<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
KOPIN CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
KOPIN CORPORATION
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
________________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
N/A
________________________________________________________________________
(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):
N/A
________________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
N/A
________________________________________________________________________
(5) Total fee paid:
N/A
________________________________________________________________________
[_] 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:
N/A
________________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
N/A
________________________________________________________________________
(3) Filing Party:
N/A
________________________________________________________________________
(4) Date Filed:
N/A
________________________________________________________________________
<PAGE>
KOPIN CORPORATION
April 14, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
KOPIN CORPORATION, to be held at 10:00 a.m. on May 22, 1997, at the offices of
Bingham, Dana & Gould, 150 Federal Street, Boston, Massachusetts (the
"Meeting").
The Notice of Meeting and the Proxy Statement that follow describe the
business to be considered and acted upon by the stockholders at the Meeting.
The Board of Directors of the Company encourages your participation in the
Company's electoral process and, to that end, solicits your proxy. You may give
your proxy by completing, dating and signing the Proxy Card and returning it
promptly in the enclosed envelope. You are urged to do so even if you plan to
attend the Meeting.
Sincerely,
/s/ JOHN C.C. FAN
JOHN C.C. FAN, Chairman
695 Myles Standish Boulevard, Taunton, Massachusetts 02780
<PAGE>
KOPIN CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 22, 1997
________________________
Notice is hereby given that the Annual Meeting (the "Meeting") of
Stockholders of Kopin Corporation (the "Company") will be held at the offices of
Bingham, Dana & Gould, 150 Federal Street, Boston, Massachusetts on May 22,
1997, at 10:00 a.m., local time, to consider and act upon the following matters:
1. A proposal to elect seven (7) directors of the Company to serve
until the next Annual Meeting of Stockholders and until their successors are
duly elected and qualified.
2. A proposal to ratify the amendment of the Company's 1992 Stock
Option Plan to increase the number of shares authorized for issuance under the
Plan.
3. A proposal to ratify the amendment of the Company's Director Stock
Option Plan to increase the number of shares authorized for issuance under the
Plan.
4. A proposal to ratify the appointment of Deloitte & Touche LLP as
independent public accountants of the Company for the current fiscal year.
5. Such other business as may properly come before the Meeting or any
adjournments thereof.
Stockholders of record at the close of business on March 28, 1997 are
entitled to notice of and to vote at the Meeting and any adjourned sessions
thereof. All stockholders are cordially invited to attend the Meeting.
By Order of the Board of Directors
/s/ JOHN C.C. FAN
JOHN C.C. FAN, Chairman
Taunton, Massachusetts
April 14, 1997
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE
BOARD OF DIRECTORS OF THE COMPANY, AND PROMPTLY RETURN IT IN THE PREADDRESSED
ENVELOPE PROVIDED FOR THAT PURPOSE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW ANY PROXY GIVEN BY
YOU AND VOTE YOUR SHARES IN PERSON.
<PAGE>
KOPIN CORPORATION
695 MYLES STANDISH BOULEVARD
TAUNTON, MASSACHUSETTS 02780
___________________
PROXY STATEMENT
___________________
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of KOPIN CORPORATION (the "Company") of proxies for
use at the Annual Meeting of Stockholders (the "Meeting") to be held on May 22,
1997, and at any adjourned session thereof. This proxy statement was first
mailed to stockholders on or about April 14, 1997. All solicitation expenses,
including costs of preparing, assembling and mailing proxy material, will be
borne by the Company.
The close of business on March 28, 1997 has been established as the
record date for determining the stockholders entitled to notice of and to vote
at the Meeting and at any adjournments thereof. As of the record date, there
were issued and outstanding and entitled to vote 10,938,831 shares of common
stock of the Company, par value $.01 per share ("Common Stock"). Holders of
shares of Common Stock are entitled to one vote for each share owned at the
record date on all matters to come before the Meeting and any adjournments
thereof. The presence in person or by proxy of holders of a majority of the
shares of Common Stock entitled to vote at the Meeting constitutes a quorum for
the transaction of business.
Proxies in the form enclosed are solicited by the Board of Directors
of the Company. Any proxy may be revoked at any time before it is voted by
written notice, received by the Secretary of the Company prior to the Meeting,
or by revocation of a written proxy by request in person at the Meeting; but if
not so revoked, the shares represented by such proxy will be voted.
All proxies will be voted in accordance with the instructions
contained therein. If no choice is specified for one or more proposals in a
proxy submitted by or on behalf of a stockholder, the shares represented by such
proxy will be voted in favor of such proposals and in the discretion of the
named proxies with respect to any other proposals which may properly come before
the Meeting. If, in a proxy submitted on behalf of a stockholder by a person
acting solely in a representative capacity, the proxy is marked clearly to
indicate that the shares represented thereby are not being voted with respect to
one or more proposals, then such proxies will be counted as present at the
Meeting for purposes of establishing a quorum at the Meeting, but such "non-
votes" will have no effect on the voting on such proposals. Proxies submitted
with abstentions as to one or more proposals will be counted as present for
purposes of establishing a quorum at the Meeting, and such abstentions will have
the effect of a vote against such proposals.
The Board of Directors does not know of any matters which will be
brought before the Meeting other than those matters specifically set forth in
the notice of Meeting (the "Notice"). However, if any other matter properly
comes before the Meeting, it is intended that the persons named in the enclosed
form of Proxy, or their substitutes acting thereunder, will vote on such matter
in accordance with their best judgment.
<PAGE>
PROPOSAL I
ELECTION OF DIRECTORS
The Company's By-laws provide that the Board shall consist of not less
than three nor more than thirteen directors. The Board has fixed the number of
directors at seven. Unless authority is withheld, it is the intention of the
persons voting under the enclosed proxy to vote such proxy in favor of the
election of each of the nominees to be directors of the Company until the 1998
Annual Meeting of Stockholders and until their successors are elected and
qualified. If any nominee is unavailable, such votes will be cast either for a
substitute nominee or to fix the number of directors at a lesser number. The
current Board has no reason to expect that any of the nominees will be
unavailable. As a result of Anthony B. Evnin's decision not to stand for
reelection to the Board, the Board intends to reduce its size from eight to
seven directors until such time as a suitable candidate to serve as an eighth
director is identified.
The following table sets forth certain information with respect to the
persons who have been nominated to serve as directors of the Company. All of
such persons are presently directors of the Company.
<TABLE>
<CAPTION>
SERVED AS POSITION AND OFFICES
NAME AGE DIRECTOR SINCE WITH THE COMPANY
- ---- --- -------------- --------------------
<S> <C> <C> <C>
John C.C. Fan.................... 53 1984 President, Chief
Executive Officer,
Director and
Chairman of the
Board
David E. Brook................... 56 1984 Secretary and
Director
Andrew H. Chapman (1)............ 42 1985 Director
Morton Collins (1)............... 61 1985 Director
Chi Chia Hsieh................... 56 1995 Director
Vallobh Vimolvanich.............. 56 1995 Director
Michael A. Wall (2).............. 68 1984 Director
- -------------------
</TABLE>
(1) Member of the Audit Committee of the Board of Directors.
(2) Member of the Compensation Committee of the Board of Directors.
BACKGROUND OF NOMINEES FOR DIRECTOR
John C.C. Fan, President, Chief Executive Officer, Chairman of the Board of
Directors. Dr. Fan, a founder of the Company, has served as Chief Executive
Officer and Chairman of the Board of Directors of the Company since its
organization in April 1984. He has also served as President of the Company
since July 1990.
David E. Brook, Secretary and Director. Mr. Brook is a founder of the
Company and has served as a Director since 1984. Mr. Brook is the founder and
senior partner of the patent law firm of Hamilton, Brook, Smith & Reynolds in
Lexington, Massachusetts.
2
<PAGE>
Andrew H. Chapman, Director. Mr. Chapman has served as a Director of the
Company since 1985. Mr. Chapman is a Managing Director of The Vertical Group, a
private investment management company, a position in which he has served since
its formation in 1989. From 1994 to 1996, Mr. Chapman also served as Executive
Vice President of Integrated Network Corporation, a privately held
telecommunications equipment company, of which he has also served as a director.
Morton Collins, Director. Mr. Collins has served as a Director of the
Company since 1985. Mr. Collins has been a General Partner of DSV Partners III,
a venture capital limited partnership, since 1981, and a General Partner of DSV
Management Ltd. since 1982. Since 1985, DSV Management Ltd. has been the
General Partner of DSV Partners IV, a venture capital limited partnership. Mr.
Collins is also a director of Tandem Computers, Inc., Liposome Company, Inc.,
ThermoTrex Corporation and a number of privately held companies.
Chi Chia Hsieh, Director. Dr. Hsieh has served as a Director of the
Company since December 1995. Dr. Hsieh has been the President of Chia Yang
Telecommunications Limited, a corporation organized under the laws of the
Kingdom of Thailand and affiliated with Telecom Holding Co., Ltd. Dr. Hsieh is
one of Telecom Holding Co., Ltd.'s designees to the Company's Board of
Directors.
Vallobh Vimolvanich, Director. Dr. Vimolvanich has served as a Director of
the Company since December 1995. Dr. Vimolvanich has been an executive Director
of Telecom Asia Corporation Public Company Limited, a telecommunications company
listed on the Stock Exchange of Thailand, since 1991. Dr. Vimolvanich has also
served as a director and President of Telecom Holding Co., Ltd., a subsidiary
and investment arm of Telecom Asia, since 1992. Dr. Vimolvanich also serves as a
director of several privately held telecommunications companies including
companies affiliated with Telecom Asia. Dr. Vimolvanich is one of Telecom
Holding Co., Ltd.'s designees to the Company's Board of Directors.
Michael A. Wall, Director. Mr. Wall is a founder of the Company and has
served as a Director since 1984. Mr. Wall is a director of Sugen, Inc. and a
director and Chairman of Alkermes, Inc. Mr. Wall has founded, been a director
of and/or managed over a dozen high technology firms in the last three decades,
including Centocor, Inc. and Flow Laboratories, Inc.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1996 (the "1996 Fiscal Year"),
the Board held seven meetings. During the 1996 Fiscal Year, each incumbent
director attended at least 75% of the aggregate of the total number of meetings
of the Board and the total number of meetings held by all committees on which
the individual director served.
