Exhibit 10.2

 

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MICROVISION, INC.

 

1996 STOCK OPTION PLAN,

AS AMENDED

 

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TABLE OF CONTENTS

1.

Purpose

 

 

2.

Administration

 

 

 

 

2.1

Procedures

 

 

 

 

2.2

Powers

 

 

 

 

2.3

Limited Liability

 

 

 

 

2.4

Securities Exchange Act of 1934

 

 

3.

Stock Subject to This Plan

 

 

4.

Eligibility

 

 

 

 

4.1

Optionees

 

 

 

 

4.2

Subsidiaries

 

 

5.

Awards

 

 

 

 

5.1

Incentive Stock Options

 

 

 

 

5.2

Non-Qualified Stock Options

 

 

 

 

5.3

Vesting

 

 

 

 

5.4

Nontransferability

 

 

 

 

5.5

Termination of Options

 

 

 

 

 

(a) Generally

 

 

 

 

 

(b) For Cause; Resignation

 

 

 

 

 

(c) Retirement

 

 

 

 

 

(d) Disability

 

 

 

 

 

(e) Death

 

 

 

 

 

(f) Extension of Exercise Period Applicable to Termination

 

 

 

 

 

(g) Failure to Exercise Option

 

 

 

 

 

(h) Transfers; Leaves

 

 

6.

Exercise

 

 

 

 

6.1

Procedure

 

 

 

 

6.2

Payment

 

 

 

 

6.3

Withholding

 

 

 

 

6.4

Conditions Precedent to Exercise

 

 

7.

Foreign Qualified Grants

 

 

8.

Corporate Mergers, Acquisitions, Etc.

 

 

9.

Holding Period

 

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10.

Option Agreements

 

 

11.

Adjustments On Changes in Capitalization

 

 

 

 

11.1

Stock Splits, Capital Stock Adjustments

 

 

 

 

11.2

Effect of Merger, Sale of Assets, Liquidation or Dissolution

 

 

 

 

 

(a) Mergers, Sale of Assets, Other Transactions

 

 

 

 

 

(b) Liquidation; Dissolution

 

 

 

 

11.3

Fractional Shares

 

 

 

 

11.4

Determination of Board to Be Final

 

 

12.

Securities Regulations

 

 

13.

Amendment and Termination

 

 

 

 

13.1

Plan

 

 

 

 

13.2

Options

 

 

 

 

13.3

Automatic Termination

 

 

14.

Miscellaneous

 

 

 

 

14.1

Time of Granting Options

 

 

 

 

14.2

No Status as Shareholder

 

 

 

 

14.3

Status as an Employee

 

 

 

 

14.4

Reservation of Shares

 

 

15.

Effectiveness of This Plan

 

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MICROVISION, INC.

1996 STOCK OPTION PLAN,
AS AMENDED

        1.    Purpose.    The purpose of the 1996 Stock Option Plan (the “Plan”)
is to provide a means by which Microvision, Inc. (the “Company”), may attract,
reward, and retain the services or advice of current or future employees,
officers, consultants or independent contractors of, and other advisors to, the
Company and to provide added incentives to them by encouraging stock ownership
in the Company.

        2.    Administration.    This Plan shall be administered by the Board of
Directors of the Company (the “Board”) or, if the Board shall authorize a
committee to administer this Plan, by such committee to the extent so
authorized; provided, however, that only the Board of Directors may suspend,
amend or terminate this Plan as provided in Section 13, and provided further
that a committee that includes officers of the Company shall not be permitted to
grant options to persons who are officers of the Company. The administrator of
this Plan is referred to as the “Plan Administrator.”

        2.1    Procedures.    The Board of Directors shall designate one member
of the Plan Administrator as chairman. The Plan Administrator may hold meetings
at such times and places as it shall determine. The acts of a majority of the
members of the Plan Administrator present at meetings at which a quorum exists,
or acts approved in writing by all Plan Administrator members, shall constitute
valid acts of the Plan Administrator.

        2.2    Powers.    Subject to the specific provisions of this Plan, the
Plan Administrator shall have the authority, in its discretion: (a) to grant the
stock options described in Section 5, including Incentive Stock Options and
Non-Qualified Stock Options, and to designate each option granted as an
Incentive Stock Option or a Non-Qualified Stock Option; (b) to determine, in
accordance with Section 5.1(f) of this Plan, the fair market value of the shares
of Common Stock subject to options; (c) to determine the exercise price per
share of options; (d) to determine the Optionees to whom, and the time or times
at which, options shall be granted and the number of shares of Common Stock to
be represented by each option; (e) to interpret this Plan; (f) to prescribe,
amend and rescind rules and regulations relating to this Plan; (g) to determine
the terms and provisions of each option granted (which need not be identical)
and, with the consent of the Optionee, modify or amend each option; (h) to
reduce the exercise price per share of outstanding and unexercised options;
(i) to defer, with the consent of the Optionee, or to accelerate the exercise
date of any option; (j) to waive or modify any term or provision contained in
any option applicable to the underlying shares of Common Stock; (k) to authorize
any person to execute on behalf of the Company any instrument required to
effectuate the grant of an option previously granted by the Plan Administrator;
and (l) to make all other determinations deemed necessary or advisable for the
administration of this Plan. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan, any option issued
hereunder or of any rule or regulation promulgated in connection herewith and
all actions taken by the Plan Administrator shall be conclusive and binding on
all interested parties. The Plan Administrator may delegate administrative
functions to individuals who are officers or employees of the Company.

        2.3    Limited Liability.    No member of the Board of Directors or the
Plan Administrator or officer of the Company shall be liable for any action or
inaction of the entity or body, or another person or, except in circumstances
involving bad faith, of himself or herself. Subject only to compliance with the
explicit provisions hereof, the Board of Directors and Plan Administrator may
act in their absolute discretion in all matters related to the Plan.

