KOPIN CORP
DEF 14A, 1999-04-09
SEMICONDUCTORS & RELATED DEVICES
Previous: DCI TELECOMMUNICATIONS INC, 4, 1999-04-09
Next: NEW SKY COMMUNICATIONS INC, 10-Q/A, 1999-04-09



<PAGE>
 
                           SCHEDULE 14A INFORMATION

               Proxy Statement Pursuant to Section 14(a) of the
                        Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [_] 

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 Rule 14a-11(c) or Rule 14a-12

                               KOPIN CORPORATION
                               -----------------
               (Name of Registrant as Specified In Its Charter)

                               KOPIN CORPORATION
                               -----------------
   (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

   
Payment of Filing Fee (Check the appropriate box):

[X]  No fee required.

[_]  Fee computed on table below per Exchange Act Rules 14a-6(i)(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 15, 1999

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 20, 1999, at the offices of
Bingham Dana LLP, 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 20, 1999

                            ________________________

     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 LLP, 150 Federal Street, Boston, Massachusetts on May 20, 1999, at
10:00 a.m., local time, to consider and act upon the following matters:

     1.  A proposal to elect six (6) 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 appointment of Deloitte & Touche LLP as
independent public accountants of the Company for the current fiscal year.

     4.  Such other business as may properly come before the Meeting or any
adjournments thereof.

     Stockholders of record at the close of business on March 26, 1999 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 15, 1999

     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 20,
1999, and at any adjourned session thereof.  This proxy statement was first
mailed to stockholders on or about April 15, 1999.  All solicitation expenses,
including costs of preparing, assembling and mailing proxy material, will be
borne by the Company.

     The close of business on March 26, 1999 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  12,408,297 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 not be counted as present at the meeting
with respect to such proposals, and 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 for
such proposals, 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 six.  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 2000
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.

     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                              
                                                           Director     Position and Offices 
Name                                            Age          Since      with the Company     
- ----                                            ---          -----      ----------------
                                                        
<S>                                        <C>           <C>            <C>
John C.C. Fan............................       55           1984       President, Chief Executive
                                                                        Officer, Director and
                                                                        Chairman of the Board
                                                                       
David E. Brook(2)........................       58           1984       Secretary and Director
                                                                       
Andrew H. Chapman (1)....................       44           1985       Director
                                                                       
Morton Collins (1).......................       63           1985       Director
                                                                       
Chi Chia Hsieh........................          54           1995       Director
                                                                       
Michael A. Wall (2)......................       70           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 and Certain Officers

          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.

          Andrew H. Chapman, Director.  Mr. Chapman has served as a Director of
the Company since 1985.  Mr. Chapman is founder, director and Executive Vice
President of MaxComm Technologies, Inc., a privately held telecommunications
equipment company, a position in which he has served since its formation in
1998. From 1994 to 1996, Mr. Chapman was an Executive Vice President of
Integrated Network Corporation, a privately held telecommunications equipment
company, of which he has also

                                       2
<PAGE>
 
served as a director. During that time, Mr. Chapman was also a founder and co-
General Manager of the Integrated Network Corporation Multimedia Business Unit
which was renamed Dagaz Technologies, Inc. and sold to Cisco Systems, Inc. in
1997. From its formation in 1988 to 1998, Mr. Chapman was also Managing Director
of The Vertical Group, a private investment management company.

          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 The Liposome Company, Inc., ThermoTrex
Corporation, Thermedics Detection, Inc. 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 is currently the Vice Chairman and was
previously the President of Microelectronics Technology, Inc., a Taiwan
corporation publicly traded on the Taiwan Stock Exchange.

          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 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, 1998 (the "1998 Fiscal
Year"), the Board held five meetings.  During the 1998 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 1998 Fiscal Year, the Audit
Committee met two times.

          The Compensation Committee presently is composed of two directors,
David E. Brook 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 regulations of the Securities and Exchange Commission, except for Mr.
Brook, who is a name partner of Hamilton, Brook, Smith & Reynolds, which is
patent counsel to the Company. During the 1998 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.

                                       3
<PAGE>
 
Executive Compensation

          The table below sets forth certain compensation information for the
fiscal years ended 1998, 1997 and 1996 with respect to the Company's Chief
Executive Officer and the other most highly paid (in 1998) executive officers of
the Company.