The Audit Committee presently is composed of two directors, Andrew H.
Chapman and Morton Collins. Responsibilities of this committee include
engagement of independent auditors, review of audit fees, supervision of matters
relating to audit functions, review and setting of internal policies and
procedure regarding audits, accounting and other financial controls, and
reviewing related party transactions. During the 1996 Fiscal Year, the Audit
Committee met two times.
During 1996 the Compensation Committee was composed of two directors,
Anthony B. Evnin and Michael A. Wall. Responsibilities of this committee
include approval of remuneration arrangements for executive officers of the
Company, review and approval of compensation plans relating to executive
officers and directors, including grants of stock options under the Company's
1992 Stock Option Plan, and other benefits and general review of the Company's
employee compensation policies. None of the members of the Compensation
Committee has been an employee of the Company at any time and none has any
relationship with either the Company or the Company's officers requiring
disclosure under applicable
3
<PAGE>
regulations of the Securities and Exchange Commission. During the 1996 Fiscal
Year, the Compensation Committee met two times.
The Board recommends that the shareholders vote "FOR" the proposed nominees
to the Board and the enclosed proxy will be so voted unless a contrary vote is
indicated. The directors shall be elected by a plurality of the votes cast by
the holders of Common Stock entitled to vote at the meeting.
EXECUTIVE COMPENSATION
The table below sets forth certain compensation information for the fiscal
years ended 1996, 1995 and 1994 with respect to the Company's Chief Executive
Officer and the four other most highly paid (in 1996) executive officers of the
Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------------------------------- ALL OTHER
NAME AND ------------------- RESTRICTED STOCK SECURITIES UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS($) AWARD(S) ($) OPTIONS (#) ($)
- ------------------------- ---- ---------- -------- ------------------- ------------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John C.C. Fan, 1996 235,000 50,000 130,000(2) 2,876(1)
Chairman, CEO and 1995 200,000 50,000 134,000(2) 1,386(1)
President 1,500(F)(3)
1994 190,000 7,500 85,000 2,958(1)
Thomas G. Frederick, 1996 161,539 -- 296,875(4) 90,000(5) 22,308(9)
Chief Operating Officer
Paul J. Mitchell, 1996 155,000 25,000 67,500(6) 2,373(1)
Treasurer and CFO 1995 138,000 25,000 69,600(6) 1,955(1)
1,500(F)(3)
1994 128,000 7,000 45,000 1,993(1)
Jeffrey J. Jacobsen, 1996 233,615 15,000 23,500(7) 0
Vice President - 1995 224,390 0 15,000 0
Business Development 1,500(F)(3)
1994 205,580 0 24,000 0
Matthew J. Micci, 1996 196,485 0 23,500(8) 2,933(1)
Vice President - 1995 131,790 0 21,400(8) 1,733(1)
Sales 1994 115,622 0 10,000 1,810(1)
- --------------
</TABLE>
(1) Amounts represent the Company's matching contributions under the Company's
401(k) Plan.
(2) Includes options to purchase 45,000 shares (1996) and 64,000 shares (1995)
of the Company's common stock granted in exchange for certain outstanding
options previously granted to Dr. Fan. See "Options Repriced".
(3) Represents options to purchase shares of common stock of Forte
Technologies, Inc. ("Forte"), the Company's majority-owned subsidiary
(designated in the tables as "F").
(4) Represents a restricted stock award vesting as follows: 40% of the shares
awarded vest on the second anniversary date of the award and 20% of the
remaining shares vest on each of the third, fourth and fifth anniversary
dates of the award, provided such person continues to be then employed by
the Company.
4
<PAGE>
(5) Includes options to purchase 90,000 shares of the Company's common stock
granted in exchange for certain outstanding options previously granted to
Mr. Frederick. See "Options Repriced".
(6) Includes options to purchase 22,500 shares (1996) and 29,600 shares (1995)
of the Company's common stock granted in exchange for certain outstanding
options previously granted to Mr. Mitchell. See "Options Repriced".
(7) Includes options to purchase 13,500 shares of the Company's common stock
granted in exchange for certain outstanding options previously granted to
Mr. Jacobsen. See "Options Repriced".
(8) Includes options to purchase 13,500 shares (1996) and 6,400 shares (1995)
of the Company's common stock granted in exchange for certain outstanding
options previously granted to Mr. Micci. See "Options Repriced".
(9) Amount represents $2,308 of the Company's matching contributions under the
Company's 401(k) Plan and $20,000 paid to Mr. Frederick in connection with
his hire as Chief Operating Officer of the Company.
The following two tables disclose, for the Chief Executive Officer and the
other named executives, information regarding stock options granted or exercised
during, or held at the end of, 1996 pursuant to the Company's stock option
plans.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES
UNDERLYING GRANTED TO OF STOCK PRICE
OPTIONS EMPLOYEES EXERCISE APPRECIATION
GRANTED IN PRICE EXPIRATION FOR OPTION TERM (4)
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- --------------------- ----------- ----------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
John C. C. Fan 15,000(1) 1.3 10.00 12/16/06 94,350 239,100
70,000(2) 6.2 7.88 11/08/06 347,200 879,200
45,000(3) 4.0 8.25 12/21/05 233,550 591,750
Thomas G. Frederick 90,000(3) 7.8 8.25 3/04/06 467,100 1,183,500
Paul J. Mitchell 10,000(1) .9 10.00 12/16/06 62,900 159,400
35,000(2) 3.1 7.88 11/08/06 173,600 439,600
22,500(3) 2.0 8.25 12/21/05 116,775 295,875
Jeffrey J. Jacobsen 10,000(1) .9 10.00 12/16/06 62,900 159,400
13,500(3) 1.2 8.25 12/21/05 70,065 177,525
Matthew J. Micci 10,000(1) .9 10.00 12/16/06 62,900 159,400
13,500(3) 1.2 8.25 12/21/05 70,065 177,525
</TABLE>
_____________
(1) Options granted under the Company's 1992 Stock Option Plan. Exercises of
one-fourth of the options to purchase shares are permitted on the first,
second, third, and fourth anniversary dates of the grant provided such
person is employed by the Company. Such options are not transferable, other
than by will or the laws of descent and distribution and to certain
immediate family members, trusts for the benefit of such family members and
partnerships in which such family members are partners.
5
<PAGE>
(2) Options granted under the Company's 1992 Stock Option Plan. Such options
are exercisable one year from the date of grant or upon the attainment of
certain corporate milestones. Such options are not transferable, other than
by will or the laws of descent and distribution and to certain immediate
family members, trusts for the benefit of such family members and
partnerships in which such family members are partners.
(3) Consists of options granted on November 8, 1996 in exchange for outstanding
options. The new options represent the right to purchase 10% fewer shares
than the options surrendered in exchange. The options vest ratably on an
annual basis over a four-year period, which vesting commenced December 21,
1996.
(4) The potential realizable value assumes that the stock price increases from
the date of grant until the end of the option term (typically 10 years) at
the annual rate of 5% and 10%. The assumed annual rates of appreciation are
computed in accordance with the rules and regulations of the Securities and
Exchange Commission. No assurance can be given that the annual rates of
appreciation assumed for the purposes of the table will be achieved, and
actual results may be lower or higher. The closing price of the Common
Stock on December 31, 1996 was $11.875.
6
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/96 (#) 12/31/96 ($)
SHARES ACQUIRED VALUE REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) (1)($) UNEXERCISABLE UNEXERCISABLE(2)
- --------------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
John C.C. Fan N/A N/A 137,583/191,417 120,094/511,282
1,500(F)/ -- N/A
Thomas G. Frederick N/A N/A -- /90,000 -- /326,250
Paul J. Mitchell N/A N/A 71,992/98,108 65,240/258,997
1,500(F)/ -- N/A
Jeffrey J. Jacobsen 2,500 28,125 46,875/36,625 29,109/72,328
1,500(F)/ -- N/A
Matthew J. Micci N/A N/A 10,509/29,391 24,009/69,628
</TABLE>
_______________
(1) Value realized is based on the closing price of the Common Stock on the
date of exercise minus the exercise price.
(2) Value of the Common Stock is based on the closing sale price of the Common
Stock as of December 31, 1996 ($11.875) minus the exercise price. Value of
Forte common stock is not readily ascertainable since the securities of
that company are not publicly traded.
7
<PAGE>
OPTIONS REPRICED
The following table provides information related to the repricing of certain
options held by executive officers of the Company which occurred during the
fiscal years ended December 31, 1996 and 1995. Such repricings are the only
instances during the last ten fiscal years in which the exercise price of any
option granted by the Company to any of its executive officers have been
repriced. The Company has never granted, and thus has never repriced, any stock
appreciation rights.
TEN YEAR OPTION REPRICING
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f) (g)
LENGTH
OF
NUMBER ORIGINAL
OF OPTION TERM
SECURITIES MARKET PRICE EXERCISE REMAINING
UNDERLYING OF STOCK AT PRICE AT AT
OPTIONS TIME OF TIME OF DATE OF
REPRICED OR REPRICING OR REPRICING OR NEW REPRICING OR
AMENDED AMENDMENT AMENDMENT EXERCISE AMENDMENT
NAME DATE (#) ($) ($) PRICE ($) (YEARS)
- --------------------- ------- ----------- ------------ ------------ -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
John C.C. Fan 11/8/96 50,000(1) 8.25 14.25 8.25 9.08
7/18/95 55,000(2) 10.75 17.25 10.75 8.42
7/18/95 25,000(2) 10.75 13.75 10.75 8.75
Thomas G. Frederick 11/8/96 100,000(1) 8.25 11.88 8.25 9.33
Paul J. Mitchell 11/8/96 25,000(1) 8.25 14.25 8.25 9.08
7/18/95 25,000(2) 10.75 17.25 10.75 8.42
7/18/95 12,000(2) 10.75 13.75 10.75 8.75
Matthew J. Micci 11/8/96 15,000(1) 8.25 14.25 8.25 9.08
7/18/95 4,000(2) 10.75 13.25 10.75 7.42
7/18/95 4,000(2) 10.75 17.25 10.75 8.42
Jeffrey J. Jacobsen 11/8/96 15,000(1) 8.25 14.25 8.25 9.08
</TABLE>
_____________
(1) Option indicated was exchanged for option to purchase 10% fewer shares.
