<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [_]
<TABLE>
<CAPTION>
Check the appropriate box:
<S> <C> <C>
[_] Preliminary Proxy Statement [_] Confidential, for Use by the
[X] Definitive Proxy Statement Commission Only (as permitted by
[_] Definitive Additional Materials Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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
N/A
<PAGE>
KOPIN CORPORATION
April 20, 2000
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 25, 2000, at the Sheraton
Framingham Hotel, 1657 Worcester Road, Framingham, 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,
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 25, 2000
________________________
Notice is hereby given that the Annual Meeting (the "Meeting") of
Stockholders of Kopin Corporation (the "Company") will be held at the Sheraton
Framingham Hotel, 1657 Worcester Road, Framingham, Massachusetts on May 25,
2000, 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 amend the Company's certificate of incorporation to
increase the number of authorized shares from 60,000,000 to 120,000,000.
3. 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.
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 31, 2000 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
JOHN C.C. FAN, Chairman
Taunton, Massachusetts
April 20, 2000
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 25,
2000, and at any adjourned session thereof. This proxy statement was first
mailed to stockholders on or about April 20, 2000. All solicitation expenses,
including costs of preparing, assembling and mailing proxy material, will be
borne by the Company.
The close of business on March 31, 2000 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 31,393,976 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, except for Proposal 2, for which such "non-votes" will
have the effect of a vote against the Proposal. 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 2001
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............... 56 1984 President, Chief Executive
Officer, Director and
Chairman of the Board
David E. Brook (2) ......... 59 1984 Secretary and Director
Andrew H. Chapman (1)....... 45 1985 Director
Morton Collins (1).......... 64 1985 Director
Chi Chia Hsieh.............. 55 1995 Director
Michael A. Wall (2)......... 71 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 was a founder of MaxComm Technologies, Inc., a
telecommunications company, and was a director and Executive Vice President of
MaxComm from 1998 to 1999, when it was sold to Cisco
2
<PAGE>
Systems. From 1994 to 1996, Mr. Chapman also served as Executive Vice President
of Integrated Network Corporation, of which he has also served as a director.
During that time, Mr. Chapman was also a founder and co-General Manager of Dagaz
Technologies, Integrated Network's Multimedia Business Unit, which was sold to
Cisco Systems 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
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 numerous
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, 1999 (the "1999 Fiscal
Year"), the Board held six meetings. During the 1999 Fiscal Year, each
incumbent director other than Dr. Hsieh 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 1999 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 1999 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 1999, 1998 and 1997 with respect to the Company's Chief
Executive Officer and the four other most highly paid (in 1999) executive
officers of the Company.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
------
Securities All Other
Name and Annual Compensation Underlying Compensation(1)
-------------------
Principal Position Year Salary ($) Bonus($) Options (#) ($)
------------------ ---- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C>
John C.C. Fan, 1999 325,000 25,000 380,000 2,400
Chairman, CEO and 1998 280,000 0 20,000 2,400
President 1997 260,000 75,000 380,000 2,400
Richard A. Sneider 1999 180,000 10,000 50,000 2,400
Treasurer and 1998 54,000 7,500 100,000 839
Chief Financial Officer
Bor Yeu Tsaur 1999 210,000 12,500 12,000 2,400
Executive Vice President - 1998 210,000 50,000 0 2,400
Display Operations 1997 95,385 0 252,400 1,431
Matthew J. Micci, 1999 196,103 0 15,000 2,400
Vice President - 1998 179,500 0 15,000 2,400
Sales, Gallium Arsenide 1997 188,670 0 14,000 2,400
Daily S. Hill 1999 122,000 177,787 24,000 2,400
Vice President - 1998 118,000 68,720 20,000 2,400
Gallium Arsenide 1997 109,000 54,882 26,000 2,400
Operations
</TABLE>
______________
(1) Amounts represent the Company's matching contributions under the Company's
401(k) Plan.
4
<PAGE>
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, 1999 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 (3)
Name (#) Fiscal Year ($/sh) Date 5%($) 10%($)
---- --- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
John C. C. Fan 200,000 (1) 18.8 21.00 10/29/09 2,642,000 6,694,000
100,000 (2) 9.4 21.00 10/29/09 605,000 1,534,000
80,000 (2) 7.5 9.63 6/15/09 484,000 1,227,200
Richard A. Sneider 20,000 (1) 1.9 21.00 10/29/09 264,200 669,400
30,000 (2) 2.8 9.63 6/15/09 181,500 460,200
Bor Yeu Tsaur 12,000 (1) 1.1 21.00 10/29/09 158,520 401,640
Matthew J. Micci 15,000 (1) 1.4 21.00 10/29/09 198,150 502,050
Daily S. Hill 24,000 (1) 2.3 21.00 10/29/09 317,040 803,280
</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 and to any other
persons in the discretion of the Compensation Committee subject to certain
restrictions.
