<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
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-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:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
MICROVISION, INC.
----------------
NOTICE OF 2000 ANNUAL MEETING
JUNE 22, 2000
------------------------
Dear Microvision Shareholder:
The Annual Meeting of Shareholders of Microvision, Inc. (the "Company"),
will be held in the Crystal Room at the Washington Athletic Club (the "WAC"),
1325 Sixth Avenue, Seattle, Washington on June 22, 2000, at 9:00 a.m. for the
following purposes:
1. To elect ten directors to serve for the ensuing one year and until their
respective successors are duly elected;
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 approve the Independent Director Stock Option Plan and the initial
grant of options thereunder to our non-employee directors;
4. To ratify the appointment of PricewaterhouseCoopers LLP as our
independent auditors for the fiscal year ending December 31, 2000; and
5. To conduct any other business that may properly come before the meeting.
Parking is available at the WAC Parking Garage, located one block north of the
WAC, at 1409 Sixth Avenue.
If you were a shareholder of record on April 17, 2000, you will be entitled
to vote on the above matters. A list of shareholders as of the record date will
be available for shareholder inspection at the headquarters of the Company,
19910 North Creek Parkway, Bothell, Washington, during ordinary business hours,
from June 12, 2000, to the date of our Annual Meeting. The list also will be
available for inspection at the Annual Meeting.
At the meeting, you will have an opportunity to ask questions about the
Company and its operations. Regardless of the number of shares you own, your
vote is important. Please sign, date and return the proxy card in the enclosed
envelope at your earliest convenience.
Details of the business to be conducted at the meeting are more fully
described in the accompanying Proxy Statement.
We look forward to seeing you. Thank you for your ongoing support of and
interest in Microvision, Inc.
Sincerely,
[SIG]
Richard F. Rutkowski
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
April 28, 2000
Bothell, Washington
<PAGE>
MICROVISION, INC.
19910 NORTH CREEK PARKWAY
BOTHELL, WASHINGTON 98011
------------------------
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
JUNE 22, 2000
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Information about the annual meeting and voting............. 2
Information about Microvision common stock ownership........ 4
Information about directors and executive officers.......... 6
The Board of Directors.................................... 6
The Committees of the Board of Directors.................. 6
How we compensate directors............................... 6
The executive officers.................................... 7
How we compensate executive officers...................... 7
Report on executive compensation for 1999 by the
compensation committee.................................... 9
Stock performance graph..................................... 11
Certain relationships and related transactions.............. 11
Discussion of proposals recommended by the Board of
Directors................................................. 12
Proposal One: Election of directors....................... 12
Proposal Two: Amendment of Company's 1996 Stock Option
Plan to increase the number of shares authorized for
issuance................................................ 14
Proposal Three: Approval of Company's Independent Director
Stock Option Plan and the initial grant of options...... 16
Proposal Four: Ratification of independent auditors....... 18
Other business............................................ 18
Information about shareholder proposals..................... 18
Shareholder proposals..................................... 18
Director candidates....................................... 18
Additional information...................................... 19
Annual Report............................................. 19
Incorporation by reference................................ 19
</TABLE>
IMPORTANT
Whether or not you expect to attend the Annual Meeting in person, we urge
you to sign, date, and return the enclosed proxy card at your earliest
convenience. An addressed envelope for which no postage is required if mailed in
the United States is enclosed for that purpose. This will ensure the presence of
a quorum at the meeting. Promptly signing, dating and returning the proxy card
will save the Company the expenses and extra work of additional solicitation.
Sending in your proxy card will not prevent you from voting your shares at the
meeting if you desire to do so, as your Proxy is revocable at your option.
<PAGE>
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Q: WHY DID YOU SEND ME THIS PROXY STATEMENT?
A: We sent you this Proxy Statement and the enclosed proxy card because the
Board of Directors of the Company (the "Board" or the "Board of Directors")
is soliciting your proxy to vote at the 2000 Annual Meeting of Shareholders
(the "Annual Meeting"). The Annual Meeting will be held in the Crystal Room
at the Washington Athletic Club (the "WAC"), 1325 Sixth Avenue, Seattle,
Washington on June 22, 2000, at 9:00 a.m.
This Proxy Statement summarizes the information regarding the matters to be
voted upon at the Annual Meeting. You do not need to attend the Annual
Meeting, however, to vote your shares. You may simply complete, sign and
return the enclosed proxy card.
On April 17, 2000, our "record date" for determining shareholders entitled
to vote at the Annual Meeting, there were 11,584,275 shares of common stock
of the Company ("Common Stock") outstanding. If you owned shares of our
Common Stock at the close of business on the record date, you are entitled
to vote the shares you owned as of that date. We mailed this Proxy Statement
to all shareholders entitled to vote their shares at the Annual Meeting on
or about May 7, 2000.
Q: HOW MANY VOTES DO I HAVE?
A: You have one vote for each share of Common Stock that you owned on the
record date. The proxy card will indicate the number of shares.
Q: HOW DO I VOTE BY PROXY?
A: If you properly fill in your proxy card and deliver it to us before the
meeting commences on June 22, 2000, your "proxy" (one of the individuals
named on your proxy card) will vote your shares as you have directed. If you
sign the proxy card but do not make specific choices, your proxy will vote
your shares as recommended by the Board as follows:
- "FOR" electing all ten nominees for Director,
- "FOR" amendment of the Company's 1996 Stock Option Plan,
- "FOR" approval of the Company's Independent Director Stock Option Plan
and initial grant of options, and
- "FOR" ratifying PricewaterhouseCoopers LLP as the Company's independent
auditors for the fiscal year ending December 31, 2000.
If any other matter is presented, your proxy will vote in accordance with
his best judgment. At the time we printed this Proxy Statement, we knew of
no matters that needed to be acted on at the Annual Meeting other than those
discussed in this Proxy Statement.
Q: MAY MY BROKER VOTE FOR ME?
A: Under the rules of the National Association of Securities Dealers, if your
broker holds your shares in its "street" name, the broker may vote your
shares on routine matters even if it does not receive instructions from you.
Q: WHAT ARE ABSTENTIONS AND BROKER NON-VOTES?
A: An abstention represents the action by a shareholder to refrain from voting
"for" or "against" a proposal. "Broker non-votes" represent votes that could
have been cast on a particular matter by a broker, as a shareholder of
record, but that were not cast because the broker (i) lacked discretionary
voting authority on the matter and did not receive voting instructions from
the
2
<PAGE>
beneficial owner of the shares, or (ii) had discretionary voting authority
but nevertheless refrained from voting on the matter.
Q: MAY I REVOKE MY PROXY?
A: Yes. You may change your mind after you send in your proxy card by following
these procedures. To revoke your proxy:
1. Send in another signed proxy with a later date;
2. Send a letter revoking your proxy to Microvision's Secretary at the
Company's offices in Bothell, Washington; or
3. Attend the Annual Meeting and vote in person.
Q: HOW DO I VOTE IN PERSON?
A: If you plan to attend the Annual Meeting and vote in person, we will give
you a ballot when you arrive. If your shares are held in the name of your
broker, bank or other nominee, you must bring an account statement or letter
from that broker, bank or nominee. The account statement or letter must show
that you were the direct or indirect (beneficial) owner of the shares on
April 17, 2000, the record date for voting.
Q: WHAT IS THE QUORUM REQUIREMENT FOR THE MEETING?
A: The quorum requirement for holding the meeting and transacting business is a
majority of the outstanding shares entitled to be voted. The shares may be
present in person or represented by proxy at the meeting. Both abstentions
and broker non-votes are counted as present for the purpose of determining
the presence of a quorum.
Q: WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
A: The ten nominees for Director who receive the most votes will be elected.
So, if you do not vote for a nominee, or you indicate "withhold authority to
vote" for a nominee on your proxy card, your vote will not count either
"for" or "against" the nominee.