(2) Option indicated was exchanged for option to purchase 20% fewer shares.
8
<PAGE>
EXECUTIVE EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with Dr. John C.C. Fan
pursuant to which the Company has agreed to employ Dr. Fan as Chief Executive
Officer. The agreement provides for the assignment of all inventions made by
Dr. Fan while in the employ of the Company and includes a covenant by Dr. Fan
not to compete with the Company during his employment and for up to two years
thereafter. The agreement expires February 20, 1998. Dr. Fan's salary is to be
determined each year by the Board of Directors. At the end of 1996 the Board of
Directors set Dr. Fan's annual salary for 1997 at $260,000.
DIRECTOR COMPENSATION
In March 1994 the Board of Directors approved compensation for outside
directors of $1,000 per meeting attended, including any special meeting or
committee meeting not held on the same day as a regularly scheduled meeting of
the Board of Directors. The Company also pays expenses for attendance at
meetings of the Board of Directors and committees thereof.
CERTAIN TRANSACTIONS
On October 16, 1995, the Company made a demand loan, secured by 5,000 shares
of the Company's Common Stock, in the original principal amount of $75,000 to
Jeffrey J. Jacobsen, Vice President, Business Development at an annual rate of
interest of 10.25%. As of March 15, 1996, $67,500 was outstanding under this
loan.
9
<PAGE>
COMPENSATION COMMITTEE REPORT
ON
EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY
The Company's executive compensation is based upon three primary components:
base salary, annual bonuses, and grants of stock options. Each component is
intended to serve the overall compensation philosophy of the Company. In this
respect, the Compensation Committee (the "Committee") believes that compensation
should reflect the value created for shareholders while supporting the Company's
short and long term strategic goals. Compensation programs should reflect and
promote the Company's values and reward individuals for outstanding
contributions to the Company's success. Also, short and long term compensation
play a critical role in attracting and retaining qualified executives.
OVERALL OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAM
The objectives of the executive compensation program are to align compensation
with business objectives and individual performance, and to enable the Company
to attract, retain and reward executive officers who contribute to the long term
success of the Company. The Company's executive compensation philosophy is
based on the following principles:
. Competitive and Fair Compensation
The Company is committed to providing an executive compensation program that
helps attract and retain highly qualified executives. To ensure that
compensation is competitive, the Committee compares the Company's compensation
practices with its general understanding of those of companies in similar
industries and at a similar stage of development. The Company also seeks to
achieve a balance of the compensation paid to a particular individual and the
compensation paid to other executives both inside the Company and at comparable
companies.
. Performance
Executive officers are rewarded based upon corporate and individual performance.
Corporate performance is evaluated by reviewing the extent to which strategic
and business plan goals are met. Individual performance is evaluated by
reviewing attainment of specified individual objectives and the degree to which
teamwork and Company values are fostered.
In evaluating each executive's performance, the Company generally conforms to
the following process:
. Prior to the beginning of the year, Company and individual goals and
objectives are set.
. Near the end of the year, the executive's manager, or, in the case of the
Chief Executive Officer, the Compensation Committee, evaluates accomplishment of
the executive's goals and objectives and his contributions to the Company.
. The executive's performance is then compared with peers within the Company.
. The comparative results, combined with the Committee's general
understanding as to comparative compensation practices of similar companies at a
similar stage of development, are then used to determine salary, bonus and stock
option compensation levels.
10
<PAGE>
COMPENSATION PROGRAM COMPONENTS
Annual compensation for the Company's executives consists of three elements -
salary, cash bonus, and stock options. Executives are also entitled to
participate in the same benefit plans available to other employees. Base
salaries are targeted to be moderate, yet competitive in relation to salaries
commanded by those in similar positions with other companies. The Compensation
Committee sets the base salary for executives by reviewing compensation for
competitive positions in the market and the historical compensation levels of
the executives. Individual salary determinations are based on experience, levels
of responsibility, sustained performance and comparison to peers inside and
outside the Company. The Compensation Committee determined that for 1997 an
average 5% increase in base salary would be appropriate as a cost of living
adjustment.
The Company's officers are eligible to receive bonuses in the discretion of
the Compensation Committee based primarily on the attainment of certain goals
and objectives and the executive's contributions to the Company. Bonus awards
to executives for 1996 reflected attainment of certain of the corporate
performance goals for the year including development of various strategic
corporate relationships, new product development, continued progress in the
commercialization of the Company's technology and increased revenues. The
Committee gave special consideration to those executives who made a material
contribution to the achievement of these performance goals in awarding bonuses.
Management had also requested and the Committee agreed to authorize further cash
bonuses to other executive and nonexecutive employees totaling approximately
4.0% of total employee compensation with an additional 2% reserve allocated to
group heads to be distributed in their discretion to deal with any inequities.
Stock option awards are designed to promote the identity of long-term
interests between the Company's employees and its shareholders and assist in the
retention of executives. The size of option grants is generally intended by the
Compensation Committee to reflect the executive's position with the Company and
his contributions to the Company. The Committee typically authorizes the grant
of stock options vesting over a period of four years in order to incentivize
each employee over a relatively significant period of time. The Compensation
Committee believes that stock options have been and remain an excellent vehicle
for compensating its employees. In the previous year, the Compensation Committee
had reserved a pool of 275,000 shares for issuance pursuant to stock option
grants to all employees. For the current year, the Committee had determined to
reduce the size of this pool to 175,000 shares and to offset this reduction with
a larger cash bonus pool. Furthermore, in November, 1996, the Committee
authorized the grant of stock options to certain executives of the Company
providing for 100% vesting upon the achievement of key milestones within one
year of the grant. The Committee's objective was to incentivize management to
reach certain specific goals and objectives within such time frame. In
establishing the appropriate number of stock options to grant to the Company's
employees and executives for 1996, the Committee determined that the total
grants to the Company's employees and executives for the year as a proportion to
the Company's ownership as a whole bore a reasonable relationship, being
approximately 2.5%. The Committee also took into consideration that in most
cases the percentage of stock options held by the Company's employees and
executives remains relatively modest in comparison to the ownership of the
Company as a whole by nonemployee stockholders.
The Committee continues to believe that stock option grants remain an
important mechanism to incentivize employees. Because the option exercise price
for the employee is generally the fair market value of the stock on the date of
grant, employees recognize a gain only if the value of the stock increases.
Thus, employees with stock options are rewarded for their efforts to improve the
Company's long-term stock market performance. Stock options, moreover, have
been used to reward substantially all employees of the Company, not just at the
executive officer level. The option program also typically uses a four-year
vesting period to encourage key employees to continue in the employ of the
Company.
11
<PAGE>
COMPENSATION COMMITTEE REPORT ON REPRICED OPTIONS
In November 1996, the Committee granted each of the Company's employees and
officers who had been granted options to purchase shares of Common Stock
subsequent to December 1, 1995 the right to exchange such options for new stock
options to purchase 10% fewer shares of Common Stock at the then current market
price (the "Option Exchange Offer"). The majority of the Company's stock
options granted after December 1, 1995 contained exercise prices that were
substantially above the then current market price of the Common Stock. Although
such options did have some financial value based on a mathematical formula used
in the investment banking community for valuing options, the Committee believed
that the Company's employees did not place any value on options which were
significantly out-of-the-money. The Committee concluded that such options
therefore were no longer effective in either aligning the interests of the
Company's employees with those of its shareholders or encouraging option holders
to remain in the employ of the Company.
In determining to make the Option Exchange Offer, the Committee considered
the fairness of such exchange in relation to the Company's other shareholders.
The Committee concluded that, instead of issuing a large number of new options
at the current fair market value and thereby causing further shareholder
dilution, it was in the shareholders' long-term best interests to make the
Option Exchange Offer so that the Company could more effectively motivate and
retain its employees and officers. In this light, the Committee decided that
employees and officers of the Company should be given the option to exchange
their options granted after December 1, 1995 for a new option to purchase 10%
fewer shares with a new exercise price set at the fair market value of the
Company's Common Stock at the date of the Option Exchange Offer, or $8.25 per
share. In order to maximize the incentive for such persons to remain in the
employ of the Company, however, the Committee required that any new options
issued be subject to a vesting schedule, with options vesting ratably on an
annual basis over their original four-year period. Like the new options issued
to non-executive employees, any new options issued to officers were subject to
their original vesting schedule, with options vesting ratably on an annual basis
over a four-year period.
It is the opinion of the Compensation Committee that the Option Exchange
Offer succeeded in its objectives of minimizing shareholder dilution and
providing strong incentives for the Company's employees and management.
1996 COMPENSATION FOR THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
In considering the compensation for the Chairman and Chief Executive
Officer and President for fiscal year 1996, the Committee reviewed his existing
compensation arrangements and both Company and individual performance.
The Compensation Committee has set Dr. Fan's annual compensation, including
a significant portion of his compensation based upon the Company's stock option
plan, to reflect Dr. Fan's senior position, his responsibilities, and his past
and expected future contributions to the Company's success, and with the
objective of incentivizing him to achieve certain key milestones within a
specified time frame. His annual compensation was intended to provide
competitive compensation for fiscal 1997.