 

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        2.4    Securities Exchange Act of 1934.    At any time that the Company
has a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), this Plan shall be
administered in accordance with Rule 16b-3 adopted under the Exchange Act and
Section 162(m) of the Internal Revenue Code of 1986, as amended, and the
regulations, proposed and final, thereunder, as all may be amended from time to
time, and each member of the Plan Administrator shall be a “disinterested
director” and an “outside director” within the meaning of such Rule 16b-3 and
Section 162(m), respectively.

        3.    Stock Subject to This Plan.    Subject to adjustment as provided
below and in Section 11 hereof, the stock subject to this Plan shall be the
Company’s common stock (the “Common Stock”), and the total number of shares of
Common Stock to be delivered on the exercise of all options granted under this
Plan shall not exceed 8,000,000 shares, as such Common Stock was constituted on
the date on which this Plan was last amended by the Board as set forth on the
last page hereof. If any option granted under this Plan expires, is surrendered,
exchanged for another option, canceled or terminated for any reason without
having been exercised in full, the unpurchased shares subject thereto shall
again be available for purposes of this Plan, including for replacement options
that may be granted in exchange for such surrendered, canceled or terminated
options. Shares issued on exercise of options granted under this Plan may be
subject to restrictions on transfer, repurchase rights or other restrictions as
determined by the Plan Administrator.

        4.    Eligibility.

        4.1    Optionees.    The Plan Administrator may award options to any
current or future employee, officer, consultant or independent contractor of, or
other advisor to, the Company or its subsidiaries. Non-employee directors of the
Company shall not be eligible to participate in the Plan. Any party to whom an
option is granted under this Plan is referred to as an “Optionee.”

        4.2    Subsidiaries.    As used in this Plan, the term “subsidiary” of a
company shall include any corporation in which such company owns, directly or
indirectly, at the time of the grant of an option hereunder, stock having 50% or
more of the total combined voting power of all classes of stock thereof.

        5.    Awards.    The Plan Administrator, from time to time, may take the
following actions, separately or in combination, under this Plan: (a) grant
Incentive Stock Options, as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the “Code”), to any employee of the Company or its
subsidiaries, as provided in Section 5.1 of this Plan; (b) grant options other
than Incentive Stock Options (“Non-Qualified Stock Options”), as provided in
Section 5.2 of this Plan; (c) grant options to officers, employees and others in
foreign jurisdictions, as provided in Section 7 of this Plan; and (d) grant
options in certain acquisition transactions, as provided in Section 8 of this
Plan. No employee may be granted options to acquire more than 100,000 shares in
any fiscal year of the Company.

        5.1    Incentive Stock Options.    Incentive Stock Options shall be
subject to the following terms and conditions:

        (a)  Incentive Stock Options may be granted under this Plan only to
employees of the Company or its subsidiaries, including employees who are
directors.

        (b)  No employee may be granted Incentive Stock Options under this Plan
to the extent that the aggregate fair market value, on the date of grant, of the
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by that employee during any calendar year, under this Plan and
under any other incentive stock option plan (within the meaning of Section 422
of the Code) of the Company or any

 

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subsidiary, exceeds $100,000. To the extent that any option designated as an
Incentive Stock Option exceeds the $100,000 limit, such option shall be treated
as a Non-Qualified Stock Option. In making this determination, options shall be
taken into account in the order in which they were granted, and the fair market
value of the shares of Common Stock shall be determined as of the time that the
option with respect to such shares was granted.

        (c)  An Incentive Stock Option may be granted under this Plan to an
employee possessing more than 10% of the total combined voting power of all
classes of stock of the Company (as determined pursuant to the attribution rules
contained in Section 424(d) of the Code) only if the exercise price is at least
110% of the fair market value of the Common Stock subject to the option on the
date the option is granted, as described in Section 5.1(f) of this Plan, and
only if the option by its terms is not exercisable after the expiration of five
years from the date it is granted.

        (d)  Except as provided in Section 5.5 of this Plan, no Incentive Stock
Option granted under this Plan may be exercised unless at the time of such
exercise the Optionee is employed by the Company or any subsidiary of the
Company and the Optionee has been so employed continuously since the date such
option was granted.

        (e)  Subject to Sections 5.1.(c) and 5.1.(d) of this Plan, Incentive
Stock Options granted under this Plan shall continue in effect for the period
fixed by the Plan Administrator, except that no Incentive Stock Option shall be
exercisable after ten years from the date it is granted.

        (f)    The exercise price shall not be less than 100% of the fair market
value of the shares of Common Stock covered by the Incentive Stock Option at the
date the option is granted. The fair market value of shares shall be the closing
price per share of the Common Stock on the date of grant as reported on a
securities quotation system or stock exchange. If such shares are not so
reported or listed, the Plan Administrator shall determine the fair market value
of the shares of Common Stock in its discretion.

        (g)  The provisions of clauses (b) and (c) of this Section shall not
apply if either the applicable sections of the Code or the regulations
thereunder are amended so as to change or eliminate such limitations or to
permit appropriate modifications of those requirements by the Plan
Administrator.

        5.2    Non-Qualified Stock Options.    Non-Qualified Stock Options shall
be subject to the following terms and conditions:

        (a)  The exercise price may be more or less than or equal to the fair
market value of the shares of Common Stock covered by the Non-Qualified Stock
Option on the date the option is granted, and the exercise price may fluctuate
based on criteria determined by the Plan Administrator. The fair market value of
shares of Common Stock covered by a Non-Qualified Stock Option shall be
determined by the Plan Administrator, as described in Section 5.1(f).

