SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
MICROVISION, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) 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) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] 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.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
MICROVISION, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
October 15, 1998
The Annual Meeting of Shareholders of Microvision, Inc., a Washington
corporation, will be held at the Company's headquarters, located at 2203 Airport
Way South, Suite 100, Seattle, Washington on October 15, 1998, at 9:00 a.m.,
Pacific Daylight Time, for the following purposes:
1. to elect seven directors of the Company to serve a term of one year
each;
2. to approve an amendment to the Company's 1996 Stock Option Plan to
increase the number of shares of Common Stock authorized for issuance upon
exercise of options granted thereunder;
3. to ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending December 31, 1998; and
4. to transact any other business that properly comes before the Annual
Meeting.
The Board of Directors is not aware of any other business to come before
the Annual Meeting.
Only shareholders of record at the close of business on August 21, 1998,
are entitled to notice of and to vote at the Annual Meeting or any adjournments
thereof. A list of shareholders as of the record date will be available for
shareholder inspection at the headquarters of the Company, 2203 Airport Way
South, Suite 100, Seattle, Washington.
Please complete, sign, and date the enclosed proxy and return it promptly
in the enclosed postage pre-paid reply envelope. If you are able to attend the
meeting, you may revoke the proxy and vote personally on all matters brought
before the meeting.
By Order of the Board of Directors,
/s/ RICHARD A. RAISIG
Richard A. Raisig
Secretary
September 10, 1998
Seattle, Washington
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING
IN PERSON, PLEASE EXECUTE AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE TO ENSURE THE PRESENCE OF A QUORUM AT THE MEETING. SENDING IN YOUR
PROXY WILL NOT PREVENT YOU FROM VOTING YOUR STOCK AT THE MEETING IF YOU DESIRE
TO DO SO.
<PAGE>
MICROVISION, INC.
2203 Airport Way South, Suite 100
Seattle, Washington 98134
September 10, 1998
------------
PROXY STATEMENT
------------
Purpose
- -------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Microvision, Inc., a Washington corporation
(the "Company"), to be voted at the Annual Meeting of Shareholders of the
Company to be held at the Company's headquarters, located at 2203 Airport Way
South, Suite 100, Seattle, Washington on October 15, 1998, at 9:00 a.m., Pacific
Daylight Time (the "Annual Meeting"). The accompanying Notice of Annual Meeting
of Shareholders and this Proxy Statement are being first mailed to shareholders
on or about September 10, 1998.
Record Date and Outstanding Shares
- ----------------------------------
The Board of Directors has fixed August 21, 1998, as the record date for
the determination of holders of common stock, no par value, of the Company (the
"Common Stock") entitled to notice of and to vote at the Annual Meeting. At the
close of business on that date, there were outstanding and entitled to vote
6,023,326 shares of Common Stock. Holders of Common Stock will be entitled to
one vote per share of Common Stock held and are not entitled to cumulative
voting rights in the election of directors.
Proxies and Revocation of Proxies
- ---------------------------------
The enclosed proxy is being solicited by the Board of Directors for use at
the Annual Meeting and any adjournments thereof and will not be voted at any
other meeting. All proxies that are properly executed, received by the Company
prior to or at the Annual Meeting, and not revoked will be voted at the Annual
Meeting or any adjournments thereof in accordance with the instructions given
therein.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of the Company, at or before the taking of the vote at the
Annual Meeting, a written notice of revocation bearing a later date than the
date of the proxy, (ii) duly executing a subsequent proxy relating to the same
shares and delivering it to the Secretary of the Company before the Annual
Meeting, or (iii) attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute a
revocation of a proxy). Any written notice revoking a proxy should be sent to
Microvision, Inc., 2203 Airport Way
<PAGE>
South, Suite 100, Seattle, Washington 98134, Attention: Secretary, or hand
delivered to the Secretary at or before the taking of the vote at the Annual
Meeting.
Quorum and Voting
- -----------------
The presence in person or by proxy of at least a majority of the total
number of outstanding shares of Common Stock entitled to vote is required to
constitute a quorum for the transaction of business at the Annual Meeting.
Abstentions and broker non-votes will be considered represented at the meeting
for the purpose of determining a quorum.
The shares represented by each proxy will be voted in accordance with the
instructions given therein. Where no instructions are indicated, the proxy will
be voted for the nominees to the Board of Directors named in this Proxy
Statement, for the amendment to the 1996 Stock Option Plan, for the ratification
of PricewaterhouseCoopers LLP as independent auditors of the Company for the
fiscal year ending December 31, 1998, and at the discretion of the persons named
in the proxy on any other business that may properly come before the Annual
Meeting.