(2) Options granted under the Company's 1992 Stock Option Plan. Such options
are exercisable upon the attainment of certain corporate objectives. 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.
(3) 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, 1999 was $42.00.
5
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at
12/31/99 (#) 12/31/99 ($)
Shares Acquired Value Realized Exercisable/ Exercisable/
Name on Exercise (#) (1)($) Unexercisable Unexercisable(2)
---- --------------- ---------- ------------- ----------------
<S> <C> <C> <C> <C>
John C.C. Fan 146,790 1,685,684 898,000/300,000 30,254,000/7,650,000
Richard A. Sneider N/A N/A 70,000/80,000 2,413,750/2,583,750
Bor Yeu Tsaur 30,960 285,668 100,000/132,960 3,625,000/4,746,840
Matthew J. Micci 6,400 70,600 95,400/22,000 3,500,600/567,320
Daily S. Hill 10,000 124,375 73,650/30,750 2,634,370/743,720
</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, 1999 ($42.00) minus the exercise price.
6
<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, 2002. Dr. Fan's salary is
to be determined each year by the Board of Directors. At the end of 1999, the
Board of Directors set Dr. Fan's annual salary for 2000 at $350,000.
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. Under the Company's Director Stock Option Plan, each
non-employee Director is entitled to receive an initial option grant for 30,000
shares on the date of his or her initial election to the Board of Directors and
a subsequent option grant for 8,000 shares on each anniversary of his or her
initial election to the Board of Directors. The Company also pays expenses for
attendance at meetings of the Board of Directors and committees thereof.
Certain Transactions
As a further retention device and reward to certain executives, in
1998, to augment the Company's existing executive compensation components, the
Compensation Committee established an incentive compensation program under which
officers were eligible to receive over a two year period beginning in 1999
certain cash based incentive compensation. This program was structured in the
form of Company loans ranging between 50% to 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 in 2000 and 2001. The original principal
amounts of such loans made in 1999 included loans to the following officers:
John C.C. Fan ($280,000), Bor Yeu Tsaur ($210,000), Ronald P. Gale ($141,000),
Matthew M. Zavracky ($127,000), Daily S. Hill ($59,000) and Matthew J. Micci
($56,000). The outstanding balances of such loans as of March 31, 2000 consisted
of loans to the following officers: John C.C. Fan ($265,250), Bor Yeu Tsaur
($197,500), Ronald P. Gale ($128,500), Matthew M. Zavracky ($114,500), Daily S.
Hill ($44,250) and Matthew J. Micci ($42,000).
7
<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.
8
<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 companies
similar in size to the Company. 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 2000 an average 6.5% 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 5.0% of
total employee compensation with a reserve, at management's discretion, of up to
an additional 2.0%.
While 1999 generally reflected an increasingly competitive market for
qualified and experienced personnel, the Company was nonetheless able to benefit
from many continuous years of loyal service from several of its key executives.
As a further retention device and reward to these executives, in 1998, to
augment the Company's existing executive compensation components, the
Compensation Committee established 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% to 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 in 2000 and 2001.
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 400,000 shares in October 1998 for issuance pursuant to stock option grants
to all employees. As a further retention device, the Committee authorized that
200,000 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 key employees within such time frame. For the current year, the Committee
reserved a pool of 125,000 shares in June 1999 and 500,000 shares in October
1999 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, the Committee authorized that the June 1999 grant provide
100% vesting upon the attainment of certain corporate objectives. In
establishing the appropriate number of stock options to grant to the Company's
employees and executives for 1999, 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 3.0%.
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
9
<PAGE>
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 fouryear vesting, period, except as described above, to
encourage key employees to continue in the employ of the Company.
1999 Compensation for the Chairman and Chief Executive Officer
In considering the compensation for the Chairman and Chief Executive
Officer and President for fiscal year 1999, 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 provide competitive compensation and to reflect Dr. Fan's
senior position, his responsibilities, and his past and expected future
contributions to the Company's success, with the objective of incentivizing him
to achieve certain key milestones within a specified time frame.