The amendment to the 1996 Stock Option Plan and the Independent Director
Stock Option Plan and the initial grant of options will be approved, and the
appointment of PricewaterhouseCoopers LLP as our auditors for fiscal year
2000 will be ratified, if the number of votes cast in favor of these
proposals exceed the number of votes cast against these proposals.
Abstentions and broker non-votes will not be counted "for" or "against" the
proposals and will have no effect on the outcome of the vote.
Q: IS VOTING CONFIDENTIAL?
A: We keep all the proxies, ballots and voting tabulations private as a matter
of practice. We only let our Inspector of Election examine these documents.
We will not disclose your vote to management unless it is necessary to meet
legal requirements. We will forward to management, however, any written
comments that you make on the proxy card or elsewhere.
Q: WHAT ARE THE COSTS OF SOLICITING THESE PROXIES?
A: The Company will pay all the costs of soliciting these proxies. We have
retained D.F. King & Co., Inc., a professional proxy solicitation firm, to
assist in the solicitation of proxies for a fee of approximately $7,500 plus
expenses for these services. In addition to the solicitation of proxies by
mail, our officers and employees also may solicit proxies by telephone, fax
or other electronic means of communication, or in person. We will reimburse
banks, brokers, nominees and other fiduciaries for the expenses they incur
in forwarding the proxy materials to you.
Q: WHO SHOULD I CALL IF I HAVE ANY QUESTIONS?
A: If you have any questions about the Annual Meeting, voting or your ownership
of Microvision Common Stock, please call Holly Ash, our Director of Investor
Relations, at (425) 415-6847. Ms. Ash's e-mail address is "[email protected]."
3
<PAGE>
INFORMATION ABOUT MICROVISION COMMON STOCK OWNERSHIP
Q: HOW MUCH STOCK IS OWNED BY 5% SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS?
A: The following table shows as of April 13, 2000, to the best of the Company's
knowledge, the number of shares of Common Stock beneficially owned by all
persons we know to beneficially own at least 5% of the Company's Common
Stock, the Company's directors, the executive officers named in the Summary
Compensation Table on page 10 of this Proxy Statement and all directors and
executive officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES(1) COMMON STOCK(2)
- ------------------------------------ ------------------- ---------------
<S> <C> <C>
Margaret Elardi(3) ....................................... 601,400 5.1%
3411 Las Vegas Blvd. South
Las Vegas, NV 89109
Richard F. Rutkowski(4) .................................. 505,992 4.2%
c/o Microvision, Inc.
19910 North Creek Parkway
Bothell, WA 98011
Stephen R. Willey(5) ..................................... 374,260 3.2%
c/o Microvision, Inc.
19910 North Creek Parkway
Bothell, WA 98011
Richard A. Raisig(6) ..................................... 177,000 1.5%
c/o Microvision, Inc.
19910 North Creek Parkway
Bothell, WA 98011
Walter Lack .............................................. 168,337 1.5%
c/o Engstrom, Lipscomb & Lack
10100 Santa Monica Blvd., 16th Floor
Los Angeles, CA 90067
Robert Ratliffe .......................................... 17,450 *
c/o Eagle River
2300 Carillon Point
Kirkland, WA 98033-7353
Richard Cowell ........................................... 8,200 *
7840 Virginia Oak Drive
Gainesville, VA 20155
Jacob Brouwer ............................................ 6,800 *
c/o Brouwer Claims
1200 West Pender Street, Suite 306
Vancouver, BC, Canada V6E2S9
William Owens ............................................ 4,800 *
c/o Teledesic
1445 120th Avenue NE
Bellevue, WA 98005
Dennis Reimer ............................................ 100 *
P.O. Box 889
Oklahoma City, OK 71301
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES(1) COMMON STOCK(2)
- ------------------------------------ ------------------- ---------------
<S> <C> <C>
All executive officers and
directors as a group (10 persons)......................... 1,864,339 15.1%
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "SEC") and generally includes voting
or investment power with respect to securities. Shares of Common Stock
subject to options or warrants that are currently exercisable or convertible
or may be exercised or converted within sixty days are deemed to be
outstanding and to be beneficially owned by the person holding these options
or warrants for the purpose of computing the number of shares beneficially
owned and the percentage of ownership of the person holding these
securities, but are not outstanding for the purpose of computing the
percentage ownership of any other person or entity.
(2) Percentage of Common Stock is based on 11,584,275 shares of Common Stock
outstanding as of April 13, 2000.
(3) Includes 100,000 shares issuable upon exercise of an option.
(4) Includes 354,703 shares issuable upon exercise of options.
(5) Includes 201,625 shares issuable upon exercise of options.
(6) Includes 143,717 shares issuable upon exercise of options.
Q: DID DIRECTORS, EXECUTIVE OFFICERS AND GREATER-THAN-10% SHAREHOLDERS COMPLY
WITH THE BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS UNDER SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 IN 1999?
A: Section 16(a) of the Securities Exchange Act of 1934 requires that our
directors, executive officers and greater-than-10% shareholders file reports
with the SEC relating to their initial beneficial ownership of the Company's
securities and any subsequent changes. They must also provide us with copies
of the reports.
Based on copies of reports furnished to us, we believe that all of these
reporting persons complied with their filing requirements for 1999, except
that Richard A. Raisig and Margaret Elardi each filed one late report (eight
and two transactions, respectively), Richard F. Rutkowski filed two late
reports (thirteen transactions) and Stephen R. Willey filed five late
reports (eighteen transactions).
5
<PAGE>
INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS
THE BOARD OF DIRECTORS
The Board of Directors oversees our business and affairs and monitors the
performance of management. In accordance with corporate governance principles,
the Board does not involve itself in day-to-day operations. The directors keep
themselves informed through discussions with the President, other key executives
and our principal advisers by reading the reports and other materials that we
send them regularly and by participating in Board and committee meetings. Our
directors hold office until their successors have been elected and duly
qualified unless the director resigns or by reason of death or other cause is
unable to serve in capacity of director.
The Board of Directors met five times during 1999. Each director, except for
Jacob Brouwer and William Owens, attended at least 75% of the meetings of the
Board and Board committees on which they serve. The Board also approved certain
actions by unanimous written consent.
THE COMMITTEES OF THE BOARD
The Board of Directors has an Audit Committee, a Compensation Committee and
a Finance Committee. There is no standing nominating or other committee that
recommends qualified candidates to the Board for election as directors. The
entire Board performs these duties.
THE AUDIT COMMITTEE. The Audit Committee reviews our accounting practices,
internal accounting controls, and interim and annual financial results, and
oversees the engagement of the Company's independent auditors.
Messrs. Cowell, Lack and Owens and Mrs. Elardi currently serve on the Audit
Committee, with Mr. Cowell serving as Chairman. The Audit Committee met twice
during 1999.
THE COMPENSATION COMMITTEE. The Compensation Committee makes decisions on
behalf of, and recommendations to, the Board regarding salaries, incentives and
other forms of compensation for directors, officers and other key employees, and
administers policies relating to compensation and benefits. The Compensation
Committee also serves as the Plan Administrator for our stock option plans. The
Compensation Committee's Report on Executive Compensation for 1999 is set forth
below beginning on page 9.
Messrs. Lack, Ratliffe, Rutkowski and Raisig currently serve as members of
the Compensation Committee, with Mr. Lack serving as Chairman. The Compensation
Committee met twice during 1999.
THE FINANCE COMMITTEE. The Finance Committee makes recommendations to the
Board on matters related to financing and our capitalization. Messrs. Rutkowski,
Lack, Brouwer and Raisig are the current members of the Finance Committee, with
Mr. Rutkowski serving as Chairman. The Finance Committee did not meet during
fiscal year 1999.