Under applicable law and the Company's Articles of Incorporation and
Bylaws, if a quorum is present at the Annual Meeting, the seven nominees for
election to the Board of Directors who receive the plurality of votes cast for
the election of Directors by the shares present in person or represented by
proxy will be elected Directors. Each shareholder will be entitled to one vote
for each share of Common Stock held and will not be entitled to cumulate votes
in the election of Directors. The amendment to the 1996 Stock Option Plan will
be approved and the appointment of PricewaterhouseCoopers LLP as the Company's
independent auditors will be ratified if the number of votes cast in favor of
each proposal exceeds the number of votes cast against it. Abstentions and
broker non-votes will have no effect on the outcome of the voting because they
will not represent votes cast.
Solicitation of Proxies
- -----------------------
The Company will bear the cost of preparing, printing, assembling, and
mailing this Proxy Statement, the accompanying proxy and any additional material
which may be furnished to shareholders, and of the solicitation of proxies.
Solicitation of proxies will be made by mail and through direct communications
with certain shareholders or their representatives by directors, officers and
employees of the Company, who will receive no additional compensation therefor.
The Company will request brokers, custodians, nominees, and other like parties
to forward copies of the proxy materials to the beneficial owners of the Common
Stock and will reimburse such parties for their reasonable and customary charges
or expenses in this connection. The Company has engaged the services of D.F.
King & Co., Inc. to solicit proxies and distribute materials to certain
shareholders, brokerage houses, banks, custodians, and other nominee holders on
behalf of the Company. The Company will pay D.F. King & Co., Inc. approximately
$5,000 for these services, exclusive of expenses.
2
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors of the Company will consist of seven Directors who
will be elected at the Annual Meeting to serve until their successors are
elected at the next annual meeting of shareholders. Proxies received from
shareholders, unless directed otherwise, will be voted FOR the election of the
following nominees: Richard F. Rutkowski, Stephen R. Willey, Richard A. Raisig,
Jacob Brouwer, Robert A. Ratliffe, Richard A. Cowell, and Walter J. Lack.
If any nominee is unable to stand for election, the shares represented by
all valid proxies will be voted for the election of such substitute nominee as
the Board of Directors may recommend. All of the nominees are currently
Directors of the Company. The Company is not aware that any nominee is or will
be unable to stand for election.
Set forth below are the name, position held with the Company, and age of
each of the nominees for Director of the Company. The principal occupation and
recent employment history of each of the nominees are described below under
"Directors and Executive Officers," and the number of shares of Common Stock
held or controlled by each nominee as of July 31, 1998, is set forth below in
"Security Ownership of Principal Shareholders and Management."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ALL OF THE NOMINEES NAMED
BELOW FOR DIRECTORS OF THE COMPANY.
<TABLE>
<CAPTION>
Name Age Position
- ------------------------ --- ----------------------------------------
<S> <C> <C>
Richard F. Rutkowski (1) 42 Chief Executive Officer, President
and Director
Stephen R. Willey 44 Executive Vice President and Director
Richard A. Raisig (1) 51 Chief Financial Officer, Vice President,
Operations, Secretary and Director
Walter J. Lack (1)(2) 50 Director
Robert A. Ratliffe 38 Director
Jacob Brouwer (2) 71 Director
Richard A. Cowell 51 Director
(1) Member of the Compensation and Finance Committees
(2) Member of the Audit Committee
</TABLE>
3
<PAGE>
Directors and Executive Officers
Richard F. Rutkowski served as Chief Operating Officer of the Company from
December 1994 until September 1995, Chief Executive Officer of the Company since
September 1995, as a director of the Company since August 1995, and was elected
President of the Company in July 1996. Between November 1992 and May 1994, Mr.
Rutkowski served as Executive Vice President of Medialink Technologies
Corporation (formerly Lone Wolf Corporation), a developer of high speed digital
networking technology for multimedia applications in audio-video computing,
consumer electronics and telecommunications. Between February 1990 and April
1995, Mr. Rutkowski was a principal of Rutkowski, Erickson & Scott, a consulting
firm. Mr. Rutkowski also serves as a director of CMT Crimble Microtest.
Stephen R. Willey has served as Executive Vice President of the Company
since October 1995 and as a director since June 1995. Mr. Willey also served as
the Company's technical liaison to the University of Washington's HIT Lab.
