Exhibit 10.1

 

SECURITIES PURCHASE AGREEMENT

 

SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of August 31, 2005,
by and between Microvision, Inc., a Delaware corporation (the “Company”), and
each of the entities whose names appear on the signature pages hereof. Such
entities are each referred to herein as an “Investor” and, collectively, as the
“Investors”.

 

A. The Company wishes to sell to each Investor, and each Investor wishes to
purchase, on the terms and subject to the conditions set forth in this
Agreement, (i) 285,714 shares (the “Shares”) of the Company’s common stock,
$.001 par value per share (the “Common Stock”), and (ii) a Warrant in the form
attached hereto as Exhibit A (each, a “Warrant” and, collectively with the other
Warrants issued hereunder, the “Warrants”). The shares of Common Stock into
which the Warrants are exercisable are referred to herein as the “Warrant
Shares”, and the Shares, the Warrants and the Warrant Shares are collectively
referred to herein as the “Securities”.

 

B. Each Warrant will entitle an Investor to purchase a number of Warrant Shares
equal to (i) the number of Shares being purchased by such Investor pursuant to
this Agreement times (ii) $5.25 times (iii) twenty-five percent (25%) divided by
$5.8254, will have an exercise price equal to $6.50 (subject to adjustment as
provided therein), and will expire on the fifth (5th) anniversary of the Closing
Date.

 

C. The Company has agreed to effect the registration of the Shares and the
Warrant Shares for resale by the holders thereof under the Securities Act of
1933, as amended (the “Securities Act”), pursuant to a Registration Rights
Agreement in the form attached hereto as Exhibit B (the “Registration Rights
Agreement”).

 

D. The sale of the Shares and the Warrants by the Company to the Investors will
be effected in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D (“Regulation D”), as promulgated by the
Commission (as defined below) under the Securities Act.

 

In consideration of the mutual promises made herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company and each Investor hereby agree as follows:

 

1. PURCHASE AND SALE OF SHARES AND WARRANTS.

 

1.1 Closing of Purchase and Sale; Purchase Price. Upon the terms and subject to
the satisfaction or waiver of the conditions set forth herein, the Company
agrees to sell and each Investor agrees to purchase (i) the number of Shares set
forth below such Investor’s name on the signature pages hereof, and (ii) a
Warrant. The date on which the closing of such purchase and sale occurs (the
“Closing”) is hereinafter referred to as the “Closing Date”. The Closing will be
deemed to occur at the offices of Ropes & Gray, One International Place, Boston,
MA 02110, when (A) this Agreement and

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the other Transaction Documents (as defined below) have been executed and
delivered by the Company and, to the extent applicable, by each Investor, (B)
each of the conditions to the Closing described in Section 5 hereof has been
satisfied or waived as specified therein and (C) full payment of each Investor’s
Purchase Price (as defined below) has been made by such Investor to the Company
by wire transfer of immediately available funds against physical delivery by the
Company of a duly executed certificates representing the Shares and Warrant
being purchased by such Investor.

 

1.2 Certain Definitions. When used herein, the following terms shall have the
respective meanings indicated:

 

“Affiliate” means, as to any Person (the “subject Person”), any other Person (a)
that directly or indirectly through one or more intermediaries controls or is
controlled by, or is under direct or indirect common control with, the subject
Person, (b) that directly or indirectly beneficially owns or holds ten percent
(10%) or more of any class of voting equity of the subject Person, or (c) ten
percent (10%) or more of the voting equity of which is directly or indirectly
beneficially owned or held by the subject Person. For the purposes of this
definition, “control” when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, through representation on
such Person’s board of directors or other management committee or group, by
contract or otherwise.

 

“Board of Directors” means the Company’s board of directors.

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which
the New York Stock Exchange is closed or on which banks in the City of New York
are required or authorized by law to be closed.

 

“Closing” and “Closing Date” have the respective meanings set forth in Section
1.1 hereof.

 

“Commission” means the Securities and Exchange Commission.

 

“Common Stock” has the meaning specified in the preamble to this Agreement.

 

“Debt” means, as to any Person at any time: (a) all indebtedness, liabilities
and obligations of such Person for borrowed money; (b) all indebtedness,
liabilities and obligations of such Person to pay the deferred purchase price of
Property or services (except trade accounts payable, accrued compensation,
accrued expenses, and unearned revenue and customer deposits of such Person
that, in any such case, arise in the ordinary course of business and are not
more than sixty (60) days past due); (c) all capital lease obligations of such
Person; (d) all indebtedness, liabilities and obligations of others guaranteed
by such Person; (e) all indebtedness, liabilities and obligations secured by a
Lien existing on Property owned by such Person, whether or not the indebtedness,
liabilities or obligations secured thereby have been assumed by such Person or
are non-recourse to such Person; (f) all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit,
bankers’ acceptances, surety or other bonds and similar

 

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instruments; and (g) all indebtedness, liabilities and obligations of such
Person to redeem or retire shares of capital stock of such Person.

 

“Disclosure Documents” means all SEC Documents filed by the Company at least two
(2) Business Days prior to the date of this Agreement via the Commission’s
Electronic Data Gathering, Analysis and Retrieval system (EDGAR) in accordance
with the requirements of Regulation S-T under the Exchange Act.

 

“Effective Date” has the meaning set forth in the Registration Rights Agreement.

 

“Environmental Law” means any federal, state, provincial, local or foreign law,
statute, code or ordinance, principle of common law, rule or regulation, as well
as any Permit, order, decree, judgment or injunction issued, promulgated,
approved or entered thereunder, relating to pollution or the protection, cleanup
or restoration of the environment or natural resources, or to the public health
or safety, or otherwise governing the generation, use, handling, collection,
treatment, storage, transportation, recovery, recycling, discharge or disposal
of hazardous materials.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.

 

“Execution Date” means the date of this Agreement.

 

“Filed S-3 Effective Date” means the date on which the Company’s registration
statement on Form S-3, as amended, File No.: 333-123902, is declared effective
by the Commission.

 

“GAAP” means generally accepted accounting principles, applied on a consistent
basis, as set forth in (i) opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements of the
Financial Accounting Standards Board and (iii) interpretations of the Commission
and the staff of the Commission. Accounting principles are applied on a
“consistent basis” when the accounting principles applied in a current period
are comparable in all material respects to those accounting principles applied
in a preceding period.

 

“Governmental Authority” means any nation or government, any state, provincial
or political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including without limitation any stock exchange, securities
market or self-regulatory organization.

 

“Governmental Requirement” means any law, statute, code, ordinance, order, rule,
regulation, judgment, decree, injunction, franchise, license or other directive
or requirement of

 

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any federal, state, county, municipal, parish, provincial or other Governmental
Authority or any department, commission, board, court, agency or any other
instrumentality of any of them.

 

“Intellectual Property” means any U.S. or foreign patents, patent rights, patent
applications, trademarks, trade names, service marks, brand names, logos and
other trade designations (including unregistered names and marks), trademark and
service mark registrations and applications, copyrights and copyright
registrations and applications, inventions, invention disclosures, protected
formulae, formulations, processes, methods, trade secrets, computer software,
computer programs and source codes, manufacturing research and similar technical
information, engineering know-how, customer and supplier information, assembly
and test data drawings or royalty rights.

 

“Lien” means, with respect to any Property, any mortgage, pledge, hypothecation,
assignment, deposit arrangement, security interest, tax lien, financing
statement, pledge, charge, or other lien, charge, easement, encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such Property (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).

 

“Market Price” means, as of a particular date, the average of each daily VWAP
for the ten (10) consecutive Trading Days occurring immediately prior to (but
not including) such date. For the avoidance of doubt, the Market Price shall be
determined by calculating the daily VWAP for each of the ten (10) Trading Days
immediately preceding the relevant date, adding together all of the daily VWAP’s
for such ten (10) Trading Day period, and dividing such sum by ten (10).

 

“Material Adverse Effect” means an effect that is material and adverse to (i)
the consolidated business, properties, assets, operations, results of operations
or financial condition of the Company and its Subsidiaries taken as a whole,
(ii) the ability of the Company to perform its obligations under this Agreement
or the other Transaction Documents (as defined below) or (iii) the rights and
benefits to which an Investor is entitled under this Agreement and the other
Transaction Documents.

 

“Material Contracts” means, as to the Company, any agreement required pursuant
to Item 601 of Regulation S-B or Item 601 of Regulation S-K, as applicable,
promulgated under the Securities Act to be filed as an exhibit to any report,
schedule, registration statement or definitive proxy statement filed or required
to be filed by the Company with the Commission under the Exchange Act or any
rule or regulation promulgated thereunder, and any and all amendments,
modifications, supplements, renewals or restatements thereof.

 

“NASD” means the National Association of Securities Dealers, Inc.

 

“Pension Plan” means an employee benefit plan (as defined in ERISA) maintained
by the Company for employees of the Company or any of its Affiliates.