        (b)  Unless otherwise established by the Plan Administrator, any
Non-Qualified Stock Option shall terminate ten years after the date it is
granted.

        5.3    Vesting.    To ensure that the Company will achieve the purposes
of and receive the benefits contemplated in this Plan, any option granted to any
Optionee hereunder shall be exercisable according to the vesting schedule, if
any, established by the Plan Administrator and set forth in the Option Agreement
issued to each Optionee.

 

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        5.4    Nontransferability.    Options granted under this Plan and the
rights and privileges conferred hereby may not be transferred, assigned, pledged
or hypothecated in any manner (whether by operation of law or otherwise) other
than by will or by the applicable laws of descent and distribution, shall not be
subject to execution, attachment or similar process, and shall be exercisable
during the Optionee’s lifetime only by the Optionee. Any purported transfer or
assignment in violation of this provision shall be void.

        5.5    Termination of Options.

        (a)    Generally.    Unless otherwise determined by the Plan
Administrator or specified in the Optionee’s Option Agreement, if the Optionee’s
employment or service with the Company terminates for any reason other than for
cause, resignation in lieu of dismissal, retirement, disability or death, and
unless by its terms the option sooner terminates or expires, then the Optionee
may exercise, for a three-month period, that portion of the Optionee’s option
that was exercisable at the time of such termination of employment or service
(provided the conditions of Section 6.4 and any other conditions specified in
the Option Agreement shall have been met by the date of exercise of such
option).

        (b)    For Cause; Resignation.    Unless otherwise determined by the
Plan Administrator or specified in the Optionee’s Option Agreement:

        (i)    If an Optionee is terminated for cause or resigns in lieu of
dismissal, any option granted hereunder shall be deemed to have terminated as of
the time of the first act that led or would have led to the termination for
cause or resignation in lieu of dismissal, and such Optionee shall thereupon
have no right to purchase any shares of Common Stock pursuant to the exercise of
such option, and any such exercise shall be null and void. Termination for
“cause” shall include (i) the violation by the Optionee of any reasonable rule
or policy of the Company; (ii) any willful misconduct or gross negligence by the
Optionee in the responsibilities assigned to him or her; (iii) any willful
failure to perform his or her job as required to meet the objectives of the
Company; (iv) any wrongful conduct of an Optionee that has an adverse impact on
the Company or that constitutes a misappropriation of the assets of the Company;
(v) unauthorized disclosure of confidential information; or (vi) the Optionee’s
performing services for any other company or person that competes with the
Company while he or she is employed by or provides services to the Company,
without the written approval of the chief executive officer of the Company.
“Resignation in lieu of dismissal” shall mean a resignation by an Optionee of
employment with or service to the Company if (i) the Company has given prior
notice to such Optionee of its intent to dismiss the Optionee for circumstances
that constitute cause, or (ii) within two months of the Optionee’s resignation,
the chief operating officer or the chief executive officer of the Company or the
Board of Directors determines, which determination shall be final and binding,
that such resignation was related to an act that would have led to a termination
for cause.

        (ii)  If an Optionee resigns from the Company, the right of the Optionee
to exercise his or her option shall be suspended for a period of two months from
the date of resignation, unless the chief executive officer of the Company or
the Board of Directors determines otherwise in writing. Thereafter, unless there
is a determination that the Optionee resigned in lieu of dismissal, the option
may be exercised at any time before the earlier of (i) the expiration date of
the option (which shall have been similarly suspended) or (ii) the expiration of
three months after the date of resignation, for that portion of the Optionee’s
option that was exercisable at the time of such resignation (provided the
conditions of Section 6.4

 

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and any other conditions specified in the Option Agreement shall have been met
at the date of exercise of such option).

        (c)    Retirement.    Unless otherwise determined by the Plan
Administrator or specified in the Optionee’s Option Agreement, if an Optionee’s
employment or service with the Company is terminated with the Company’s approval
for reasons of age, the Option may be exercised at any time before the earlier
of (a) the expiration date of the option or (b) the expiration of three months
after the date of such termination of employment or service, for that portion of
the Optionee’s option that was exercisable at the time of such termination of
employment or service (provided the conditions of Section 6.4 and any other
conditions specified in the Option Agreement shall have been met at the date of
exercise of such option).

        (d)    Disability.    Unless otherwise determined by the Plan
Administrator or specified in the Optionee’s Option Agreement, if an Optionee’s
employment or relationship with the Company terminates because of a permanent
and total disability (as defined in Section 22(e)(3) of the Code), the option
may be exercised at any time before the earlier of (a) the expiration date of
the option or (b) the expiration of 12 months after the date of such
termination, for up to the full number of shares of Common Stock covered
thereby, including any portion not yet vested (provided the conditions of
Section 6.4 and any other conditions specified in the Option Agreement shall
have been met by the date of exercise of such option).

        (e)    Death.    Unless otherwise determined by the Plan Administrator
or specified in the Optionee’s Option Agreement, in the event of the death of an
Optionee while employed by or providing service to the Company, the option may
be exercised at any time before the earlier of (a) the expiration date of the
option or (b) the expiration of 12 months after the date of death by the person
or persons to whom such Optionee’s rights under the option shall pass by the
Optionee’s will or by the applicable laws of descent and distribution, for up to
the full number of shares of Common Stock covered thereby, including any portion
not yet vested (provided the conditions of Section 6.4 and any other conditions
specified in the Option Agreement shall have been met by the date of exercise of
such option).

        (f)    Extension of Exercise Period Applicable to Termination.    The
Plan Administrator, at the time of grant or at any time thereafter, may extend
the one-month, three-month and 12-month exercise periods to any length of time
not longer than the original expiration date of the option, and may increase the
portion of an option that is exercisable, subject to such terms and conditions
as the Plan Administrator may determine; provided, that any extension of the
exercise period or other modification of an Incentive Stock Option shall be
subject to the written agreement and acknowledgment by the Optionee that the
extension or modification disqualifies the option as an Incentive Stock Option.