Between January 1994 and April 1996, Mr. Willey served as an outside consultant
to the Company through DGI The Development Group, Inc. ("DGI"), a business and
technology consulting firm that Mr. Willey founded in 1985. As principal of DGI,
Mr. Willey provided senior management consulting services to CREO Products,
Inc., an electro-optics equipment manufacturer, between June 1989 and December
1992. In 1993, Mr. Willey co-founded PRO.NET Communications, Inc., an Internet
services company. Mr. Willey serves as a director of CMT Crimble Microtest and
of In Step Mobile Communications Inc.
Richard A. Raisig has served as Chief Financial Officer and Vice President,
Operations of the Company since August 1996, as Secretary since April 1998, and
as a director of the Company since March 1996. Mr. Raisig was Chief Financial
Officer of Videx Equipment Corporation, a manufacturer and rebuilder of wire
processing equipment for the cabling industry from June 1995 until August 1996.
From July 1992 to May 1995, Mr. Raisig was Chief Financial Officer and Senior
Vice President-Finance for Killion Extruders, Inc., a manufacturer of plastic
extrusion equipment. From February 1990 to July 1992, Mr. Raisig was Managing
Director of Crimson Capital Company, an investment banking firm. Prior to
February 1990, Mr. Raisig was a Senior Vice President of Dean Witter Reynolds,
Inc. Mr. Raisig is a Certified Public Accountant.
Walter J. Lack has served as a director of the Company since August 1995.
Mr. Lack is a partner of Engstrom, Lipscomb & Lack, a Los Angeles, California
law firm that he founded in 1974. Mr. Lack has acted as a special arbitrator for
the Superior Court of the State of California since 1976 and for the American
Arbitration Association since 1979. Mr. Lack also serves as a director of HCCH
Insurance Holdings, Inc., a multinational insurance company listed on The New
York Stock Exchange. Mr. Lack has been involved in a number of start-up
companies, both as an investor and as a director.
4
<PAGE>
Robert A. Ratliffe joined the Company as a director in July 1996. Mr.
Ratliffe has been Vice President and principal of Eagle River, Inc., an
investment company specializing in the telecommunications and technology sectors
since early 1996. Between 1986 and 1996, Mr. Ratliffe served as Senior Vice
President, Communications, for AT&T Wireless Services, Inc., and its
predecessor, McCaw Cellular Communications, Inc., where he also served as Vice
President of External Affairs and as Vice President of Acquisitions and
Development. Prior to joining McCaw Cellular Communications, Inc., Mr. Ratliffe
was a Vice President with Seafirst Bank.
Jacob Brouwer joined the Company as a director in July 1996. Mr. Brouwer is
the Chairman and Chief Executive Officer of Brouwer Claims Canada & Co. Ltd., an
insurance adjusting company that he founded in 1956. Mr. Brouwer has served as a
director for numerous companies, including the Canadian National Railway
Company, The Insurance Corporation of British Columbia, Air B.C., Golden Tulips
Hotels Ltd., First Interstate Bank, Prime Resources Ltd., Grand Trunk Corp.
(U.S.), and Northwestel, Inc., and is the former Chairman of the International
Financial Centre of British Columbia. Mr. Brouwer currently serves as a director
of Doman Industries, a forest products company.
Richard A. Cowell joined the Company as a director in August 1996. Mr.
Cowell is a Senior Associate at Booz Allen & Hamilton involved in, among other
things, the incorporation of simulation and models into education and training
programs for Department of Defense contractors. Prior to joining Booz Allen &
Hamilton in March of 1996, Mr. Cowell served in the United States Army for 25
years. Immediately prior to his retirement from the Army, Mr. Cowell served as
Director of the Louisiana Maneuvers Task Force reporting directly to the Chief
of Staff, Army. Mr. Cowell has authored a number of articles relating to the
future of the Army and received awards for his writing and producing of a film
entitled "America's Army" in 1994. Mr. Cowell retired from the Army holding the
rank of Colonel.
No employee of the Company receives any compensation for his services as a
Director. Currently, non-employee Directors receive no salary for their services
and receive no fee for their participation in meetings, although all Directors
are reimbursed for reasonable travel and other out-of-pocket expenses incurred
in attending meetings of the Board. The 1996 Independent Director Stock Plan,
which was approved by the shareholders in August 1996, provides for the grant of
shares of Common Stock to non-employee directors of the Company on an annual
basis each time he or she is elected to the Board (or, if directors are elected
to serve terms longer than one year, as of the date of each annual shareholders'
meeting during that term) (the "Annual Award"). The number of shares awarded in
the Annual Award is equivalent to the result of $20,000 divided by the fair
market value of a share on the date of the award, rounded to the nearest 100
shares (or a fraction thereof if the Independent Director is elected or
appointed to the Board at any time other than at the annual meeting of
shareholders).
