SCHEDULE
14A
(RULE
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934
Filed
by
the Registrant x
Filed
by
a Party other than the Registrant o
Check
the
appropriate box:
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Additional Materials
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| o |
Soliciting
Material Pursuant to §240 14a-12
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Neonode
Inc.
(Name
of
Registrant as Specified in Its Charter)
Not
applicable
(Name
of
Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined:
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(4)
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Proposed
maximum aggregate value of transaction:
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| o |
paid
previously with preliminary
materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the form or schedule and the date of its
filing.
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(1)
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Amount
previously paid: N/A
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(2)
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Form,
Schedule or Registration Statement No.: N/A
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NEONODE
INC.
__________,
2008
Dear
Stockholder:
You
are
cordially invited to attend the Special Meeting of Stockholders of Neonode
Inc.
(the “Company”) to be held on _____, 2008 at the Company’s headquarters located
at Warfvingesväg 45, SE-112 51 Stockholm, Sweden. The meeting will begin
promptly at 9:00 a.m. local time.
The
items
of business to be considered at the Special Meeting are listed in the following
Notice of Special Meeting and are more fully addressed in the proxy statement
included with this letter. The item you will be asked to vote on at the Special
Meeting is the ratification of the terms of the May 2008 Financing, including
without limitation the anti-dilution provisions applicable to warrants issued
pursuant to the May 2008 Financing.
As
discussed in the Proxy Statement, the failure of stockholders to ratify the
May
2008 Financing could make future financings more difficult.
The
Company’s Board of Directors believes that a favorable vote for the matter
described in the attached Notice of Special Meeting and Proxy Statement is
in
the best interest of the Company and its stockholders and recommends a vote
“FOR” such matter. Accordingly, we urge you to review the accompanying material
carefully and to return the enclosed proxy promptly.
Whether
or not you plan to attend the Special Meeting in person, it is important that
your shares be represented and voted at the meeting.
Please
date, sign, and return your proxy card promptly in the enclosed envelope to
ensure that your shares will be represented and voted at the Special Meeting,
even if you cannot attend. If you attend the Special Meeting and are the
stockholder of record, you may vote your shares in person even though you have
previously signed and returned your proxy.
On
behalf
of your board of directors, thank you for your investment in, and continued
support of, Neonode Inc.
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Sincerely,
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/s/
Per Bystedt
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Per
Bystedt
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President
and Chief Executive Officer
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San
Ramon, California
_________,
2008
NEONODE
INC.
NOTICE
OF SPECIAL MEETING OF STOCKHOLDERS
To
Be Held On _____, 2008
To
the
Stockholders of Neonode Inc.:
You
are
cordially invited to attend the Special Meeting of Stockholders of Neonode
Inc,
a Delaware corporation (the “Company”). The Special Meeting will be held on
_____, 2008, at the Company’s headquarters located at Warfvingesv’g 45, SE-112
51 Stockholm, Sweden. The meeting will begin promptly at 9:00 a.m. local
time.
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(1)
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To
ratify the terms of the May 2008 Financing, including without limitation
the anti-dilution provisions applicable to warrants issued pursuant
to the
May 2008 Financing; and
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(2)
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To
transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
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These
items of business are more fully described in the Proxy Statement accompanying
this Notice.
The
record date for the Special Meeting is _____, 2008. Only stockholders of record
at the close of business on that date will be entitled to notice and vote at
the
meeting or any adjournment thereof.
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By
Order of the Board of Directors,
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/s/
David W. Brunton
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Secretary
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San
Ramon, California
______,
2008
YOU
ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING IN PERSON. WHETHER OR NOT
YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH DOES
NOT
REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES, IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE SPECIAL MEETING. EVEN IF YOU HAVE VOTED BY PROXY, YOU
MAY
STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE NOTE, HOWEVER, THAT
IF
YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH
TO VOTE AT THE MEETING, YOU MUST OBTAIN A PROXY ISSUED IN YOUR NAME FROM THAT
RECORD HOLDER IN ORDER TO VOTE IN PERSON.
HISTORY
Neonode
Inc., formerly known as SBE, Inc., was incorporated in the state of Delaware
on
September 4, 1997.