 

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“Permitted Liens” means the following:

 

(a) encumbrances consisting of easements, rights-of-way, zoning restrictions or
other restrictions on the use of Real Property or imperfections to title that do
not (individually or in the aggregate) materially impair the ability of the
Company to use such Property in its businesses, and none of which is violated in
any material respect by existing or proposed structures or land use;

 

(b) Liens for taxes, assessments or other governmental charges (including
without limitation in connection with workers’ compensation and unemployment
insurance) that are not delinquent or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the Property subject to such Liens, and for which adequate
reserves (as determined in accordance with GAAP) have been established; and

 

(c) Liens of mechanics, materialmen, warehousemen, carriers, landlords or other
similar statutory Liens securing obligations that are not yet due and are
incurred in the ordinary course of business or which are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject to such Liens, for
which adequate reserves (as determined in accordance with GAAP) have been
established.

 

“Person” means any individual, corporation, trust, association, company,
partnership, joint venture, limited liability company, joint stock company,
Governmental Authority or other entity.

 

“Principal Market” means the principal exchange or market on which the Common
Stock is listed or traded.

 

“Property” means property and/or assets of all kinds, whether real, personal or
mixed, tangible or intangible (including, without limitation, all rights
relating thereto).

 

“Pro Rata Share” means, with respect to an Investor, the ratio determined by
dividing (i) the number of Shares purchased hereunder by such Investor by (ii)
the aggregate number of Shares purchased hereunder by all of the Investors.

 

“Purchase Price” means, with respect to an Investor, the number of Shares
purchased by such Investor at the Closing times $5.25.

 

“Real Property” has the meaning specified in Section 3.22 hereof.

 

“Registrable Securities” has the meaning set forth in the Registration Rights
Agreement.

 

“Rule 144” means Rule 144 under the Securities Act or any successor provision.

 

“SEC Documents” has the meaning specified in Section 3.4 hereof.

 

“Securities” has the meaning specified in the preamble to this Agreement.

 

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“Subsequent Placement” means the issuance, sale, exchange, or agreement or
obligation to issue, sell or exchange or reserve, or agreement to or set aside
for issuance, sale or exchange, (i) any shares of Common Stock, (ii) any other
equity security of the Company, including without limitation shares of preferred
stock, (iii) any other security of the Company which by its terms is convertible
into or exchangeable or exercisable for any equity security of the Company, or
(iv) any option, warrant or other right to subscribe for, purchase or otherwise
acquire any such security described in the foregoing clauses (i) through (iii).

 

“Subsidiary” means, with respect to the Company, any corporation or other entity
(other than an entity having no material operations or business during the
twelve month period immediately preceding the Execution Date) of which at least
a majority of the outstanding shares of stock or other ownership interests
having by the terms thereof ordinary voting power to elect a majority of the
board of directors (or Persons performing similar functions) of such corporation
or entity (regardless of whether or not at the time, in the case of a
corporation, stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time directly or indirectly owned or controlled by the Company or one or
more of its Affiliates.

 

“Termination Date” means the first date on which there are no Warrants
outstanding.

 

“Trading Day” means any day on which the Common Stock is purchased and sold on
the Principal Market.

 

“Transaction Documents” means, collectively, this Agreement, the Registration
Rights Agreement, the Warrants, and all other agreements, documents and other
instruments executed and delivered by or on behalf of the Company or any of its
officers at the Closing.

 

“VWAP” on a Trading Day means the volume weighted average price of the Common
Stock for such Trading Day on the Principal Market as reported by Bloomberg
Financial Markets or, if Bloomberg Financial Markets is not then reporting such
prices, by a comparable reporting service of national reputation selected by the
Investors and reasonably satisfactory to the Company. If the VWAP cannot be
calculated for the Common Stock on such Trading Day on any of the foregoing
bases, then the Company shall submit such calculation to an independent
investment banking firm of national reputation reasonably acceptable to the
Investors, and shall cause such investment banking firm to perform such
determination and notify the Company and the Investors of the results of
determination no later than two (2) Business Days from the time such calculation
was submitted to it by the Company. All such determinations shall be
appropriately adjusted for any stock dividend, stock split or other similar
transaction during such period.

 

1.3 Other Definitional Provisions. All definitions contained in this Agreement
are equally applicable to the singular and plural forms of the terms defined.
The words “hereof”, “herein” and “hereunder” and words of similar import
referring to this Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement.

 

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2. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.

 

Each Investor (with respect to itself only) hereby represents and warrants to
the Company and agrees with the Company that, as of the Execution Date and as of
the Closing Date:

 

2.1 Authorization; Enforceability. Such Investor is duly and validly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization as set forth below such Investor’s name on the
signature page hereof with the requisite corporate power and authority to
purchase the Shares and Warrant to be purchased by it hereunder and to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party. This Agreement constitutes, and upon execution and delivery thereof, each
other Transaction Document to which such Investor is a party will constitute,
such Investor’s valid and legally binding obligation, enforceable in accordance
with its terms, subject to (i) applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and (ii) general principles of equity.

 

2.2 Accredited Investor. Such Investor (i) is an “accredited investor” as that
term is defined in Rule 501 of Regulation D, (ii) is acquiring the Securities in
the ordinary course of its business, solely for its own account, and not with a
view to the public resale or distribution of all or any part thereof, except
pursuant to sales that are registered under the Securities Act or are exempt
from the registration requirements of, the Securities Act and does not have any
agreement or understanding with any person to distribute any of the Securities;
provided, however, that, in making such representation, such Investor does not
agree to hold the Securities for any minimum or specific term and reserves the
right to sell, transfer or otherwise dispose of the Securities at any time in
accordance with the provisions of this Agreement and with Federal and state
securities laws applicable to such sale, transfer or disposition.

 

2.3 Information. The Company has, prior to the Execution Date, provided such
Investor with information regarding the business, operations and financial
condition of the Company and has, prior to the Execution Date, granted to such
Investor the opportunity to ask questions of and receive satisfactory answers
from representatives of the Company, its officers, directors, employees and
agents concerning the Company and materials relating to the terms and conditions
of the purchase and sale of the Securities hereunder, as such Investor deems
relevant in making an informed decision with respect to its investment in the
Securities. Such Investor is able to bear the economic risk of an investment in
the Securities and, at the present time, is able to afford a complete loss of
such investment. Neither such information nor any other investigation conducted
by such Investor or any of its representatives shall modify, amend or otherwise
affect such Investor’s right to rely on the Company’s representations and
warranties contained in this Agreement.

 

2.4 Limitations on Disposition. Such Investor acknowledges that, except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the Securities Act and may not be transferred or
resold without registration under the Securities Act or unless pursuant to an
exemption therefrom.

 

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2.5 Legend. Such Investor understands that the certificates representing the
Securities may bear at issuance a restrictive legend in substantially the
following form:

 

“The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended (the “Securities Act”), or the securities
laws of any state, and may not be offered, transferred, pledged, hypothecated,
sold or otherwise disposed of unless a registration statement under the
Securities Act and applicable state securities laws shall have become effective
with regard thereto, or an exemption from registration under the Securities Act
and applicable state securities laws is available in connection with such offer
or sale.”

 

Notwithstanding the foregoing, it is agreed that, as long as (A) the resale or
transfer (including without limitation a pledge) of any of the Securities is
registered pursuant to an effective registration statement and the holder
represents in writing to the Company that such Securities have been or will be
sold pursuant to such registration statement, (B) such Securities have been sold
pursuant to Rule 144, subject to receipt by the Company of customary
documentation in connection therewith, or (C) such Securities are eligible for
resale under Rule 144(k) or any successor provision and the holder thereof
represents in writing to the Company that it is eligible to use such rule for
public resales of such Securities, the certificates representing such Securities
shall be issued without any legend or other restrictive language and, with
respect to Securities upon which such legend is stamped, the Company shall issue
new certificates without such legend to the holder upon request.

 

2.6 Reliance on Exemptions. Such Investor understands that the Securities are
being offered and sold to it in reliance upon specific exemptions from the
registration requirements of U.S. federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations and
warranties of such Investor set forth in this Section 2 in order to determine
the availability of such exemptions and the eligibility of such Investor to
acquire the Securities.

 

2.7 Non-Affiliate Status; Common Stock Ownership. Such Investor is not an
Affiliate of the Company or of any other Investor and is not acting in
association or concert with any other Person in regard to its purchase of the
Securities or otherwise in respect of the Company. Such Investor’s investment in
the Securities is not for the purpose of acquiring, directly or indirectly,
control of, and it has no intent to acquire or exercise control of, the Company
or to influence the decisions or policies of the Board of Directors.

 

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents
and warrants to each Investor that, except as expressly set forth on the
disclosure schedules to this Agreement, as of the Execution Date and as of the
Closing Date:

 

3.1 Organization, Good Standing and Qualification. The Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite power
and authority to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which it conducts business except where the failure so to qualify has not had or
would not reasonably be expected to have a Material Adverse Effect. The Company
does not have any Subsidiaries.