5
<PAGE>
Directors are elected at the annual meeting of shareholders. Vacancies
resulting from an increase in the size of the Board may be filled by the
Directors or by the shareholders. Directors hold office until the next annual
shareholders' meeting and until their successors are elected and qualified.
Board Committees and Meetings
The Board of Directors met six times during the last fiscal year. Each
director attended at least 75% of the meetings of the full Board and of all
Board committees on which he served during fiscal 1997 in person or by
telephone. The Board of Directors also approved certain actions by unanimous
written consent.
The Company's Board of Directors maintains a Compensation Committee, a
Finance Committee, and an Audit Committee. The Board has not established a
Nominating Committee.
The Compensation Committee makes recommendations to the Board regarding
salaries, incentives, and other forms of compensation for directors, officers,
and other key employees of the Company, and administers policies relating to
compensation and benefits. The Compensation Committee also serves as the Plan
Administrator for the Company's stock option plans, except for the granting of
such options to officers, which grants are made by the Board. Messrs. Rutkowski,
Raisig, and Lack are the current members of the Compensation Committee. The
Compensation Committee met three times during fiscal 1997.
The Finance Committee makes recommendations to the Board on matters related
to financing and the Company's capitalization. Messrs. Rutkowski, Raisig and
Lack are the current members of the Finance Committee. The Finance Committee did
not meet during fiscal 1997.
The Audit Committee reviews the Company's accounting practices and internal
accounting controls and financial results, and oversees the engagement of the
Company's independent auditors. Messrs. Lack and Brouwer are the current members
of the Audit Committee. The Audit Committee met one time during fiscal 1997.
6
<PAGE>
Security Ownership of Principal Shareholders and Management
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of July 31, 1998, by (i) each person known by
the Company to own beneficially more than five percent of the Company's
outstanding Common Stock ("Principal Shareholder"); (ii) each of the Company's
directors; and (iii) all executive officers and directors of the Company as a
group.
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percentage of
of Beneficial Owner Beneficial Ownership (1) Common Stock (2)
- ------------------- ------------------------ ----------------
<S> <C> <C>
Richard F. Rutkowski (3) 388,992 6.1%
c/o Microvision, Inc.
2203 Airport Way South
Suite 100
Seattle, WA 98134
George M. Galpin (4) 371,350 6.0%
120 West Dayton
Suite D-5
Edmonds, WA 98020
Stephen R. Willey (5) 317,760 5.0%
c/o Microvision, Inc.
2203 Airport Way South
Suite 100
Seattle, WA 98134
Walter J. Lack 213,537 3.6%
10100 Santa Monica Blvd.
16th Floor
Los Angeles, CA 90067
Richard A. Raisig (6) 108,672 1.8%
c/o Microvision, Inc.
2203 Airport Way South
Suite 100
Seattle, WA 98134
Robert A. Ratliffe 12,650 *
2300 Carillon Point
Kirkland, WA 98033
Jacob Brouwer 6,400 *
1200 West Pender Street
Suite 1200
Vancouver, B.C. VGE 259
Canada
Richard A. Cowell 6,400 *
c/o Booz Allen & Hamilton
4301 N. Fairfax Drive
Suite 200
Arlington, VA 22203
7
<PAGE>
Name and Address Amount and Nature of Percentage of
of Beneficial Owner Beneficial Ownership (1) Common Stock (2)
- ------------------- ------------------------ ----------------
<S> <C> <C>
All executive officers and _________ _____
directors as a group
(7 persons) 1,054,411 15.5%
- --------------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within 60 days are treated as
outstanding for determining the amount and percentage of Common Stock
owned by such individual. To the Company's knowledge, each person has
sole voting and sole investment power with respect to the shares shown,
subject to community property laws, where applicable.
(2) Rounded to the nearest 1/10th of one percent, based on 6,010,326 shares
of Common Stock outstanding at July 31, 1998.
(3) Includes options to purchase up to 361,517 shares of Common Stock.
(4) Mr. Galpin filed a Schedule 13G on June 30, 1998 reporting his beneficial
ownership of 371,350 shares of the Company's Common Stock. Includes
currently exercisable warrants to purchase up to 213,500 shares of Common
Stock.