        (g)    Failure to Exercise Option.    To the extent that the option of
any deceased Optionee or of any Optionee whose employment or service terminates
is not exercised within the applicable period, all rights to purchase shares of
Common Stock pursuant to such options shall cease and terminate.

        (h)    Transfers; Leaves.    For purposes of this Section 5.5, a
transfer of employment or other relationship between or among the Company and/or
any subsidiaries shall not be deemed to constitute a termination of employment
or other cessation of relationship with the Company or any of its subsidiaries.
For purposes of this Section 5.5, with respect to Incentive Stock Options,
employment shall be deemed to continue while the Optionee is

 

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on military leave, sick leave or other bona fide leave of absence (as determined
by the Plan Administrator) in accordance with the policies of the Company.

        6.    Exercise.

        6.1    Procedure.    Subject to the provisions of Section 5.3 above,
each option may be exercised in whole or in part; provided, however, that no
fewer than 100 shares (or the remaining shares then purchasable under the
option, if less than 100 shares) may be purchased on any exercise of any option
granted hereunder and that only whole shares will be issued pursuant to the
exercise of any option (the number of 100 shares shall not be changed by any
transaction or action described in Section 8 or Section 11 unless the Plan
Administrator determines that such a change is appropriate). Options shall be
exercised by delivery to the Secretary of the Company or his or her designated
agent of notice of the number of shares with respect to which the option is
exercised, together with payment in full of the exercise price and any
applicable withholding taxes.

        6.2    Payment.    Payment of the option exercise price shall be made in
full when the notice of exercise of the option is delivered to the Secretary of
the Company or his or her designated agent and shall be in cash or bank
certified or cashier’s check or through irrevocable instructions to a stock
broker to deliver the amount of sales proceeds necessary to pay the appropriate
exercise price and withholding tax obligations, all in accordance with
applicable governmental regulations, for the shares of Common Stock being
purchased. The Plan Administrator may determine at the time the option is
granted for Incentive Stock Options, or at any time before exercise for
Non-Qualified Stock Options, that additional forms of payment will be permitted.

        6.3    Withholding.    Before the issuance of shares of Common Stock on
the exercise of an option, the Optionee shall pay to the Company the amount of
any applicable federal, state or local tax withholding obligations. The Company
may withhold any distribution in whole or in part until the Company is so paid.
The Company shall have the right to withhold such amount from any other amounts
due or to become due from the Company to the Optionee, including salary (subject
to applicable law) or to retain and withhold a number of shares having a market
value not less than the amount of such taxes required to be withheld by the
Company to reimburse it for any such taxes and cancel (in whole or in part) any
such shares so withheld.

        6.4    Conditions Precedent to Exercise.    The Plan Administrator may
establish conditions precedent to the exercise of any option, which shall be
described in the relevant Option Agreement.

        7.    Foreign Qualified Grants    Options under this Plan may be granted
to officers and employees of the Company and other persons described in
Section 4 who reside in foreign jurisdictions as the Plan Administrator may
determine from time to time. The Board of Directors may adopt supplements to the
Plan as needed to comply with the applicable laws of such foreign jurisdictions
and to give Optionees favorable treatment under such laws; provided, however,
that no award shall be granted under any such supplement on terms more
beneficial to such Optionees than those permitted by this Plan.

        8.    Corporate Mergers, Acquisitions, Etc.    The Plan Administrator
may also grant options under this Plan having terms, conditions and provisions
that vary from those specified in this Plan provided that such options are
granted in substitution for, or in connection with the assumption of, existing
options granted, awarded or issued by another corporation and assumed or
otherwise agreed to be provided for by the Company pursuant to or by reason of a
transaction involving a corporate merger, consolidation, acquisition of property
or stock, reorganization or liquidation to which the Company is a party.

 

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        9.    Holding Period.    Unless otherwise determined by the Plan
Administrator, if a person subject to Section 16 of the Exchange Act exercises
an option within six months of the date of grant of the option, the shares of
Common Stock acquired on exercise of the option may not be sold until six months
after the date of grant of the option.

        10.    Option Agreements.    Options granted under this Plan shall be
evidenced by written stock option agreements (the “Option Agreements”) that
shall contain such terms, conditions, limitations and restrictions as the Plan
Administrator shall deem advisable and that are consistent with this Plan. All
Option Agreements shall include or incorporate by reference the applicable terms
and conditions contained in this Plan.

        11.    Adjustments On Changes in Capitalization.

        11.1    Stock Splits, Capital Stock Adjustments.    The aggregate number
and class of shares for which options may be granted under this Plan, the number
and class of shares covered by each outstanding option and the exercise price
per share thereof (but not the total price), and each such option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a stock split, stock
dividend or consolidation of shares or any like capital stock adjustment.

        11.2    Effect of Merger, Sale of Assets, Liquidation or Dissolution.

        (a)    Mergers, Sale of Assets, Other Transactions.    In the event of a
merger, consolidation or plan of exchange to which the Company is a party or a
sale of all or substantially all of the Company’s assets (each, a
“Transaction”), the Board of Directors, in its sole discretion and to the extent
possible under the structure of the Transaction, shall select one of the
following alternatives for treating outstanding options under this Plan:

        (i)    Outstanding options shall remain in effect in accordance with
their terms;

        (ii)  Outstanding options shall be converted into options to purchase
stock in the corporation that is the surviving or acquiring corporation in the
Transaction. The amount, type of securities subject thereto and exercise price
of the converted options shall be determined by the Board of Directors of the
Company, taking into account the relative values of the companies involved in
the Transaction and the exchange rate, if any, used in determining shares of the
surviving corporation to be issued to holders of shares of the Company. Unless
otherwise determined by the Board of Directors, the converted options shall be
vested only to the extent that the vesting requirements relating to options
granted hereunder have been satisfied;

        (iii)  The Board of Directors provides a period before the consummation
of the Transaction during which outstanding options shall be exercisable to the
extent vested and, on the expiration of such period, all unexercised options
shall immediately terminate. The Board of Directors, in its sole discretion, may
accelerate the vesting of such options so that they are exercisable in full
during such period; or

        (iv)  The Board of Directors shall take such other action with respect
to outstanding options as the Board deems to be in the best interests of the
Company.