Dr. Fan's salary for fiscal 1996 was increased $35,000 from $200,000 to
$235,000 reflecting in part a cost of living adjustment as well as an adjustment
to reflect the increased duties and obligations of his position relative to
other similarly situated chief executive officers. His bonus award of $50,000
for fiscal 1996 reflected success in the attainment of his principal individual
and corporate 1996 performance goals established by the Compensation Committee
including milestones relating to development of various strategic corporate
relationships, new product development, continued progress in the
commercialization of the Company's technology and increased revenues. In
November 1996, the Committee granted Dr. Fan an option to purchase 70,000 shares
at an exercise price equal to the fair market value at the date of grant. The
option is exercisable one year following the date of grant, or upon the
achievement of certain
12
<PAGE>
milestones during 1997. The Committee's objective was to incentivize the Chief
Executive Officer to reach certain specific goals and objectives within such
time frame. In December 1996, the Compensation Committee granted Dr. Fan an
option, for fiscal 1996 performance, for the purchase of 15,000 shares at an
exercise price equal to the fair market value per share at the date of grant.
The option is exercisable ratably over the four years following the date of
grant subject to Dr. Fan's continued employment with the Company. In determining
the number of shares covered by the options granted to Dr. Fan, the Compensation
Committee evaluated Dr. Fan's overall compensation package relative to that of
other chief executives in the Company's industry, achievement of both individual
and corporate 1996 performance goals previously described and the need to
continue to adequately incentivize Dr. Fan.
Section 162(m) of the Internal Revenue Code limits the tax deduction to $1
million for compensation paid to certain executives of public companies. The
Committee has considered these new requirements and believes that grants
pursuant to the Company's 1992 Stock Option Plan meet the requirement that they
be "performance based" and, therefore, exempt from the limitations on
deductibility. Historically, the combined salaries and bonuses of each of the
Company's executive officers have been well under the $1 million limit. The
Committee's present intention is to comply with Section 162(m) unless the
Committee feels that required changes would not be in the best interest of the
Company or its shareholders.
Compensation Committee
Anthony B. Evnin, Chairman
Michael A. Wall
13
<PAGE>
SHAREHOLDER RETURN
PERFORMANCE GRAPH
The following graph compares the performance of the Company's Common Stock
to the NASDAQ Stock Market Total Return Index for U.S. Companies (the "NASDAQ
Stock Market Index") and to the Hambrecht & Quist Technology Index (the "H&Q
Technology Index") since the Company's initial public offering on April 15,
1992. The graph assumes that the value of the investment in the Company's
Common Stock and each index was $100 at April 15, 1992 and that all dividends
were reinvested.
COMPARISON OF CUMULATIVE RETURN
[Graph Appears Here ]
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG KOPIN CORPORATION, NASDAQ STOCK
MARKET- U.S. INDEX AND H&Q TECHNOLOGY
INDEX
<TABLE>
<CAPTION>
NASDAQ Stock Market H&Q Technology
Measurement Point Kopin Corporation Index Index
- ------------------- ----------------- ------------------- --------------
<S> <C> <C> <C>
4/15/92 $100.00 $100.00 $100.00
12/31/92 $170.00 $113.43 $110.43
12/31/93 $180.00 $129.44 $120.51
12/31/94 $102.50 $126.58 $139.87
12/31/95 $142.50 $180.15 $210.02
12/31/96 $118.75 $221.60 $252.00
</TABLE>
14
<PAGE>
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 28, 1997 by: (a) all those
known by the Company to be beneficial owners of more than 5% of its Common
Stock; (b) all Directors; (c) all named executive officers; and (d) all
executive officers and directors of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OWNERSHIP (1) PERCENT
- ---------------------------------------- ------------------ -------
<S> <C> <C>
John C.C. Fan (2)....................... 378,083 3.5
David E. Brook (3)...................... 58,747 *
Andrew H. Chapman (3)................... 16,000 *
Morton Collins (3)...................... 33,286 *
Anthony B. Evnin (3).................... 37,000 *
Chi Chia Hsieh (4)...................... 1,651,278 15.1
Vallobh Vimolvanich (5)................. 1,651,278 15.1
Michael A. Wall (3)..................... 150,402 1.4
Telecom Holding Co., Ltd (6)............ 1,643,716 15.0
Thomas G. Frederick (7)................. 23,500 *
Paul J. Mitchell (8).................... 81,992 *
Jeffrey J. Jacobsen (9)................. 53,375 *
Matthew J. Micci (10)................... 10,534 *
Ronald P. Gale (11)..................... 52,275 *
Meth Jiaravanont (12)................... 14,625 *
Glen G. Kephart (13).................... 14,625 *
All directors and executive officers as
a group (14 persons) (14)..............
2,575,722 23.5
- --------------------------
</TABLE>
*Less than 1%
(1) Unless otherwise indicated in these footnotes, each stockholder has sole
voting and investment power with respect to the shares beneficially owned.
(2) Includes 6,000 shares held by Dr. Fan's wife as custodian under the Uniform
Gifts to Minors Act, and 10,000 shares owned by Wilex Realty and
Development, a company of which Dr. Fan is an
15
<PAGE>
officer and director. Dr. Fan disclaims beneficial ownership of all such
shares. Also includes 137,583 shares representing options that are
currently exercisable or exercisable within 60 days.
(3) Includes 6,000 shares representing options that are currently exercisable
or exercisable within 60 days.
(4) Consists of 1,643,716 shares owned by Telecom Holding Co., Ltd.
("Telecom"). The ultimate parent of Telecom Holding Co., Ltd. is Charoen
Pokphand Group Company Limited, a limited company organized and existing
under the laws of the Kingdom of Thailand. Dr. Hsieh is one of Telecom
Holding Co., Ltd.'s designees to the Company's Board of Directors. Dr.
Hsieh disclaims beneficial ownership of such shares. His address is 16
Harcourt Road, Hong Kong. Based on the information set forth in Schedule
13D filed with the Securities and Exchange Commission on October 20, 1995
and Amendment No. 1 thereto filed with the Securities and Exchange
Commission on December 4, 1995. Also includes 7,562 shares representing
options that are currently exerciseable or exerciseable within 60 days.
(5) Consists of 1,643,716 shares owned by Telecom Holding Co., Ltd. Dr.
Vimolvanich is one of Telecom Holding Co., Ltd.'s designees to the
Company's Board of Directors. Dr. Vimolvanich disclaims beneficial
ownership of such shares. His address is 18 Ratchadaphisek Road, Huai
Khwang, Bangkok, Thailand. Based on the information set forth in Schedule
13D filed with the Securities and Exchange Commission on October 20, 1995
and Amendment No. 1 thereto filed with the Securities and Exchange
Commission on December 4, 1995. Also includes 7,562 shares representing
options that are currently exerciseable or exerciseable within 60 days.
(6) So long as Telecom, together with its affiliates and Chia Yang
Telecommunication Limited, a Thailand corporation (of which Chi Chia Hsieh
is President), hold not less than 1,479,344 of the Company's shares,
Telecom is entitled to two representatives on the Company's Board of
Directors pursuant to a Stock Purchase Agreement between Telecom and the
Company. The address of Telecom is 18 Ratchadaphisek Road, Huai Khwang,
Bangkok, Thailand.
(7) Includes 22,500 shares representing options that are currently exercisable
or exercisable within 60 days.
(8) Includes 8,000 shares held by Mr. Mitchell as custodian under the Uniform
Gifts to Minors Act. Mr. Mitchell disclaims beneficial ownership of such
shares. Also includes 71,992 shares representing options that are
currently exercisable or exercisable within 60 days.
(9) Includes 48,375 shares representing options that are currently exercisable
or exercisable within 60 days.
(10) Includes 10,509 shares representing options that are currently exercisable
or exercisable within 60 days.
(11) Includes 36,775 shares representing options that are currently exercisable
or exercisable within 60 days.
(12) Includes 14,625 shares representing options that are currently exercisable
or exercisable within 60 days. Does not include shares held by Telecom, of
which shares Mr. Jiaravanont disclaims beneficial ownership. Mr.
Jiaravanont is employed as Vice President of Strategic Business pursuant to
an agreement between the Company and Telecom.
(13) Includes 14,625 shares representing options that are currently exercisable
or exercisable within 60 days.
(14) Includes 379,608 shares issuable to certain directors and executive
officers pursuant to options that are currently exercisable or exercisable
within 60 days.
16
<PAGE>
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of reports furnished to the Company or written
representations from the Company's directors and executive officers, the Company
believes that all reports required to be filed pursuant to Section 16 of the
Securities Exchange Act of 1934 were filed timely by the Company's directors,
executive officers and 10% holders during Fiscal Year 1996, with the exception
of the following: (i) Mr. Jacobsen filed one late Form 4 reporting two
transactions; (ii) Mr. Brook filed one late Form 4 reporting two transactions;
and (iii) Dr. Hsieh filed one late Form 5 reporting one transaction.
17
<PAGE>
PROPOSAL 2
AMENDMENT OF THE COMPANY'S 1992 STOCK OPTION PLAN
The Board of Directors has authorized, subject to stockholder ratification,
an increase in the number of shares available under the Company's 1992 Stock
Option Plan (the "Plan") from 2,350,000 to 2,700,000 (including 303,051 shares
issued upon exercise of options granted pursuant to the Company's 1985 Incentive
Stock Option Plan, which was terminated in 1992). As of December 31, 1996,
2,033,580 shares were issued or issuable upon exercise of options granted
pursuant to the Plan.
Purpose. The purpose of the Plan is to attract and retain the best
available personnel for positions of substantial responsibility and to provide
additional incentive to employees and directors of and advisers and consultants
to the Company. The purpose of the proposed amendment is to provide the Company
with additional capacity to award stock options to existing personnel and to
attract qualified new employees, directors, advisers and consultants through
grants of stock options.
Administration. The Plan is administered by the Compensation Committee
(the "Committee") which consists of directors of the Company appointed by its
Board of Directors. Subject to the provisions of the Plan, the Committee has
discretion to determine when awards are made, which employees are granted
awards, the number of shares subject to each award and all other relevant terms
of the awards. The Committee also has broad discretion to construe and
interpret the Plan and adopt rules and regulations thereunder.