On
January 11, 2007, SBE, Inc. entered into an Agreement for the Purchase and
Sale
of Assets with One Stop Systems, Inc., pursuant to which SBE, Inc. sold
substantially all of the assets associated with its embedded hardware business
to One Stop Systems, Inc.
On
August
10, 2007, Cold Winter Acquisition Corporation (“Cold Winter Acquisition Sub”), a
Delaware corporation and wholly-owned subsidiary of SBE, Inc., consummated
a
merger and reorganization where Cold Winter Acquisition Sub was merged with
and
into Neonode Inc., a Delaware Corporation (“Old Neonode”), with Old Neonode
continuing after the merger as the surviving corporation and a wholly-owned
subsidiary of SBE, Inc. (the “Merger”).
SBE, Inc.’s
name was subsequently changed to “Neonode Inc.” in connection with the
completion of the Merger.
Old
Neonode was incorporated in the State of Delaware in 2006 and is the parent
of
Neonode AB, a company founded in February 2004 and incorporated in Sweden.
After
the
Merger with Cold Winter Acquisition Sub, Old Neonode changed its name to Cold
Winter, Inc. (“Cold Winter”). The stockholders of SBE, Inc. approved the
transaction in a special meeting of stockholders held on August 10, 2007.
Following the closing of the Merger, the business and operations of Cold Winter
prior to the Merger became the primary business and operations of the
newly-combined company. The newly-combined company’s headquarters is located in
Stockholm, Sweden.
Unless
the context otherwise requires, all references herein to “Neonode,” “we,” “our,”
“us,” and similar words in this proxy statement refer to Old Neonode prior to
the Merger, and Neonode Inc. (formally known as SBE, Inc.) and its wholly-owned
subsidiaries after the Merger.
WHERE
YOU CAN FIND MORE INFORMATION
We
are a
reporting company and file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, proxy statements or other information that we file at the SEC’s public
reference room at 100 F Street N.E., Room 1580, Washington, D.C., 20549. You
can
also request copies of these documents by writing to the SEC and paying a fee
for the copying costs. Please call the SEC at 1-800-SEC-0330 for more
information about the operation of the public reference room. Our public filings
with the SEC are also available on the web site maintained by the SEC at
http://www.sec.gov.
NEONODE
INC.
4000
Executive Parkway, Suite 200
San
Ramon, California 94583
PROXY
STATEMENT
FOR
THE SPECIAL MEETING OF STOCKHOLDERS
To
Be Held On _____, 2008
The
Special Meeting of Stockholders of Neonode Inc. will be held on _____, 2008,
at
the Company’s headquarters located at Warfvingesvag 45, SE-112 51 Stockholm,
Sweden, beginning promptly at 9:00 a.m., local time. The enclosed proxy is
solicited by our board of directors. It is anticipated that this proxy statement
and the accompanying proxy card will be first mailed to holders of our common
stock on or about ______, 2008.
QUESTIONS
AND ANSWERS ABOUT THE PROPOSALS
Why
am I receiving this proxy statement and proxy card?
You
are
receiving a proxy statement and proxy card because you own shares of our common
stock. This proxy statement describes the issues on which we would like you,
as
a stockholder, to vote. It also gives you information on these issues so that
you can make an informed decision.
Who
can vote at the Special Meeting?
Only
stockholders of record at the close of business on _____, 2008 will be entitled
to vote at the Special Meeting. On this record date, there were ______ shares
of
our common stock outstanding and entitled to vote.
Stockholder
of Record: Shares Registered in Your Name
If
on
_____, 2008 your shares were registered directly in your name with our transfer
agent, American Stock Transfer & Trust, then you are a stockholder of
record. As a stockholder of record, you may vote in person at the meeting or
vote by proxy. Whether or not you plan to attend the meeting, we urge you to
fill out and return the enclosed proxy card to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If
on
_____, 2008 your shares were held, not in your name, but rather in an account
at
a brokerage firm, bank, dealer, or other similar organization, then you are
the
beneficial owner of shares held in “street name” and these proxy materials are
being forwarded to you by that organization. The organization holding your
account is considered to be the stockholder of record for purposes of voting
at
the Special Meeting. As a beneficial owner, you have the right to direct your
broker or other agent on how to vote the shares in your account. You are also
invited to attend the Special Meeting. However, since 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 other agent.
What
is being voted on?