        (b)    Liquidation; Dissolution.    If the Company is liquidated or
dissolved, options shall be treated in accordance with Section 11.2(a)(iii).

        11.3    Fractional Shares.    If the number of shares covered by any
option is adjusted, any fractional shares resulting from such adjustment shall
be disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.

 

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        11.4    Determination of Board to Be Final    All adjustments under this
Section 11 shall be made by the Board of Directors, and its determination as to
what adjustments shall be made, and the extent thereof, shall be final, binding
and conclusive. Unless an Optionee agrees otherwise, any change or adjustment to
an Incentive Stock Option shall be made, if possible, in such a manner so as not
to constitute a “modification,” as defined in Section 424(h) of the Code, and so
as not to cause the Optionee’s Incentive Stock Option to fail to continue to
qualify as an Incentive Stock Option.

        12.    Securities Regulations.

        Shares of Common Stock shall not be issued with respect to an option
granted under this Plan unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, applicable laws of foreign
countries and other jurisdictions and the requirements of any quotation service
or stock exchange on which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance, including the availability of an exemption from registration for the
issuance and sale of any shares hereunder. The inability of the Company to
obtain, from any regulatory body having jurisdiction, the authority deemed by
the Company’s counsel to be necessary for the lawful issuance and sale of any
shares hereunder or the unavailability of an exemption from registration for the
issuance and sale of any shares hereunder shall relieve the Company of any
liability with respect of the nonissuance or sale of such shares as to which
such requisite authority shall not have been obtained.

        As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares of Common Stock are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any relevant
provision of the aforementioned laws. The Company may place a stop-transfer
order against any shares of Common Stock on the official stock books and records
of the Company, and a legend may be stamped on stock certificates to the effect
that the shares of Common Stock may not be pledged, sold or otherwise
transferred unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating that such transfer is not in violation of any
applicable law or regulation. The Plan Administrator may also require such other
action or agreement by the Optionees as may from time to time be necessary to
comply with the federal and state securities laws. THIS PROVISION SHALL NOT
OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE OPTIONS OR STOCK
THEREUNDER.

        If any of the Company’s capital stock of the same class as the Common
Stock subject to options granted hereunder is listed on a national securities
exchange, all shares of Common Stock issued hereunder if not previously listed
on such exchange shall be authorized by that exchange for listing thereon before
the issuance thereof.

        13.    Amendment and Termination.

        13.1    Plan.    The Board of Directors may at any time suspend, amend
or terminate this Plan, provided that, except as set forth in Section 8, the
approval of the Company’s shareholders is necessary within twelve months before
or after the adoption by the Board of Directors of any amendment that will:

        (a)  increase the number of shares of Common Stock to be reserved for
the issuance of options under this Plan;

        (b)  permit the granting of stock options to a class of persons other
than those now permitted to receive stock options under this Plan; or

 

8

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        (c)  require shareholder approval under applicable law, including
Section 16(b) of the Exchange Act.

        13.2    Options.    Subject to the requirements of Section 422 of the
Code with respect to Incentive Stock Options and to the terms and conditions and
within the limitations of this Plan, the Plan Administrator may modify or amend
outstanding options granted under this Plan. The modification or amendment of an
outstanding option shall not, without the consent of the Optionee, impair or
diminish any of his or her rights or any of the obligations of the Company under
such option. Except as otherwise provided in this Plan, no outstanding option
shall be terminated without the consent of the Optionee. Unless the Optionee
agrees otherwise, any changes or adjustments made to outstanding Incentive Stock
Options granted under this Plan shall be made in such a manner so as not to
constitute a “modification,” as defined in Section 425(h) of the Code, and so as
not to cause any Incentive Stock Option issued hereunder to fail to continue to
qualify as an Incentive Stock Option as defined in Section 422(b) of the Code.

        13.3    Automatic Termination.    Unless sooner terminated by the Board
of Directors, this Plan shall terminate ten years from the date on which this
Plan is adopted by the Board. No option may be granted after such termination or
during any suspension of this Plan. The amendment or termination of this Plan
shall not, without the consent of the Optionee, alter or impair any rights or
obligations under any option theretofore granted under this Plan.

        14.    Miscellaneous.

        14.1    Time of Granting Options.    The date of grant of an option
shall, for all purposes, be the date on which the Company completes the required
corporate action relating to the grant of an option; the execution of an Option
Agreement and the conditions to the exercise of an option shall not defer the
date of grant.

        14.2    No Status as Shareholder.    Neither the Optionee nor any party
to which the Optionee’s rights and privileges under the option may pass shall
be, or have any of the rights or privileges of, a shareholder of the Company
with respect to any of the shares of Common Stock issuable on the exercise of
any option granted under this Plan unless and until such option has been
exercised and the issuance (as evidenced by the appropriate entry on the books
of the Company or duly authorized transfer agent of the Company) of the stock
certificate evidencing such shares.

        14.3    Status as an Employee.    Nothing in this Plan or in any option
granted pursuant to this Plan shall confer on any Optionee any right to continue
in the employ of the Company, or to interfere in any way with the right of the
Company to terminate his or her employment or other relationship with the
Company at any time for any reason.