 

3.2 Authorization; Consents. The Company has the requisite corporate power and
authority to enter into and perform its obligations under the Transaction
Documents, including, without limitation, its obligations to issue and sell the
Securities to the Investors in accordance with the terms

 

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hereof and thereof, and to issue the Warrant Shares upon exercise of the
Warrants. All corporate action on the part of the Company by its officers,
directors and stockholders necessary for the authorization, execution and
delivery of, and the performance by the Company of its obligations under, the
Transaction Documents has been taken, and no further consent or authorization of
the Company, its Board of Directors, stockholders, any Governmental Authority or
organization (other than such approval as may be required under the Securities
Act and applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the NASD or otherwise).

 

3.3 Due Execution; Enforceability. This Agreement has been and, at or prior to
the Closing, each other Transaction Document to be delivered at the Closing will
be, duly executed and delivered by the Company. This Agreement constitutes and,
upon the execution and delivery thereof by the Company, each other Transaction
Document will constitute the valid and legally binding obligation of the
Company, enforceable against it in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, fraudulent transfer, moratorium,
reorganization or other similar laws of general application relating to or
affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity.

 

3.4 Disclosure Documents; Agreements; Financial Statements; Other Information.
The Company is subject to the reporting requirements of the Exchange Act and has
filed with the Commission all reports, schedules, registration statements and
definitive proxy statements that the Company was required to file with the
Commission on or after December 31, 2004 (collectively, the “SEC Documents”).
The Company is not aware of any event occurring or expected to occur on or prior
to the Closing Date (other than the transactions effected hereby and quarterly
releases of financial results) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing. Each SEC
Document, as of the date of the filing thereof with the Commission (or if
amended or superseded by a filing prior to the Execution Date, then on the date
of such amending or superseding filing), complied in all material respects with
the requirements of the Securities Act or Exchange Act, as applicable, and the
rules and regulations promulgated thereunder and, as of the date of such filing
(or if amended or superseded by a filing prior to the Execution Date, then on
the date of such filing), such SEC Document (including all exhibits and
schedules thereto and documents incorporated by reference therein) did not
contain an untrue statement of material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. All
documents required to be filed as exhibits to the SEC Documents have been filed
as required. Except as set forth in the Disclosure Documents, the Company has no
liabilities, contingent or otherwise, other than liabilities incurred in the
ordinary course of business which, under GAAP, are not required to be reflected
in the financial statements included in the Disclosure Documents and which,
individually or in the aggregate, are not material to the business or financial
condition of the Company. As of their respective dates, the financial statements
of the Company included in the SEC Documents have been prepared in accordance
with GAAP (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end adjustments).

 

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3.5 Capitalization; Debt Schedule. The capitalization of the Company as of the
date hereof, including its authorized capital stock, the number of shares issued
and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company’s stock option plans and agreements, the number of
shares issuable and reserved for issuance pursuant to securities (other than the
Warrants) exercisable for, or convertible into or exchangeable for any shares of
Common Stock and the number of shares initially to be reserved for issuance upon
exercise of the Warrants, is set forth on Schedule 3.5 hereto. All issued and
outstanding shares of capital stock of the Company have been, or upon issuance
will be, validly issued, fully paid and non-assessable. No shares of the capital
stock of the Company were issued in violation of preemptive rights or any other
similar rights of security holders of the Company or any Liens created by or
through the Company. Except as disclosed on Schedule 3.5 or as contemplated
herein, there are no outstanding preemptive rights, rights of first refusal,
shareholder rights, options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exercisable or exchangeable for, any shares of capital stock
of the Company, or arrangements by which the Company is or may become (as a
result of the transactions contemplated hereby or the other Transaction
Documents or otherwise) bound to issue additional shares of capital stock of the
Company (whether pursuant to anti-dilution, “reset” or other similar
provisions). Except as described on Schedule 3.5 hereto, the Company has no
material Debt outstanding as of the date hereof. Except as described on Schedule
3.5 hereto, the Company’s shares of the capital stock of Lumera Corporation are
held by the Company free and clear of all Liens.

 

3.6 Due Authorization; Valid Issuance. The Shares and Warrants are duly
authorized and, when issued, sold and delivered in accordance with the terms
hereof, (i) the Shares and Warrants will be duly and validly issued, and the
Shares will be fully paid and nonassessable; in each case, free and clear of any
Liens imposed by or through the Company, and (ii) assuming the accuracy of each
Investor’s representations in this Agreement, the Shares and Warrants will be
issued, sold and delivered in compliance with all applicable Federal and state
securities laws. The Warrant Shares are duly authorized and reserved for
issuance and, when issued in accordance with the terms of the Warrants, will be
duly and validly issued, fully paid and nonassessable, free and clear of any
Liens imposed by or through the Company and, assuming the accuracy of each
Investor’s representations in this Agreement at the time of exercise, will be
issued, sold and delivered in compliance with all applicable Federal and state
securities laws.

 

3.7 No Conflict with Other Instruments. The Company is not in violation of any
provisions of its charter, bylaws or any other governing document or in default
(and no event has occurred which, with notice or lapse of time or both, would
constitute a default) under any provision of any instrument or contract to which
it is a party or by which it or any of its Property is bound, or in violation of
any provision of any Governmental Requirement applicable to it, except for any
violation or default under any such instrument or contract or any violation of
any provision of a Governmental Requirement that, in either such case, has not
had or would not reasonably be expected to have a Material Adverse Effect (any
such violation or default being referred to herein as a “Current Violation”).
The (i) execution, delivery and performance of this Agreement and the other
Transaction Documents, and (ii) consummation of the transactions contemplated
hereby and thereby (including without limitation, the issuance of the Shares and
the Warrants and the reservation for issuance and issuance of the Warrant
Shares) will not result in any violation of any provisions of the Company’s
charter, Bylaws or any other

 

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governing document or in a default under any provision of any instrument or
contract to which it is a party or by which it or any of its Property is bound,
or in violation of any provision of any Governmental Requirement applicable to
the Company or be in conflict with or constitute, with or without the passage of
time and giving of notice, either a default under any such provision, instrument
or contract or an event which results in the creation of any Lien upon any
assets of the Company.

 

3.8 Financial Condition; Taxes; Litigation.

 

3.8.1 The Company’s financial condition is, in all material respects, as
described in the Disclosure Documents, except for changes in the ordinary course
of business and normal year-end adjustments that are not, in the aggregate,
materially adverse to the business or financial condition of the Company. There
has been no (i) material adverse change to the Company’s business, operations,
properties, financial condition, or results of operations since the date of the
Company’s most recent audited financial statements contained in the Disclosure
Documents or (ii) change by the Company in its accounting principles, policies
and methods except as required by changes in GAAP or applicable law.

 

3.8.2 The Company (i) has prepared in good faith and duly and timely filed all
tax returns required to be filed by it and such returns are complete and
accurate in all material respects and (ii) has paid all taxes required to have
been paid by it, except for taxes which it reasonably disputes in good faith or
the failure of which to pay has not had or would not reasonably be expected to
have a Material Adverse Effect, and has no liability with respect to accrued
taxes in excess of the amounts that are described as accrued in the most recent
financial statements included in the Disclosure Documents.

 

3.8.3 Except as described in Schedule 3.8.3, the Company is not the subject of
any pending or, to the Company’s knowledge, threatened inquiry, investigation or
administrative or legal proceeding by the Internal Revenue Service, the taxing
authorities of any state or local jurisdiction (other than with respect to taxes
which it reasonably disputes in good faith or the failure of which to pay has
not had or would not reasonably be expected to have a Material Adverse Effect),
the Commission, the NASD, any state securities commission or other Governmental
Authority.

 

3.8.4 Except as described in Schedule 3.8.4, there is no material claim,
litigation or administrative proceeding pending or, to the Company’s knowledge,
threatened or contemplated, against the Company or, to the Company’s knowledge,
against any officer, director or employee of the Company in connection with such
person’s employment therewith. The Company is not a party to or subject to the
provisions of, any order, writ, injunction, judgment or decree of any court or
Governmental Authority which has had or would reasonably be expected to have a
Material Adverse Effect.

 

3.9 Form S-3. The Company is eligible to register the Registrable Securities for
resale by each Investor on a registration statement on Form S-3 under the
Securities Act. To the Company’s knowledge, there exist no facts or
circumstances (including without limitation any required approvals or waivers of
any circumstances that may delay or prevent the obtaining of accountant’s
consents) that could reasonably be expected to prohibit or delay the
preparation, filing or effectiveness of such registration statement.

 

11

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3.10 Acknowledgement of Dilution. The Company acknowledges that the issuance of
Warrant Shares upon exercise of the Warrants may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation
to issue Warrant Shares upon exercise of the Warrants in accordance with the
terms of the Warrants, is unconditional (other than with respect to the
conditions set forth in the Warrants) regardless of the effect of any such
dilution.