Eligibility. Awards may be granted to persons who are employees of the
Company whether or not officers or members of the Board of Directors of the
Company and directors of or advisers or consultants to the Company. Pursuant to
the Plan, incentive stock options may only be granted to employees, non-
qualified stock options may be granted to directors, advisors and consultants of
the Company as well as employees. The maximum number of shares issuable upon
exercise of options granted in any one year to any employee of the Company
pursuant to the Plan may not exceed 400,000 shares.
Shares Subject to the Plan. The shares issued or to be issued under the
Plan are shares of the Company's Common Stock, $.01 par value, which may be
newly issued shares or shares held in the treasury or acquired in the open
market. Previously, no more than 2,350,000 shares could be issued under the
Plan (including 303,051 shares issued upon exercise of options granted pursuant
to the Company's 1985 Incentive Stock Option Plan, which was terminated in
1992). The foregoing limit is subject to adjustment for stock dividends, stock
splits or other changes in the Company's capitalization.
Stock Options. The Committee in its discretion may issue stock options
which qualify as incentive stock options under the Internal Revenue Code or non-
qualified stock options. The Committee will determine the time or times when
each stock option becomes exercisable, the period within which it remains
exercisable and the price per share at which it is exercisable, provided that no
incentive stock option shall be exercised more than 10 years after it is granted
and no other options shall be exercised more than 10 years and one day after it
is granted, and further provided that the exercise price shall not be less than
the fair market value of the Company's Common Stock on the date of grant. The
reported closing price of the Company's Common Stock by NASDAQ on April 4, 1997
was $13.00 per share.
Payment for shares purchased upon exercise of any option must be made in
full in cash or check when the option is exercised. No option is transferable
except by will or the laws of descent and distribution and, during the
optionee's lifetime, the option may be exercised only by the optionee provided,
that the Compensation Committee may, in its discretion, authorize all or a
portion of the options to be granted to an optionee to be on terms which permit
transfer by such optionee to (i) the spouse, former spouse, children (including
stepchildren) or grandchildren of the optionee ("Immediate Family Members"),
(ii) a trust or trusts for the exclusive benefit of such Immediate Family
Members, (iii) a partnership in
18
<PAGE>
which such Immediate Family Members are the only partners including family
limited partnerships controlled by the Optionee or (iv) to any other persons or
entities in the discretion of the Compensation Committee subject to certain
restrictions. If an optionee's employment terminates for any reason, including
without limitation by reason of voluntary severance, involuntary severance,
retirement, but not by reason of death, any options exercisable on the date of
termination expire thirty days after such termination. If an optionee dies, any
options exercisable at the time of such death may be exercised by the optionee's
executor or administrator at any time within the shorter of the option period or
12 months after the date of death.
Notwithstanding any other provision of the Plan, the aggregate fair market
value of the shares with respect to which incentive stock options are
exercisable for the first time by an employee in any calendar year shall not
exceed $100,000.
The Board of Directors has appointed the Compensation Committee, which
during 1996 was composed of Messrs. Anthony B. Evnin and Michael A. Wall. Mr.
Evnin has determined not to stand for reelection to the Board of Directors and
accordingly will no longer continue as a member of the Compensation Committee
following the Meeting. It is anticipated that one of the directors who is
reelected at the Meeting will be elected to the Compensation Committee at the
next meeting of the Board of Directors following the Meeting.
The following is a brief and general discussion of the Federal income tax
rules applicable to awards under the Plan. With respect to an incentive stock
option, an employee will generally not be taxed at the time of grant or
exercise, although exercise of an incentive option will give rise to an item of
tax preference that may result in an alternative minimum tax. If the employee
holds the shares acquired upon exercise of an incentive stock option until at
least one year after issuance and two years after the option grant, he or she
will have long-term capital gain (or loss) based on the difference between the
amount realized on the sale or disposition and his or her option price. If
these holding periods are not satisfied, then upon disposition of the shares the
employee will recognize ordinary income equal, in general, to the excess of the
fair market value of the shares at time of exercise over the option price, plus
capital gain in respect of any additional appreciation. With respect to a non-
qualified option, an employee will not be taxed at the time of grant; upon
exercise, he or she will generally realize compensation income to the extent the
then fair market value of the stock exceeds the option price. The Company will
generally have a tax deduction to the extent that, and at the time that, an
employee realizes compensation income with respect to an award.
OPTION GRANTS UNDER THE PLAN
<TABLE>
<CAPTION>
NAME OPTIONS (SHARES)
- ---------------------------------------- ----------------
<S> <C>
John C.C. Fan........................... 329,000
Paul J. Mitchell........................ 170,100
Ronald P. Gale.......................... 78,700
Jeffrey J. Jacobsen..................... 83,500
Matthew J. Micci........................ 39,900
Meth Jiaravanont........................ 58,500
Glen G. Kephart......................... 58,500
All executive officers
as a group.............................. 818,200
All directors, excluding executive
officers, as a group.................... 0
All employees, excluding executive
officers, as a group.................... 906,329
</TABLE>
19
<PAGE>
The Board recommends that the shareholders vote "FOR" the proposed
amendment of the Plan and the enclosed proxy will be so voted unless a contrary
vote is indicated. The affirmative vote of the holders of a majority of the
shares of the Common Stock represented in person or by proxy at the Meeting is
required for approval of the amendment of the Plan.
20
<PAGE>
PROPOSAL 3
AMENDMENT OF THE COMPANY'S DIRECTOR STOCK OPTION PLAN
The Board of Directors has authorized, subject to stockholder ratification,
an increase in the number of shares available under the Company's Director Stock
Option Plan (the "Director Plan") from 100,000 to 175,000. As of December 31,
1996, 98,000 shares were issued or issuable upon exercise of options granted
pursuant to the Director Plan.
In March 1994, the Company adopted the Director Plan (the "Director Plan")
under which (1) those persons not already serving as Directors who are elected
or appointed to the Board of Directors for the first time and who are not
employees shall be granted 15,000 non-qualified stock options on the date of
election or appointment and 4,000 non-qualified stock options on each
anniversary of his initial grant, and (2) each non-employee Director then
serving as a Director was granted 4,000 non-qualified stock options on the date
of the 1994 Annual Meeting of Stockholders and on each anniversary thereof. All
such non-qualified options will have an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. Previously the
Director Plan provided that options to purchase up to an aggregate of 100,000
shares of Common Stock could be granted under the Director Plan.
Purpose. The purpose of the Director Plan is to obtain and retain the
services of qualified persons who are not employees of the Company to serve as
directors, and to demonstrate the Company's appreciation for their service upon
the Company's Board of Directors.
Shares Subject to the Director Plan. The shares issued or to be issued
under the Director Plan are shares of the Company's Common Stock, $.01 par
value, which may be newly issued shares or shares held in the treasury or
acquired in the open market. The foregoing limit is subject to adjustment for
stock dividends, stock splits or other changes in the Company's capitalization
Market Price. The reported closing price of the Company's Common Stock by
NASDAQ on April 4, 1997 was $13.00 per share.
Term and Vesting. Each option expires at the end of five years and one day
after the date on which it was granted. Each initial option will be 25% vested
upon the initial grant and the remaining 75% will vest over a four year term.
Each annual option will vest 25% per year over a four year term. Any option
shall terminate and may no longer be exercised (i) if the non-employee Director
dies before such fifth anniversary, or (ii) in the event the non-employee
Director ceases to be a Director of the Company for any other reason, on the
close of business on the thirtieth day following such cessation; provided that
if the non-employee Director dies at a time when he or she was entitled to
exercise an option, then his or her estate or representative may exercise such
option at any time prior to the fifth anniversary of the grant date and within a
period of one year after such non-employee Director's death.
Option Exercise. Payment for shares purchased upon exercise of any option
under the Director Plan must be made in full in cash or check when the option is
exercised. No option may be transferred except by will or the laws of descent
and distribution and, during the optionee's lifetime, the option may be
exercised only by the optionee. If an optionee ceases to be a non-employee
Director of the Company before an option granted under the Director Plan becomes
fully exercisable by reason of death or in connection with or following a sale
of all, or substantially all, of the Company's assets, or the Company's merger
or consolidation with another corporation and where the stockholders of the
Company immediately prior to such transaction do not own, immediately after such
transaction, stock of the purchasing or surviving corporation in this
transaction (or of its parent) possessing more than 50% of the voting power (for
election of Directors) of the outstanding stock of that corporation, such
exercisability shall be
21
<PAGE>
accelerated so that such option shall become exercisable in full as of the date
of such cessation. No option may be exercised later than five years after the
grant date.
Federal Tax Matters. Under applicable Internal Revenue Code provisions, no
taxable income will be recognized by an optionee upon the grant of a non-
qualified stock option under the Director Plan. Upon the exercise of the
option, however, the amount, if any, by which the fair market value of the
shares on the date of exercise exceeds the option price will be treated as
ordinary income to the optionee in the year of exercise. The Company will be
allowed an income tax deduction in the year of exercise of the option in an
amount equal to the amount the optionee recognizes as ordinary income. The
optionee's tax "basis" will be increased by the amount of such ordinary income
for the purpose of computing gain or loss on the sale or exchange of the shares.
OPTION GRANTS UNDER THE PLAN
<TABLE>
<CAPTION>
NAME OPTIONS (SHARES)
- ---------------------------------------- ----------------
<S> <C>
David E. Brook.......................... 12,000
Andrew H. Chapman....................... 12,000
Morton Collins.......................... 12,000
Anthony B. Evnin........................ 12,000
Chi Chia Hsieh.......................... 19,000
Vallobh Vimolvanich..................... 19,000
Michael A. Wall......................... 12,000
All directors
as a group.............................. 98,000
</TABLE>
The Board recommends that the shareholders vote "FOR" the proposed
amendment of the Director Plan and the enclosed proxy will be so voted unless a
contrary vote is indicated. The affirmative vote of the holders of a majority
of the shares of the Common Stock represented in person or by proxy at the
Meeting is required for approval of the amendment of the Director Plan.
22
<PAGE>
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF ACCOUNTANTS
Deloitte & Touche LLP, independent certified public accountants, have been
auditors of the Company since 1985. The Board of Directors has recommended that
the stockholders ratify the reappointment of Deloitte & Touche LLP as the
Company's auditors for the current year.