                           Summary Compensation Table
                                        
<TABLE>
<CAPTION>
                                                                                                                   
                                                                                                                    
                                                                               Long-Term                            
                                                                              Compensation                          
                                                                                 Awards                             
                                                                                 ------                             
                                                  Annual Compensation          Securities             All Other     
         Name and                                 -------------------          Underlying          Compensation(1)  
    Principal Position           Year         Salary ($)      Bonus($)        Options (#)                ($)
    ------------------           ----         ----------      --------        -----------              -------         
 
<S>                         <C>             <C>             <C>           <C>                   <C>
John C.C. Fan,                     1998           280,000             0         10,000                  2,400
Chairman, CEO and                  1997           260,000        75,000        190,000                  2,400
President                          1996           235,000        50,000        130,000(2)               2,250
                                                                             
Bor Yeu Tsaur                      1998           210,000        50,000              0                  2,400
Executive Vice President -         1997            95,385             0        126,200                  1,431
Display Operations                                                           
                                                                             
Matthew J. Micci,                  1998           179,500             0          7,500                  2,400
Vice President -                   1997           188,670             0          7,000                  2,400
Sales, Gallium Arsenide            1996           196,485             0         23,500(3)               2,250
                                                                             
Daily S. Hill                      1998           118,000        68,720         10,000                  2,400
Vice President                     1997           109,000        54,882         13,000                  2,400
Gallium Arsenide                   1996            95,000        17,844         12,900(4)               1,693
Operations                                                                  
                                                                             
Ronald P. Gale                     1998           141,000         7,500          5,000                  2,222
Vice President and Chief           1997           132,000        10,000         14,000                  1,976
Technology Officer                 1996           120,000        25,000         23,500(5)               1,754
                                                                             
Paul J. Mitchell                   1998           151,438        30,000          5,000                  2,400
Formerly. Chief Financial          1997           170,000        35,000         30,000                  2,400
Officer                            1996           155,000        25,000         67,500(6)               2,250
                                                                             
Jeffrey J. Jacobsen                1998           155,253             0              0                      0
Formerly. Senior Vice              1997           183,000        24,000         14,000                      0
President-Business                 1996           233,615        15,000         23,500(7)                   0
Development
</TABLE>

                                       4
<PAGE>
 
___________________

(1)  Amounts represent the Company's matching contributions under the Company's
     401(k) Plan.
(2)  Includes options to purchase 45,000 shares of the Company's common stock
     granted in exchange for certain outstanding options previously granted to
     Dr. Fan.
(3)  Includes options to purchase 13,500 shares of the Company's common stock
     granted in exchange for certain outstanding options previously granted to
     Mr. Micci.
(4)  Includes options to purchase 5,400 shares of  the Company's common stock
     granted in exchange for certain outstanding options previously granted to
     Mr. Hill.
(5)  Includes options to purchase 13,500 shares of  the Company's common stock
     granted in exchange for certain outstanding options previously granted to
     Mr. Gale.
(6)  Includes options to purchase 22,500 shares of  the Company's common stock
     granted in exchange for certain outstanding options previously granted to
     Mr. Mitchell.
(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.


     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, 1998 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 (2)
Name                              (#)(1)            Fiscal Year     ($/sh)         Date              5%($)         10%($)
- ----------------------            ------           -------------     -----         ----            ------        -------
<S>                     <C>                        <C>            <C>          <C>           <C>            <C>
 
John C. C. Fan                    10,000                3.7            12.50       10/08/08        78,600        199,200
                                                                  
Matthew J. Micci                   7,500                2.8            12.50       10/08/08        58,950        149,400
                                                                  
Daily S. Hill                     10,000                3.7            12.50       10/08/08        78,600        199,200
                                                                  
Ronald P. Gale                     5,000                1.9            12.50       10/08/08        39,300         99,600
                                                                  
Paul J. Mitchell                   5,000                1.9            12.50       10/08/08        39,300         99,600
</TABLE>
___________

(1)  Options granted under the Company's 1992 Stock Option Plan.  Such options
     are exercisable on December 31, 1999.  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 and to any other
     persons in the discretion of the Compensation Committee subject to certain
     restrictions.
(2)  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, 1998 was $21.00.

                                       5
<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
                                                                            12/31/98 (#)             12/31/98 ($)
                           Shares Acquired      Value Realized           Exercisable/               Exercisable/
Name                       on Exercise (#)        (1)($)                 Unexercisable            Unexercisable(2)
- ----                      ------------------   -----------------         -------------            ----------------    
<S>                       <C>                  <C>                 <C>                         <C>
 
John C.C. Fan                    N/A                  N/A                460,250/68,750          4,153,813/550,937
 
Bor Yeu Tsaur                    N/A                  N/A                 30,240/90,720          342,300/1,026,900
 
Matthew J. Micci                 N/A                  N/A                 37,025/17,375            391,850/168,250
 
Daily S. Hill                  2,700               19,913                 27,850/17,350            247,697/153,165
 
Ronald P. Gale                   N/A                  N/A                 81,325/16,375            782,707/153,469
 
Paul J. Mitchell              36,250              298,370                106,975/26,875            886,337/240,001
                                                                  
Jeffrey J. Jacobsen            8,332              171,407                     - / -                    - / -
</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, 1998 ($21.00) minus the exercise price.