 

3.11 Intellectual Property. Except as set forth in Schedule 3.11:

 

(a) The Company owns, free and clear of claims or rights or any other Person,
with full right to use, sell, license, sublicense, dispose of, and bring actions
for infringement of, or, to the knowledge of the Company, has acquired licenses
or other rights to use, all Intellectual Property necessary for the conduct of
its business as presently conducted (other than with respect to software which
is generally commercially available and not used or incorporated into the
Company’s products and open source software which may be subject to one or more
“general public” licenses). All works that are used or incorporated into the
Company’s services, products or services or products actively under development
and which is proprietary to the Company was developed by or for the Company by
the current or former employees, consultants or independent contractors of the
Company or its predecessors in interest or purchased or licensed by the Company
or its predecessors in interest.

 

(b) The business of the Company as presently conducted and the production,
marketing, licensing, use and servicing of any products or services of the
Company do not, to the knowledge of the Company, infringe or conflict with any
patent, trademark, copyright, or trade secret rights of any third parties or any
other Intellectual Property of any third parties in any material respect. The
Company has not received written notice from any third party asserting that any
Intellectual Property owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company and,
to the Company’s knowledge, there is no valid basis for any such claim (whether
or not pending or threatened).

 

(c) No claim is pending or, to the Company’s knowledge, threatened against the
Company nor has the Company received any written notice or other written claim
from any Person asserting that any of the Company’s present or contemplated
activities infringe or may infringe in any material respect any Intellectual
Property of such Person and the Company is not aware of any infringement by any
other Person of any material rights of the Company under any Intellectual
Property Rights.

 

(d) All licenses or other agreements under which the Company is granted
Intellectual Property (excluding licenses to use software utilized in the
Company’s internal operations and which is generally commercially available) are
in full force and effect and, to the Company’s knowledge, there is no material
default by any party thereto. The Company has no reason to believe that the
licensors under such licenses and other agreements do not have and did not have
all requisite power and authority to grant the rights to the Intellectual
Property purported to be granted thereby.

 

(e) All licenses or other agreements under which the Company has granted rights
to Intellectual Property to others (including all end-user agreements) since
January 1, 2003, are in full force and effect, unless otherwise terminated in
accordance with the terms of such licenses or

 

12

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arrangements, there has been no material default by the Company thereunder and,
to the Company’s knowledge, there is no material default by any other party
thereto.

 

(f) The Company has taken all steps required in accordance with commercially
reasonable business practice to establish and preserve its ownership in its
owned Intellectual Property and to keep confidential all material technical
information developed by or belonging to the Company which has not been patented
or copyrighted. To the Company’s knowledge, the Company is not making any
material unlawful use of any Intellectual Property of any other Person,
including, without limitation, any former employer of any past or present
employees of the Company. To the Company’s knowledge, neither the Company nor
any of its employees has any agreements or arrangements with former employers of
such employees relating to any Intellectual Property of such employers, which
materially interfere or conflict with the performance of such employee’s duties
for the Company or result in any former employers of such employees having any
rights in, or claims on, the Company’s Intellectual Property. Except as set
forth on Schedule 3.11(f)(i), each current and former employee of the Company
has executed agreements regarding confidentiality, proprietary information and
assignment of inventions and copyrights to the Company, each independent
contractor or consultant of the Company has executed agreements regarding
confidentiality and proprietary information, and the Company has not received
written notice that any employee, consultant or independent contractor is in
violation of any agreement or in breach of any agreement or arrangement with
former or present employers relating to proprietary information or assignment of
inventions. Without limiting the foregoing: (i) the Company has taken reasonable
security measures to guard against unauthorized disclosure or use of any of its
Intellectual Property; and (ii) the Company has no reason to believe that any
Person (including, without limitation, any former employee or consultant of the
Company) has unauthorized possession of any of its Intellectual Property, or any
part thereof, or that any Person has obtained unauthorized access to any of its
Intellectual Property. The Company is in compliance in all material respects
with its obligations pursuant to all agreements relating to Intellectual
Property rights that are the subject of licenses granted by third parties,
except for any non-compliance that has not had or would not reasonably be
expected to have a Material Adverse Effect.

 

3.12 Registration Rights; Rights of Participation. Except as described on
Schedule 3.12 hereto, the Company has not granted or agreed to grant to any
person or entity any rights (including “piggy-back” registration rights) to have
any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied in full prior or waived to
the date hereof.

 

3.13 Fees. Except as contemplated by Section 6.11 hereof and as set forth on
Schedule 3.13 or disclosed in writing to the Investor by the Company, the
Company is not obligated to pay any compensation or other fee, cost or related
expenditure to any underwriter, broker, agent or other representative in
connection with the transactions contemplated hereby. The Company will indemnify
and hold harmless each Investor from and against any claim by any person or
entity alleging that, as a result of any agreement or arrangement between such
Person and the Company, such Investor is obligated to pay any such compensation,
fee, cost or related expenditure in connection with the transactions
contemplated hereby or the other Transaction Documents.

 

3.14 Solicitation; Other Issuances of Securities. Neither the Company nor any of
its Subsidiaries or Affiliates, nor any person acting on its or their behalf,
(i) has engaged in any form of

 

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general solicitation or general advertising (within the meaning of Regulation D)
in connection with the offer or sale of the Securities, or (ii) has, directly or
indirectly, made any offers or sales of any security or the right to purchase
any security, or solicited any offers to buy any security or any such right,
under circumstances that would require registration of the Securities under the
Securities Act.

 

3.15 Foreign Corrupt Practices. Neither the Company, nor to the Company’s
knowledge any director, officer, agent, employee or other person acting on
behalf of the Company, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity, (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee (including without
limitation any bribe, rebate, payoff, influence payment, kickback or other
unlawful payment), or (iii) violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended.

 

3.16 Key Employees. Each of the Company’s executive officers (as defined in Rule
501(f) of the Securities Act) (each, a “Key Employee”) is currently serving in
the capacity described in the Disclosure Documents. The Company has no knowledge
of any fact or circumstance (including without limitation (i) the terms of any
agreement to which such person is a party or any litigation in which such person
is or may become involved and (ii) any illness or medical condition that could
reasonably be expected to result in the disability or incapacity of such person)
that would limit or prevent any such person from serving in such capacity on a
full-time basis in the foreseeable future, or of any intention on the part of
any such person to limit or terminate his or her employment with the Company.

 

3.17 Employee Matters. There is no strike, labor dispute or union organization
activities pending or, to the knowledge of the Company, threatened between it
and its employees. No employees of the Company belong to any union or collective
bargaining unit. The Company has complied in all material respects with all
applicable federal and state equal opportunity and other laws related to
employment.

 

3.18 Environment. To the Company’s knowledge, the Company does not have any
current liability under any Environmental Law, nor, to the knowledge of the
Company, do any factors exist that are reasonably likely to give rise to any
such liability that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect. To the Company’s
knowledge, the Company has not violated any Environmental Law applicable to it
now or previously in effect, other than such violations or infringements that,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Material Adverse Effect.

 

3.19 ERISA. Except as described on Schedule 3.19, the Company does not maintain
or contribute to, or have any obligation under, any Pension Plan. The Company is
in compliance in all material respects with the presently applicable provisions
of ERISA and the United States Internal Revenue Code of 1986, as amended, with
respect to each Pension Plan except in any such case for any such matters that,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect.

 

3.20 Insurance. The Company maintains insurance in such amounts and covering
such losses and risks as the Company believes to be reasonably prudent in
relation to the businesses in which the Company is engaged. No notice of
cancellation has been received for any of such policies

 

14

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and the Company reasonably believes that is in compliance with all of the terms
and conditions thereof. The Company has no reason to believe that it will not be
able to renew any existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue doing business as currently conducted without a significant increase in
cost, other than normal increases in the industry. Without limiting the
generality of the foregoing, the Company maintains Director’s and Officer’s
insurance in an amount deemed to be reasonable and appropriate by the Company’s
Board of Directors.

 

3.21 Property. The Company does not own any real property. The Company has good
and marketable title to all personal Property owned by it which, in each such
case free and clear of all Liens except for Permitted Liens and except for such
Liens which, individually and together with all other Liens (including without
limitation Permitted Liens) do not have, and cannot reasonably be expected to
have, a Material Adverse Effect. Any Property held under lease by the Company is
held by it under valid, subsisting and enforceable leases with such exceptions
as are not material and do not materially interfere with the use made or
proposed to be made of such Property by the Company.

 

3.22 Regulatory Permits. The Company possesses all material certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct its businesses other than where the
failure to possess such certificates, authorizations or permits, individually or
in the aggregate, has not had and would not reasonably be expected to have a
Material Adverse Effect. The Company has not received any notice or otherwise
become aware of any proceedings, inquiries or investigations relating to the
revocation or modification of any such certificate, authorization or permit.