        14.4    Reservation of Shares.    The Company, during the term of this
Plan, at all times will reserve and keep available such number of shares of
Common Stock as shall be sufficient to satisfy the requirements of this Plan.

        15.    Effectiveness of This Plan.    This Plan shall become effective
on the date on which it is adopted by the Board of Directors of the Company. No
option granted under this Plan to any officer or director of the Company shall
become exercisable until the Plan is approved by the shareholders, and any
option granted before such approval shall be conditioned on and is subject to
such approval.

Adopted by the Board of Directors on July 10, 1996, and approved by the
shareholders on August 9, 1996.

Amended by the Board of Directors on November 8, 1996.

 

9

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Amended by the shareholders, pursuant to the recommendation of the Board of
Directors, on October 15, 1998.

Amended by the shareholders, pursuant to the recommendation of the Board of
Directors, on June 22, 2000.

Amended by the Board of Directors on October 19, 2000.

Amended by the Board of Directors on April 26, 2001.

 

10

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FORM OF SPECIAL OPTION GRANT

MICROVISION, INC.
STOCK OPTION AGREEMENT
FOR INDEPENDENT DIRECTORS
(NON-PLAN GRANT)

        THESE OPTIONS AND THE UNDERLYING SHARES OF COMMON STOCK HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE
SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED IN RELIANCE UPON EXEMPTIONS
FROM REGISTRATION UNDER THE ACT AND STATE SECURITIES LAWS.

        «Date»

To:    «Title» «First» «Mid» «Last»

        You have been awarded an option to purchase the number of shares of
Common Stock of Microvision, Inc. (the “Company”) specified below. The grant of
this option is subject to shareholder approval and this option cannot be
exercised until such approval is obtained. The terms of your option are
summarized below. A complete description of the terms and conditions to which
this option is subject is set forth in the “Terms and Conditions of Grant”
attached as Exhibit A hereto.

        1.    Number of Shares.    You may purchase a maximum of
«Total            Shares» shares of the Company’s Common Stock pursuant to this
option.

        2.    Date Option Granted.    October 24, 2001.

        3.    Term of This Option.    Unless sooner terminated, this option must
be exercised on or before «term», as described more fully in the Exercise
Schedule attached as Exhibit B hereto.

        4.    Exercise Schedule and Prices.    This option shall vest and become
exercisable upon shareholder approval and have an exercise price of $15.00 per
share.

        5.    How to Exercise.    To exercise this option in whole or in part
(i.e., in increments of no less than 100 shares), you must deliver to the
Secretary of the Company at least two full business days prior to the date on
which you wish to exercise the option, a written notice of exercise and the
exercise price, payable by personal, bank certified or cashier’s check, for the
number of shares that you desire to purchase. A form of Notice of Exercise that
you may use has been attached to this Agreement as Exhibit B. You must pay all
applicable withholding taxes upon exercise of this option. At the Company’s
discretion, you also may pay the exercise price through irrevocable instructions
to a stock broker to deliver the amount of sales proceeds necessary to pay the
exercise price and applicable withholding tax in accordance with applicable
governmental regulations.

        The Company also may require you to execute other documents as a
condition to exercising this option. You should contact the Secretary in advance
when you are considering an exercise of this option.

        6.    Termination of Option.    This option shall expire and all rights
thereto shall cease and terminate in accordance with the provisions of Section 4
of the “Terms and Conditions of Grant” attached as Exhibit A hereto.

        7.    No Transfer of Option.    This option cannot be transferred except
by will or the applicable laws of descent and distribution.

        8.    Certain Tax Matters.    This option is not intended to qualify as
an “Incentive Stock Option” as that term is defined in Section 422A of Code and
its tax consequences are different than such an option. The time at which you
exercise this option or dispose of any shares thus acquired may affect
significantly your resultant tax burden. You are counseled to seek tax advice in
this regard.

        9.    Securities Compliance.    This option cannot be exercised until it
is approved by the shareholders of the Company. The Company intends to submit a
proposal relating to the grant of this

 

 

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and certain other options granted to the non-employee directors of the Company
for approval by the shareholders at the 2002 annual meeting of shareholders. If
the shareholders approve the proposal, then promptly thereafter the Company
intends to register the offer and sale of the shares of Common Stock issuable
upon exercise of this option under the Securities Act of 1933, as amended, by
filing a registration statement on Form S-8 with the Securities and Exchange
Commission. Until such registration statement becomes effective, the shares of
Common Stock issuable upon exercise of this option will not be registered and
the issuance thereof will be subject to applicable securities laws, as described
in Section 7 of the “Terms and Conditions of Grant” attached as Exhibit A
hereto. Shares purchased through the exercise of this option cannot be sold or
otherwise transferred unless they are subsequently registered or exemptions from
registration are available.

        Please complete and sign the Election to Accept or Decline Stock Option
attached hereto at Exhibit C indicating whether you accept or decline this
option upon the terms set forth in this Agreement, including the Terms and
Conditions of Grant, and return a copy of the Election to the Company.

 

Very truly yours,

 

 

 

 

MICROVISION, INC.

 

 

 

 

By

 

 

 

Richard A. Raisig, Chief Financial Officer

 

11

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Exhibit A
Terms and Conditions of Grant

        1.    Administration.    This option shall be administered by the Board
of Directors of the Company (the “Board”) or, if the Board shall authorize a
committee of the Board, by such committee to the extent so authorized. The
administrator of this option is referred to as the “Administrator.”

