsection, 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 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.

12.  Tax Withholding.

12.1  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 BoardTax 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.

12.2  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 Directors fix therefor.

13.  Compliance with Securities Law.

13.1  Section 16 Persons. With respect to Section 16 Persons, transactions under this Plan are intended to qualify for the election of directors and of business to be broughtexemption provided by stockholders beforeRule 16b-3. To the extent any meetingprovision of the stockholdersPlan, 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.

13.2  Investment Representations. As a condition to the exercise of an Award, the corporation must be givenCompany 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 manner provided inopinion of counsel for the Bylaws of the corporation.

13.3  Inability to Obtain Authority. The Company will not be personally liablerequired 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 corporationCompany, 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 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.

14.  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 monetary damagesthe 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.

15.  Miscellaneous Provisions.

15.1  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.

15.2  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.

15.3  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.

15.4  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.

15.5  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 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.

15.6  Clawback Provision for Participants.If the Board determines that the Participant engaged in an act of embezzlement, fraud, or breach of fiduciary duty as a director, except for liability (1) for any breachduring 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 director's dutyfinancial statements required to be restated. The term “option proceeds” means, with respect to any sale or other disposition of loyaltyshares 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 corporationamount equal to the number of shares of Stock sold or its stockholders, (2) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violationdisposed of, law (3) under Section 174multiplied by the difference between the market value per share of the Delaware General Corporation Law, or (4) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director will be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended.

15.7  Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise or settlement of any actAward.

15.8  Retirement and Welfare Plans. Neither Awards made under this Plan nor shares of Stock or omissioncash paid pursuant to act giving risesuch 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.

15.9  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 in good faith; provided that neither the Company, the Board nor any of the Company’s employees, directors or indemnification.