 

3.23 Exchange Act Registration; Listing. The Company files supplementary and
periodic information, documents, and reports pursuant to Section 15(d) of the
Exchange Act. The Company’s Common Stock is registered pursuant to Section 12(g)
of the Exchange Act and is listed on the Nasdaq National Market. The Company
currently meets the continuing eligibility requirements for listing on the
Nasdaq National Market and has not received any notice from such market or the
NASD that it does not currently satisfy such requirements or that such continued
listing is in any way threatened. The Company has taken no action designed to,
or which, to the knowledge of the Company, would reasonably be expected to have
the effect of, terminating the registration of the Common Stock under the
Exchange Act or delisting the Common Stock from the Nasdaq National Market.

 

3.24 Investment Company Status. The Company is not, and immediately after
receipt of payment for the Shares and the Warrants issued under this Agreement
will not be, an “investment company” or an entity “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended
(the “Investment Company Act”), and shall conduct its business in a manner so
that it will not become subject to the Investment Company Act.

 

3.25 Transfer Taxes. No stock transfer or other taxes (other than income taxes)
are required to be paid in connection with the issuance and sale of any of the
Securities, other than such taxes for which the Company has established
appropriate reserves and intends to pay in full on or before the Closing.

 

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3.26 Sarbanes-Oxley Act; Internal Controls and Procedures. The Company is in
material compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 and any and all applicable rules and regulations
promulgated by the SEC thereunder that are effective as of the date hereof. The
Company maintains internal accounting controls, policies and procedures, and
such books and records as are reasonably designed to provide reasonable
assurance that (i) all transactions to which the Company is a party or by which
its properties are bound are effected by a duly authorized employee or agent of
the Company, supervised by and acting within the scope of the authority granted
by the Company’s senior management; (ii) the recorded accounting of the
Company’s consolidated assets is compared with existing assets at regular
intervals; and (iii) all transactions to which the Company is a party, or by
which its properties are bound, are recorded (and such records maintained) in
accordance with all Governmental Requirements and as may be necessary or
appropriate to ensure that the financial statements of the Company are prepared
in accordance with GAAP.

 

3.27 Embargoed Person. None of the funds or other assets of the Company shall
constitute property of, or shall be beneficially owned, directly or indirectly,
by any person subject to trade restrictions under United States law, including,
but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §
1701 et seq., the Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any
Executive Orders or regulations promulgated under any such United States laws
(each, an “Embargoed Person”), with the result that the investments evidenced by
the Securities are or would be in violation of law. No Embargoed Person shall
have any interest of any nature whatsoever in the Company with the result that
the investments evidenced by the Securities are or would be in violation of law.
None of the funds or other assets of the Company shall be derived from any
unlawful activity with the result that the investments evidenced by the
Securities are or would be in violation of law.

 

3.28 Solvency. As of the Execution Date and as of the Closing Date, (i) the fair
saleable value of the Company’s assets exceeds the amount that will be required
to be paid on or in respect of the Company’s existing Debt as such Debt matures
or is otherwise payable; (ii) the Company’s assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted taking into account the current
and projected capital requirements of the business conducted by the Company and
projected capital availability; and (iii) the current cash flow of the Company,
together with the proceeds the Company would receive upon liquidation of its
assets, after taking into account all anticipated uses of such amounts, would be
sufficient to pay all Debt when such Debt is required to be paid. The Company
has no knowledge of any facts or circumstances which lead it to believe that it
will be required to file for reorganization or liquidation under the bankruptcy
or reorganization laws of any jurisdiction, and has no present intention to so
file.

 

3.29 Transactions with Interested Persons. Except as set forth in Schedule 3.29,
no officer, director or employee of the Company is or has made any arrangements
with the Company to become a party to any transaction with the Company (other
than for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any

 

16

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entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.

 

3.30 Customers and Suppliers. The relationships of the Company with its
customers and suppliers are maintained on commercially reasonable terms. Except
as set forth on Schedule 3.30 hereto, to the Company’s knowledge, no customer or
supplier of the Company has any plan or intention to terminate its agreement
with the Company, which termination would reasonably be expected to have a
Material Adverse Effect.

 

3.31 Full Disclosure. The representations, warranties and written statements
contained in this Agreement and the other Transaction Documents and in the
certificates, exhibits and schedules delivered to such Investor by the Company
pursuant to this Agreement and the other Transaction Documents and in connection
with such Investor’s due diligence investigation of the Company, do not contain
any untrue statement of a material fact, and do not omit to state a material
fact required to be stated therein or necessary in order to make such
representations, warranties or statements not misleading in light of the
circumstances under which they were made. Neither the Company nor any Person
acting on its behalf or at its direction has provided such Investor with
material non-public information. Following the issuance of the press release in
accordance with Section 4.1(c) hereof, to the Company’s knowledge, such Investor
will not possess any material non-public information concerning the Company. The
Company acknowledges that such Investor is relying on the representations,
acknowledgments and agreements made by the Company in this Section 3.31 and
elsewhere in this Agreement in making trading and other decisions concerning the
Company’s securities.

 

3.32 No Other Agreements. The Company has not, directly or indirectly, entered
into any agreement with or granted any right to any Investor relating to the
terms or conditions of the transactions contemplated by the Transaction
Documents, except as expressly set forth in the Transaction Documents.

 

4. COVENANTS OF THE COMPANY AND EACH INVESTOR.

 

4.1 The Company agrees with each Investor that the Company will:

 

(a) file a Form D with respect to the Securities issued at the Closing as and
when required under Regulation D and provide a copy thereof to such Investor
promptly after such filing;

 

(b) take such action as the Company reasonably determines upon the advice of
counsel is necessary to qualify the Shares and Warrants for sale under
applicable state or “blue-sky” laws or obtain an exemption therefrom, and shall
promptly provide evidence of any such action to such Investor at such Investor’s
request; and

 

(c) (i) on or prior to 8:30 a.m. (eastern time) on the Business Day immediately
following the Execution Date, issue a press release disclosing the material
terms of this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby, and (ii) on or prior to 5:00 p.m. (eastern
time) on the second Business Day following the Execution Date, file with the
Commission a Current Report on Form 8-K disclosing the material terms

 

17

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of this Agreement and the other Transaction Documents and the transactions
contemplated hereby and thereby, including as exhibits this Agreement and the
other Transaction Documents; provided, however, that each Investor shall have a
reasonable opportunity to review and comment on any such press release or Form
8-K prior to the issuance or filing thereof. Thereafter, the Company shall
timely file any filings and notices required by the Commission or applicable law
with respect to the transactions contemplated hereby.

 

4.2 The Company agrees that it will, during the period beginning on the
Execution Date and ending on the Termination Date:

 

(a) maintain its corporate existence in good standing;

 

(b) maintain, keep and preserve all of its Properties necessary in the proper
conduct of its businesses in good repair, working order and condition (ordinary
wear and tear excepted) and make all necessary repairs, renewals and
replacements and improvements thereto, except where the failure to do so would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;

 

(c) pay or discharge before becoming delinquent (a) all taxes, levies,
assessments and governmental charges imposed on it or its income or profits or
any of its Property and (b) all lawful claims for labor, material and supplies,
which, if unpaid, might become a Lien upon any of its Property, except where the
failure to do so would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect; provided, however, that the Company
shall not be required to pay or discharge any tax, levy, assessment or
governmental charge, or claim for labor, material or supplies, whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings being diligently pursued and for which appropriate reserves have
been established under GAAP;

 

(d) comply with all Governmental Requirements applicable to the operation of its
business, except for instances of noncompliance that would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect;

 

(e) comply with all agreements, documents and instruments binding on it or
affecting its Properties or business, including, without limitation, all
Material Contracts, except for instances of noncompliance that would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;

 

(f) provide each Investor with copies of all materials sent to its stockholders,
in each such case at the same time as delivered to such stockholders;

 

(g) timely file with the Commission all reports required to be filed pursuant to
the Exchange Act and refrain from terminating its status as an issuer required
by the Exchange Act to file reports thereunder even if the Exchange Act or the
rules or regulations thereunder would permit such termination;

 

(h) until the earlier of (A) Effective Date of the Registration Statement and
(B) the six (6) month anniversary of the Closing Date, take commercially
reasonable steps to restrict

 

18

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each of the Company’s Chief Executive Officer, President and Chief Financial
Officer (each, a “Specified Employee”) from selling shares of Common Stock,
other than (i) in connection with any 10b-5(1) trading plans in effect as of the
Execution Date and disclosed to each Investor in writing and (ii) with respect
to each Specified Employee, unless and until the VWAP for 10 consecutive Trading
Days exceeds 140% of the Market Price on the Closing Date (the “Specified
Employee Threshold”), up to 15% of the shares of Common Stock and vested options
held on the date hereof by such Specified Employee; provided, that in the event
the Specified Employee Threshold occurs, the restriction contained in this
section shall terminate, and each Specified Employee shall be free to sell any
Common Stock held by such Specified Employee; and

 

(i) use commercially reasonable efforts to maintain adequate insurance coverage
(including D&O insurance) for the Company and each Subsidiary.