A representative of Deloitte & Touche LLP is expected to be present at the
Meeting and will be afforded an opportunity to make a statement, if such
representative desires to do so, and will be available to answer any appropriate
questions.
The Board of Directors recommends that the shareholders vote "FOR" the
proposal to ratify the appointment of Deloitte & Touche LLP, and the enclosed
proxy will be so voted unless a contrary vote is indicated. In the event the
appointment of Deloitte & Touche LLP should not be approved by the shareholders,
the Board of Directors will make another appointment to be effective at the
earliest possible time.
STOCKHOLDER PROPOSALS
The Board will make provision for presentation of proposals by shareholders
at the 1998 annual meeting of shareholders (or special meeting in lieu thereof)
provided such proposals are submitted by eligible shareholders who have complied
with the relevant regulations of the Securities and Exchange Commission. Such
proposals must be received by the Company no later than December 16, 1997 to be
considered for inclusion in the Company's proxy materials relating to that
meeting.
GENERAL
The management of the Company knows of no matter other than the foregoing
to be brought before the Meeting. However, the enclosed proxy gives
discretionary authority in the event any additional matters should be presented.
The Company will provide free of charge to any Stockholder from whom a
proxy is solicited pursuant to this proxy statement, upon written request from
such stockholder, a copy of the Company's annual report filed with the
Securities and Exchange Commission on Form 10-K for the Company's fiscal year
ended December 31, 1996. Requests for such report should be directed to Kopin
Corporation, 695 Myles Standish Boulevard, Taunton, Massachusetts 02780,
Attention: Chief Financial Officer.
The Company expects to hold its next stockholder meeting on or about May
21, 1998, and proxy materials in connection with that meeting are expected to be
mailed approximately 30 days prior to the meeting.
/s/ JOHN C.C. FAN
JOHN C.C. FAN,
Chairman
23
<PAGE>
APPENDIX A
KOPIN CORPORATION
Amended and Restated
1992 Stock Option Plan
----------------------
1. Definitions. As used in this 1992 Stock Option Plan of Kopin
-----------
Corporation, the following terms shall have the following meanings:
Code means the Internal Revenue Code of 1986, as amended.
----
Committee means a committee comprised of two or more directors of the
---------
Company, appointed by the Board of Directors of the Company, responsible for the
administration of the Plan, as provided in Section 4.
Company means Kopin Corporation, a Delaware corporation.
-------
Employers means the Company and its Related Corporations. Employer means
--------- --------
any one of the Employers.
Grant Date means the date on which an Option is granted, as specified in
----- ----
Section 7.
Incentive Option means an Option that satisfies the requirements of Section
--------- ------
422 of the Code.
Market Value means, with respect to a certain date, the average of the bid
------ -----
and asked prices for a share of the Stock on the first trading day prior to such
date.
Nonstatutory Option means an Option that will not be treated as an
------------ ------
Incentive Option.
Old Plan means the 1985 Incentive Stock Option Plan of the Company, as
--- ----
amended.
Option means an option to purchase shares of the Stock granted under the
------
Plan, which can be either an Incentive Option or a Nonstatutory Option.
Option Agreement means an agreement between the Company and an Optionee,
------ ---------
setting forth the terms and conditions of an Option.
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<PAGE>
Optionee means a person eligible to receive an Option, as provided in
--------
Section 6, to whom an Option shall have been granted under the Plan.
Plan means this 1992 Stock Option Plan of the Company.
----
Related Corporation means, with respect to the Company, any corporation
------- -----------
which is a parent corporation of the Company, as defined in Section 424(e) of
the Code, or a subsidiary corporation of the Company, as defined in Section
424(f) of the Code.
Stock means the Common Stock, $.01 par value per share, of the Company.
-----
2. Purpose. The Plan is intended to encourage ownership of the Stock by
-------
employees, directors, advisers and consultants of the Employer and is intended
to provide additional incentive for them to promote the success of the business
of the Employers. The Plan is intended to be an incentive stock option plan
within the meaning of Section 422 of the Code, but not all Options granted
hereunder are required to be or to remain Incentive Options.
3. Term of the Plan. Options under the Plan may be granted on or after
---- -- --- ----
January 1, 1992 but not later than December 31, 2001.
4. Administration. The Plan shall be administered by the Committee. No
--------------
member of the Committee shall have received an Option during service on the
Committee or during the one-year period preceding such service. Subject to the
provisions of the Plan, the Committee shall have complete authority, in its
discretion, to make the following determinations with respect to each Option to
be granted by the Company to any employee of the Employers: (a) whether the
Option will be an Incentive Option or a Nonstatutory Option; (b) the key
employee to receive the Option; (c) the time of granting the Option; (d) the
number of shares subject to the Option; (e) the option price for any Option; (f)
the option period for any Option; (g) the vesting, if any, of the Optionee's
right to exercise an option; (h) the restrictions, if any, to be imposed upon
transfer of shares of the Stock purchased by the Optionee upon the exercise of
the Option and (i) the effect of termination of employment or other association
with the Employers on the subsequent exercisability of the Option. The
Committee shall have complete authority to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it, to determine the terms
and provisions of the respective Option Agreements (which need not be
identical), and to make all other determinations necessary or advisable for the
A-2
<PAGE>
administration of the Plan. The Committee's determination on the matters
referred to in this Section 4 shall be conclusive.
5. Stock Subject to the Plan. The Plan covers 2,700,000 shares of Stock;
----- ------- -- --- ----
provided, that the number of shares purchased pursuant to the exercise of
- --------
Options granted under the Plan and options granted under the Old Plan and the
---
number of shares subject to outstanding Options granted under the Plan and
options granted under the Old Plan shall be charged against the shares covered
by the Plan; but shares subject to Options granted under the Plan or options
granted under the Old Plan which terminated without being exercised shall not be
so charged. Shares to be issued upon the exercise of Options granted under the
Plan may be either authorized but unissued shares or shares held by the Company
in its treasury. If any Option granted under the Plan or any option granted
under the Old Plan expires or terminates for any reason without having been
exercised in full, the shares not purchased thereunder shall again be available
for Options thereafter to be granted. The number of shares of Stock covered by
the Plan shall be subject to adjustment as provided in Section 15 hereof. No
person may be granted in any calendar year an option or options to purchase more
than 400,000 shares of Stock under the Plan.
6. Eligibility. An Incentive Option may be granted only to an employee
-----------
of one or more of the Employers. A Nonstatutory Option may be granted to an
employee or a director of, or a consultant or advisor to, one or more of the
Employers. Any person who, within the meaning of Section 422(b)(6) of the Code,
is deemed to own stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (or of a Related Corporation) shall
be eligible to receive an Incentive Option only if the option price thereunder
is at least 110% of the Market Value of the Stock on the Grant Date and the term
of the Option does not exceed five years.
7. Time of Granting Options. The granting of Options shall take place at
---- -- -------- -------
the time specified by the Committee. Only if expressly so provided by the
Committee shall the Grant Date be the date on which an Option Agreement shall
have been duly executed and delivered by the Company and the Optionee.
8. Option Price. The option price under each Incentive Option shall not
------ -----
be lower than the Market Value on the Grant Date.
9. Maximum Size of Incentive Options. The aggregate Market Value of
------- ---- -- --------- -------
Stock for which Incentive Options become exercisable by an Optionee for the
first time in any calendar year shall not exceed $100,000. To the extent that
A-3
<PAGE>
such aggregate Market Value exceeds $100,000, those options intended to be
Incentive Options shall be treated as Nonstatutory Options. For purposes of
this Section 9, all Incentive Options granted to an Optionee by the Company
shall be considered in the order in which they were granted, and Market Value
shall be determined as of the respective Grant Dates of each Option.
10. Exercise of Option. An Optionee may exercise an Option, to the extent
-------- -- ------
vested, at any time after the Option vests in whole or in part. An Option will
expire as to shares for which it had not previously been exercised if not
exercised before the tenth anniversary of the Grant Date (or the expiration date
of the Option if sooner). The Optionee shall give written notice of exercise to
the chief financial officer of the Company. The Optionee shall enclose a
personal check equal to the option price or shares of Stock with a Market Value
on the purchase date equal to the option price and satisfying such restrictions
as the Committee may impose to avoid adverse accounting effects. The Company
shall deliver or cause to be delivered to the Optionee a certificate for the
number of shares then being purchased by him. If any law or applicable
regulation of the Securities and Exchange Commission or other body having
jurisdiction in the premises shall require the Company or the Optionee to take
any action in connection with shares being purchased upon exercise of the
option, exercise of the option and delivery of the certificate or certificates
for such shares shall be postponed until completion of the necessary action,
which shall be taken promptly by the Company or the Optionee, as applicable.
Each outstanding Option shall be reduced by one share for each share of the
Stock purchased upon exercise of the option.
11. Purchase for Investment; Registration. Unless the shares to be issued
-------- --- ---------- ------------
upon exercise of an Option have been effectively registered under the Securities
Act of 1933 as now in force or hereafter amended, the Company shall be under no
obligation to issue any shares covered by any Option unless the person who
exercises the Option, in whole or in part, shall give a written representation
to the Company, satisfactory in form and substance to its counsel and upon which
the Company may reasonably rely, that he or she is acquiring such shares as an
investment and not with a view to, or for sale in connection with, the
distribution of any such shares. Each certificate representing a share of Stock
issued pursuant to the exercise of an Option may bear a reference to any
investment representation made in accordance with this Section 11 and to the
fact that no registration statement has been filed with the Securities and
Exchange Commission in respect to that Stock.
A-4
<PAGE>
12. Withholding; Notice of Disposition of Stock Prior to Expiration of
----------- ------ -- ----------- -- ----- ----- -- ---------- --
Specified Holding Period.
- --------- ------- ------
12.1. Whenever shares are to be issued upon exercise of an Option,
the Company shall have the right to require, as a condition to the exercise
of the Option, that the Optionee remit to the Company an amount sufficient
to satisfy Federal, state, local or other withholding tax requirements
(whether so required to secure for the Company an otherwise available tax
deduction or otherwise) if and to the extent required by law prior to the
delivery of any certificate or certificates for such shares.