HOW WE COMPENSATE DIRECTORS
Pursuant to the 1996 Independent Director Stock Plan (the "Director Stock
Plan"), each non-employee director ("Independent Director") receives an annual
award of Common Stock ("Annual Award") 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 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 (pro rated as appropriate if the Independent Director is
elected or appointed to the Board at any time other than at the annual meeting
of shareholders). Shares issued pursuant to an Annual Award vest in full on the
earlier of one year from the date of grant or on the day prior to the next
annual meeting of shareholders subsequent to the date on which the Annual Award
was granted. If any shares awarded under the Director Stock
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<PAGE>
Plan are forfeited, such shares will again be available for issuance under the
Director Stock Plan. Unless earlier suspended or terminated by the Board, the
Director Stock Plan will continue in effect until the earlier of: (i) ten years
from the date on which it is adopted by the Board and (ii) the date on which all
shares available for issuance under the Director Stock Plan have been issued.
On February 16, 2000, the Board of Directors adopted, subject to shareholder
approval, an Independent Director Stock Option Plan (the "Director Stock Option
Plan"). Under the Director Stock Option Plan, each Independent Director will be
granted a nonstatutory option to purchase 5,000 shares of Common Stock on the
date on which he or she is elected, re-elected or appointed to the Board of
Directors. Options granted pursuant to the Director Stock Option Plan will vest
in full on the day prior to the date of the Company's Annual Meeting of
Shareholders next following the date of grant, provided the Independent Director
remains in service. The exercise price is equal to the average closing price of
the Company's Common Stock as reported on the Nasdaq National Market during the
ten trading days prior to the date of grant. The Director Stock Option Plan is
more fully described under Proposal Three: Approval of the Independent Director
Stock Option Plan and the initial grant of options, beginning on page 16.
Independent Directors also receive a fee of $1,000 per committee meeting
attended, excluding committee meetings held in conjunction with meetings of the
Board of Directors. All directors are reimbursed for reasonable travel and other
out-of-pocket expenses incurred in attending meetings of the Board of Directors.
THE EXECUTIVE OFFICERS
Executive officers are elected by our Board of Directors and hold office
until their successors are elected and duly qualified.
HOW WE COMPENSATE EXECUTIVE OFFICERS
The following table sets forth the compensation we paid to our Chief
Executive Officer and all other executive officers of the Company receiving
compensation in excess of $100,000 during the fiscal year ended December 31,
1999 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
------------------------------ ALL OTHER SECURITIES
NAME AND FISCAL SALARY BONUS(1) COMPENSATION(2) UNDERLYING
PRINCIPAL POSITION YEAR ($) ($) $ OPTIONS
- ------------------ -------- -------- -------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Richard F. Rutkowski.................. 1999 200,000 90,000 102,304 --
Chief Executive Officer 1998 175,000 105,000 -- --
and President 1997 145,000 100,000 -- 340,000
Stephen R. Willey..................... 1999 170,000 70,000 87,856 --
Executive Vice President 1998 150,000 88,000 -- 238,000
1997 130,000 85,000 -- --
Richard A. Raisig..................... 1999 150,000 60,000 74,915 --
Chief Financial Officer, 1998 130,000 64,000 -- --
and Vice President, 1997 120,000 60,000 -- 136,000
Operations
</TABLE>
- ------------------------
(1) Bonus amounts for 1998 include amounts paid in 1999 for services performed
in 1998. Bonus amounts for 1997 include amounts paid in 1998 for services
performed in 1997.
7
<PAGE>
(2) All Other Compensation amounts for 1999 include special bonuses of $100,000,
$80,000 and $70,000 awarded to Messrs. Rutkowski, Willey and Raisig,
respectively, in connection with the redemption of the company's publicly
traded warrants. The amounts also include forgiveness of $2,304, $7,856 and
$4,915 in interest for Messrs. Rutkowski, Willey and Raisig, respectively,
under the Company's Executive Option Exercise Loan Plan. For a description
of the Executive Option Exercise Loan Plan, see "Employment Agreements"
below.
AGGREGATED OPTION VALUES AS OF YEAR-END 1999.
The following table provides information regarding the aggregate number of
options exercised during the fiscal year ended December 31, 1999, by each of the
Named Executive Officers and the number of shares subject to both exercisable
and unexercisable stock options as of December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1999 AT DECEMBER 31, 1999*
SHARES ACQUIRED VALUE --------------------------- -----------------------------------
NAME ON EXERCISE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE ($) UNEXERCISABLE ($)
- ---- --------------- ------------ ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Rutkowski.... 15,000 194,250 466,517 140,000 9,720,915 567,600
Stephen R. Willey....... 98,125 1,096,003 279,750 154,000 6,154,038 988,680
Richard A. Raisig....... 21,250 196,500 159,750 45,000 2,632,138 294,750
</TABLE>
- ------------------------
* The value of unexercised in-the-money options is based on difference between
$30.25 (the fair market value of the Company's Common Stock on December 31,
1999, as reflected by the closing price of the Common Stock on the Nasdaq
National Market as of that date) and the exercise price of such options.
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
1997, 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 vest immediately 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. In January 2000, Mr. Rutkowski's base salary was adjusted to
$225,000. In April 2000, Mr. Rutkowski's employment agreement was extended to
December 31, 2004, and Mr. Rutkowski was granted options to purchase up to
300,000 shares of common stock for services to the Company during the period
January 1, 2002, through December 31, 2004. These options have ten year terms,
vest quarterly, and will vest immediately and become exercisable upon the
occurrence of certain events following a change in control.
Pursuant to his employment agreement with the Company effective October 1,
1998, Mr. Willey receives an annual base salary of $150,000, 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
1998, Mr. Willey received options to purchase up to an aggregate of 238,000
shares of Common Stock for service to the Company during the period October 1,
1998, through December 31, 2002. These options have ten-year terms, vest
quarterly, and will vest immediately and become exercisable upon the occurrence
of certain events following a change in control. Mr. Willey is entitled to all
benefits offered generally to the Company's employees. Upon termination without
cause of
8
<PAGE>
Mr. Willey's employment by the Company, Mr. Willey's stock options will continue
to vest and Mr. Willey will be entitled to a severance payment. In January 2000,
Mr. Willey's base salary was adjusted to $185,000. In April 2000, Mr. Willey's
employment agreement was extended to December 31, 2003, and Mr. Willey was
granted options to purchase up to 72,000 shares of Common Stock for service to
the Company during the period January 1, 2003, through December 31, 2003. These
options have ten year terms, vest quarterly, and will vest immediately and
become exercisable upon the occurrence of certain events following a change in
control.
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 1997, 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 vest immediately 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. In January 2000, Mr. Raisig's base
salary was adjusted to $170,000. In April 2000, Mr. Raisig's employment
agreement was extended to December 31, 2003, and Mr. Raisig was granted options
to purchase up to 204,000 shares of common stock for service to the Company
during the period January 1, 2001, through December 31, 2003. These options have
ten year terms, vest quarterly, and will vest immediately and become exercisable
upon the occurrence of certain events following a change in control.
The Company has adopted the Executive Option Exercise Loan Plan, under which
an executive officer may borrow an amount, cumulatively not to exceed three
times his annual salary, to exercise options to purchase the Company's Common
Stock. At the end of each year, the Company will forgive the interest that
accrues under the loan if the executive remains in the employ of the Company.
For 1999, the Company has forgiven $2,304, $7,856 and $4,915 in interest for
Messrs. Rutkowski, Willey and Raisig, respectively, under the plan. For
additional details regarding these transactions see "Certain Relationships and
Related Transactions" on page 11.
CERTAIN TAX CONSIDERATIONS RELATED TO EXECUTIVE COMPENSATION
As a result of Section 162(m) of the Internal Revenue Code of 1986, as
amended, 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.
REPORT ON EXECUTIVE COMPENSATION FOR 1999
BY THE COMPENSATION COMMITTEE
EXECUTIVE COMPENSATION PHILOSOPHY
The Compensation Committee of the Board of Directors is comprised of two
independent directors and two employee directors. The Compensation Committee is
responsible for evaluating compensation levels and compensation programs for
executives and for making appropriate compensation awards for executive
management.