(5) Includes options and Public Warrants to purchase up to 309,375 shares of
Common Stock.
(6) Includes options to purchase 108,047 shares of Common Stock.
</TABLE>
Section 16(a) Beneficial Ownership Reporting Compliance
Based solely on a review of the copies of the forms provided to the Company
and written representations that no other filing of forms was required, the
Company believes that, during the fiscal year ended December 31, 1997, the
reporting persons subject to Section 16(a) of the Exchange Act, as amended,
complied with all filing requirements applicable thereto, except that Stephen R.
Willey filed one late report.
8
<PAGE>
Executive Compensation
The following table sets forth the compensation received for services in
all capacities to the Company for the last three fiscal years by Richard F.
Rutkowski, the Company's Chief Executive Officer and President; Stephen R.
Willey, its Executive Vice President; and Richard A. Raisig, its Chief Financial
Officer, Vice President, Operations, and Secretary (the "Named Executives"). No
other officer of the Company received annual salary and bonuses exceeding
$100,000 for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
A n n u a l C o m p e n s a t i o n ------
----------------------------------------- Securities
Name and Fiscal Salary Bonus Other Annual Underlying
Principal Position Year ($) ($) Compensation ($) Options
- ------------------ ------ -------- -------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Richard F. Rutkowski 1997 145,000 100,000 - 340,000
Chief Executive 1996 126,250 107,500 - -
Officer and President 1995 97,500 30,000 - 69,671
Stephen R. Willey 1997 130,000 85,000 - -
Executive Vice President 1996 78,333 92,320 36,667 (1) -
1995 - - 67,500 (1) 296,875
Richard A. Raisig 1997 120,000 60,000 - 136,000
Chief Financial Officer, 1996 40,729 30,000 - 100,000
Vice President, Operations 1995 - - - -
and Secretary
- --------------------------
(1) Represents payments in consideration of consulting services rendered to
the Company by Mr. Willey prior to and concurrent with Mr. Willey's
employment with the Company.
</TABLE>
9
<PAGE>
Option Grants
The following table sets forth the grants of options to purchase common
stock during the last fiscal year to the Named Executives.
<TABLE>
<CAPTION>
Percent
Number of of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted in 1997 ($/Sh) Date
- ---- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Richard F. Rutkowski 80,000 7.18 14.00 10/1/07
80,000 7.18 17.50 10/1/07
80,000 7.18 21.88 10/1/07
80,000 7.18 27.34 10/1/07
20,000 1.79 34.18 10/1/07
Stephen R. Willey - - - -
Richard A. Raisig 28,000 2.51 14.00 10/1/07
28,000 2.51 17.50 10/1/07
65,000 5.83 21.88 10/1/07
15,000 1.35 27.34 10/1/07
</TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values. The following table sets forth information concerning exercise of stock
options during 1997 by the Named Executives and the fiscal year-end value of
unexercised options:
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Number of Options at the-Money Options at
Shares December 31, 1997 December 31, 1997 (1)
Acquired Value ----------------- ---------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard F.
Rutkowski - - 331,517 320,000 $3,329,214 $ 0
Stephen R.
Willey - - 250,000 46,875 $2,575,000 $ 318,750
Richard A.
Raisig - - 46,453 189,547 $ 329,218 $ 354,220
- ----------------
(1) Calculated based on a closing price of $14.00 per share on December 31,
1997.
</TABLE>
10
<PAGE>
Employment Agreements. Pursuant to his employment agreement with the
Company effective October 1, 1997, Mr. Rutkowski receives an annual base salary
of $145,000, subject to increases as determined by the Board of Directors, and
an annual cash performance bonus in an amount to be determined by the Board of
Directors. In January 1998, Mr. Rutkowski's base salary was adjusted to $175,000
and he was awarded a bonus of $100,000 for services performed during 1997. In
addition, Mr. Rutkowski received options to purchase up to an aggregate of
340,000 shares of Common Stock for service to the Company during the period
October 1, 1997 through December 31, 2001. These options have ten-year terms,
vest quarterly, and will immediately vest and become exercisable upon the
occurrence of certain events following a change in control. Mr. Rutkowski is
entitled to all benefits offered generally to the Company's employees. Upon
termination without cause of Mr. Rutkowski's employment by the Company, Mr.
Rutkowski's stock options will continue to vest and Mr. Rutkowski will be
entitled to a severance payment. The employment agreement expires, unless
previously terminated, on December 31, 2001.