12.2. The Company may require as a condition to the issuance of
shares covered by any Incentive Option that the person exercising the
Option give a written representation to the Company, satisfactory in form
and substance to its counsel and upon which the Company may reasonably
rely, that he or she will report to the Company any disposition of those
shares prior to the expiration of the holding periods specified by Section
422(a)(1) of the Code. If and to the extent that the disposition imposes
upon the Company federal, state, local or other withholding tax
requirements, or any such withholding is required to secure for the Company
an otherwise available tax deduction, the Company shall have the right to
require that the person making the disposition remit to the Company an
amount sufficient to satisfy those requirements.
13. Transferability of Options. Options shall not be transferable,
--------------- -- -------
otherwise by will or the laws of descent and distribution, and may be exercised
during the life of the Optionee only by the Optionee and except as otherwise
provided hereinbelow. Notwithstanding the foregoing, the Committee may, in its
discretion, authorize all or a portion of the options to be granted to an
optionee to be on terms which permit transfer by such Optionee to (i) the
spouse, former spouse, children (including stepchildren) or grandchildren of the
optionee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive
benefit of such Immediate Family Members, (iii) a partnership in which such
Immediate Family Members are the only partners including family limited
partnerships controlled by the Optionee or (iv) to any other persons or entities
in the discretion of the Committee, provided that (x) the stock option agreement
pursuant to which such options are granted much be approved by the Committee,
and must expressly provide for transferability in a manner consistent with this
Section 13, and (y) subsequent transfers of transferred options shall be
prohibited except those in accordance with this Section 13 (by
A-5
<PAGE>
will or the laws of descent and distribution). Following transfer, any such
options shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that for purposes of Section
13 hereof the term "Optionee" shall be deemed to refer to the transferee. The
events of termination of employment of Section 14 hereof shall continue to be
applied with respect to the original Optionee, following which the options shall
be exercisable by the transferee only to the extent, and for the periods
specified at Section 14.
14. Termination of Employment or Service. If an Optionee's employment or
----------- -- ---------- -- -------
association with the Employers terminates for any reason, including without
limitation by reason of voluntary severance, involuntary severance, retirement,
transfer or in connection with a transaction which causes his or her employer
corporation to cease to be a Related Corporation of the Company, but not by
reason of death, the Option shall expire as of the close of business on the
thirtieth day after such termination, and after such termination the Option may
be exercised only to the extent exercisable on the date of termination. If an
Optionee dies, any Option held by that Optionee may be exercised by the
Optionee's executor or administrator at any time within the shorter of the
option period or 12 months after the date of death, but only to the extent
exercisable at death. Military or sick leave shall not be deemed termination of
employment; provided that it does not exceed the longer of ninety days or the
period during which the absent employee's re-employment rights are guaranteed by
statute or by contract.
15. Adjustment of Number of Shares. In the event of any stock dividend
---------- -- ------ -- ------
payable in the Stock or any split-up or contraction in the number of shares of
the Stock occurring after the date of the agreement and prior to the exercise in
full of the Option, the number of shares for which the Option may thereafter be
exercised shall be proportionately adjusted. In case of any reclassification or
change of outstanding shares of the Stock or in case of any consolidation or
merger of the Company with or into another company or in case of any sale or
conveyance to another company or entity of the property of the Company as a
whole, shares of stock or other securities equivalent in kind and value to those
shares which a holder would have received if he or she had held the full number
of shares of the Stock subject to the Option immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and had
continued to hold those shares (together with all other shares, stock and
securities thereafter issued in respect thereof) to the time of the exercise of
the Option shall thereupon be subject to the Option. Upon dissolution or
liquidation of the Company, the Option shall terminate, but the Optionee (if at
A-6
<PAGE>
the time in the employ of an Employer) shall have the right, immediately prior
to such dissolution or liquidation, to exercise the Option to the full extent
not theretofore exercised. No fraction of a share shall be purchasable or
deliverable, but in the event any adjustment of the number of shares covered by
the Option shall cause such number to include a fraction of a share, such
fraction shall be adjusted to the nearest smaller whole number of shares. In
the event of changes in the outstanding Common Stock by reason of any stock
dividend, split-up, contraction, reclassification, or change of outstanding
shares of the Stock of the nature contemplated by this Section 15, the number of
shares of the Stock available for the purpose of the Plan as stated in Section 5
shall be correspondingly adjusted.
16. Limitation of Rights in Option Stock. The Optionee shall have no
---------- -- ------ -- ------ -----
rights as stockholder in respect of shares as to which his or her Option shall
not have been exercised, certificates issued and delivered and payment as herein
provided made in full, and shall have no rights with respect to such shares not
expressly conferred by this Plan.
17. Stock Reserved. The Company shall at all times during the term of the
----- --------
Options reserve and keep available such number of shares of the Stock as will be
sufficient to satisfy the requirements of this Plan (if then in effect) and such
Options and shall pay all other fees and expenses necessarily incurred by the
Company in connection therewith.
18. Termination and Amendment of Plan. The Board of Directors of the
----------- --- --------- -- ----
Company may at any time terminate the Plan or make such modifications of the
Plan as it shall deem advisable, subject to any requirement of applicable law
that the holders of the Stock approve any such modification. No termination or
amendment of the Plan may, without the consent of the Optionee to whom any
Option shall theretofore have been granted, adversely affect the rights of that
Optionee under that Option.
A-7
<PAGE>
IN WITNESS WHEREOF, the Company hereby adopts this amended and restated
Plan as of the 10th day of April, 1997.
KOPIN CORPORATION
By: /s/ JOHN C.C. FAN
---------------------------
A-8
<PAGE>
APPENDIX B
KOPIN CORPORATION
AMENDED AND RESTATED
DIRECTOR STOCK OPTION PLAN
1. PURPOSE.
-------
The Kopin Corporation Director Stock Option Plan (the "Plan") has been
adopted to assist in attracting and retaining non-employee members of the
Corporation's Board of Directors and to foster alignment of their interests with
those of stockholders of the Corporation. This Plan is intended to satisfy all
of the conditions of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended.
2. DEFINITIONS.
-----------
As used herein, the following words or terms have the meanings set forth
below:
2.1 "Affiliate" means any business entity that is directly or indirectly
controlled by the Corporation or any entity in which the Corporation has a
significant equity interest, as determined by the Chief Executive Officer of the
Corporation.
2.2 "Annual Option" means an Option to purchase 4,000 Shares, subject to
adjustment as provided in Section 5.2 hereof.
2.3 "Board of Directors" means the Board of Directors of the Corporation
2.4 "Common Stock" means the Common Stock, par value $.01 per share, of
the Corporation.
2.5 "Corporation" means Kopin Corporation, a corporation established under
the laws of the State of Delaware.
2.6 "Effective Date" has the meaning set forth in Section 3.
2.7 "Fair Market Value," in the case of a share of Common Stock on a
particular day, means the closing price of the Common Stock for that day as
reported in the "NASDAQ National Market Issues" section of the Eastern Edition
of The Wall Street Journal, or if no prices are quoted for that day, for the
last preceding day on which such prices of Common Stock are so quoted. In the
event "NASDAQ National Market Issues" cease to be reported or the Common Stock
to be included therein, the Chief Executive Officer shall select some other
appropriate method for determining Fair Market Value.
2.8 "Grant Date" means the date of grant of an Initial Option or Annual
Option, as the case may be.
2.9 "Initial Option" means an Option to purchase 15,000 Shares, subject to
adjustment as provided in Section 5.2 hereof.
2.10 "Initial Grant Date" means the date of grant of an Initial Option.
2.11 "Non-Employee Director" means as of any date a person who on such date
is a director of the Corporation and is not an employee of the Corporation or
any Affiliate. A director of the Corporation who is also an employee of the
Corporation or any Affiliate shall become eligible to participate in the Plan
upon termination of such employment.
B-1
<PAGE>
2.12 "Option" means a nonstatutory option to purchase Shares granted under
the Plan, pursuant to Article 7.
2.13 "Option Agreement" means an agreement between the Corporation and a
Non-Employee Director, setting forth the terms and conditions of an Option,
substantially in the form of Annex A hereto (in the case of an Initial Option)
or Annex B hereto (in the case of an Annual Option).
2.14 "Option Price" means the price to be paid by an Option holder upon
exercise of an Option.
2.15 "Optionee" means a person eligible to receive an Option to whom an
Option shall have been granted under the Plan.
2.16 "Shares" means shares of Common Stock.
3. EFFECTIVE DATE.
--------------
The Plan shall become effective on March 29, 1994 (the "Effective Date"),
the date it was adopted by the Board of Directors, provided that the Plan is
approved by the voting stockholders of the Corporation within one year after
that date. Although Options may be granted before such stockholder approval, no
Option may be exercised until such approval is obtained and any such Options
will be null and void if such approval is not obtained by the first anniversary
of the Effective Date.
4. ADMINISTRATION.
--------------
4.1 The Plan shall be administered by the Chief Executive Officer of the
Corporation. Subject to the provisions set forth herein, the Chief Executive
Officer shall have full authority to construe and interpret the terms of the
Plan and to make all determinations and take all other actions necessary or
advisable for the administration of the Plan, except that the persons entitled
to receive Options and the terms and amounts of such Options shall be determined
as provided in Article 7, and the Chief Executive Officer shall have no
discretion as to such matters. The Chief Executive Officer may delegate to one
or more employees of the Corporation or any Affiliate the authority to perform
administrative functions under the Plan.
4.2 Any determinations or actions made or taken by the Chief Executive
Officer pursuant to this Article shall be binding and final.
5. SHARES AVAILABLE FOR OPTIONS; ANTI-DILUTION ADJUSTMENTS.
-------------------------------------------------------
5.1 The maximum number of Shares that may be issued under the Plan shall
be 175,000, subject to adjustment in accordance with the provisions of Section
5.2. Any Shares subject to an Option which for any reason expires or is
terminated unexercised as to such Shares may again be the subject of an Option.