 

4.3 Reservation of Common Stock. The Company shall, on the Closing Date, have
authorized and reserved for issuance to the Investors free from any preemptive
rights, and shall keep available at all times during which any Warrants are
outstanding, a number of shares of Common Stock (the “Reserved Amount”) that, on
the Closing Date, is not less than one hundred percent (100%) of the number of
Warrant Shares issuable upon exercise of all of the Warrants issued at the
Closing, without regard to any limitation or restriction on such conversion or
exercise that may be set forth in the Warrants. The Reserved Amount shall be
allocated in accordance with each Investor’s Pro Rata Share. In the event that
an Investor shall sell or otherwise transfer any of such Investor’s Warrants,
each transferee shall be allocated a pro rata portion of such transferor’s
Reserved Amount. Any portion of the Reserved Amount allocated to any Investor or
other Person which no longer holds any Warrants shall be reallocated to the
remaining Investors pro rata based on the number of Registrable Securities held
by such Investors at such time. In the event that the Reserved Amount is
insufficient at any time to cover one hundred percent 100% of the Registrable
Securities issuable upon the exercise of the Warrants (without regard to any
restriction on such conversion or exercise), the Company shall take such action
(including without limitation holding a meeting of its stockholders) to increase
the Reserved Amount to cover 100% of the Registrable Securities issuable upon
such conversion and exercise, such increase to be effective not later than the
thirtieth (30th) day (or sixtieth (60th) day, in the event stockholder approval
is required for such increase) following the Company’s receipt of written notice
of such deficiency. While any Warrants are outstanding, the Company shall not
reduce the Reserved Amount without obtaining the prior written consent of each
Investor then holding Warrants.

 

4.4 Use of Proceeds. The Company shall use the proceeds from the sale of the
Shares and Warrants for general business purposes; provided, that the Company
shall not use any of such proceeds (i) to pay any dividend or make any
distribution on any of its securities, or (ii) to repay any loan made to or
incurred by any Key Employee or any other officer or director or Affiliate of
the Company.

 

4.5 Use of Investor Name. Except as may be required by applicable law and/or
this Agreement, the Company shall not use, directly or indirectly, any
Investor’s name or the name of any of its Affiliates in any advertisement,
announcement, press release or other similar communication unless it has
received the prior written consent of any Investor for the specific use
contemplated or as otherwise required by applicable law or regulation.

 

4.6 Company’s Instructions to Transfer Agent. As soon as practicable following
the Closing Date (but in no event later than five Business Days after the
Closing Date), the Company shall

 

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execute and deliver irrevocable written instructions to the transfer agent for
its Common Stock (the “Transfer Agent”), and provide each Investor with a copy
thereof, directing the Transfer Agent (i) to issue certificates representing
Warrant Shares upon exercise of the Warrants and (ii) to deliver such
certificates to such Investor no later than the close of business on the third
(3rd) Business Day following the related Exercise Date (as defined in the
Warrants). Such certificates may bear legends pursuant to applicable provisions
of this Agreement or applicable law. The Company shall instruct the transfer
agent that, in lieu of delivering physical certificates representing shares of
Common Stock to an Investor upon exercise of the Warrants, and as long as the
Transfer Agent is a participant in the Depository Trust Company (“DTC”) Fast
Automated Securities Transfer program, and such Investor has not informed the
Company that it wishes to receive physical certificates therefor, and no legend
is required to appear on any physical certificate if issued, the transfer agent
shall effect delivery of Warrant Shares by crediting the account of such
Investor or its nominee at DTC for the number of shares for which delivery is
required hereunder within the time frame specified above for delivery of
certificates. The Company represents to and agrees with each Investor that it
will not give any instruction to the Transfer Agent that will conflict with the
foregoing instruction or otherwise restrict such Investor’s right to exercise
the Warrant or to receive Warrant Shares upon exercise of the Warrants. In the
event that the Company’s relationship with the Transfer Agent should be
terminated for any reason, the Company shall use its best efforts to cause the
Transfer Agent to continue acting as transfer agent pursuant to the terms hereof
until such time that a successor transfer agent is appointed by the Company and
receives the instructions described above.

 

4.7 Limitations on Disposition. No Investor shall sell, transfer, assign or
dispose of any Securities, unless:

 

(a) there is then in effect an effective registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or

 

(b) such Investor has notified the Company in writing of any such disposition,
and furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such
Securities under the Securities Act; provided, however, that no such opinion of
counsel will be required (A) if the sale, transfer or assignment complies with
federal and state securities laws and is made to a fund or other institutional
investor that is an Affiliate of such Investor and which is also an “accredited
investor” as that term is defined in Rule 501 of Regulation D; provided, that
such Affiliate provides the Company with customary accredited investor and
investment representations (comparable with those set forth in Section 2.2
hereof), and agrees to be bound by the terms and conditions of this Agreement,
(B) if the sale, transfer or assignment is made pursuant to Rule 144 and such
Investor provides the Company with evidence reasonably satisfactory to the
Company that the proposed transaction satisfies the requirements of Rule 144 or
(C) in connection with a bona fide pledge or hypothecation of any Securities
under a margin arrangement with a broker-dealer or other financial institution
or the sale of any such Securities by such broker-dealer or other financial
institution following such Investor’s default under such margin arrangement.

 

4.8 Disclosure of Non-public Information. The Company agrees that it will not at
any time following the Execution Date disclose material non-public information
to any Investor without first

 

20

--------------------------------------------------------------------------------

obtaining such Investor’s written consent to such disclosure, except to the
extent required by any Transaction Documents.

 

4.9 Listing. The Company (i) has, or promptly following the Closing shall, use
its best efforts to include all of the Warrant Shares issuable upon exercise of
the Warrants (without regard to any limitation on such exercise) for listing on
the Nasdaq National Market, and (ii) shall use its best efforts to maintain the
designation and quotation, or listing, of the Common Stock on the Nasdaq
National Market, the Nasdaq Small Cap Market or the New York Stock Exchange for
a minimum of five (5) years following the Closing Date.

 

4.10 Indemnification of Investors. The Company will indemnify and hold each
Investor and its directors, managers, officers, shareholders, members, partners,
employees and agents (each, an “Investor Party”) harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys’ fees and costs of investigation that any such Investor
Party may suffer or incur as a result of or relating to (a) any breach of any of
the representations, warranties, covenants or agreements made by the Company in
this Agreement or in the other Transaction Documents or (b) any action
instituted against an Investor, or any of them or their respective Affiliates,
by any stockholder of the Company who is not an Affiliate of such Investor, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Investor’s representation,
warranties or covenants under the Transaction Documents or any agreements or
understandings such Investor may have with any such stockholder or any
violations by such Investor of state or federal securities laws or any conduct
by such Investor which constitutes fraud, gross negligence, willful misconduct
or malfeasance). If any action shall be brought against any Investor Party in
respect of which indemnity may be sought pursuant to this Agreement, such
Investor Party shall promptly notify the Company in writing, and the Company
shall have the right to assume the defense thereof with counsel of its own
choosing. Any Investor Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Investor Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time following such Investor Party’s written request that it do so, to assume
such defense and to employ counsel or (iii) in such action there is, in the
reasonable opinion of such separate counsel, a material conflict on any material
issue between the position of the Company and the position of such Investor
Party. The Company will not be liable to any Investor Party under this Agreement
(i) for any settlement by an Investor Party effected without the Company’s prior
written consent, which shall not be unreasonably withheld or delayed; or (ii) to
the extent, but only to the extent that a loss, claim, damage or liability is
attributable to such Investor Party’s wrongful actions or omissions, or gross
negligence or to such Investor Party’s breach of any of the representations,
warranties, covenants or agreements made by such Investor in this Agreement or
in the other Transaction Documents.

 

4.11 Restriction on Issuances. During the period beginning on the Execution Date
and ending on the Filed S-3 Effective Date, the Company will not, directly or
indirectly, effect a Subsequent Placement.