The Company entered into an employment agreement with Stephen R. Willey,
the Company's Executive Vice President and a director of the Company, effective
May 1, 1996. Pursuant to this agreement, Mr. Willey receives an annual base
salary of $110,000, adjusted annually for the cost of living and subject to
increases as determined by the Board of Directors. In addition, Mr. Willey is
entitled to receive an annual cash performance bonus in an amount determined by
the Board of Directors. Mr. Willey received options to purchase an aggregate of
296,875 shares of Common Stock for his services during the period 1995 through
1998. In January 1998, Mr. Willey's base salary was adjusted to $150,000 and he
was awarded a bonus of $85,000 for services performed in 1997. Upon termination
without cause of Mr. Willey's employment by the Company, certain of Mr. Willey's
stock options will vest and Mr. Willey will be entitled to a severance payment.
Mr. Willey is entitled to all benefits offered generally to the Company's
employees. Mr. Willey's employment agreement expires, unless previously
terminated, on September 30, 1998.
Pursuant to his employment agreement with the Company, effective October 1,
1997, Mr. Raisig receives an annual base salary of $130,000, subject to
increases as determined by the Board of Directors, and an annual cash
performance bonus in an amount to be determined by the Board of Directors. In
January 1998, Mr. Raisig was awarded a bonus of $75,000 for services performed
during 1997 and four months in 1996. In addition, Mr. Raisig received options to
purchase up to an aggregate of 136,000 shares of Common Stock for service to the
Company during the period October 1, 1997 through December 31, 2000. These
options have ten-year terms, vest quarterly, and will immediately vest and
become exercisable upon the occurrence of certain events following a change in
control. Mr. Raisig is entitled to all benefits offered generally to the
Company's employees. Upon termination without cause of Mr. Raisig's employment
by the Company, Mr. Raisig's stock options will continue to vest and Mr. Raisig
will be entitled to a severance payment. The employment agreement expires,
unless previously terminated, on December 31, 2000.
11
<PAGE>
Certain Tax Considerations Related to Executive Compensation
As a result of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), in the event that compensation paid by the Company to a
"covered employee" (the chief executive officer and the next four highest paid
employees) in a year were to exceed an aggregate of $1,000,000, the Company's
deduction for such compensation could be limited to $1,000,000.
12
<PAGE>
PROPOSAL TWO
AMENDMENT TO 1996 STOCK OPTION PLAN
TO INCREASE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
The Board of Directors has authorized an amendment to the Company's 1996
Stock Option Plan (the "Plan"). The amendment will increase the number of shares
of Common Stock reserved for issuance upon exercise of options granted under the
Plan by 2,250,000 shares to a total of 3,000,000 shares.
The Board of Directors and management believe that the long term success of
the Company is dependent upon the ability of the Company to attract, motivate
and retain highly capable employees and that shareholder value is most
effectively enhanced by aligning the interests of employees with those of
shareholders. Accordingly, substantially all employees are provided with options
as a part of their compensation arrangement, with the number of options granted
based on position, level of compensation, special skills and experience brought
to the Company by the individual, and other factors considered important by
management. The Plan is intended to enable the Company to provide employees with
meaningful incentives and awards commensurate with their contributions and
competitive with those incentives and awards offered by other companies. The
amendment to the Plan will enable the Company to continue to grant the options
needed to attract, incent and retain employees.
Management determined the number of shares recommended to be reserved for
issuance under the Plan based on the number of shares reserved for issuance upon
exercise of option grants, subject to shareholder approval, to current
employees, and both the planned growth in employees and the potential future
grants to current employees.
In furtherance of aligning the interests of employees with those of
shareholders, it has been the Company's practice to structure the options to
reflect an exercise price for those options vesting in the initial year at the
fair market value on the date of grant and to increase the exercise prices for
those shares vesting in subsequent years, with the exercise price of options
vesting each year after the first being 25% higher than the exercise price of
the options vesting in the preceding year. Although this feature reduces the
value of the options granted, management believes that the shareholders are
entitled to earn a return on their investment in the Company before employees
participate in any increase in the stock price.
THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT THE AMENDMENT TO THE
1996 STOCK OPTION PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
SHAREHOLDERS AND RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
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Summary of the Plan
The Plan, which was adopted and approved by the Company's Board of
Directors and the shareholders in July and August 1996, respectively, provides
for the grant of options to acquire a maximum of 750,000 shares of the Company's
authorized but unissued Common Stock, subject to adjustments in the event of
certain changes in the Company's capitalization. The Board of Directors of the
Company has authorized, subject to shareholder approval at the Annual Meeting,
an additional 2,250,000 shares of Common Stock to be reserved for issuance upon
exercise of options granted under the Plan. Unless sooner terminated by the
Board of Directors, the Plan will terminate ten years after its adoption by the
Board of Directors of the Company.