The executive compensation program of the Company is designed to attract,
retain and motivate executive officers capable of leading the Company to meet
its business objectives, to enhance long term shareholder value and to reward
executive management based on contributions to both the short and long term
success of the Company. The Compensation Committee's philosophy is for the
Company to
9
<PAGE>
use compensation policies and programs that align the interests of executive
management with those of the shareholders and to provide compensation programs
that incentivize and reward both the short and long term performance of the
executive officers based on the success of the Company in meeting its business
objectives.
EXECUTIVE COMPENSATION COMPONENTS
BASE SALARY. Base salaries for executive officers are set at levels
believed by the Compensation Committee to be sufficient to attract and retain
qualified executive officers based on the stage of development of the Company
and the market practices of other companies. A change in base salary of an
executive officer is based on an evaluation of the performance of the executive,
prevailing market practices and of the performance of the Company as a whole. In
determining base salaries, the Compensation Committee not only considers the
short term performance of the Company, but also the success of the executive
officers in developing and executing the Company's strategic plans, developing
management employees and exercising leadership in the development of the
Company.
INCENTIVE BONUS. The Compensation Committee believes that a portion of the
total cash compensation for executive officers should be based on the Company's
success in meeting its short term performance objectives and contributions by
the executive officers that enable the Company to meet its long term objectives,
and has structured the executive compensation program to reflect this
philosophy. This approach creates a direct incentive for executive officers to
achieve desired short term corporate goals that also further the long term
objectives of the Company, and places a significant portion of each executive
officer's annual compensation at risk.
STOCK OPTIONS. The Compensation Committee believes that equity
participation is a key component of the Company's executive compensation
program. Stock options are awarded by the Compensation Committee to executive
officers primarily based on potential contributions to the Company's growth and
development and marketplace practices. These awards are designed to retain
executive officers and to motivate them to enhance shareholder value by aligning
the financial interests of executive officers with those of shareholders. Stock
options provide an effective incentive for management to create shareholder
value over the long term because the full benefits of the option grants cannot
be realized unless an appreciation in the price of the Company's common stock
occurs over a number of years.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Based on the executive compensation policy and components described above,
the Compensation Committee recommended the salary and incentive bonus received
by Richard F. Rutkowski, the President and Chief Executive Officer of the
Company for services rendered in fiscal 1999. Mr. Rutkowski received a base
salary of $200,000 for 1999 and also earned a bonus of $90,000 for the year. The
Company did not grant Mr. Rutkowski any stock options in 1999. Mr. Rutkowski
earned the bonus based upon achieving technical successes, progress made in the
staff and organizational development of the Company, and advances in the market
acceptance and commercialization of the Company's technology. Mr. Rutkowski also
was awarded a special bonus of $100,000 in connection with the redemption of the
Company's publicly traded warrants. The Company also forgave $2,304 in interest
on $36,000 owed to the Company by Mr. Rutkowski under the Company's Executive
Option Exercise Loan Plan.
COMPENSATION COMMITTEE
Walter J. Lack, Chairman
Robert Ratliffe
Richard F. Rutkowski
Richard A. Raisig
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STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on an
initial $100 investment in the Company's Common Stock since August 26, 1996, the
date the Company's Common Stock began trading on the Nasdaq National Market, to
two indices: the Nasdaq Stock Market Index and an index of peer companies
selected by the Company ("Peer Index"). The companies in the Peer Index are as
follows: Kopin Corporation, Planar Corporation, and Three-Five Systems, Inc. The
past performance of the Company's Common Stock is not an indication of future
performance. We cannot assure you that the price of the Company's Common Stock
will appreciate at any particular rate or at all in future years.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
COM-
PANY
<S> <C> <C> <C>
Nasdaq Stock Determined
Microvison Market Index Peer Index
8/27/96 100.00 100.00 100.00
12/31/96 76.19 112.36 111.53
12/31/97 266.67 136.67 134.38
12/31/98 247.62 190.83 145.39
12/31/99 576.19 354.15 636.78
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1999, Margaret Elardi, a director of the Company, purchased 5,000
shares of the Company's Series B Convertible Preferred Stock, Class 1 (the
"Series B-1 Stock") for $5,000,000 in cash. In May 1999, the Company redeemed
the Series B-1 Stock and issued 400,000 shares of common stock. In July 1999,
Mrs. Elardi exercised an option to purchase 1,600 shares of Series B Convertible
Preferred Stock, Class 2 (the "Series B-2 Stock") at $1,000 per share
convertible at a rate of $16.00 preferred stock per common share. In March 2000,
the Company redeemed the Series B-2 Stock and issued 100,000 shares of Common
Stock. The Company also granted Mrs. Elardi an option to purchase 1,920 shares
of Series B Convertible Preferred Stock, Class 3 (the "Series B-3 Stock") at
$1,000 per share at any time prior to October 14, 1999. The initial conversion
price for the Series B-3 Stock is $19.20 per share. In October 1999, the Company
amended the option to purchase 1,920 shares of the Series B-3 stock to extend
the expiration date of the option to June 30, 2000. In consideration of the
extension, Mrs. Elardi waived the right to receive dividends on the outstanding
Series B-2 convertible preferred stock. The terms of the option were also
amended to an option to purchase 100,000 shares of common stock at a price of
$19.20 per share. Terms of the transaction include certain rights for
Mrs. Elardi to have the common stock underlying the preferred stock registered
by the Company.
As of December 31, 1999, Mr. Rutkowski had five notes outstanding with a
cumulative balance of $36,000 under the Executive Option Exercise Loan Plan.
Mr. Willey had four notes outstanding with a
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cumulative balance of $170,000. Mr. Raisig had five notes outstanding with a
cumulative balance of $143,062.50. Each of these balances were the largest
aggregate amount of indebtedness outstanding at any time during the 1999 fiscal
year. The interest rates on the notes range from 4.64% to 6.20% per annum. Each
note is payable in full upon the earliest of (1) a fixed date ranging from
January 31, 2001, to December 31, 2004, depending on the option; (2) the sale of
all of the shares acquired with the note; or (3) within 90 days of the officer's
termination of employment. Each note is also payable on a pro rata basis upon
the partial sale of shares acquired with the note.
DISCUSSION OF PROPOSALS RECOMMENDED BY THE BOARD
PROPOSAL ONE: ELECTION OF DIRECTORS
Our Board of Directors will consist of ten members who will be elected at
the Annual Meeting to serve until their successors are duly elected and
qualified at the next annual meeting of shareholders, unless the director
resigns or by reason of death or other cause is unable to serve in the capacity
of director. Proxies received from shareholders, unless directed otherwise, will
be voted FOR the election of the nominees listed below.
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 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, and the number of shares of
Common Stock beneficially owned by each nominee as of April 13, 2000, is set
forth beginning on page 4.
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)(3)....... 44 Chief Executive Officer, President
and Director
Stephen R. Willey................ 46 Executive Vice President and
Director
Richard A. Raisig(1)(3).......... 52 Chief Financial Officer, Vice
President, Operations and Director
Jacob Brouwer(3)................. 73 Director
Richard A. Cowell(2)............. 52 Director
Margaret Elardi(2)............... 75 Director
Walter J. Lack(1)(2)(3).......... 52 Director
William A. Owens(2).............. 59 Director
Robert A. Ratliffe(1)............ 39 Director
Dennis Reimer.................... 60 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of the Finance Committee
RICHARD F. RUTKOWSKI has served as Chief Executive Officer of the Company
since September 1995, as President since July 1996, and as a director since
August 1995. From November 1992 to 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
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<PAGE>
applications in audio-video computing, consumer electronics and
telecommunications. From February 1990 to 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 served as the
Company's technical liaison to the University of Washington's HIT Lab. From
January 1994 to April 1996, Mr. Willey served as an outside consultant to the
Company through The Development Group, Inc. ("DGI"), a business and technology
consulting firm founded by Mr. Willey in 1985. As a principal of DGI,
Mr. Willey provided senior management consulting services to CREO Products,
Inc., an electro-optics equipment manufacturer, from June 1989 to
December 1992. Mr. Willey also co-founded an Internet services company, PRO.NET
Communications, Inc. 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. From June 1995 to August 1996,
Mr. Raisig was Chief Financial Officer of Videx Equipment Corporation, a
manufacturer and rebuilder of wire processing equipment for the cabling
industry. 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 1990, Mr. Raisig was a Senior Vice President of Dean Witter Reynolds, Inc.