 

21

--------------------------------------------------------------------------------

5. CONDITIONS TO CLOSING.

 

5.1 Conditions to Investors’ Obligations at the Closing. Each Investor’s
obligations to effect the Closing, including without limitation its obligation
to purchase Shares and Warrant at the Closing, are conditioned upon the
fulfillment (or waiver by such Investor in its sole and absolute discretion) of
each of the following events as of the Closing Date, and the Company shall use
commercially reasonable efforts to cause each of such conditions to be
satisfied:

 

  5.1.1 the representations and warranties of the Company set forth in this
Agreement and in the other Transaction Documents shall be true and correct in
all material respects as of such date as if made on such date (except that to
the extent that any such representation or warranty relates to a particular
date, such representation or warranty shall be true and correct in all material
respects as of that particular date);

 

  5.1.2 the Company shall have complied with or performed in all material
respects all of the agreements, obligations and conditions set forth in this
Agreement that are required to be complied with or performed by the Company on
or before the Closing;

 

  5.1.3 the Closing Date shall occur on a date that is not later than September
2, 2005;

 

  5.1.4 the Company shall have delivered to such Investor a certificate, signed
by the Chief Executive Officer and Chief Financial Officer of the Company,
certifying that the conditions specified in this Section 5.1.1, 5.1.2, 5.1.10,
5.1.11, 5.1.12 and 5.1.13 have been fulfilled as of the Closing, it being
understood that such Investor may rely on such certificate as though it were a
representation and warranty of the Company made herein;

 

  5.1.5 the Company shall have delivered to such Investor an opinion of counsel
for the Company, dated as of the Closing Date, in form and substance
satisfactory to such Investor;

 

  5.1.6 the Company shall have delivered to such Investor duly executed
certificates representing the Shares and the Warrants being purchased by such
Investor;

 

  5.1.7 the Company shall have executed and delivered to the Investor the
Registration Rights Agreement;

 

  5.1.8

the Company shall have delivered to such Investor a certificate, signed by the
Secretary or an Assistant Secretary of the Company, attaching (i) the charter
and By-Laws of the Company, and (ii) resolutions passed by its Board of
Directors to authorize the transactions contemplated hereby and by the other
Transaction Documents, and certifying that such documents are true and complete
copies of the originals and that such

 

22

--------------------------------------------------------------------------------

 

resolutions have not been amended or superseded, it being understood that such
Investor may rely on such certificate as a representation and warranty of the
Company made herein;

 

  5.1.9 the Company shall have obtained the written agreement of each Key
Employee to refrain from selling shares of Common Stock for the period specified
in, and in accordance with, Section 4.2(h) hereof;

 

  5.1.10 there shall have occurred no material adverse change in the Company’s
consolidated business or financial condition since the date of the Company’s
most recent financial statements contained in the Disclosure Documents;

 

  5.1.11 the Common Stock shall be listed on the Nasdaq National Market

 

  5.1.12 the Company shall have authorized and reserved for issuance the
aggregate number of shares of Common Stock issuable upon exercise of all of the
Warrants to be issued at the Closing (such number to be determined without
regard to any restriction on such exercise); and

 

  5.1.13 there shall be no injunction, restraining order or decree of any nature
of any court or Government Authority of competent jurisdiction that is in effect
that restrains or prohibits the consummation of the transactions contemplated
hereby and by the other Transaction Documents.

 

5.2 Conditions to Company’s Obligations at the Closing. The Company’s
obligations to effect the Closing with each Investor are conditioned upon the
fulfillment (or waiver by the Company in its sole and absolute discretion) of
each of the following events as of the Closing Date:

 

  5.2.1 the representations and warranties of such Investor set forth in this
Agreement and in the other Transaction Documents shall be true and correct in
all material respects as of such date as if made on such date (except that to
the extent that any such representation or warranty relates to a particular
date, such representation or warranty shall be true and correct in all material
respects as of that date);

 

  5.2.2 such Investor shall have complied with or performed all of the
agreements, obligations and conditions set forth in this Agreement that are
required to be complied with or performed by such Investor on or before the
Closing;

 

  5.2.3

there shall be no injunction, restraining order or decree of any nature of any
court or Government Authority of competent jurisdiction that is in effect that
restrains or prohibits the consummation of the

 

23

--------------------------------------------------------------------------------

 

transactions contemplated hereby and by the other Transaction Documents;

 

  5.2.4 such Investor shall have executed each Transaction Document to which it
is a party and shall have delivered the same to the Company; and

 

  5.2.5 such Investor shall have tendered to the Company the Purchase Price for
the Shares and the Warrant being purchased by it at the Closing by wire transfer
of immediately available funds.

 

6. MISCELLANEOUS.

 

6.1 Survival; Severability. The representations, warranties, covenants and
indemnities made by the parties herein and in the other Transaction Documents
shall survive the Closing notwithstanding any due diligence investigation made
by or on behalf of the party seeking to rely thereon. In the event that any
provision of this Agreement becomes or is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision; provided that in such case the
parties shall negotiate in good faith to replace such provision with a new
provision which is not illegal, unenforceable or void, as long as such new
provision does not materially change the economic benefits of this Agreement to
the parties.

 

6.2 Successors and Assigns. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. After the Closing, the Investors may assign their respective
rights and obligations hereunder, in connection with any private sale or
transfer of the Shares or Warrants in accordance with the terms hereof, as long
as, as a condition precedent to such transfer, the transferee executes an
acknowledgment agreeing to be bound by the applicable provisions of this
Agreement, in which case the term “Investor” shall be deemed to refer to such
transferee as though such transferee were an original signatory hereto. The
Company may not assign its rights or obligations under this Agreement.

 

6.3 No Reliance. Each party acknowledges that (i) it has such knowledge in
business and financial matters as to be fully capable of evaluating this
Agreement, the other Transaction Documents, and the transactions contemplated
hereby and thereby, (ii) it is not relying on any advice or representation or
warranty of any other party in connection with entering into this Agreement, the
other Transaction Documents, or such transactions (other than the
representations and warranties made in this Agreement or the other Transaction
Documents), (iii) it has not received from any party any assurance or guarantee
as to the merits (whether legal, regulatory, tax, financial or otherwise) of
entering into this Agreement or the other Transaction Documents or the
performance of its obligations hereunder and thereunder, and (iv) it has
consulted with its own legal, regulatory, tax, business, investment, financial
and accounting advisors to the extent that it has deemed necessary, and has
entered into this Agreement and the other Transaction Documents based on its own
independent judgment and on the advice of its advisors as it has deemed
necessary, and not on any view (whether written or oral) expressed by any party.

 

24

--------------------------------------------------------------------------------

6.4 Independent Nature of Investors’ Obligations and Rights. The obligations of
each Investor hereunder are several and not joint with the obligations of the
other Investors hereunder, and no Investor shall be responsible in any way for
the performance of the obligations of any other Investor hereunder. The Company
acknowledges and agrees that nothing contained herein or in any other agreement
or document delivered at Closing, and no action taken by any Investor pursuant
hereto or thereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or a “group” as
described in Section 13(d) of the Exchange Act, or create a presumption that the
Investors are in any way acting in concert with respect to such obligations or
the transactions contemplated by this Agreement. Each Investor has been
represented by its own separate counsel in connection with the transactions
contemplated hereby, shall be entitled to protect and enforce its rights,
including without limitation rights arising out of this Agreement or the other
Transaction Documents, individually, and shall not be required to be join any
other Investor as an additional party in any proceeding for such purpose.

 

6.5 Injunctive Relief. The parties hereto acknowledge and agree that a breach by
either of their obligations hereunder will cause irreparable harm the other
party and that the remedy or remedies at law for any such breach will be
inadequate and agrees, in the event of any such breach, in addition to all other
available remedies, the non-breaching party shall be entitled to an injunction
restraining any breach and requiring immediate and specific performance of such
obligations

 

6.6 Investors’ Trading Activity. The Company acknowledges that, following the
Closing and the press release described in paragraph 4.1 above, each Investor
shall have the right to purchase or sell, long or short, Common Stock and
instruments or contracts whose value is derived from the market value of the
Common Stock, and that sales of or certain derivative transactions relating to
the Common Stock may have a negative impact on the market price of the Common
Stock.

 

6.7 Governing Law; Jurisdiction. This Agreement shall be governed by and
construed under the laws of the State of New York applicable to contracts made
and to be performed entirely within the State of New York. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City and County of New York for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby and hereby irrevocably waives, and agrees not to assert in any such suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.

 

6.8 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument. This Agreement may be executed and
delivered by facsimile transmission.

 

25

--------------------------------------------------------------------------------

6.9 Headings. The headings used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.

 

6.10 Notices. Any notice, demand or request required or permitted to be given by
the Company or the Investor pursuant to the terms of this Agreement shall be in
writing and shall be deemed delivered (i) when delivered personally or by
verifiable facsimile transmission, unless such delivery is made on a day that is
not a Business Day, in which case such delivery will be deemed to be made on the
next succeeding Business Day, (ii) on the next Business Day after timely
delivery to an overnight courier and (iii) on the Business Day actually received
if deposited in the U.S. mail (certified or registered mail, return receipt
requested, postage prepaid), addressed as follows:

 

If to the Company:

 

Microvision, Inc.

19910 North Creek Parkway

Bothell, WA 98011

Attn:    General Counsel

Tel:       (425) 415-6847

Fax:       (425) 415-6795

 

with a copy to:

 

Ropes & Gray LLP

One International Place

Boston, MA 02110

Attn:     Joel F. Freedman

Tel:       (617) 951-7000

Fax:       (617) 951-7050

 

and if to any Investor, to such address for such Investor as shall appear on the
signature page hereof executed by such Investor, or as shall be designated by
such Investor in writing to the Company in accordance with this Section 6.10.