You
are
being asked to vote on the following proposal:
Proposal
1—To
ratify the terms of the May 2008 Financing, including without limitation the
anti-dilution provisions applicable to warrants issued pursuant to the May
2008
Financing.
How
do I vote?
For
Proposal 1 you may vote “For” or “Against” or abstain from voting. The
procedures for voting are fairly simple:
Stockholder
of Record: Shares Registered in Your Name
If
you
are a stockholder of record, you may vote in person at the Special Meeting
or
vote by proxy using the enclosed proxy card. To vote using the proxy card,
simply complete, sign and date the enclosed proxy card and return it promptly
in
the envelope provided. If you return your signed proxy card to us before the
Special Meeting, we will vote your shares as you direct. Whether or not you
plan
to attend the meeting, we urge you to vote by proxy to ensure your vote is
counted. You may still attend the meeting and vote in person if you have already
voted by proxy. If you would like to vote in person, come to the Special Meeting
and we will give you a ballot when you arrive.
Beneficial
Owner: Shares Registered in the Name of Broker or Bank
If
you
are a beneficial owner of shares registered in the name of your broker, bank,
or
other agent, you should have received a proxy card and voting instructions
with
these proxy materials from that organization rather than from us. Simply
complete and mail the proxy card to ensure that your vote is counted. To vote
in
person at the Special Meeting, you must obtain a valid proxy from your broker,
bank, or other agent. Follow the instructions from your broker or bank included
with these proxy materials, or contact your broker or bank to request a proxy
form.
How
many votes do I have?
On
each
matter to be voted upon, you have one vote for each share of common stock you
own as of _________, 2008.
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the meeting, who
will
count Proposal 1, “For” and “Against” votes, abstentions and broker non-votes.
Abstentions will be counted towards the vote total for Proposal 1, and will
have
the same effect as “Against” or “Withhold” votes. Broker non-votes have no
effect and will not be counted towards the vote total for any
proposal.
If
your
shares are held by your broker as your nominee (“street name”), in order to vote
your shares you will need to obtain a proxy form from the institution that
holds
your shares and follow the instructions included on that form regarding how
to
instruct your broker to vote your shares. If you do not give instructions to
your broker, your shares may not be voted by your broker for Proposal 1 in
this
proxy statement.
How
many votes are needed to approve each proposal?
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·
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To
be approved, Proposal No. 1 to ratify the terms of the May 2008 Financing,
including without limitation the anti-dilution provisions applicable
to
warrants issued pursuant to the May 2008 Financing must receive a
“For”
vote from the majority of shares present either in person or by proxy
and
entitled to vote.
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If
you
“Abstain” from voting, it will have the same effect as an “Against” vote. Broker
non-votes will have no effect.
What
is the quorum requirement?
A
quorum
is necessary to hold a valid meeting. A quorum will be present if a majority
of
the outstanding shares of common stock are represented in person or by proxy
at
the Special Meeting. On the record date, there were _____ shares of Neonode
common stock outstanding and entitled to vote. Thus, at least _____ shares
must
be represented in person or by proxy at the Special Meeting in order to have
a
quorum.
Your
shares will be counted towards the quorum only if you submit a valid proxy
(or
one is submitted on your behalf by your broker, bank or other nominee) or if
you
vote in person at the meeting. Abstentions and broker non-votes will be counted
towards the quorum requirement. If there is no quorum, a majority of the votes
present at the Special Meeting may adjourn the Special Meeting to another
date.
What
if I return a proxy card but do not make specific
choices?
If
you
return a signed and dated proxy card without marking any voting selections,
your
shares will voted as the Board of Director recommends.
Who
is paying for this proxy solicitation?
We
will
pay for the entire cost of soliciting proxies. In addition to these mailed
proxy
materials, our directors and employees may also solicit proxies in person,
by
telephone or by other means of communication. Directors and employees will
not
be paid any additional compensation for soliciting proxies. We may also
reimburse brokerage firms, banks and other agents for the cost of forwarding
proxy materials to beneficial owners.
What
does it mean if I receive more than one proxy card?
If
you
receive more than one proxy card, it means that your shares are registered
in
more than one name or are registered in different accounts. Please complete,
sign and return each proxy card to ensure that all of your shares are
voted.
Can
I change my vote after submitting my proxy?
Yes.