The Plan permits the granting of incentive stock options ("ISOs") and
nonqualified stock options ("NSOs") at the discretion of a plan administrator
(the "Plan Administrator"). The Compensation Committee of the Board of Directors
serves as Plan Administrator except with respect to grants awarded to executive
officers of the Company, with respect to which the Board serves as Plan
Administrator. Subject to the terms of the Plan, the Plan Administrator
determines the terms and conditions of any options granted, including the
exercise price. Eligible optionees include any current or future employee,
officer, or agent of the Company or its subsidiaries. The Plan provides that the
Plan Administrator must establish an exercise price for ISOs that is not less
than the fair market value of the shares at the date of grant. If ISOs are
granted to persons owning more than 10% of the voting stock of the Company,
however, the Plan provides that the exercise price must be not less than 110% of
the fair market value of the shares at the date of grant and that the term of
the ISOs may not exceed five years. The term of all other options granted under
the Plan may not exceed ten years. At the time of grant, the Plan Administrator
determines when options become exercisable. Options are not transferable other
than by will or the laws of descent and distribution, and each option is
exercisable during the lifetime of the optionee only by such optionee. In the
event of a merger, consolidation or plan of exchange to which the Company is a
party or a sale of all or substantially all of the Company's assets, the Board
of Directors may elect one of the following alternatives: (i) outstanding
options remain in effect in accordance with their terms; (ii) outstanding
options may be converted into options to purchase stock in the surviving or
acquiring corporation in the transaction; or (iii) outstanding options may be
exercised within a 30-day period prior to the consummation of the transaction,
at which time they will automatically expire, and the Board may accelerate the
time frame for exercise of all options in full. Shares subject to options
granted under the Plan that have lapsed or terminated may again be made subject
to options granted under the Plan. Following termination of employment by the
Company other than for cause, resignation, retirement, disability or death, an
option holder has three months within which to exercise his options before the
options will automatically expire.
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Federal Income Tax Consequences
The following discussion is intended to provide an overview of the U.S.
federal income tax consequences under current law of participation in the Plan
and does not attempt to describe all potential tax consequences. Furthermore,
tax consequences are subject to change and an optionee's particular situation
may be such that some variation of the described rules applies. As a result,
optionees are advised to consult their own tax advisors as to the tax
consequences of participating in the Plan.
Certain options authorized to be granted under the Plan are intended to
qualify as ISOs for federal income tax purposes. An optionee will recognize no
income upon grant or exercise of an ISO, however the difference between the fair
market value of the option shares at the time of exercise and the exercise price
will be included in the calculation of the optionee's alternative minimum tax.
If an employee exercises an ISO and does not dispose of any of the option shares
within two years following the date of grant and within one year following the
date of exercise, then any gain realized upon subsequent disposition of the
shares will be treated as income from the sale or exchange of a capital asset.
If an employee disposes of shares acquired upon exercise of an ISO before the
expiration of either the one-year holding period or the two-year waiting period,
any amount realized will be taxable as ordinary compensation income in the year
of such disqualifying disposition to the extent that the lesser of the fair
market value of the shares on the exercise date or the fair market value of the
shares on the date of disposition exceeds the exercise price. The Company will
not be allowed any deduction for federal income tax purposes at either the time
of the grant or exercise of an ISO. Upon any disqualifying disposition by an
employee, the Company will generally be entitled to a deduction to the extent
the employee realizes ordinary income.
Certain options authorized to be granted under the Plan may be treated as
NSOs for federal income tax purposes. No income is realized by the grantee of an
NSO until the option is exercised. At the time of exercise of an NSO, the
optionee will realize ordinary compensation income, and the Company will
generally be entitled to a deduction in the amount by which the market value of
the shares subject to the option at the time of exercise exceeds the exercise
price. The Company is required to withhold on the income amount. Upon the sale
of shares acquired upon exercise of an NSO, the excess of the amount realized
from the sale over the market value of the shares on the date of exercise will
be taxable as income from the sale or exchange of a capital asset.