Dr. Fan's salary for fiscal 1999 was increased $45,000 from $280,000
to $325,000 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. Dr. Fan also
participates 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 1999, the
Compensation Committee granted Dr. Fan options for the purchase of 180,000
shares at exercise prices equal to the fair market value per share at the date
of grant. The options are exercisable upon the achievement of certain corporate
milestones, subject to Dr. Fan's continued employment with the Company. In
addition, in October 1999, the Committee granted Dr. Fan an option for the
purchase of 200,000 shares at an exercise price equal to the fair market value
per share at the date of grant. These options vest ratably over a four year
period. The Committee's objective was to incentivize the Chief Executive
Officer to reach certain specific goals and objectives. In determining the
overall incentive 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 1999 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
10
<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 Chase Hambrecht & Quist Technology Index (the
"Chase 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, 1995 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 CHASE H&Q TECHNOLOGY
INDEX
<TABLE>
<CAPTION>
NASDAQ Stock Market Chase H&Q Technology
Measurement Point Kopin Corporation -U.S.Index Index
----------------- ----------------- ---------- -----
<S> <C> <C> <C>
12/31/94 $100.00 $100.00 $100.00
12/31/95 139.02 141.33 149.52
12/31/96 115.85 173.89 185.84
12/31/97 164.02 213.07 217.87
12/31/98 204.88 300.25 338.89
12/31/99 819.51 542.43 756.85
</TABLE>
<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 31, 2000 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:
Amount and Nature
of Beneficial
Name Ownership (1) Percent
---- ------------- -------
John C.C. Fan (2)...................... 1,161,590 3.7
David E. Brook (3)..................... 99,382 *
Andrew H. Chapman (4).................. 16,000 *
Morton Collins (3)..................... 36,000 *
Chi Chia Hsieh (5)..................... 42,000 *
Michael A. Wall (3).................... 220,804 *
Bor Yeu Tsaur (6)...................... 161,440 *
Matthew J. Micci (7)................... 45,450 *
Daily S. Hill (8)...................... 35,000 *
Richard A. Sneider (9)................. 39,243 *
All directors and executive 1,963,894 6.3
officers as a group (12 persons) (10)..
_____________________
*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 12,000 shares held by Dr. Fan's wife as custodian under the
Uniform Gifts to Minors Act. Dr. Fan disclaims beneficial ownership of all
such shares. Also includes 580,000 shares representing options that are
currently exercisable or exercisable within 60 days.
(3) Includes 28,000 shares representing options that are currently exercisable
or exercisable within 60 days.
(4) Includes 8,000 shares representing options that are currently exercisable
or exercisable within 60 days.
(5) Includes 42,000 shares representing options that are currently exercisable
or exercisable within 60 days.
(6) Includes 98,310 shares representing options that are currently exercisable
or exercisable within 60 days.
12
<PAGE>
(7) Includes 45,400 shares representing options that are currently
exercisable or exercisable within 60 days.
(8) Includes 35,000 shares representing options that are currently
exercisable or exercisable within 60 days.
(9) Includes 39,243 shares representing options that are currently
exercisable or exercisable within 60 days.
(10) Includes 1,026,953 shares issuable to certain directors and executive
officers pursuant to options that are currently exercisable or
exercisable within 60 days.
Section 16(a) 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 1999, with the exception
of the following:
(i) Mr. Gale filed one late Form 4 reporting two transactions; (ii) Mr. Hill
filed one late Form 4 reporting two transactions; (iii) Mr. Micci filed one late
Form 4 reporting two transactions; and (iv) Dr. Hsieh filed one late Form 5
reporting one transaction.
13
<PAGE>
PROPOSAL 2
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION
The current authorized capital stock of the Company consists of 3,000
shares of preferred stock, $.01 par value ("Preferred Stock"), and 60,000,000
shares of Common Stock, $.01 par value, of which no shares of Preferred Stock
and 31,393,976 shares of Common Stock were issued and outstanding at March 31,
2000. The Board of Directors, on March 30, 2000, adopted a proposed amendment to
Article FOURTH of the Company's Certificate of Incorporation increasing the
authorized number of shares of Common Stock from 60,000,000 to 120,000,000 for
submission to the stockholders at the Meeting.
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders of the Company and to ratably receive
dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefor, subject to the payment of any
outstanding preferential dividends declared with respect to any Preferred Stock
that from time to time may be outstanding. Upon liquidation, dissolution or
winding up of the Company, holders of Common Stock are entitled to share ratably
in any assets available for distribution to stockholders after payment of all
obligations of the Company, subject to the rights to receive preferential
distributions of the holders of any Preferred Stock then outstanding.