        1.1    Powers.    Subject to the specific provisions of these terms and
conditions, the Administrator shall have the authority, in its discretion:
(a) to interpret the terms and conditions of this option; (b) to prescribe,
amend, and rescind rules and regulations relating to the exercise of this
option; (c) with the consent of the Optionee, modify or amend each option;
(d) to reduce the exercise price per share of this option; (e) to defer, with
the consent of the Optionee, or to accelerate the exercise date of any option;
(f) to waive or modify any term or provision contained in this option applicable
to the underlying shares of Common Stock; and (g) to make all other
determinations deemed necessary or advisable for the administration of this
option. The interpretation and construction by the Administrator of any terms or
provisions of this option or of any rule or regulation promulgated in connection
herewith and all actions taken by the Administrator shall be conclusive and
binding on all interested parties. The Administrator may delegate administrative
functions to individuals who are officers or employees of the Company.

        1.2    Limited Liability.    No member of the Board or the Administrator
or any officer of the Company shall be liable for any action or inaction of the
entity or body, or another person or, except in circumstances involving bad
faith, of himself or herself, with respect to any matter related to this option.
Subject only to compliance with the explicit provisions hereof, the Board and
Administrator may act in their absolute discretion in all matters related to
this option.

        2.    Stock Subject to This Option.    If this option expires, is
surrendered, exchanged for another option, canceled or terminated for any reason
without having been exercised in full, the unpurchased shares subject thereto
shall again be available for issuance by the Company, including for replacement
options that may be granted in exchange for such surrendered, canceled or
terminated options. Shares issued on exercise of this option may be subject to
restrictions on transfer, repurchase rights or other restrictions as determined
by the Administrator.

        3.    Nontransferability.    This option and the rights and privileges
conferred hereby may not be transferred, assigned, pledged or hypothecated in
any manner (whether by operation of law or otherwise) other than by will or by
the applicable laws of descent and distribution, shall not be subject to
execution, attachment or similar process, and shall be exercisable during the
Optionee’s lifetime only by the Optionee. Any purported transfer or assignment
in violation of this provision shall be void.

        4.    Termination of Option.

        4.1    Generally

        Unless earlier termination results from the application of the
provisions of this Section 4, each option granted hereunder shall expire and all
rights thereto shall cease and terminate on the tenth anniversary of the date of
grant.

        4.2    Disability or Death

        If the Optionee is unable to continue his or her service as an
Independent Director of the Company as a result of his or her permanent and
total disability (as defined in Section 22(e)(3) of the Code) or death, all
unvested options issued hereunder will become vested immediately as of the date
of disability or death. In such an event, this option may be exercised at any
time before the earlier of (i) the expiration date of the option or (ii) twelve
(12) months after the date of (A) permanent and total disability or (B) death
(by the person or persons to whom your rights

 

A-1

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

 

under the option shall pass by your will or by the applicable laws of descent
and distribution), for up to the full number of shares of Common Stock covered
thereby.

        4.3    Failure to Exercise Option; Expiration

        To the extent that an Optionee fails to exercise this option within the
period provided in this Section 4, all rights to purchase shares of Common Stock
pursuant to this option shall cease and terminate.

        5.    Exercise.

        5.1    Procedure

        Each option may be exercised, subject to its vesting schedule, in whole
or in part; provided, however, that no fewer than 100 shares (or the remaining
shares then purchasable under the option, if less than 100 shares) may be
purchased on any exercise of any option granted hereunder and that only whole
shares will be issued pursuant to the exercise of any option (the number of 100
shares shall not be changed by any transaction or action described in Section 6
unless the Administrator determines that such a change is appropriate). Options
shall be exercised by delivery to the Secretary of the Company or his or her
designated agent of notice of the number of shares with respect to which the
option is being exercised, together with payment in full of the exercise price
and any applicable withholding taxes.

        5.2    Payment

        Payment of the option exercise price shall be made in full when the
notice of exercise of the option is delivered to the Secretary of the Company or
his or her designated agent and shall be by personal, bank certified or
cashier’s check or through irrevocable instructions to a stock broker to deliver
to the Company the amount of sales proceeds necessary to pay the appropriate
exercise price and withholding tax obligations, all in accordance with
applicable governmental regulations, for the shares of Common Stock being
purchased. The Administrator may determine at any time before exercise that
additional forms of payment will be permitted.

        5.3    Withholding

        Before the issuance of shares of Common Stock on the exercise of an
option, the Optionee shall pay to the Company the amount of any applicable
federal, state or local tax withholding obligations. The Company may withhold
any distribution in whole or in part until the Company is so paid. The Company
shall have the right, subject to applicable law, to withhold such amount from
any other amounts due or to become due from the Company to the Optionee, or to
retain and withhold a number of shares having a market value not less than the
amount of such taxes required to be withheld by the Company, to reimburse it for
any such taxes and cancel (in whole or in part) any such shares so withheld.

        6.    Adjustments On Changes in Capitalization.

        6.1    Stock Splits, Capital Stock Adjustments.    The number and class
of shares covered by this option and the exercise price per share thereof (but
not the total price) shall all be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock of the Company resulting
from a stock split, stock dividend or consolidation of shares or any like
capital stock adjustment.

        6.2    Effect of Merger, Sale of Assets, Liquidation or Dissolution.

        (a)    Mergers, Sale of Assets, Other Transactions.    In the event of a
merger, consolidation or plan of exchange to which the Company is a party or a
sale of all or substantially all of the Company’s assets (each, a
“Transaction”), the Board, in its sole discretion and to the extent

 

A-2

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possible under the structure of the Transaction, shall select one of the
following alternatives for treating this option:

          (i)  This option shall remain in effect in accordance with its terms;

        (ii)  This option shall be converted into options to purchase stock in
the corporation that is the surviving or acquiring corporation in the
Transaction. The amount, type of securities subject thereto and exercise price
of the converted option shall be determined by the Board, taking into account
the relative values of the companies involved in the Transaction and the
exchange rate, if any, used in determining shares of the surviving corporation
to be issued to holders of shares of the Company. Unless otherwise determined by
the Board, the converted option shall be vested only to the extent that the
vesting requirements relating to this option have been satisfied;

        (iii)  The Board provides a period before the consummation of the
Transaction during which this option shall be exercisable to the extent vested
and, on the expiration of such period, this option shall immediately terminate.
The Board, in its sole discretion, may accelerate the vesting of this option so
that it is exercisable in full during such period; or

        (iv)  The Board shall take such other action with respect to this option
as the Board deems to be in the best interests of the Company.