You
can revoke your proxy at any time before the final vote at the meeting. If
you
are the record holder of your shares, you may revoke your proxy in any one
of
three ways:
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·
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You
may submit another properly completed proxy card with a later date;
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·
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You
may send a written notice that you are revoking your proxy to our
Secretary at 4000 Executive Parkway, Suite 200, San Ramon, California
94583; or
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·
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You
may attend the Special Meeting and vote in person. However, simply
attending the Special Meeting will not, by itself, revoke your proxy.
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If
your
shares are held by your broker or bank as a nominee or agent, you should follow
the instructions provided by your broker or bank.
Does
the board of directors recommend approval of the proposals at the Special
Meeting?
Yes.
After careful consideration, our board of directors recommends that our
stockholders vote FOR the proposal.
What
is the deadline for submitting Stockholder proposals for the 2009 Annual
Meeting?
To
be
considered for inclusion in next year’s proxy materials, your proposal must be
submitted in writing by October 1, 2008, to the Secretary of Neonode Inc.,
4000
Executive Parkway, Suite 200, San Ramon, California 94583. If you wish to submit
a proposal that is not to be included in next year’s proxy materials or nominate
a director, you must do so by not later than the close of business on the 90th
day nor earlier than the close of business on the 120th day prior to the first
anniversary of the preceding year’s annual meeting of stockholders (no earlier
than January 1, 2009 and no later than January 31, 2009, as currently
scheduled); provided, however, that in the event that the date of the annual
meeting of stockholders is advanced more than 30 days prior to or delayed by
more than 30 days after the anniversary of the preceding year’s annual meeting
of stockholders, notice by the stockholder to be timely must be so delivered
not
earlier than the close of business on the 120th day prior to such annual meeting
of stockholders or the 10th day following the day on which public announcement
of the date of such meeting is first made. Stockholders wishing to submit any
such proposal are also advised to review Rule 14a-8 under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and the Company’s Bylaws,
which contain additional requirements about advance notice of stockholder
proposals and director nominations.
Who
can help answer my questions about the proposals?
If
you
have additional questions about these proposals, you should contact David
Brunton, our Secretary and Chief Financial Officer, at (925)
355-7700.
How
can I find out the results of the voting at the Special
Meeting?
Preliminary
voting results may be announced at the Special Meeting. Final voting results
will be published in our Quarterly Report on Form 10-Q for the three and nine
months ended September 30, 2008.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information regarding the estimated ownership
of our common stock as of June 16, 2008 of: (i) each director and nominee
for director; (ii) each of our “named executive officers,” as defined in
Item 402 under Regulation S-K promulgated by the Securities and Exchange
Commission; (iii) all executive officers and directors of Neonode as a
group; and (iv) all those known by us to be beneficial owners of more than
five percent of our outstanding shares of common stock. Unless otherwise
indicated, the address for each of the persons and entities set forth below
is
c/o Neonode Inc., Warfvingesvag 45, SE-112 51 Stockholm, Sweden.
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Beneficial
Owner
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Beneficial
Ownership (1)
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Beneficial
Owner
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Number
of Shares
of
Common Stock
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Percent
of
Total(2)
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AIGH
Investment Partners LLC
6006
Berkeley Avenue
Baltimore,
MD 21209 (5)
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4,834,447
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14.4%
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Per
Bystedt (3)(4)
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4,967,297
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14.8%
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Magnus
Goertz (3)(6)
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2,101,754
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6.3%
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Thomas
Eriksson (3)(7)
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1,255,351
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3.7%
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David
W. Brunton (3)
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138,011
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0.4%
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John
Reardon (3)
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200,986
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0.6%
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Susan
Major (3(8)
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215,965
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0.6%
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All
executive officers and directors as a group (6 persons)
(3)(4)(8)
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8,879,364
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26.5%
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(1)
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This
table is based upon information supplied by officers, directors and
principal stockholders. Unless otherwise indicated in the footnotes
to
this table and subject to community property laws where applicable,
we
believe that each of the stockholders named in this table has sole
voting
and investment power with respect to the shares indicated as beneficially
owned.
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| (2) |
Applicable
percentages are based on 29,979,953 shares, the number of shares
outstanding on June 16, 2008 plus the stock options that officers
and
directors have the right to acquire within 60 days after the date
of this
table under outstanding stock options and the warrants issuable under
this
table.
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| (3) |
Includes,
116,553, 296,680, 215,446, 79,000, 192,095, and 176,595 shares that
Messrs. Bystedt, Goertz, Eriksson, Brunton, Reardon, and Ms. Major,
respectively, have the right to acquire within 60 days after the
date of
this table under outstanding stock
options.
|
| (4) |
Includes
3,223,028 shares and options or warrants to purchase an aggregate
of
570,590 shares held by Iwo Jima Sarl and 883,108 shares and 290,350
warrants issuable to Petrus Holdings S.A. Iwo Jima Sarl and Petrus
Holdings S.A. may be deemed affiliates of Mr. Bystedt.
|
| (5) |
Includes,
1,558,150 shares that AIGH Investment Partners LLC has the right
to
acquire under common stock warrant
agreements.
|
| (6) |
Includes
1,805,074 shares held by Athemis Limited, which may be deemed an
affiliate
of Mr. Goertz.
|
| (7) |
Includes
1,039,905 shares held by Wirelesstoys Sweden AB, which may be deemed
an
affiliate of Mr. Ericksson.
|
| (8) |
Includes
19,685 shares that Ms. Major has the right to acquire under common
stock
warrant agreements..
|
PROPOSAL
1
RATIFICATION
OF THE TERMS OF THE MAY 2008 FINANCING, INCLUDING WITHOUT
LIMITATION
THE ANTI-DILUTION PROVISIONS APPLICABLE TO WARRANTS ISSUED
PURSUANT
TO THE MAY 2008 FINANCING
Background
and Reasons for Shareholder Approval
On
May
19, 2008, we completed a $5,086,091 private placement with accredited investors
through the exercise at a reduced price, of existing warrants (the “Exercise
Warrants”), for net proceeds of approximately $4,450,000 (the “May 2008
Financing”). In all, 4,004,796 outstanding warrants were exercised at a strike
price of $1.27 per warrant (including $375,000 of surrender of debt).
As
part
of the May 2008 financing, we also issued two new common stock purchase
warrants, with an exercise price of $1.45, for each outstanding warrant
exercised, for a total of 8,009,592 new warrants (the “New Warrants”).
Additionally, we extended the maturity date of $2.85 million of convertible
debt
that was due on June 30, 2008 until December 31, 2008 by issuing the note
holders 510,293 common stock purchase warrants, with an exercise price of $1.45
(the “Extension Warrants”).
Empire
Asset Management Company acted as financial advisor for the transaction and
received 1,201,439 warrants exercisable at prices ranging from $1.27 to $1.45
per share (the “Empire Warrants”), and a cash fee of $509,961, equal to 10% of
the gross proceeds received at the closing of the May 2008 Financing through
the
exercise of the Exercise Warrants.
In
connection with the private placement, we agreed to elect two members of the
Board of Directors as instructed by Empire and/or significant investors in
the
private placement. At the time of the mailing of this proxy, these directors
have not yet been elected. In addition we agreed to permit an employee of Empire
to observe all board meetings of Neonode.
We
refer
to the New Warrants, the Extension Warrants and the Empire Warrants collectively
as the “Warrants” and the shares of our Common Stock that may be acquired upon
exercise of the Warrants are referred to as the “Warrant Shares.” The securities
in this private placement were sold under Section 4(2) and Regulation D of
the
Securities Act of 1933, as amended.
Members
of Neonode’s Board of Directors and management contributed approximately
$480,000 of the new capital.
| |
·
|
Per
Bystedt, CEO and Chairman of the Board of Directors invested a total
of
$450,000 through the following two entities controlled by Mr.
Bystedt:
|
| |
1.
|
Petrus
Holding S.A. - Invested $150,000 and received 118,100 shares of common
stock and 236,220 warrants to purchase common
stock.
|
| |
2.
|
Iwo
Jima SARL - Invested $300,000 and received 236,221 shares of common
stock
and 472,442 warrants to purchase common
stock.
|
| |
·
|
Susan
Major, Member of the Board of Directors invested a total of $25,000
and
received 19,685 shares of common stock and 19,685 warrants to purchase
common stock.
|
| |
·
|
Mikael
Hagman, Former President and CEO and member of the Board of Directors
invested a total of $5,000 and received 3,937 shares of common stock
and
7,474 warrants to purchase common
stock
|
The
Warrants contain anti-dilution provisions which would increase the number of
Warrant Shares and decrease the exercise price for the Warrant Shares under
certain circumstances. However, to comply with the “NASDAQ 20% Rule” described
below, the anti-dilution provisions included in the Warrants are not effective
until Stockholder Approval is obtained pursuant to the terms of the May 2008
Financing Warrant Exercise Subscription Agreement (the “Subscription
Agreement”). Accordingly, the Subscription Agreement provides that we will
solicit the affirmative vote of our stockholders for approval of a resolution
ratifying the issuance of all Warrants, and without limitation on the foregoing,
the anti-dilution provisions contained in the Warrants (“Stockholder Approval”)
not later than September 1, 2008. Furthermore, the Warrants prohibit us from
issuing or selling shares of our Common Stock at a purchase price lower than
the
exercise price per share in effect at the time each Warrant was issued until
we
have obtained Stockholder Approval.
NASDAQ
Marketplace Rule 4350(i)(1)(D) (the “NASDAQ 20% Rule”) requires a company whose
securities are traded on NASDAQ to obtain shareholder approval for the issuance
of securities, other than in a public offering, at a price less than the greater
of book or market value per share if the issuance amounts to 20% or more of
the
company’s common stock outstanding prior to the issuance. Since our common stock
is traded on the NASDAQ Capital Market and the anti-dilution provisions included
in the Warrants may cause us to issue shares amounting to 20% or more of our
stock at a price less than the market value of the shares when the Warrants
were
issued, Stockholder Approval is required to make the anti-dilution provisions
effective and to comply with the NASDAQ 20% Rule.
As
a
result of the limitations imposed by the NASDAQ 20% Rule, and as noted above,
the anti-dilution provisions are not effective until after Stockholder Approval.
Thus, in connection with the May 2008 Financing, we agreed to seek Stockholder
Approval at a stockholder meeting to be held not later than September 1, 2008,
and we are obligated to continue to seek Stockholder Approval at additional
stockholder meetings to be held once in each twelve month period thereafter
until Stockholder Approval is obtained.
Accordingly,
we are seeking Stockholder Approval of a resolution ratifying the issuance
of
all Warrants, and without limitation on the foregoing, the anti-dilution
provisions of the Warrants.
Terms
of the May 2008 Financing
As
part
of the May 2008 Financing we issued new warrants to purchase our Common Stock
pursuant to a Warrant Exercise Subscription Agreement, Transfer Agreement,
Warrant Extension Agreement and Financial Advisory Agreement (collectively,
the
“Transaction Documents”). The following sections describe the material terms of
the Transaction Documents and the May 2008 Financing:
Warrant
Exercise Subscription Agreement
In
order
to induce the exercise of existing warrants (the “Exercise Warrants”) as part of
the May 2008 Financing, we entered into a Subscription Agreement which provides
for (i) a reduced exercise price for the Exercise Warrants equal to the closing
sale price of our Common Stock on May 16, 2008 plus $0.01 ($1.45) and (ii)
the
issuance of two (2) new warrants (the “New Warrants”) to purchase our Common
Stock for each Exercise Warrant then exercised. On May 19, 2008, we completed
a
$5,086,091 private placement with accredited investors through the exercise
at
this reduced price of the Exercise Warrants for net proceeds of approximately
$4,450,000. We have used and intend to continue to use the net proceeds from
the
May 2008 Financing for general corporate purposes, including continuing the
development of Neonode products, obtaining regulatory approvals and working
capital.
The
Subscription Agreement provides that we are to use our best efforts to seek
and
obtain approval of resolutions ratifying the issuance of all securities issued
under the Transaction Documents (as more fully described below) and, without
limitation to the foregoing, the anti-dilution provisions of the Warrants,
at an
annual or special meeting of our stockholders to be held no later than September
1, 2008. The Subscription Agreement further provides that if, despite our best
efforts, Stockholder Approval is not obtained prior to September 1, 2008, that
we shall be obligated to cause an additional stockholder meeting to be held
once
in each twelve month period thereafter until such Stockholder Approval is
obtained.
Transfer
Agreement
In
connection with the May 2008 Financing, and pursuant to the terms of the
Subscription Agreement, holders of Exercise Warrants (“Transfer Holders”) who
did not wish to exercise their Exercise Warrants were permitted to sell the
Exercise Warrants to an accredited investor(s) (each, a “Transferee”) who would
simultaneously exercise such Exercise Warrants for cash or surrender of Company
debt, in exchange for delivery to the Transfer Holders of one New Warrant
issuable upon exercise of the transferred Exercise Warrant.
Warrant
Extension Agreement
Pursuant
to a Note Purchase Agreement, dated as of July 31, 2007, we made an offering
of
notes bearing 8% interest and convertible into equity (the “8% Notes”). We
currently have outstanding a principal amount of $3,250,000 on the 8% Notes.
Under the Note Purchase Agreement, as amended, the 8% Notes plus accrued
interest are convertible at the option of the holders into Common Stock and
warrants. Simultaneously with the issuance of the 8% Notes, we also agreed
to
sell up to $750,000 of additional 8% Notes to Ellis International at its option,
expiring June 30, 2008. As part of the May 2008 Financing, we agreed with
holders of the 8% Notes (the “Warrant Extension Agreement”) to issue to them
warrants, substantially similar to the New Warrants (the “Extension Warrants”),
to purchase an aggregate of 1,252,998 shares of Common Stock, in exchange for
an
extension of the maturity date of the 8% Notes to December 31, 2008, and have
also agreed to extend the Ellis option to December 31, 2008.
Financial
Advisory Agreement
As
part
of the May 2008 Financing, we entered into a Financial Advisory Agreement with
our financial advisor and placement agent, Empire Asset Management Company
(“Empire”), providing that Empire would receive (i) cash fees equal to 10% of
the gross proceeds from the May 2008 Financing, plus (ii) warrants (the “Empire
Warrants”), in substantially the form of the New Warrants, to purchase a number
of shares of our Common Stock equal to 10% of the aggregate number of Warrant
Shares and New Warrants issued in the May 2008 Financing at an exercise price
equal to the reduced exercise price of the Exercise Warrants and the exercise
price of the New Warrants, respectively, and (iii) a non-accountable expense
allowance of $35,000.
Pursuant
to the terms of the Financial Advisory Agreement, we agreed to elect two members
of the Board of Directors designated by Empire and/or significant investors
in
the private placement. At the time of the mailing of this proxy, these directors
have not yet been elected. In addition we agreed to permit an employee of Empire
to observe all board meetings of Neonode.
The
Warrants and the Anti-Dilution Provisions
As
stated
above, as part of the May 2008 Financing, we issued the New Warrants, the
Extension Warrants and the Empire Warrants (collectively, the “Warrants”)
pursuant to the terms of the Transaction Documents. The New Warrants may be
converted into shares of our Common Stock, for an exercise price of $1.45 per
share, at any time commencing six (6) months after the date issued until the
fifth (5th) anniversary of the issue date. The Extension Warrants may be
converted into shares of our Common Stock, for an exercise price of $1.45 per
share, at any time commencing six (6) months after the date issued until the
third (3rd) anniversary of the issue date. The Empire Warrants may be converted
into shares of our Common Stock, for an exercise price ranging from $1.27 to
$1.45 per share, at any time commencing six (6) months after the date issued
until the fifth (5th) anniversary of the issue date.
The
Warrants also contain anti-dilution provisions which are effective upon
Stockholder Approval and provide that (i) if we sell or issue shares of our
Common Stock (or securities convertible into shares of our Common Stock) at
a
purchase price below the exercise price of the Warrants, the exercise price
of
the Warrants will be reduced to such purchase price; and (ii) in the event
of an
adjustment to the exercise price as described in (i), the number of shares
of
underlying securities issuable upon exercise of the Warrant shall be increased
so that the aggregate exercise price of the Warrant is not reduced as a result
of reduced purchase price.
Because
the dual effect of a reduced purchase price and an increase in the number of
shares issuable under the Warrants, as set forth in the anti-dilution
provisions, may in some cases violate the NASDAQ 20% Rule, the anti-dilution
provision is not effective until Stockholder Approval has been obtained.
Accordingly, we agreed pursuant to the Subscription Agreement to seek
Stockholder Approval as set forth above. Moreover, the Warrants provide that
we
shall not issue or sell shares of our Common Stock at a lower exercise price
prior to obtaining Stockholder Approval.
Effect
of Stockholder Approval of Proposal 1
Upon
stockholder approval of this Proposal 1 (i) the anti-dilution provisions set
forth in the Warrants shall become effective and (ii) we will be permitted
to
issue and sell shares of our Common Stock at a exercise price lower than the
Warrant exercise prices ($1.45), subject to the terms of the anti-dilution
provisions.
Effect
of Failure to Obtain Shareholder Approval of Proposal 1
If
the
stockholders do not approve Proposal 1, then we will not be permitted to enter
into any new capital raising transactions involving the issuance of shares
of
our common stock or securities exercisable for, or convertible into, Common
Stock for a price less than $1.45 per share without breaching current contracts
with investors, even if the then-current market price of our Common Stock is
less than $1.45 per share. Such a limitation could have a material adverse
impact on our ability to raise capital.
Vote
Required and Board of Directors Recommendation
The
proposal to ratify the terms of the May 2008 Financing, including without
limitation the anti-dilution provisions applicable to warrants issued pursuant
to the May 2008 Financing, will be approved if a majority of shares entitled
to
vote and present in person or by proxy at the meeting vote in favor of the
proposal.
OUR
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL TO RATIFY THE TERMS OF
THE MAY 2008 FINANCING, INCLUDING WITHOUT LIMITATION THE ANTI-DILUTION
PROVISIONS APPLICABLE TO WARRANTS ISSUED PURSUANT TO THE MAY 2008
FINANCING.
OTHER
BUSINESS
As
of the
date of this proxy statement, the Board of Directors knows of no other matter
to
come before this Special Meeting. However, if any other matter requiring a
vote
of the shareholders arises, the persons named in the accompanying proxy will
vote such proxy in accordance with their best judgment.
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By
Order of the Board of Directors,
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/s/
David Brunton
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David
Brunton
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Secretary
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San
Ramon, California_____, 2008
NEONODE
INC.
SPECIAL
MEETING OF STOCKHOLDERS
PROXY
CARD
Special
Meeting, _____, 2008
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF NEONODE
INC.
By
signing and returning this proxy, you appoint Per Bystedt and David Brunton,
and
each of them, with full power of substitution, to vote and represent these
shares at the Special Meeting of Stockholders to be held on _____, 2008 at
9:00
a.m. local time, (or any adjournments or postponements thereof) at the Company’s
headquarters located at Warfvingesvag 45, SE-112 51 Stockholm, Sweden.
WHEN
PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS YOU DIRECT. IF NO DIRECTION
IS
GIVEN, THIS PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS “FOR”
PROPOSAL 1.
PLEASE
SIGN, DATE AND MAIL THIS PROXY IN THE ENVELOPE PROVIDED.
TO
VOTE
IN ACCORDANCE WITH THE BOARD OF DIRECTORS’ RECOMMENDATION, YOU MAY SIMPLY SIGN
AND DATE THIS CARD ON THE REVERSE SIDE; NO BOXES NEED TO BE CHECKED.
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE.
SPECIAL
MEETING OF STOCKHOLDERS OF
NEONODE
INC.
______,
2008
Please
date, sign and mail
your
proxy card in the
envelope
provided as soon as possible.
↓Please
detach along perforated line and mail in the envelope provided.↓
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THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE PROPOSAL.
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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1.
To
ratify the terms of the May 2008 Financing, including without limitation
the anti-dilution provisions applicable to warrants issued pursuant
to the
May 2008 Financing:
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FOR
o
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AGAINST
o
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ABSTAIN
o
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IN
THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY BE PRESENTED TO THE MEETING OR ANY ADJOURNMENTS,
POSTPONEMENTS, CONTINUATIONS OR RESCHEDULINGS THEREOF. The signer
hereby
revokes all proxies heretofore given by the signer to vote at the
Special
Meeting of NEONODE INC. and any adjournments, postponements, continuations
or reschedulings thereof.
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To
change the address on your account, please check the box at right
and
indicate your new address in the address space above. Please note
that
changes to the registered name(s) on the account may not be submitted
via
this method. o
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Signature
of Stockholder _________ Date:_______ Signature of Stockholder_________
Date:______
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Note:
Please sign exactly as your name or names appear on this Proxy. When shares
are
held jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the signer
is
a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.