If the proposed amendment is approved, all or any part of the authorized
but unissued shares of Common Stock may thereafter be issued without further
approval from the stockholders, except as may be required by law or the policies
of any stock exchange or stock market on which the shares of stock of the
Company may be listed or quoted, for such purposes and on such terms as the
Board of Directors may determine. Holders of the capital stock of the Company do
not have any preemptive rights to subscribe for the purchase of any shares of
Common Stock, which means that current stockholders do not have a prior right to
purchase any new issue of Common Stock in order to maintain their proportionate
ownership.
The proposed amendment will not affect the rights of existing holders of
Common Stock except to the extent that future issuances of Common Stock will
reduce each existing stockholder's proportionate ownership.
If the proposed amendment is adopted, Article FOURTH of the Certificate of
Incorporation would be amended to read, in part, as follows:
FOURTH: The total number of shares of capital stock which the
------
corporation shall have authority to issue is as follows:
<TABLE>
<CAPTION>
Without Par With
Value Par Value Aggregate
Class of Stock No. of Shares No. of Shares Par Value Amount
-------------- ------------- ------------- --------- ------
<S> <C> <C> <C> <C>
Preferred None 3,000 $.01 $ 30.00
Common None 120,000,000 $.01 $1,200,000.00
</TABLE>
The proposed amendment to Article FOURTH will not change any other aspect
of Article FOURTH.
The Board of Directors has determined that it would be appropriate for the
Company to increase the number of its authorized shares of Common Stock in order
to have additional shares
14
<PAGE>
available for possible future acquisition or financing transactions and other
issuances, or to satisfy requirements for additional reservations of shares by
reason of future transactions which might require increased reservations. The
Board of Directors believes that the complexity of customary financing,
employment and acquisition transactions requires that the Directors be able to
respond promptly and effectively to opportunities that involve the issuance of
shares of Common Stock. For example, if the proposal is approved, the Company
will have the flexibility to authorize stock splits and stock dividends and to
enter into joint ventures and corporate financings involving the issuance of
shares of Common Stock. The Company has no present plans, agreements,
understandings or arrangements regarding transactions expected to require
issuance of the additional shares of Common Stock that would be authorized by
the proposed amendment.
The Board of Directors unanimously recommends that the stockholders adopt
the proposed amendment. The affirmative vote of holders of at least a majority
of the outstanding Common Stock is required in order to adopt the proposed
amendment. Unless indicated to the contrary, the enclosed proxy will be voted
FOR the proposed amendment.
15
<PAGE>
PROPOSAL 3
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 6,500,000 to 7,500,000 (including 606,102 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, 1999
6,476,084 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 800,000 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 6,500,000 shares could be issued under the Plan
(including 606,102 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 14, 2000
was $52.875 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
16
<PAGE>
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 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 1999 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.
Option Grants under the Plan
(as of March 31, 2000)
<TABLE>
<CAPTION>
Name Options (Shares)
---- ----------------
<S> <C>
John C.C. Fan............................... 1,438,000
Ronald P. Gale.............................. 203,400
Matthew J. Micci............................ 123,800
Bor Yeu Tsaur............................... 264,400
Daily S. Hill............................... 119,800
Matthew M. Zavracky......................... 213,000
Richard A. Sneider.......................... 150,000
All executive officers
as a group.................................. 2,512,400
All directors, excluding executive
officers, as a group........................ 0
All employees, excluding executive
officers, as a group........................ 3,412,454
</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 and
entitled to vote is required for approval of the amendment of the Plan.
17
<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 2001 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 March 11, 2001 to be
included in the agenda for that meeting and must be received by the Company no
later than December 22, 2000 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, 1999. 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
24, 2001, and proxy materials in connection with that meeting are expected to be
mailed approximately 30 days prior to the meeting.
JOHN C.C. FAN,
Chairman
18
<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 25, 2000
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 25,
2000 at 10:00 a.m. at the Sheraton Framingham Hotel, 1657 Worcester Road,
Framingham, 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]
<PAGE>
_______________________________________________________________________________
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.
<TABLE>
<CAPTION>
1. PROPOSAL TO ELECT DIRECTORS FOR AGAINST ABSTAIN
<S> <C> <C> <C> <C>
NOMINEES: John C.C. Fan; David E. Brook; Andrew H. Chapman;
Morton Collins; Chi-Chia Hsieh; Michael A. Wall 2. PROPOSAL TO AMEND THE COMPANY'S [_] [_] [_]
CERTIFICATE OF INCORPORATION
FOR WITHHELD TO INCREASE THE NUMBER OF
[_] [_] AUTHORIZED SHARES
[_] For all nominees except as noted above 3. 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.
4. PROPOSAL TO RATIFY THE APPOINTMENT [_] [_] [_]
OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS
OF THE COMPANY
<CAPTION>
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_______________
</TABLE>