Mr. Raisig is a Certified Public Accountant.
JACOB BROUWER has served as a director of the Company since 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, Grand Trunk Railway (USA), First Interstate Bank of Washington
and First Interstate Bank of Canada, The Insurance Corporation of British
Columbia, Air BC, Golden Tulip Hotels Ltd., Prime Resources Group Inc.
(Homestake), and Pioneer Life Assurance Company and former Chairman of the
International Financial Centre of British Columbia and Northwestel Inc.
Mr. Brouwer currently serves as a Director of Doman Industries Inc., a major
Canadian Forest Company, The Family Insurance Company, and Stox.com.Ltd., and
was recently appointed as a board member of the West Vancouver Police Commission
for the Province of British Columbia. He also serves on the Board of Governors
of numerous charitable organizations such as the YMCA, Vancouver Aquarium, the
Vancouver Bach Choir and the PC Canada Fund.
RICHARD A. COWELL has served as a director of the Company since August 1996.
Mr. Cowell is a Senior Associate at Booz Allen & Hamilton where he is involved
in advanced concepts development and technology transition, joint and service
experimentation, and the incorporation of simulation and models into education
and training programs for Department of Defense and other agencies. Prior to
joining Booz Allen 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 and received awards for a
number of documents relating to the potential future capabilities of various
services and agencies.
MARGARET ELARDI has served as a director of the Company since January 1999.
A long-time entrepreneur and philanthropist, Mrs. Elardi is a prominent real
estate developer with a distinguished career spanning more than 30 years in the
Nevada real estate and destination entertainment industry. Mrs. Elardi has
served as a director of Nevada State Bank and Community Bank of Nevada.
Mrs. Elardi instituted a first-of-its-kind scholarship program at the University
of Nevada Las Vegas, which guarantees a four-year tuition waiver for virtually
every high school valedictorian in the state.
13
<PAGE>
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. He is a member of the International Academy
of Trial Lawyers and an Advocate of the American Board of Trial Advocates.
Mr. Lack also serves as a director of HCCH Insurance Holdings, Inc., a
multinational insurance company listed on The New York Stock Exchange. He is a
director of SUPERGEN, Inc., a pharmaceutical company listed on NASDAQ, dedicated
to the development of products for the treatment of various cancers. Mr. Lack
has been involved in a number of start-up companies, both as an investor and as
a director.
WILLIAM A. OWENS has served as a director of the Company since October 1998.
Admiral Owens is the Vice Chairman and Co-Chief Executive Officer of Teledesic
LLC, a satellite communications network company. Prior to joining Teledesic,
Admiral Owens was President, Chief Operating Officer and Vice Chairman of the
Board of Science Applications International Corporation (SAIC), a diversified
high-technology research and engineering company. Prior to joining SAIC, Admiral
Owens was Vice Chairman of the Joint Chiefs of Staff, the nation's second
highest ranking military officer. From 1991 to 1993, Admiral Owens was deputy
chief of Naval Operations for Resources, Warfare Requirements and Assessments,
and from 1990 to 1991 served as commander of the U.S. Sixth Fleet. From 1988 to
1991, Admiral Owens served as senior military assistant to the Secretary of
Defense. In 1988 Admiral Owens was the director of the Office of Program
Appraisal for the Secretary of the Navy and in 1987 he served as commander of
Submarine Group Six, the Navy's largest submarine group.
ROBERT A. RATLIFFE has served as a director of the Company since July 1996.
Since 1996, Mr. Ratliffe has been Vice President and principal of Eagle River,
Inc., an investment company specializing in the telecommunications and
technology sectors, and Vice President of Communications for Nextel
Communications, Inc., a wireless telecommunications company. From 1986 to 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.
DENNIS J. REIMER has served as a director of the Company since February
2000. Mr. Reimer is the Director of the National Memorial Institute for the
Prevention of Terrorism. The Institute is dedicated to preventing, reducing and
mitigating the effects of terrorism with particular emphasis on the role of
first responders. General Dennis J. Reimer became the 33(rd) Chief of Staff,
U.S. Army on June 20, 1995. Prior to that, he was the Commanding General of the
United States Army, Forces Command, Fort McPherson, Georgia. During his military
career he has commanded soldiers from company to Army level. Mr. Reimer served
in a variety of joint and combined assignments and has served two combat tours
in Vietnam. He also served in Korea as the Chief of Staff, Combined Field Army
and Assistant Chief of Staff for Operations and Training, Republic of
Korea/United States Combined Forces Command. He served three other tours at the
Pentagon as aide-de-camp to the Army Chief of Staff, General Creighton Abrams,
as the Deputy Chief of Staff for Operations and Plans for the Army during Desert
Storm, and as Army Vice Chief of Staff.
PROPOSAL TWO: AMENDMENT TO COMPANY'S 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 2,500,000 shares to a total of 5,500,000 shares.
14
<PAGE>
The Board of Directors believes that the long term success of the Company is
dependent upon the ability of the Company to attract, motivate and retain
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 level of
compensation, position, 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,
motivate and retain employees.
The Board of Directors determined the estimated 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE
COMPANY'S 1996 STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES AUTHORIZED FOR
ISSUANCE.
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, provided 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. In 1998, the Board of Directors
and the shareholders amended the Plan to increase the number of shares of Common
Stock reserved for issuance to 3,000,000. The Board of Directors of the Company
has authorized, subject to shareholder approval at the Annual Meeting, an
additional 2,500,000 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 in July 2006.
The Plan permits the Company to grant 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. 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
15
<PAGE>
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.
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 federal income taxes, federal
Medicare taxes and applicable Social Security taxes 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.
PROPOSAL THREE: APPROVAL OF COMPANY'S INDEPENDENT DIRECTOR STOCK OPTION PLAN AND
INITIAL GRANT OF OPTIONS
On February 16, 2000, the Board of Directors adopted, subject to shareholder
approval, the Director Stock Option Plan. The Director Stock Option Plan
provides that each person who is an Independent Director will be granted a
nonstatutory stock option to purchase 5,000 shares of Common Stock on the date
on which he or she is elected, re-elected or appointed to the Board of Directors
of the Company. In adopting the Director Stock Option Plan, the Board awarded,
subject to shareholder approval, an option to purchase 5,000 shares of Common
Stock to then current Independent Directors.
16
<PAGE>
The Board of Directors believes that the Director Stock Option Plan allows the
Company to attract and retain the best available personnel as directors and
provides added incentive to such persons by increasing their ownership interest
in the Company. If the shareholders approve the Director Stock Option Plan at
the Annual Meeting, each Independent Director of the Company as of February 16,
2000, will receive an option to purchase 5,000 shares of Common Stock at an
exercise price of $36.39. Each Independent Director elected at the Annual
Meeting, and each Independent Director elected, re-elected or appointed to the
Board of Directors thereafter, will receive an option to purchase 5,000 shares
of Common Stock at an exercise price equal to the average closing price of the
Company's Common Stock as reported on the Nasdaq National Market during the ten
trading days prior to the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE COMPANY'S
INDEPENDENT DIRECTOR STOCK OPTION PLAN AND INITIAL GRANT OF OPTIONS.