Section 162(m) of the Code limits to $1,000,000 per person the amount that
the Company may deduct for compensation paid to any of its most highly
compensated officers in any year. Under IRS regulations, in the event that any
such officer makes a disqualifying disposition of an ISO or exercises an NSO,
the Company's deduction can in certain circumstances be limited by the
$1,000,000 cap on deductibility.
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PROPOSAL THREE
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as
independent auditors of the Company for the fiscal year ending December 31,
1998, and has further directed that the selection of such auditors be submitted
for ratification by the shareholders at the Annual Meeting. The Company has been
advised by PricewaterhouseCoopers LLP that neither that firm nor any of its
associates has any relationship with the Company other than the usual
relationship that exists between independent public accountants and clients.
PricewaterhouseCoopers LLP will have one or more representatives at the Annual
Meeting who will have an opportunity to make a statement and will be available
to respond to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1998.
In the event that the votes cast in favor of ratification of the
appointment of PricewaterhouseCoopers LLP as independent auditors do not exceed
the votes cast against such action, the selection of other auditors will be
considered by the Board of Directors.
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended December 31, 1997 was
first mailed to the shareholders of the Company on or about July 29, 1998. The
Annual Report is not to be treated as part of the proxy solicitation material or
as having been incorporated by reference herein.
OTHER BUSINESS
The Board of Directors does not intend to present any business for action
at the meeting other than the election of directors and the proposals set forth
herein, nor does it have knowledge of any matters that may be presented by
others. If any other matter properly comes before the meeting, the persons named
in the accompanying form of proxy intend to vote in accordance with the
recommendations of the Board of Directors.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Any shareholder proposal intended for inclusion in the proxy materials for
the Company's 1999 Annual Meeting must be received at the principal executive
offices of the Company not later than January 6, 1999.
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For a proposal to be properly brought before a meeting of the shareholders
other than in the Proxy Statement, the shareholder making such proposal must
have given notice thereof in writing to the Secretary of the Company not less
than 60 nor more than 90 days in advance of the meeting or, if later, the tenth
business day following the first public announcement of the date of the meeting.
A shareholder's notice to the Secretary shall set forth as to each matter the
shareholder proposes to bring before the meeting (1) a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting, and the language of the proposal; (2) the name and
address, as they appear on the Company's books, of the shareholder proposing
such business; (3) the number of shares owned by the shareholder and the dates
upon which such shares were acquired; (4) a representation that the shareholder
is entitled to vote at such meeting; (5) a representation that the shareholder
intends to appear in person or in proxy at the meeting; and (6) any material
interest of the shareholder in such business. The Board of Directors or the
Chairman of such meeting may direct that any business not properly brought
before the meeting shall not be considered.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS WHO DO NOT
EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE URGED TO EXECUTE AND RETURN
THE ENCLOSED PROXY IN THE REPLY ENVELOPE PROVIDED HEREIN.
By Order of the Board of Directors
/s/ RICHARD A. RAISIG
Richard A. Raisig
Secretary
September 10, 1998
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Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
MICROVISION, INC.
October 15, 1998
Please Detach and Mail in the Envelope Provided
<PAGE>
A [ X ] Please mark your votes as in this example.
1. Election of Directors:
Nominees: Richard F. Rutkowski, Stephen R. Willey,
Richard A. Raisig, Walter J. Lack,
Robert A. Ratliffe, Richard A. Cowell,
Jacob Brouwer
[ ] FOR the nominees [ ] WITHHOLD AUTHORITY to vote for the nominees
Shareholders may withhold authority to vote for any particular nominee by lining
through or otherwise striking out the name of any nominee.
2. Proposal to amend the Company's 1996 Stock Option Plan to increase the number
of shares of common stock reserved for issuance upon the exercise of options.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to ratify the appointment of PriceWaterhouse Coopers LLP as
independent auditors of the Company for the fiscal year ending December 31,
1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Transaction of any business that properly comes before the meeting or any
adjournments thereof and matters incident to the conduct of the meeting. A
majority of the proxies or substitutes at the meeting may exercise all the
powers granted hereby.
The shares represented by this proxy will be voted as specified above, but if
no specification is made, this proxy will be voted FOR the election of
directors, FOR the amendment to the Stock Option Plan, and FOR the ratification
of the selection of PriceWaterhouse Coopers LLP as independent auditors of the
Company. The proxies may vote in their discretion as to other matters that may
come before the meeting.
Signature or Signatures: ___________________________ Date ________________, 1998
Note: Please date and sign as name is imprinted hereon, including designation as
executor, trustee, etc., if applicable. A corporation must sign its name
by the president or other authorized officer.