Shares delivered upon exercise of an Option under the Plan may consist in whole
or in part of authorized but unissued Shares or treasury Shares.
5.2 Pro rata adjustment shall be made in the maximum number of Shares
subject to the Plan and to the number of Shares thereafter included in each
Option grant to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the capital
structure of the Corporation. Pro rata adjustments shall be made in the number,
kind and price of Shares covered by any outstanding Option hereunder to give
effect to any stock dividends, stock splits, stock combinations,
recapitalizations and similar changes in the capital structure of the
Corporation, or a merger, dissolution or reorganization of the Corporation,
after the date the Option is granted, so that the Optionee is treated in a
manner equivalent to that of holders of the underlying Common Stock.
6. ELIGIBILITY.
-----------
Options shall be granted only to Non-Employee Directors, as provided in
Article 7.
B-2
<PAGE>
7. OPTION GRANTS.
-------------
7.1 Initial Options. Each person who shall become a Non-Employee Director
---------------
after the Effective Date shall, on the date of his or her initial election or
appointment to the Board of Directors, automatically and without necessity of
any action by the Chief Executive Officer, receive an Initial Option.
7.2 Annual Options. (a) On the date of the next annual meeting of
--------------
stockholders of the Corporation and each anniversary thereof, each person who is
then a Non-Employee Director and who became a Non-Employee Director before the
Effective Date shall, automatically and without necessity of any action by the
Chief Executive Officer, receive an Annual Option.
(b) On the anniversary of his or her respective Initial Grant Date, each
other person not described in Section 7.2(a) who is then a Non-Employee Director
shall, automatically and without necessity of any action by the Chief Executive
Officer, receive an Annual Option.
7.3 Option Price, Exercisability and Term. The Option Price for each
-------------------------------------
Option shall be the Fair Market Value on the Grant Date. Each Option shall
become exercisable as provided in the Option Agreement; provided, however, that
-------- -------
in the event any Optionee ceases to be a director of the Corporation after the
Grant Date of an Option and before it shall become fully exercisable, by reason
of death or in connection with or following a sale of all, or substantially all,
of the Corporation's assets, or the Corporation's merger or consolidation with
another corporation and where the stockholders of the Corporation immediately
prior to such transaction do not own, immediately after such transaction, stock
of the purchasing or surviving corporation in this transaction (or of the parent
corporation of the purchasing or surviving corporation) possessing more than 50%
of the voting power (for election of Directors) of the outstanding stock of that
corporation, which ownership shall be measured without regard to any stock of
the purchasing, surviving or parent corporation owned by the stockholders of the
Corporation before the transaction, such exercisability shall be accelerated so
that such Option shall become exercisable in full as of the date of such
cessation. No Option shall be exercisable later than five years after the Grant
Date. Each Optionee shall enter into an agreement with the Corporation with
respect thereto substantially in the form of the Option Agreement.
7.4 Termination of Options. Any Option shall terminate and may no longer
----------------------
be exercised on the fifth anniversary of its Grant Date, or prior thereto (i) if
the Optionee dies before such fifth anniversary, in accordance with the
following sentence, or (ii) in the event the Optionee ceases to be a director of
the Corporation for any other reason, on the close of business on the thirtieth
day following such cessation. If the Optionee dies at a time when he or she
might have exercised an Option, then his or her estate, personal representative
or beneficiary to whom it has been transferred pursuant to Section 7.4 may at
any time prior to the fifth anniversary of its Grant Date and within a period of
one year after the Optionee's death, but not thereafter, exercise the Option to
the extent the Optionee might have exercised it at the time of death.
7.5 Nontransferability. No Option shall be transferable by the Optionee
------------------
otherwise than by will or the laws of descent and distribution, and each Option
shall be exercisable during the Optionee's lifetime only by him or her. The
foregoing restriction shall not, however, preclude the Optionee from effecting
"cashless" exercise of an Option, in accordance with and as described in Section
7.6(ii).
7.6 Notice of Exercise and Payment.
------------------------------
(i) An exercisable Option may be exercised in whole or in part. An
Option shall be exercisable only by delivery of a written notice to the
Corporation's Treasurer or Clerk, specifying the number of Shares for which
it is exercised. If the Shares are not at that time effectively registered
under the Securities Act of 1933, as amended, the Optionee shall include
with such notice a letter, in form and substance satisfactory to the
Corporation, confirming that the Shares are being purchased for the
Optionee's own account for investment and not with a view to distribution.
Payment shall be made in full at the time the Option is exercised, by cash
or check, except as otherwise permitted by Section 7.6(ii) below.
B-3
<PAGE>
(ii) In lieu of payment by cash or check accompanying the written
notice of exercise as described in Section 7.6(i), an Optionee may, unless
prohibited by applicable law, elect to effect payment by including with the
written notice referred to in Section 7.6(i) irrevocable instructions to
deliver for sale to a registered securities broker acceptable to the
Corporation a number of the Shares subject to the Option being exercised
sufficient, after brokerage commissions, to cover the aggregate exercise
price of such Option and, if the Optionee further elects, the Optionee's
withholding obligations with respect to such exercise referred to in
Section 7.8, together with irrevocable instructions to such broker to sell
such Shares and to remit directly to the Corporation such aggregate
exercise price and, if the Optionee has so elected, the amount of such
withholding obligation. The Corporation shall not be required to deliver
to such securities broker any stock certificate for such Shares until it
has received from the broker such exercise price and, if the Optionee has
so elected, such withholding obligation amount.
7.7 No Rights as Shareholder. No Optionee shall have any rights as a
------------------------
shareholder or any claim to dividends paid with respect to any Shares to which
the Option relates until the date such Shares are issued to him or her.
7.8 Withholding Taxes. The Corporation's obligation to deliver Shares
-----------------
upon exercise of an Option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
obligations. The Optionee shall satisfy such obligations by making a payment of
the requisite amount in cash or by check, unless the Optionee has elected to
effect such payment through a "cashless" exercise in accordance with Section
7.6(ii).
8. DURATION.
---------
This Plan shall terminate ten years from the Effective Date, unless
terminated earlier pursuant to Section 9.2, and no Options shall be granted
thereafter.
9. GENERAL PROVISIONS.
------------------
9.1 No Right to Service. Participating in the Plan does not constitute a
-------------------
guarantee or contract of service as a director.
9.2 Amendment and Termination. The Board of Directors may amend, suspend
-------------------------
or terminate the Plan or any portion thereof at any time; provided, however,
-------- -------
that the provisions of the Plan relating to the determination of persons
entitled to receive Options pursuant to Article 7 and the dates, amounts and
terms of such Options shall not be amended more than once every six months,
other than to comport with changes in the Internal Revenue Code of 1986, as
amended, the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder; provided, further that any such amendment which increases the
-------- -------
maximum number of Shares subject to this Plan, changes the class of persons
eligible to participate in this Plan or materially increases the benefits
accruing the participants under this Plan shall be subject to approval by the
voting stockholders of the Corporation within one year from the effective date
of such amendment and shall be null and void if such approval is not obtained;
and provided, further that no such amendment, suspension or termination shall
-------- -------
adversely affect or impair any then outstanding Option without the consent of
the Optionee.
9.3 Registration of Shares. Nothing in the Plan shall be construed to
----------------------
require the Corporation to register under the Securities Act of 1933, as
amended, any Options or Shares subject to Options.
9.4 Governing Law. The provisions of the Plan shall be governed by and
-------------
interpreted in accordance with the laws of the Commonwealth of Massachusetts.
B-4
<PAGE>
IN WITNESS WHEREOF, the Company hereby adopts this amended and restated
Plan as of the 10th day of April, 1997.
KOPIN CORPORATION
By: /s/ JOHN C.C. FAN
---------------------------
B-5
<PAGE>
PROXY
KOPIN CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD MAY 22, 1997
The undersigned hereby appoints John C.C. Fan and Paul J. Mitchell or either
of them as Proxies, with full power of substitution to vote all the shares of
common stock which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Stockholders to be held on May 22, 1997 at
10:00 a.m. at the offices of Bingham, Dana & Gould, 150 Federal Street, Boston,
Massachusetts, or any adjournment thereof, upon any and all matters which may
properly be brought before the meeting or any adjournments thereof, hereby
revoking all former proxies.
[SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE]
________________________________________________________________________________
Please mark
[X] vote as in
this example
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1), (2), (3)
AND (4) IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS IF
THERE IS NO SUCH SPECIFICATION.
1. PROPOSAL TO ELECT DIRECTORS
NOMINEES: John C.C. Fan, David E. Brook, Andrew
H. Chapman, Morton Collins, Chi Chia Hsieh,
Michael A. Wall, Vallobh Vimolvanich
FOR WITHHELD
[ ] [ ]
[ ] For all nominees except as noted above
FOR AGAINST ABSTAIN
2. PROPOSAL TO RATIFY THE [ ] [ ] [ ]
AMENDMENT TO THE COMPANY'S
1992 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF
SHARES AUTHORIZED FOR
ISSUANCE UNDER THE PLAN.
3. PROPOSAL TO RATIFY THE [ ] [ ] [ ]
AMENDMENT TO THE COMPANY'S
DIRECTOR STOCK OPTION PLAN
TO INCREASE THE NUMBER OF
SHARES AUTHORIZED FOR
ISSUANCE UNDER THE PLAN.
4. PROPOSAL TO RATIFY THE [ ] [ ] [ ]
APPOINTMENT OF DELOITTE &
TOUCHE LLP AS THE INDEPENDENT
PUBLIC ACCOUNTANTS OF THE
COMPANY.
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
MARK HERE [ ]
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
PLEASE DATE AND SIGN exactly as your name(s) appears at left indicating where
proper official position or representation capacity in which you are signing.
When signing as executor, administrator, trustee or guardian, give full title
as such, when shares have been issued in the name of two or more persons, all
should sign.
Signature ___________________________ Date_______________
Signature ___________________________ Date_______________