SUMMARY OF THE PLAN
Under the Director Stock Option Plan, each Independent Director will be
granted a nonstatutory option to purchase 5,000 shares of Common Stock on the
date on which he or she is elected, re-elected or appointed to the Board of
Directors of the Company. Options granted pursuant to the Director Stock Option
Plan will vest in full on the day prior to the date of the Company's Annual
Meeting of Shareholders next following the date of grant, provided the
Independent Director remains in service. If a director ceases to be an
Independent Director for any reason other than death or disability before his or
her term expires, then the options issued for that term will be forfeited. If
any options awarded under the Director Stock Option Plan are forfeited, the
shares subject to such options will again be available for option grants under
the Director Stock Option Plan. If an Independent Director is unable to continue
his or her service as a director as a result of his or her disability or death,
all unvested options issued under the Director Stock Option Plan to such
Independent Director will become vested immediately as of the date of disability
or death. In the event of a merger, consolidation or plan of exchange to which
the Company is a party and in which the Company is not the survivor, or a sale
of all or substantially all of the Company's assets, any unvested options issued
under the Director Stock Option Plan will vest automatically upon the closing of
such transaction. No Independent Director may transfer any interest in unvested
options issued under the Director Stock Option Plan to any person other than to
the Company.
The exercise price of options issued under the Director Stock Option Plan
will be the average closing price of the Company's Common Stock as reported on
the Nasdaq National Market during the ten trading days prior to the date of
grant. The options will expire on the tenth anniversary of the date of grant.
The Board of Directors has reserved a total of 150,000 shares of Common
Stock for issuance under the Director Stock Option Plan. Unless earlier
suspended or terminated by the Board, the Director Stock Option Plan will
continue in effect until the earlier of: (i) ten years from the date on which it
was adopted by the Board, or (ii) the date on which all shares available for
issuance under the Director Stock Option Plan have been issued. The Director
Stock Option Plan may be administered by the Board of Directors or by a
committee of directors and officers of the Company, except that only the Board
of Directors may suspend, amend or terminate the Director Stock Option Plan. The
Director Stock Option Plan will be administered in accordance with Rule 16b-3
adopted under the Securities Exchange Act of 1934, and Section 162(m) of the
Internal Revenue Code and the regulations thereto.
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<PAGE>
PROPOSAL FOUR: RATIFICATION OF INDEPENDENT AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP as
independent auditors of the Company for the fiscal year ending December 31,
2000, and has further directed that the selection of such auditors be submitted
for ratification by the shareholders at the Annual Meeting. Microvision's Bylaws
do not require that our shareholders ratify the selection of
PricewaterhouseCoopers LLP as our independent auditors. The Company is seeking
shareholder ratification because its believes that it is a matter of good
corporate practice. The Company has been advised by PricewaterhouseCoopers LLP
that neither that firm nor any of its associates has any relationship with us
other than the usual relationship that exists between independent public
auditors 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, 2000.
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.
OTHER BUSINESS
We know of no other matters to be voted on at the Annual Meeting. If,
however, other matters are presented for a vote at the meeting, the proxy
holders (the individuals designated on the proxy card) will vote your shares
according to their judgment on those matters.
INFORMATION ABOUT SHAREHOLDER PROPOSALS
SHAREHOLDER PROPOSALS
In order for a shareholder proposal to be considered for inclusion in our
proxy statement for the 2001 Annual Meeting, the written proposal must be
received by the Company no later than December 21, 2000. Such proposals also
must comply with SEC regulations regarding the inclusion of shareholder
proposals in company sponsored proxy materials. The proposal also must contain
the information required in our Bylaws for shareholder proposals.
If a shareholder proposal is not included in our proxy statement for the
2001 Annual Meeting, it may be raised from the floor during the meeting if
written notice of the proposal is received by the Company not less than 60 nor
more than 90 days prior to the meeting or, if less than 60 days' notice of the
date of the meeting is given, by the 10th business day following the first
public announcement of the meeting.
DIRECTOR CANDIDATES
You may propose director candidates for consideration by our Board by
writing to us.
In addition, our Bylaws permit shareholders to nominate directors at a
shareholder meeting. In order to nominate a director at a shareholder meeting,
you must notify us not fewer than 60 nor more than 90 days in advance of the
meeting or, if later, by the 10th business day following the first public
announcement of the meeting. In addition, the proposal must contain the
information required in our Bylaws for director nominations.
If you wish to obtain a free copy of our Bylaws or make proposals or
nominate candidates for the Board, please contact Richard A. Raisig, Secretary,
Microvision, Inc., 19910 North Creek Parkway, Bothell, Washington 98011.
18
<PAGE>
ADDITIONAL INFORMATION
ANNUAL REPORT
The Company's Annual Report for the fiscal year ended December 31, 1999, was
first mailed to the shareholders of the Company with this Proxy Statement on or
about May 7, 2000. The Annual Report is not to be treated as part of the proxy
solicitation material or as having been incorporated by reference herein.
INCORPORATION BY REFERENCE
To the extent that this Proxy Statement is incorporated by reference into
any other filing by us under the Securities Act of 1933 or the Securities
Exchange Act of 1934, the sections of this Proxy Statement entitled "Report on
Executive Compensation for 1999 by the Compensation Committee" and "Stock
Performance Graph" will not be deemed incorporated, unless otherwise
specifically provided in such filing.
A copy of our Annual Report on Form 10-K for the fiscal year ended
December 31, 1999, as filed with the SEC, excluding exhibits, may be obtained by
shareholders without charge by written request to Holly Ash, Director of
Investor Relations, Microvision, Inc., 19910 North Creek Parkway, Bothell,
Washington 98011-3008, telephone (425) 415-6847 or may be accessed on the
Internet at WWW.SEC.GOV.
By Order of the Board of Directors,
[SIG]
Richard F. Rutkowski
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
April 28, 2000
Bothell, Washington
19
<PAGE>
MICROVISION, INC.
INDEPENDENT DIRECTOR STOCK OPTION PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Purpose..................................................................................................1
2. Administration...........................................................................................1
2.1 Procedures
2.2 Powers
2.3 Limited Liability
2.4 Securities Exchange Act of 1934
3. Stock Subject to This Plan...............................................................................2
4. Eligibility..............................................................................................2
4.1 Optionees
4.2 Subsidiaries
5. Independent Director Stock Options.......................................................................2
5.1 Awards
5.2 Exercise Price
5.3 Vesting
5.4 Nontransferability
5.5 Termination of Options
(a) Generally
(b) Disability or Death
(c) Failure to Exercise Option
6. Option Agreements........................................................................................3
7. Exercise.................................................................................................3
7.1 Procedure
7.2 Payment
7.3 Withholding
7.4 Conditions Precedent to Exercise
8. Foreign Qualified Grants.................................................................................4
-2-
<PAGE>
9. Holding Period...........................................................................................4
10. Adjustments On Changes in Capitalization.................................................................4
10.1 Stock Splits, Capital Stock Adjustments
10.2 Effect of Merger, Sale of Assets, Liquidation or Dissolution
(a) Mergers, Sale of Assets, Other Transactions
(b) Liquidation; Dissolution
10.3 Fractional Shares
10.4 Determination of Board to Be Final
11. Securities Regulations...................................................................................5
12. Amendment and Termination................................................................................6
12.1 Plan
12.2 Automatic Termination
13. Miscellaneous............................................................................................6
13.1 Time of Granting Options
13.2 No Status as Shareholder
13.3 Reservation of Shares
14. Effectiveness of This Plan...............................................................................6
</TABLE>
-3-
<PAGE>
1. PURPOSE. The purpose of the Independent Director Stock Option Plan (the
"Plan") is to provide a means by which Microvision, Inc. (the "Company"), may
attract and retain the best available personnel as non-employee directors
("Independent Directors") and to provide added incentive to such persons by
increasing their ownership interest in the Company.
2. ADMINISTRATION. This Plan shall be administered by the Board of Directors of
the Company (the "Board") or, if the Board shall authorize a committee to
administer this Plan, by such committee to the extent so authorized; provided,
however, that only the Board of Directors may suspend, amend or terminate this
Plan as provided in Section 12. The administrator of this Plan is referred to as
the "Plan Administrator."
2.1 PROCEDURES. The Board of Directors shall designate one member of the
Plan Administrator as chairman. The Plan Administrator may hold meetings at such
times and places as it shall determine. The acts of a majority of the members of
the Plan Administrator present at meetings at which a quorum exists, or acts
approved in writing by all Plan Administrator members, shall constitute valid
acts of the Plan Administrator.
2.2 POWERS. Subject to the specific provisions of this Plan, the Plan
Administrator shall have the authority, in its discretion: (a) to grant the
stock options described in Section 5; (b) to determine, in accordance with
Section 5.2 of this Plan, the exercise price per share of options; (c) to
interpret this Plan; (d) to prescribe, amend and rescind rules and regulations
relating to this Plan; (e) to determine the terms and provisions of each option
granted and, with the consent of the Optionee, modify or amend each option; (f)
to defer, with the consent of the Optionee, or to accelerate the exercise date
of any option; (g) to waive or modify any term or provision contained in any
option applicable to the underlying shares of Common Stock; (h) to authorize any
person to execute on behalf of the Company any instrument required to effectuate
the grant of an option; and (i) to make all other determinations deemed
necessary or advisable for the administration of this Plan. The interpretation
and construction by the Plan Administrator of any terms or provisions of this
Plan, any option issued hereunder or of any rule or regulation promulgated in
connection herewith and all actions taken by the Plan Administrator shall be
conclusive and binding on all interested parties. The Plan Administrator may
delegate administrative functions to individuals who are officers or employees
of the Company.
2.3 LIMITED LIABILITY. No member of the Board of Directors or the Plan
Administrator or officer of the Company shall be liable for any action or
inaction of the entity or body, or another person or, except in circumstances
involving bad faith, of himself or herself. Subject only to compliance with the
explicit provisions hereof, the Board of Directors and Plan Administrator may
act in their absolute discretion in all matters related to the Plan.
2.4 SECURITIES EXCHANGE ACT OF 1934. At any time that the Company has a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), this Plan shall be administered in
accordance with Rule 16b-3 adopted under the Exchange Act and Section 162(m) of
the Internal Revenue Code of 1986, as amended
<PAGE>
(the "Code"), and the regulations, proposed and final, thereunder, as all may be
amended from time to time.
3. STOCK SUBJECT TO THIS PLAN. Subject to adjustment as provided below and in
Section 10 hereof, the stock subject to this Plan shall be the common stock of
the Company (the "Common Stock"), and the total number of shares of Common Stock
to be delivered on the exercise of all options granted under this Plan shall not
exceed 150,000 shares as such Common Stock was constituted on the date on which
this Plan was first adopted by the Board of Directors as set forth on the last
page hereof. If any option granted under this Plan expires, is surrendered,
exchanged for another option, canceled or terminated for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
again be available for purposes of this Plan, including for replacement options
that may be granted in exchange for such surrendered, canceled or terminated
options. Shares issued on exercise of options granted under this Plan may be
subject to restrictions on transfer, repurchase rights or other restrictions as
determined by the Plan Administrator.
4. ELIGIBILITY.
4.1 OPTIONEES. The Plan Administrator may award options to any current or
future Independent Director of the Company or its subsidiaries. Any party to
whom an option is granted under this Plan is referred to as an "Optionee."
4.2 SUBSIDIARIES. As used in this Plan, the term "subsidiary" of a company
shall include any corporation in which such company owns, directly or
indirectly, at the time of the grant of an option hereunder, stock equal to 50%
or more of the total combined voting power of all classes of stock thereof.
5. INDEPENDENT DIRECTOR STOCK OPTIONS.
5.1 AWARDS. The Plan Administrator shall grant to each Independent Director
an option to purchase 5,000 shares of Common Stock on the date upon which he or
she is elected, re-elected or appointed to the Board of Directors of the
Company.
5.2 EXERCISE PRICE. The exercise price of options issued under the Plan
will be the average closing price of the Company's Common Stock as reported on
the Nasdaq National Market during the ten trading days prior to the date of
grant.
5.3 VESTING. To ensure that the Company will achieve the purposes of and
receive the benefits contemplated in this Plan, options granted pursuant to the
Plan will vest in full on the day prior to the date of the Company's Annual
Meeting of Shareholders next following the date of grant, provided the
Independent Director continues to serve as an Independent Director of the
Company as of such vesting date.
5.4 NONTRANSFERABILITY. Options granted under this Plan and the rights and
privileges
<PAGE>
conferred hereby may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than by will or by
the applicable laws of descent and distribution, shall not be subject to
execution, attachment or similar process, and shall be exercisable during the
Optionee's lifetime only by the Optionee. Any purported transfer or assignment
in violation of this provision shall be void.
5.5 TERMINATION OF OPTIONS.
(a) GENERALLY. If an Optionee ceases to be an Independent Director of
the Company for any reason other than death or disability before his or her term
expires, then the options issued for that term will terminate as of the date
such Optionee ceases to be an Independent Director.
(b) DISABILITY OR DEATH. If an Optionee is unable to continue his or
her service as an Independent Director of the Company as a result of his or her
death or permanent and total disability (as defined in Section 22(e)(3) of the
Code), all unvested options issued under the Plan to such Optionee will become
vested immediately as of the date of disability or death. In such an event, the
option may be exercised at any time before the earlier of (a) the expiration
date of the option or (b) the expiration of 12 months after the date of death by
the person or persons to whom such Optionee's rights under the option shall pass
by the Optionee's will or by the applicable laws of descent and distribution,
for up to the full number of shares of Common Stock covered thereby.
(c) FAILURE TO EXERCISE OPTION. To the extent that the option of any
deceased Optionee or of any Optionee whose service terminates is not exercised
within the period provided in Section 5.5(b) hereof, all rights to purchase
shares of Common Stock pursuant to such options shall cease and terminate.
6. OPTION AGREEMENTS. Options granted under this Plan shall be evidenced by
written stock option agreements (the "Option Agreements") that shall contain
such terms, conditions, limitations and restrictions as the Plan Administrator
shall deem advisable and that are consistent with this Plan. All Option
Agreements shall include or incorporate by reference the applicable terms and
conditions contained in this Plan.
7. EXERCISE.
7.1 PROCEDURE. Subject to Section 5.3 above, each option may be exercised
in whole or in part; provided, however, that no fewer than 100 shares (or the
remaining shares then purchasable under the option, if less than 100 shares) may
be purchased on any exercise of any option granted hereunder and that only whole
shares will be issued pursuant to the exercise of any option (the number of 100
shares shall not be changed by any transaction or action described in Section 10
unless the Plan Administrator determines that such a change is appropriate).
Options shall be exercised by delivery to the Secretary of the Company or his or
her designated
<PAGE>
agent of notice of the number of shares with respect to which the option is
exercised, together with payment in full of the exercise price and any
applicable withholding taxes.
7.2 PAYMENT. Payment of the option exercise price shall be made in full
when the notice of exercise of the option is delivered to the Secretary of the
Company or his or her designated agent and shall be by bank certified or
cashier's check or through irrevocable instructions to a stock broker to deliver
the amount of sales proceeds necessary to pay the appropriate exercise price and
withholding tax obligations, all in accordance with applicable governmental
regulations, for the shares of Common Stock being purchased. The Plan
Administrator may determine at any time before exercise that additional forms of
payment will be permitted.
7.3 WITHHOLDING. Before the issuance of shares of Common Stock on the
exercise of an option, the Optionee shall pay to the Company the amount of any
applicable federal, state or local tax withholding obligations. The Company may
withhold any distribution in whole or in part until the Company is so paid. The
Company shall have the right, subject to applicable law, to withhold such amount
from any other amounts due or to become due from the Company to the Optionee, or
to retain and withhold a number of shares having a market value not less than
the amount of such taxes required to be withheld by the Company, to reimburse it
for any such taxes and cancel (in whole or in part) any such shares so withheld.
7.4 CONDITIONS PRECEDENT TO EXERCISE. The Plan Administrator may establish
conditions precedent to the exercise of any option, which shall be described in
the relevant Option Agreement.
8. FOREIGN QUALIFIED GRANTS. Options under this Plan may be granted to
Independent Directors of the Company who reside in foreign jurisdictions. The
Board of Directors may adopt supplements to the Plan as needed to comply with
the applicable laws of such foreign jurisdictions and to give Optionees
favorable treatment under such laws; provided, however, that no award shall be
granted under any such supplement on terms more beneficial to such Optionees
than those permitted by this Plan.
9. HOLDING PERIOD. Unless otherwise determined by the Plan Administrator, if a
person subject to Section 16 of the Exchange Act exercises an option within six
months of the date of grant of the option, the shares of Common Stock acquired
on exercise of the option may not be sold until six months after the date of
grant of the option.
10. ADJUSTMENTS ON CHANGES IN CAPITALIZATION.
10.1 STOCK SPLITS, CAPITAL STOCK ADJUSTMENTS. The aggregate number of
shares for which options may be granted under this Plan, the number and class of
shares covered by each outstanding option and each such option shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a stock split, stock
dividend or consolidation of shares or any like capital stock adjustment.
<PAGE>
10.2 EFFECT OF MERGER, SALE OF ASSETS, LIQUIDATION OR DISSOLUTION.
(a) MERGERS, SALE OF ASSETS, OTHER TRANSACTIONS. 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 (each, a
"Transaction"), any unvested options issued under the Plan will vest
automatically upon the closing of the Transaction.
(b) LIQUIDATION; DISSOLUTION. If the Company is liquidated or
dissolved, options shall be treated in accordance with Section 10.2(a).
10.3 FRACTIONAL SHARES. If the number of shares covered by any option is
adjusted, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
10.4 DETERMINATION OF BOARD TO BE FINAL. All adjustments under this Section
10 shall be made by the Board of Directors, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.
11. SECURITIES REGULATIONS.
Shares of Common Stock shall not be issued with respect to an option
granted under this Plan unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, applicable laws of foreign
countries and other jurisdictions and the requirements of any quotation service
or stock exchange on which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance, including the availability of an exemption from registration for the
issuance and sale of any shares hereunder. The inability of the Company to
obtain, from any regulatory body having jurisdiction, the authority deemed by
the Company's counsel to be necessary for the lawful issuance and sale of any
shares hereunder or the unavailability of an exemption from registration for the
issuance and sale of any shares hereunder shall relieve the Company of any
liability with respect of the nonissuance or sale of such shares as to which
such requisite authority shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares of Common Stock are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any relevant
provision of the aforementioned laws. The Company may place a stop-transfer
order against any shares of Common Stock on the official stock books and records
of the Company, and a legend may be stamped on stock certificates to the effect
that the shares of Common Stock may not be pledged, sold or otherwise
transferred unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating that such transfer is not in violation of any
applicable law or
<PAGE>
regulation. The Plan Administrator may also require such other action or
agreement by the Optionees as may from time to time be necessary to comply with
the federal and state securities laws. THIS PROVISION SHALL NOT OBLIGATE THE
COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK THEREUNDER.
12. AMENDMENT AND TERMINATION.
12.1 PLAN. The Board of Directors may at any time suspend, amend or
terminate this Plan, provided that, the approval of the Company's shareholders
is necessary within twelve months before or after the adoption by the Board of
Directors of any amendment that will:
(a) increase the number of shares of Common Stock to be reserved for
the issuance of options under this Plan;
(b) permit the granting of stock options to a class of persons other
than those now permitted to receive stock options under this Plan; or
(c) require shareholder approval under applicable law, including
Section 16(b) of the Exchange Act.
12.2 AUTOMATIC TERMINATION. Unless earlier suspended or terminated by the
Board, the Plan will continue in effect until the earlier of: (i) ten years from
the date on which it was adopted by the Board, or (ii) the date on which all
shares available for issuance under the Plan have been issued. No option may be
granted after such termination or during any suspension of this Plan. The
amendment or termination of this Plan shall not, without the consent of the
Optionee, alter or impair any rights or obligations under any option theretofore
granted under this Plan.
13. MISCELLANEOUS.
13.1 TIME OF GRANTING OPTIONS. The date of grant of an option shall, for
all purposes, be the date on which the Independent Director is elected,
re-elected or appointed to the Board of Directors of the Company, and the
execution of an Option Agreement and the conditions to the exercise of an option
shall not defer the date of grant.
13.2 NO STATUS AS SHAREHOLDER. Neither the Optionee nor any party to which
the Optionee's rights and privileges under the option may pass shall be, or have
any of the rights or privileges of, a shareholder of the Company with respect to
any of the shares of Common Stock issuable on the exercise of any option granted
under this Plan unless and until such option has been exercised and the issuance
(as evidenced by the appropriate entry on the books of the
<PAGE>
Company or duly authorized transfer agent of the Company) of the stock
certificate evidencing such shares.
13.3 RESERVATION OF SHARES. The Company, during the term of this Plan, at
all times will reserve and keep available such number of shares of Common Stock
as shall be sufficient to satisfy the requirements of this Plan.
14. EFFECTIVENESS OF THIS PLAN. This Plan shall become effective on the date on
which it is adopted by the Board of Directors of the Company. No option granted
under this Plan to any Independent Director of the Company shall become
exercisable until the Plan is approved by the shareholders, and any option
granted before such approval shall be conditioned on and is subject to such
approval.
Adopted by the Board of Directors on February 16, 2000, and approved by the
shareholders on __________________.
<PAGE>
PROXY
MICROVISION, INC.
ANNUAL MEETING JUNE 22, 2000
PROXY SOLICITED BY BOARD OF DIRECTORS
THE ANNUAL MEETING OF SHAREHOLDERS OF MICROVISION, INC. WILL BE HELD
ON JUNE 22, 2000 AT 9:00 A.M., PACIFIC DAYLIGHT TIME, AT
THE WASHINGTON ATHLETIC CLUB, 1325 SIXTH AVENUE, SEATTLE, WASHINGTON.
The undersigned hereby appoints Richard F. Rutkowski and Richard A.
Raisig, and each of them, proxies with power of substitution to vote on
behalf of the undersigned all shares that the undersigned may be entitled to
vote at the annual meeting of shareholders of Microvision, Inc. (the
"Company") on June 22, 2000, and any adjournments thereof, with all powers
that the undersigned would possess if personally present, with respect to the
following matters proposed by the Board of Directors:
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE.)
- --------------------------------------------------------------------------------
- Please Detach and Mail in the Envelope Provided -
<PAGE>
Please mark
your votes / X /
as in this
example
FOR the WITHHOLD AUTHORITY
nominees to vote for the nominees
1. Election of / / / /
Directors:
Nominees: Richard F. Rutkowski
Stephen R. Willey
Richard A. Raisig
Jacob Brouwer
Richard A. Cowell
Margaret Elardi
Walter J. Lack
William A. Owens
Robert A. Ratliffe
Dennis Reimer
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 FOR AGAINST ABSTAIN
Stock Option Plan to increase the number / / / / / /
of shares of Common Stock authorized for
issuance upon exercise of options.
3. Proposal to approve the Independent Director FOR AGAINST ABSTAIN
Stock Option Plan and the initial grant of / / / / / /
options thereunder to non-employee directors.
4. Proposal to ratify the appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as independent / / / / / /
auditors of the Company for the fiscal
year ending December 31, 2000.
5. 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 THE PROXY WILL BE VOTED AS SPECIFIED ABOVE, BUT IF
NO SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, AND FOR THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS
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 , 2000
------------------ ----------------- --------
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.
- --------------------------------------------------------------------------------
- Please Detach and Mail in the Envelope Provided -
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
MICROVISION, INC.
JUNE 22, 2000