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, 2000.  Dr. Fan's salary is
to be determined each year by the Board of Directors.  At the end of 1998, the
Board of Directors set Dr. Fan's annual salary for 1999 at $325,000.


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.

                                       6
<PAGE>
 
                         COMPENSATION COMMITTEE REPORT
                                       ON
                             EXECUTIVE COMPENSATION
                                        
Compensation Philosophy

          The Company's executive compensation is based upon three primary
components:  base salary, incentive or bonus compensation, 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, incentive or
bonus compensation and stock option compensation levels.

                                       7
<PAGE>
 
Compensation Program Components

          Annual compensation for the Company's executives consists of three
elements -- salary, incentive and bonus payments, 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 1999 an average 6% increase in base
salary would be appropriate for a merit and cost of living adjustment.

          The Company's officers are eligible to receive incentive or bonus
compensation 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. The Committee gave special consideration to those executives who
made a material contribution to the achievement of corporate performance goals
including development of various strategic corporate relationships, new product
development, continued progress in the commercialization of the Company's
technology and increased product revenues, in awarding incentive compensation.
Management had also requested and the Committee agreed to authorize cash bonuses
to other executive and nonexecutive employees totaling approximately 4.0% of
total employee compensation.

          While 1998 generally reflected an increasingly competitive market for
qualified and experienced personnel, the Company was nonetheless able to benefit
from the many continuous years of service from several of its key executives.
Accordingly, as a further retention device and incentive to these executives,
the Compensation Committee established for 1998, to augment the Company's
existing executive compensation components, an incentive compensation program
under which officers are eligible to receive over a two year period beginning in
1999 certain cash based incentive compensation. This program is structured in
the form of Company loans ranging between 50% and 100% of the officer's annual
base salary. A percentage of these loans up to 100% is forgiven subject to the
continued employment of the officer over a two year period.

     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 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 180,000 shares in July 1997 and an additional 110,000 shares in December 1997
for issuance pursuant to stock option grants to all employees. For the current
year, the Committee reserved a pool of 200,000 shares in October 1998 for
issuance pursuant to stock option grants to employees. 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.
However, in 1998, as a further retention device, the Committee authorized that
100,000 shares of the October 1998 grant provide for 100% vesting on December
31, 1999.  The Committee's objective was to significantly reduce the risk of
loss of certain key executives and employees within such time frame.  In
establishing the appropriate number of stock options to grant to the Company's
employees and executives for 1998, 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 1.6%.

     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 

                                       8
<PAGE>
 
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.


1998 Compensation for the Chairman and Chief Executive Officer

          In considering the compensation for the Chairman and Chief Executive
Officer and President for fiscal year 1998, 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 1999.

          Dr. Fan's salary for fiscal 1998 was increased $20,000 from $260,000
to $280,000 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. In lieu of a cash
bonus award for 1998, Dr. Fan will participate in the incentive compensation
program described under the previous section of this report under which he is
eligible to receive over a two year period  incentive compensation based on up
to 100% of his annual base salary, subject to Dr. Fan's continued employment
with the Company. In October 1998, the Compensation Committee granted Dr. Fan an
option for the purchase of 10,000 shares at an exercise price equal to the fair
market value per share at the date of grant.  The number of shares subject to
this option was reduced compared to the previous year to take into account the
level of Dr. Fan's cash incentive compensation for the year. The option is
exercisable on December 31, 1999  subject to Dr. Fan's continued employment with
the Company.  In determining the overall compensation 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 1998 performance goals previously described, the level
of stock options granted to Dr. Fan in previous years 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


                                  Michael A. Wall, Chairman
                                  David E. Brook

                                       9
<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") over the last five years. The graph assumes that the
value of the investment in the Company's Common Stock and each index was $100 at
January 1, 1994 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               -U.S.Index                    Index
    -----------------          -----------------               ----------                    -----               
 
<S>                        <C>                         <C>                         <C>
        12/31/93                   $100.00                       $100.00                     $100.00          
        12/31/94                     56.94                         97.75                      120.12          
        12/31/95                     79.17                        138.26                      179.61          
        12/31/96                     65.97                        170.01                      223.23          
        12/31/97                     93.40                        208.58                      261.72          
        12/31/98                    116.67                        293.21                      407.08          
</TABLE>