        (b)    Liquidation; Dissolution.    If the Company is liquidated or
dissolved, options shall be treated in accordance with Section 6.2(a)(iii).

        6.3    Fractional Shares.    If the number of shares covered by this
option is adjusted, any fractional shares resulting from such adjustment shall
be disregarded and this option shall cover only the number of full shares
resulting from such adjustment.

        6.4    Determination of Board to Be Final.    All adjustments under this
Section 6 shall be made by the Board, and its determination as to what
adjustments shall be made, and the extent thereof, shall be final, binding and
conclusive.

        7.    Securities Regulations.

        Shares of Common Stock shall not be issued with respect to this option
unless the exercise of the option and the issuance and delivery of such shares
pursuant hereto shall comply with all relevant provisions of law, including,
without limitation, any applicable state and federal securities laws and the
rules and regulations promulgated thereunder, applicable laws of foreign
countries and other jurisdictions, and the requirements of any stock exchange or
market on which the shares may then be listed, and shall be further subject to
the approval of counsel for the Company with respect to such compliance,
including the availability of an exemption from registration for the issuance
and sale of any shares hereunder. The inability of the Company to obtain, from
any regulatory body having jurisdiction, the authority deemed by the Company’s
counsel to be necessary for the lawful issuance and sale of any shares hereunder
or the unavailability of an exemption from registration for the issuance and
sale of any shares hereunder shall relieve the Company of any liability with
respect of the nonissuance or sale of such shares as to which such requisite
authority shall not have been obtained.

        As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares of Common Stock are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any relevant
provision of the aforementioned laws. The Company may place a stop-transfer
order against any shares of Common Stock on the official stock books and records
of the Company, and a legend may be stamped on stock certificates to the effect
that the shares of Common Stock may not be pledged, sold or otherwise
transferred unless an opinion of counsel is provided (concurred in by counsel
for the Company) stating

 

A-3

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

 

that such transfer is not in violation of any applicable law or regulation. The
Administrator may also require such other action or agreement by the Optionee as
may from time to time be necessary to comply with the federal and state
securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE
REGISTRATION OF THIS OPTION OR THE STOCK ISSUABLE UPON EXERCISE HEREOF.

        8.    Amendment and Termination.

        8.1    Options.    Subject to the terms and conditions hereof, the
Administrator may modify or amend this option. The modification or amendment of
this option shall not, without the consent of the Optionee, impair or diminish
any of his or her rights or any of the obligations of the Company hereunder.
Except as otherwise provided in this option, this option shall not be terminated
without the consent of the Optionee.

        8.2    Automatic Termination.    Unless sooner terminated, this option
shall terminate ten (10) years from the date of grant.

        9.    Miscellaneous.

        9.1    No Status as Shareholder.    Neither the Optionee nor any party
to which the Optionee’s rights and privileges under the option may pass shall
be, or have any of the rights or privileges of, a shareholder of the Company
with respect to any of the shares of Common Stock issuable on the exercise of
this option unless and until this option has been exercised and the issuance (as
evidenced by the appropriate entry on the books of the Company or duly
authorized transfer agent of the Company) of the stock certificate evidencing
such shares.

        9.2    Reservation of Shares.    The Company, during the term of this
option, at all times will reserve and keep available such number of shares of
Common Stock as shall be sufficient to satisfy the requirements hereof.

 

A-4

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Exhibit B
Notice of Exercise of Non-Qualified Stock Option

Date:

To:    Microvision, Inc.

        I hereby exercise the non-qualified stock option granted to me by
Microvision, Inc. (the “Company”) on «grant», subject to all the terms and
provisions thereof, and notify the Company of my desire to purchase             
shares of Common Stock of the Company at the exercise price of $            per
share, or an aggregate exercise price of $               .

        I hereby deliver the full exercise price and all applicable withholding
taxes with respect to this exercise as follows:

 

 

personal, bank certified or cashier’s check, or

 

 

irrevocable instructions to a stock broker to deliver the necessary sales
proceeds, all in accordance with applicable governmental regulations.

 

        I further agree to execute such other documents as the Company may
request.

By:

 

 

 

Print Name:

 

 

 

Address:

 

 

 

 

 

 

B-1

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Exhibit C
Election to Accept or Decline Stock Option

Date:

To:    Microvision, Inc.

        I              ACCEPT              DECLINE the non-qualified stock
option granted to me pursuant to the Stock Option Agreement, dated as of
                        . If I accept the grant of this option, I acknowledge
that I have received and understand, and agree to, the terms of the Stock Option
Agreement, including the “Terms and Conditions of Grant” attached as Exhibit A
to the Agreement.

 

Yours very truly,

 

 

 

 

 

«First» «Last»

Optionee

 

C-1

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Schedule of Special Option Grants

Optionee

 

# of option shares

 

Jacqueline Brandwynne

 

4,030

 

Jacob Brouwer

 

8,867

 

Richard A. Cowell

 

8,867

 

Walter J. Lack

 

8,867

 

William A. Owens

 

8,867

 

Robert A. Ratliffe

 

8,867

 

Dennis Reimer

 

8,867

 

 

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