 

6.11 Expenses. The Company and each Investor shall pay all costs and expenses
that it incurs in connection with the negotiation, execution, delivery and
performance of this Agreement or the other Transaction Documents, provided,
however, that that the Company shall, at the Closing, pay up to $10,000 in
immediately available funds for all reasonable, documented out-of-pocket
expenses (including without limitation reasonable legal fees and expenses)
incurred or to be incurred by Omnicron Master Trust (“Omnicron”) in connection
its due diligence investigation of the Company and the negotiation, preparation,
execution, delivery and performance of this Agreement and the other Transaction
Documents. At the Closing, the amount due for such fees and expenses (which may
include fees and expenses estimated to be incurred for completion of the
transaction and post-closing matters) may be netted out of the Purchase Price
payable by Omnicron. In the event the amount paid by the Company for such fees
and expenses is less than the amount of such reasonable, documented, fees and
expenses actually incurred by Omnicron, the Company shall promptly pay such
deficiency (up to

 

26

--------------------------------------------------------------------------------

$10,000 in the aggregate, including any amounts paid at Closing) within thirty
(30) days following receipt of an invoice therefor.

 

6.12 Entire Agreement; Amendments. This Agreement and the other Transaction
Documents constitute the entire agreement between the parties with regard to the
subject matter hereof and thereof, superseding all prior agreements or
understandings, whether written or oral, between or among the parties. Except as
expressly provided herein, neither this Agreement nor any term hereof may be
amended except pursuant to a written instrument executed by the Company and the
holders of at least a majority of the Shares and Warrant Shares into which all
of the Warrants then outstanding are exercisable (without regard to any
limitation on such exercise), and no provision hereof may be waived other than
by a written instrument signed by the party against whom enforcement of any such
waiver is sought. Any waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.

 

[Signature Pages to Follow]

 

27

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first-above written.

 

MICROVISION, INC.

By:  

/s/ Richard F. Rutkowski

   

Name: Richard F. Rutkowski

Title: Chief Executive Officer

 

OMICRON MASTER TRUST    

By: Omicron Capital L.P., as advisor

By: Omicron Capital Inc., its general partner

        By:  

/s/ Bruce Bernstein

           

Name: Bruce Bernstein

Title: Managing Partner

 

ADDRESS:

c/o Omicron Capital L.P.

650 Fifth Ave., 24th Floor

New York, New York 10019

Attention: Bruce Bernstein

Telephone: (212) 258-2301

Facsimile: (212) 258-2315

 

With a copy to:

 

Attn:    Brian Daly

Tel:       212 258-2302

Fax:       212 258-2315

--------------------------------------------------------------------------------

Schedule 3.5

 

Microvision, Inc.

 

Capitalization and Debt

At August 25, 2005

 

     Shares

--------------------------------------------------------------------------------

A. Shares Capitalization

      

Preferred Stock

      

Authorized

     25,000,000

Outstanding-Convertible Preferred Series A

     5,000

Retired-Convertible Preferred Series A

     5,000     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Available

     24,990,000     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Common Stock

      

Authorized

     73,000,000     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Issued and outstanding

     23,299,848     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Reserved for warrants issued (A)

     1,523,200

Reserved for options issued (B)

     5,388,978

Conversion of Debt & Related Warrants:

      

Common Stock (C)

     2,069,546

Warrants (C)

     1,212,330

Additional Reserve

     984,564

Conversion of Series A Preferred & Related Warrants:

      

Common Stock (C)

     736,155

Warrants (C)

     361,795

Additional Reserve

     162,048     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

       12,438,616     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Available

     37,261,536     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

 

(A)   Balance includes 360,301 Warrants subject to anti-dilution rights

 

(B)   Balance excludes 3,069,570 authorized but ungranted option shares

 

(C)   Subject to anti-dilution rights

      

B. Initial Warrant Reserve For This Agreement

      

Warrant shares initially to be reserved for issuance upon exercise of the
Warrants per this agreement

     64,373     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

     Balance

--------------------------------------------------------------------------------

C. Debt

      

Redeemable Preferred Stock

   $ 5,000,000     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Convertible Notes

   $ 10,000,000     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Tenant improvement loan, capital leases, other

   $ 243,487     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

D. Participation Rights of Existing Security Holders

      

The holder of the convertible notes has the option to participate in certain
subsequent transactions on the same terms as other investors.

See Note Agreement.

     Shares

--------------------------------------------------------------------------------

E. Lumera Corporation Common Stock Pledged

      

Lumera Corp. common stock pledged as collateral

     1,750,000     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Schedule 3.5

(continued)

 

1,750,000 shares of Lumera Stock are pledged to secure obligations relating to
the Company’s Senior Secured Convertible Notes (the “Notes”) originally issued
in March 2005, as amended to date.

 

Pursuant to the Securities Purchase Agreement dated as of March 11, 2005 by and
among the Company and the buyers listed on the Schedule of Buyers thereto, the
holders of the Notes have the right to participate in any Subsequent Placement
(as defined therein) of equity securities other than Excluded Securities (as
defined therein) in the manner provided in Section 4(o) of such Agreement. The
Company intends to satisfy its obligations pursuant to Section 4(o) of such
Agreement by providing the notice required by Section 4(o)(iii) of such
Agreement, offering to issue to the Buyers a pro rata portion of 33 1/3% of the
Post-Offered Securities (as defined therein) issued to the Investors on the same
terms and conditions as those of the issuance to Investors.

 

The securities issued to such Buyers (the Notes and related Warrants) have
anti-dilution rights that will be triggered by the issuance of the Post-Offered
Securities.

 

The Company’s Series A Convertible Preferred Stock and the warrant dated
September 10, 2004 issued in favor of Satellite Strategic Finance Associates,
LLC have anti-dilution rights that will be triggered by the issuance of the
Post-Offered Securities.

 

Satellite Strategic Finance Associates, LLC and Satellite Strategic Finance
Partners, Ltd. have waived certain anti-dilution rights granted in connection
with the issuance of securities pursuant to the Securities Purchase Agreement
dated as of August 8, 2005 by and among the Company, Satellite Strategic Finance
Associates, LLC and Satellite Strategic Finance Partners, Ltd.

--------------------------------------------------------------------------------

Schedules 3.8.3 and 3.8.4

 

None

--------------------------------------------------------------------------------

Schedule 3.11

 

None

--------------------------------------------------------------------------------

Schedule 3.11(f)

 

None

--------------------------------------------------------------------------------

Schedule 3.12

 

Microvision, Inc.

 

Registration Rights

 

A. Restricted Common Stock

 

Issue

Date

--------------------------------------------------------------------------------

  

Common

Shares

--------------------------------------------------------------------------------

  

Exercise

Price

--------------------------------------------------------------------------------

  

Expiration

Date

--------------------------------------------------------------------------------

   Demand

--------------------------------------------------------------------------------

   Piggyback

--------------------------------------------------------------------------------

11/11/03    8,625    N/A    N/A    No    Yes 9/1/04    6,601    N/A    N/A    No
   Yes

 

B. Warrants

 

Warrant
No.

--------------------------------------------------------------------------------

  

Issue

Date

--------------------------------------------------------------------------------

  

Warrant

Shares

--------------------------------------------------------------------------------

  

Exercise

Price

--------------------------------------------------------------------------------

  

Expiration

Date

--------------------------------------------------------------------------------

   Demand

--------------------------------------------------------------------------------

   Piggyback

--------------------------------------------------------------------------------

70

   09/12/03    60,000    7.50    09/12/07    Yes    Yes

71

   09/12/03    10,000    12.00    09/12/07    Yes    Yes

77 - 80

   03/11/05    462,330    6.84    03/11/10    No    No

82 - 85

   07/25/05    750,000    6.84    07/25/08    No    No

 

C. The Company has granted registration rights in connection with (1) the
issuance of the Notes described on Schedule 3.5 and related Warrants, (2) the
issuance of its Series A Convertible Preferred Stock and related warrants and
(3) the issuance of the shares of common stock and related warrants pursuant to
the Securities Purchase Agreement dated as of August 8, 2005 by and among the
Company, Satellite Strategic Finance Associates, LLC and Satellite Strategic
Finance Partners, Ltd.

 

-5-

--------------------------------------------------------------------------------

Schedule 3.13

 

Fees

 

The Company pays fees to American Stock Transfer & Trust Company to issue and
deliver shares and will incur legal fees and expenses.

 

-6-

--------------------------------------------------------------------------------

Schedule 3.19

 

ERISA/Pension Plans

 

The Company has a retirement savings plan that qualifies under Internal Revenue
Code Section 401(k).

 

-7-

--------------------------------------------------------------------------------

Schedule 3.29

 

Transactions with Interested Persons

 

In August 2000, the Company entered into a five-year consulting agreement with
Jacqueline Brandwynne, a director of the Company. In consideration for entering
into the agreement, the Company issued warrants to purchase an aggregate of
100,000 shares of common stock to Ms. Brandwynne.

 

The Company has two existing executive loan plans under which Richard F.
Rutkowski, Stephen R. Willey, and Richard A. Raisig have borrowed funds from the
Company.

 

-8-

--------------------------------------------------------------------------------

Schedule 3.30

 

None

 

-9-