                                       10
<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 26, 1999 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).................                 584,145                              4.7
 
David E. Brook (3)................                  66,747                                *
 
Andrew H. Chapman (3).............                  24,000                                *
 
Morton Collins (3)................                  14,000                                *
 
Chi Chia Hsieh (4)................                  15,188                                *
 
Michael A. Wall (3)...............                 135,902                              1.1
 
ICM Asset Management (5)..........                 813,011                              6.6
 
Bor Yeu Tsaur (6).................                  30,240                                *
 
Ronald P. Gale (7)................                  96,825                                *
 
Matthew J. Micci (8)..............                  37,050                                *
 
Daily S. Hill  (9)................                  27,850                                *
 
Paul J. Mitchell(10)..............                 106,975                                *
 
All directors and executive                                                                  
 officers as a group (14 persons)
 (11).............................               1,264,047                             10.2 
</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 officer.  Dr. Fan disclaims
     beneficial ownership of all such shares.  Also includes 340,250 shares
     representing options that are currently exercisable or exercisable within
     60 days.
(3)  Includes 14,000 shares representing options that are currently exercisable
     or exercisable within 60 days.
(4)  Includes 15,188 shares representing options that are currently exercisable
     or exercisable within 60 days.
(5)  The address of ICM Asset Management is 601 West Main Ave., Spokane,
     Washington 99201. The number of shares beneficially owned is based on 13G
     filing made with the Securities and Exchange Commission.

                                       11
<PAGE>
 
(6)  Includes 30,240 shares representing options that are currently exercisable
     or exercisable within 60 days.
(7)  Includes 81,325 shares representing options that are currently exercisable
     or exercisable within 60 days.
(8)  Includes 37,025 shares representing options that are currently exercisable
     or exercisable within 60 days.
(9)  Includes 27,850 shares representing options that are currently exercisable
     or exercisable within 60 days.
(10) Includes 8,000 shares held by Mr. Mitchell as custodian under the Uniform
     Gifts to Minors Act, Mr. Mitchell disclaims beneficial ownership of all
     such shares.  Also includes 77,975 shares representing options that are
     currently exercisable or exercisable within 60 days.
(11) Includes 790,978 shares issuable to certain directors and executive
     officers pursuant to options that are currently exercisable or exercisable
     within 60 days.


Reports of Beneficial Ownership

          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 1998, with the
exception of the following: (i) Mr. Gale filed one late Form 4 reporting one
transaction; (ii) Mr. Hill filed one late Form 4 reporting three transactions;
(iii) Mr. Kephart filed one late Form 4 reporting two transactions; and, (iv)
Dr. Vimolvanich filed one late Form 5 reporting one transaction.

                                       12
<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 3,100,000 to 3,250,000 (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, 1998 2,779,917 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 3,100,000 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 6, 1999
as $14.75 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 

                                       13
<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 1998 was composed of Messrs. David E. Brook and Michael A. Wall.

          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.

                         Options Granted under the Plan
                             (as of March 26, 1999)
<TABLE>
<CAPTION>
Name                                                                              Options (Shares)
- -----                                                                             ---------------
<S>                                                                            <C>
John C.C. Fan................................................................          529,000       
Ronald P. Gale...............................................................           97,700       
Matthew J. Micci.............................................................           54,400       
Glen G. Kephart..............................................................           75,000       
Bor Yeu Tsaur................................................................          126,200       
Daily S. Hill................................................................           47,900       
Matthew M. Zavracky..........................................................           95,500       
Richard A. Sneider...........................................................           50,000       
All executive officers                                                                               
 as a group..................................................................        1,075,700       
All directors, excluding executive                                                                   
 officers, as a group........................................................                0       
All employees, excluding executive                                                                   
 officers, as a group........................................................        1,423,602        
</TABLE>

          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.

                                       14
<PAGE>
 
                                   PROPOSAL 3
                                        
                   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
stockholders at the 2000 annual meeting of stockholders (or special meeting in
lieu thereof) provided such proposals are submitted by eligible stockholders who
have complied with the relevant regulations of the Securities and Exchange
Commission.  Such proposals must be received by the Company no later than
January 26, 2000 to be included in the agenda for that meeting and must be
received by the Company no later than December 14, 1999 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, 1998.  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 23, 2000, 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

                                       15
<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 20, 1999
                                        
     The undersigned hereby appoints John C.C. Fan and Richard A. Sneider 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 20,
1999 at 10:00 a.m. at the offices of Bingham Dana LLP, 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),
AND (3) 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

                             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 APPOINTMENT      [_]         [_]           [_] 
OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE
COMPANY.

4. 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 
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_________________


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission