Prepared by MerrillDirect





Exhibit 10.2


LUMERA CORPORATION


INVESTORS’ RIGHTS AGREEMENT


MARCH 14, 2001










TABLE OF CONTENTS


1.          Registration Rights


1.1        Definitions

1.2        Request for Registration

1.3        Company Registration

1.4        Form S-3 Registration

1.5        Obligations of the Company

1.6        Furnish Information

1.7        Expenses of Registration.

1.8        Underwriting Requirements

1.9        Delay of Registration

1.10      Indemnification

1.11      Reports
Under Securities Exchange Act of 1934

1.12      Assignment of
Registration Rights

1.13      Limitations
on Subsequent Registration Rights

1.14      “Market Stand-Off” Agreement

1.15      Termination of Registration
Rights



2.          Covenants of the Company


2.1        Delivery of Financial
Statements

2.2        Inspection

2.3        Right of Participation

2.4        Stock Vesting

2.5        Employee
Non-Disclosure and Assignment of Inventions Agreement

2.6        IRS Ruling

2.7        Termination of Covenants



3.          Miscellaneous


3.1        Successors and Assigns

3.2        Amendments and Waivers

3.3        Notices

3.4        Severability

3.5        Governing Law

3.6        Counterparts

3.7        Titles and Subtitles

3.8        Aggregation of Stock

3.9        Specific Enforcement











LUMERA CORPORATION


INVESTORS’ RIGHTS AGREEMENT


             This
Investors’ Rights Agreement (the “Agreement”) is made as of the 14 day
of March, 2001, by and among Lumera Corporation, a Washington corporation (the
“Company”) and the investors listed on Exhibit A hereto, each of
which is herein referred to as an “Investor.”


RECITALS


             WHEREAS, the Company and certain Investors have entered into
a Series A Preferred Stock Purchase Agreement (the “Purchase Agreement”)
of even date herewith pursuant to which the Company desires to sell to such
Investors and such Investors desire to purchase from the Company shares of the
Company’s Series A Preferred Stock;


             WHEREAS, a condition to the Investors’ obligations under the
Purchase Agreement is that the Company and the Investors enter into this
Agreement in order to provide the Investors with (i) certain rights to register
shares of the Company’s Class A Common Stock issuable upon conversion of the
Series A Preferred Stock held by the Investors, (ii) certain rights to receive
or inspect information pertaining to the Company, and (iii) a right of
participation with respect to certain issuances by the Company of its
securities; and


             WHEREAS, the Company desires to induce certain of the
Investors to purchase shares of Series A Preferred Stock pursuant to the
Purchase Agreement by agreeing to the terms and conditions set forth herein.


             NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties hereto agree as follows:


1.          Registration Rights.  The Company and the
Investors covenant and agree as follows:


             1.1        Definitions
.  For purposes of this
Section 1:


                           (a)         
The
terms “register,” “registered,” and “registration” refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
“Securities Act”), and the declaration or ordering of effectiveness of
such registration statement or document;


                           (b)        The
term “Registrable Securities” means (i) the shares of Class A
Common Stock issuable or issued upon conversion of the Series A Preferred Stock
purchased pursuant to the Purchase Agreement and (ii) any other shares of
Class A Common Stock of the Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, the shares listed in (i); provided, however, that
the foregoing definition shall exclude in all cases any Registrable Securities
sold by a person in a transaction in which his or her rights under this
Agreement are not assigned. 
Notwithstanding the foregoing, Class A Common Stock or other
securities shall only be treated as Registrable Securities if and so long as
they have not been (A) sold to or through a broker or dealer or underwriter in
a public distribution or a public securities transaction, or (B) sold in a
transaction exempt from the registration and prospectus delivery requirements
of the Securities Act under Section 4(l) thereof or Rule 144
thereunder so that all transfer restrictions, and restrictive legends with
respect thereto, if any, are removed upon the consummation of such sale;





 


                           (c)         
The
number of shares of “Registrable Securities then outstanding” shall be
determined by the number of shares of Class A Common Stock outstanding
which are, and the number of shares of Class A Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;


                           (d)        The
term “Holder” means any person owning or having the right to acquire
Registrable Securities or any assignee thereof in accordance with
Section 1.12 of this Agreement;


                           (e)         
The
term “Form S-3” means such form under the Securities Act as in effect on
the date hereof or any successor form under the Securities Act;


                           (f)         
The
term “SEC” means the Securities and Exchange Commission; and


                           (g)        The
term “Qualified IPO” means a firm commitment underwritten public
offering by the Company of shares of its Common Stock pursuant to a
registration statement under the Securities Act, with a public offering price
per share of not less than $10 and which results in aggregate cash proceeds to
the Company of an amount equal to or greater than $20,000,000 (net of
underwriting discounts and commissions).


             1.2        Request for
Registration


                           (a)         
If
the Company shall receive at any time after the earlier of (i) March __,
2004 or (ii) six (6) months after the effective date of the first registration
statement for a public offering of securities of the Company (other than a
registration statement relating either to the sale of securities to employees
of the Company pursuant to a stock option, stock purchase or similar plan
approved by the Board of Directors of the Company or an SEC Rule 145
transaction approved by the Board of Directors of the Company), a written
request from the Holders of at least 30% of the Registrable Securities then
outstanding that the Company file a registration statement under the Securities
Act covering the registration of not less than 30% of the Registrable
Securities then outstanding with an anticipated aggregate gross offering price
of at least $10,000,000, then the Company shall, within ten (10) days of the
receipt thereof, give written notice of such request to all Holders and shall,
subject to the limitations of subsection 1.2(b), use reasonable efforts to
effect as soon as practicable, and in any event within 90 days of the receipt
of such request, the registration under the Securities Act of all Registrable
Securities which the Holders request to be registered within fifteen (15) days
of the mailing of such notice by the Company in accordance with
Section 3.3.  Subject to the
limitations of this Section 1.2, the Company may also include shares of
its capital stock in such registration.





 


                           (b)        If
the Holders initiating the registration request hereunder (“Initiating
Holders”) intend to distribute the Registrable Securities covered by their
request by means of an underwriting, they shall so advise the Company as a part
of their request made pursuant to this Section 1.2 and the Company shall
include such information in the written notice referred to in
subsection 1.2(a). The underwriter will be selected by a majority in
interest of the Initiating Holders and shall be reasonably acceptable to the
Company.  In such event, the right of
any Holder to include his Registrable Securities in such registration shall be
conditioned upon such Holder’s participation in such underwriting and the
inclusion of such Holder’s Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in subsection 1.5(e)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting.  Notwithstanding any
other provision of this Section 1.2, if the underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of
the number of shares to be underwritten, then the Initiating Holders shall so
advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable
Securities that may be included in the underwriting shall be allocated among
all Holders thereof, including the Initiating Holders, in proportion (as nearly
as practicable) to the amount of Registrable Securities of the Company owned by
each Holder; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other securities are first entirely excluded from the underwriting; provided,
further, that notwithstanding the foregoing, if the University of
Washington (the “University”) requests pursuant to the Restricted Stock
Purchase Agreement dated October 20, 2000 between the University and the
Company to include in a registration pursuant to this Section 1.2 shares
of the Company’s Class A Common Stock held by the University (the “UW
Shares”), the number of securities to be registered in such registration shall
be allocated to each Holder and the University in proportion (as nearly as
practicable) to the amount of the Company’s securities held by each Holder
exercising its rights hereunder and the University (so long as, in a
registration subsequent to the Company’s initial public offering, the number of
UW Shares is not reduced below twenty percent (20%) of the number of securities
to be registered in such registration.


                           (c)         
Notwithstanding
the foregoing, if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 1.2, a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, the filing would interfere with a material
financing, corporate reorganization, acquisition, merger, consolidation or
other material fact or event, the Company shall have the right to defer such
filing for a period of not more than ninety (90) days after receipt of the
request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve-month period.


                           (d)        In
addition, the Company shall not be obligated to effect, or to take any action
to effect, any registration pursuant to this Section 1.2:


                                     
   (i)          After
the Company has effected two (2) registrations pursuant to this
Section 1.2 and such registrations have been declared or ordered
effective;





 


                                     
   (ii)         During
the period starting with the date sixty (60) days prior to the Company’s good
faith estimate of the date of filing of, and ending on a date one hundred
eighty (180) days after the effective date of, a registration subject to
Section 1.3 hereof; provided that the Company is in good faith using
reasonable efforts to cause such registration statement to become effective; or


                                     
   (iii)        If
the Initiating Holders propose to dispose of shares of Registrable Securities
that may be immediately registered on Form S-3 pursuant to a request made
pursuant to Section 1.4 below.


             1.3        Company Registration
.  After the Company’s
initial public offering, if (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by the
Company for shareholders other than the Holders) any of its stock under the
Securities Act in connection with the public offering of such securities solely
for cash (other than a registration relating solely to the sale of securities
to participants in a Company stock plan approved by the Board of Directors of
the Company or a transaction covered by Rule 145 under the Securities Act
approved by the Board of Directors of the Company, a registration in which the
only stock being registered is Common Stock issuable upon conversion of debt
securities which are also being registered, or any registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities), the Company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each Holder given
within twenty (20) days after mailing of such notice by the Company in
accordance with Section 3.3, the Company shall, subject to the provisions
of Section 1.8, cause to be registered under the Securities Act all of the
Registrable Securities that each such Holder has requested to be registered.  If a Holder decides not to include any or
all of its Registrable Securities in any registration statement filed by the
Company, such holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
statements as may be filed by the Company with respect to offerings of its
securities, all upon the terms and conditions set forth herein.


             1.4        Form S-3 Registration
.  In case the Company
shall receive from any Holder or Holders a written request or requests that the
Company effect a registration on Form S-3, with an anticipated aggregate gross
offering price of not less than $2,000,000, and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:


                           (a)         
promptly
give written notice of the proposed registration, and any, related
qualification or compliance, to all other Holders; and





 


                           (b)        as
soon as practicable, effect such registration, up to one (1) per year, and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder’s
or Holders’ Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within twenty (20) days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.4:
(i) if Form S-3 is not available for such offering by the Holders; (ii) if the
Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate gross price to
the public of less than $2,000,000; (iii) if the Company shall furnish to the
Holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors of the Company, the filing
would interfere with a material financing, corporate reorganization,
acquisition, merger, consolidation or other material fact or event, in which
event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 1.4; provided,
however, that the Company shall not utilize this right more than once in
any twelve month period; (iv) if the Company has, within the twelve (12) month
period preceding the date of such request, already effected one registration on
Form S-3 for the Holders pursuant to this Section 1.4; (v) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting
such registration, qualification or compliance, and in which the Company is not
already qualified to do business or subject to service of process; or (vi)
during the period ending one hundred eighty (180) days after the effective date
of (x) a registration statement filed pursuant to Section 1.2 or a
registration statement subject to Section 1.3 or (y) the registration
statement for the Company’s initial public offering.


                           (c)         
Subject
to the foregoing, the Company shall file a registration statement covering the
Registrable Securities and other securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Holders.
Registrations effected pursuant to this Section 1.4 shall not be counted
as demands for registration or registrations effected pursuant to Sections 1.2
or 1.3, respectively.


             1.5        Obligations of
the Company.  Whenever required
under this Section 1 to effect the registration of any Registrable
Securities, the Company shall, as expeditiously as reasonably possible:


                           (a)         
Prepare
and file with the SEC a registration statement with respect to such Registrable
Securities and use reasonable efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the
Registrable Securities registered thereunder, keep such registration statement
effective for up to ninety (90) days. 
The Company shall not be required to file, cause to become effective or
maintain the effectiveness of any registration statement that contemplates a
distribution of securities on a delayed or continuous basis pursuant to Rule
415 under the Securities Act, except for registrations pursuant to
Section 1.4; provided, however, that the Company will only
be required to keep such registration statement effective for up to ninety (90)
days.


                          (b)        Prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration
statement as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement for up to ninety (90) days.





 


                           (c)         
Furnish
to the Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them.


                           (d)        Use
reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders, provided
that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions, and in which the
Company is not already qualified to do business or subject to service of
process.


                           (e)         
In
the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing
underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such an agreement.


                           (f)         
Notify
each Holder of Registrable Securities covered by such registration statement at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, such obligation to
continue for ninety (90) days.


                           (g)        Cause

all such Registrable Securities registered pursuant hereunder to be listed on
each securities exchange or over-the-counter market on which similar securities
issued by the Company are then listed.


                           (h)        
Provide
a transfer agent and registrar for all Registrable Securities registered
pursuant hereunder and a CUSIP number for all such Registrable Securities, in
each case not later than the effective date of such registration.


                           (i)          
Use
reasonable efforts to furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the
date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, being
sold through underwriters, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated such date, from
the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters and to the Holders requesting registration of Registrable
Securities.





 


             1.6        Furnish Information
.  It shall be a
condition precedent to the obligations of the Company to take any action
pursuant to this Section 1 with respect to the Registrable Securities of
any selling Holder that such Holder shall furnish to the Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to
effect the registration of such Holder’s Registrable Securities. The Company
shall have no obligation with respect to any registration requested pursuant to
Section 1.2 or Section 1.4 of this Agreement if, as a result of the
application of the preceding sentence, the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company’s
obligation to initiate such registration as specified in subsection 1.2(a)
or section 1.4, whichever is applicable.


             1.7        Expenses of
Registration.


                           (a)         Demand
Registration.
All expenses other than underwriting discounts and commissions incurred in
connection with registrations, filings or qualifications pursuant to
Section 1.2, including (without limitation) all registration, filing and
qualification fees, printers’ and accounting fees, fees and disbursements of
counsel for the Company, and the reasonable and documented fees and
disbursements of one counsel for the selling Holders selected by them not to
exceed $15,000 shall be borne by the Company; provided, however,
that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 1.2 if the registration
request is subsequently withdrawn at the request of the Holders of a majority
of the Registrable Securities to be registered and the Company is in compliance
with this Agreement (in which case all participating Holders shall bear all
such reasonable expenses in proportion to the number of shares for which
registration was requested), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 1.2; provided further, however, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the
condition, results, business, or prospects of the Company that would adversely
affect the offering and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain
their rights pursuant to Section 1.2.


                           (b)        Company
Registration.  All expenses other than underwriting
discounts and commissions incurred in connection with registrations, filings or
qualifications of Registrable Securities pursuant to Section 1.3 for each
Holder, including (without limitation) all registration, filing, and
qualification fees, printers’ and accounting fees, fees and disbursements of
counsel for the Company and the reasonable and documented fees and
disbursements of one counsel for the selling Holder or Holders selected by them
not to exceed $15,000 shall be borne by the Company.





 


                           (c)         Registration
on Form S-3.  All expenses incurred in connection with
registrations requested pursuant to Section 1.4, including (without
limitation) all registration, filing, qualification, printers’ and accounting
fees and the reasonable and documented fees and disbursements of one counsel
for the selling Holder or Holders selected by them not to exceed $15,000 and
counsel for the Company, and any underwriters’ discounts or commissions
associated with Registrable Securities, shall be borne by the Company.


             1.8        Underwriting
Requirements.  In connection with
any offering involving an underwriting of shares of the Company’s capital
stock, the Company shall not be required under Section 1.3 to include any
of the Holders’ securities in such underwriting unless they accept the usual
and customary terms of the underwriting as agreed upon between the Company and
the underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the underwriters determine in
their sole discretion will not jeopardize the success of the offering by the
Company. If the total amount of securities, including Registrable Securities,
requested by shareholders to be included in such offering exceeds the amount of
securities to be sold, other than by the Company, that the underwriters
determine in their sole discretion is compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not jeopardize the success
of the offering (the securities so included to be apportioned pro rata among
the selling shareholders according to the total amount of securities entitled
to be included therein owned by each selling shareholder or in such other
proportions as shall mutually be agreed to by such selling shareholders) but in
no event shall (i) any shares being sold by a shareholder exercising a demand
registration right similar to that granted in Section 1.2 be excluded from
such offering; (ii) or any securities held by an officer or director of the
Company (or an affiliate thereof, other than Microvision, Inc. or the
University of Washington) be included if any securities held by any selling
Holder are excluded; provided, however, that in a registration subsequent to
the Company’s initial public offering the number of UW Shares is not reduced
below twenty percent (20%) of the number of securities to be registered in such
registration. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single “selling shareholder,” and
any pro-rata reduction with respect to such “selling shareholder” shall be
based upon the aggregate amount of shares carrying registration rights owned by
all entities and individuals included in such “selling shareholder,” as defined
in this sentence.


             1.9        Delay of Registration
.  No Holder shall have
any right to obtain or seek an injunction restraining or otherwise delaying any
such registration as the result of any controversy that might arise with
respect to the interpretation or implementation of this Section 1.





 


             1.10      Indemnification
.  In the event any Registrable Securities are included in a
registration statement under this Section 1:


                           (a)         
To
the extent permitted by law, the Company will indemnify and hold harmless each
Holder, any underwriter (as defined in the Securities Act) for such Holder and
each person, if any, who controls such Holder or underwriter within the meaning
of the Securities Act or the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations (each, a “Violation”):
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable to
any Holder, underwriter or controlling person for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.


                           (b)        To
the extent permitted by law, each selling Holder will indemnify and hold
harmless the Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls the
Company within the meaning of the Securities Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Securities Act, the Exchange Act or other federal
or state law, insofar as such losses, claims, damages, or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder expressly for use in connection with such registration; and each such
Holder will pay, as incurred, any legal or other expenses reasonably incurred
by any person indemnified pursuant to this subsection 1.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that in no event shall any
indemnity under this subsection 1.10(b) exceed the net proceeds from the
offering received by such Holder, except in the case of fraud by such Holder.


                           (c)         
Promptly
after receipt by an indemnified party under this Section 1.10 of notice of
the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 1.10, deliver to the indemnifying
party a written notice of the commencement thereof and the indemnifying party
shall have the right to participate in, and, to the extent the indemnifying
party so desires, jointly with any other indemnifying party similarly noticed,
to assume the defense thereof with counsel mutually satisfactory to the
parties; provided, however, that an indemnified party (together
with all other indemnified parties which may be represented without conflict by
one counsel) shall have the right to retain one separate counsel, with the
reasonable and documented fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement
of any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.





 


                           (d)        If
the indemnification provided for in this Section 1.10 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such proportion
as is appropriate to reflect the relative fault of the indemnifying party on
the one hand and of the indemnified party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage or
expense as well as any other relevant equitable considerations; provided,
that in no event shall any contribution by a Holder under this
subsection 1.10(d) exceed the net proceeds from the offering received by
such Holder, except in the case of fraud by such Holder. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.


                           (e)         
Notwithstanding
the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection
with the underwritten public offering are in conflict with the foregoing
provisions, the provisions in the underwriting agreement shall control.


                           (f)         
The
obligations of the Company and Holders under this Section 1.10 shall
survive the completion of any offering of Registrable Securities in a
registration statement and the termination of this Agreement.


             1.11      Reports Under
Securities Exchange Act of 1934.  With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:


                           (a)         
make
and keep public information available, as those terms are understood and
defined in SEC Rule 144, at all times after ninety (90) days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public so long as the Company remains
subject to the periodic reporting requirements under Sections 13 or 15(d) of
the Exchange Act;





 


                           (b)        take

such action, including the voluntary registration of its Common Stock under
Section 12 of the Exchange Act, as is necessary to enable the Holders to
utilize Form S-3 for the sale of their Registrable Securities, such action to
be taken as soon as practicable after the end of the fiscal year in which the
first registration statement filed by the Company for the offering of its
securities to the general public is declared effective;


                           (c)         
file
with the SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act; and


                           (d)        
furnish
to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) a written statement by the Company that it has complied with
the reporting requirements of SEC Rule 144 (at any time after ninety (90) days
after the effective date of the first registration statement filed by the
Company), the Securities Act and the Exchange Act (at any time after it has
become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.


             1.12      Assignment of
Registration Rights.  The rights to cause
the Company to register Registrable Securities pursuant to this Section 1
may be assigned (but only with all related obligations) by a Holder (i) to
parent corporation of or a subsidiary of such Holder or (ii) any trust for
the benefit of the Holder or a spouse or family member or (iii) to a transferee
or assignee of at least 500,000 shares of such securities, provided the Company
is, within a reasonable time after such transfer, furnished with written notice
of the name and address of such affiliate, transferee or assignee and the
securities with respect to which such registration rights are being assigned,
provided such transferee shall agree to be subject to all restrictions set
forth in this Agreement; and provided, further, that such assignment shall be
effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the
Securities Act. For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by
gift, will or intestate succession) shall be aggregated together and with the
partnership; provided that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under Section 1.





 


             1.13      Limitations
on Subsequent Registration Rights.  Except for
registration rights to be granted to Microvision, Inc. covering Class A
Common Stock issuable upon conversion of shares of Series A Preferred
Stock issuable upon exercise of warrants to be issued under the terms of the
Company’s Convertible Promissory Note dated February 28, 2001 payable to
Microvision, Inc. (the “Convertible Note”), from and after the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the outstanding Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 1.2 hereof, unless
under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included, (b) to make a demand registration
which could result in such registration statement being declared effective
prior to the earlier of either of the dates set forth in subsection 1.2(a)
or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.


             1.14      “Market Stand-Off”
Agreement.  Each Holder hereby
agrees that, during the period of duration (up to, but not exceeding, one
hundred eighty (180) days) specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Securities Act, it
shall not, to the extent requested by the Company and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including,
without limitation, any short sale), grant any option to purchase or otherwise
transfer or dispose of (other than to donees who agree to be similarly bound)
any securities of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that:


                           (a)         
such
agreement shall be applicable only to the first such registration statement of
the Company which covers Common Stock (or other securities) to be sold on its
behalf to the public in an underwritten offering; and


                           (b)        all
officers and directors of the Company and all one-percent (1%) securityholders,
and all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements, except that the University of
Washington shall only be required to do so to the extent required under the
terms of the Restricted Stock Purchase Agreement between the Company and the
University of Washington dated October 20, 2000.


             In
order to enforce the foregoing covenant, the Company may impose stop transfer
instructions with respect to the Registrable Securities of each Holder (and the
shares or securities of every other person subject to the foregoing
restriction) until the end of such period, and each Holder agrees that, if so
requested, such Holder will execute an agreement in the form provided by the
underwriter containing terms which are essentially consistent with the
provisions of this Section 1.14.


             Notwithstanding
the foregoing, the obligations described in this Section 1.14 shall not
apply to a registration relating solely to employee benefit plans on Form S-8
or similar forms which may be promulgated in the future, or a registration
relating solely to an SEC Rule 145 transaction on Form S-4 or similar forms
which may be promulgated in the future.





 


             1.15      Termination of
Registration Rights.  No Holder shall be
entitled to exercise any right provided for in this Section 1 after the
earlier of (i) three (3) years following the consummation of a Qualified IPO,
(ii) March __, 2008, or (ii) such time as Rule 144 or another similar
exemption under the Securities Act is available for the sale of all of such
Holder’s shares during a ninety (90) day period without registration.


2.          Covenants of the Company


             2.1        Delivery
of Financial Statements.  The Company shall
deliver to each Holder of at least 500,000 shares of Registrable Securities:


                           (a)         
as
soon as practicable, but in any event within ninety (90) days after the end of
each fiscal year of the Company ending after the date hereof, an income
statement for such fiscal year, a balance sheet of the Company and statement of
shareholder’s equity as of the end of such year, and a statement of cash flows
for such year, such year-end financial reports to be in reasonable detail,
prepared in accordance with generally accepted accounting principles (“GAAP”),
and audited and certified by an independent public accounting firm of
nationally recognized standing selected by the Company;


                           (b)        as
soon as practicable, but in any event within forty-five (45) days after the end
of each of the first three (3) quarters of each fiscal year of the Company, an
unaudited profit or loss statement, a statement of cash flows for such fiscal
quarter, a summary of bookings and backlog and an unaudited balance sheet as of
the end of such fiscal quarter;


                           (c)         
within
thirty (30) days of the beginning of each fiscal year, monthly financial
projections for such fiscal year, operating budgets for such fiscal year and a
fiscal business plan in reasonable detail; and


                           (d)        with

respect to the financial statements called for in subsections (b) of this
Section 2.1, an instrument executed by the Chief Financial Officer or
President of the Company and certifying that such financials were prepared in
accordance with GAAP consistently applied with prior practice for earlier
periods (with the exception of footnotes that may be required by GAAP) and
fairly present the financial condition of the Company and its results of
operation for the period specified, subject to normal and recurring year-end
audit adjustment, provided that the foregoing shall not restrict the right of
the Company to change its accounting principles consistent with GAAP.


             2.2        Inspection
.  The Company shall
permit each Holder of at least 500,000 shares of Series A Preferred Stock, at
such Holder’s expense and at reasonable times and with advance notice, to visit
and inspect the Company’s properties, to examine its books of account and
records and to discuss the Company’s affairs, finances and accounts with its
officers, all at such reasonable times as may be requested by the Investor;
provided, however, that the Company shall not be obligated pursuant to this
Section 2.2 to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.


             2.3        Right of 
Participation.  Subject to the terms and conditions
specified in this paragraph 2.3, the Company hereby grants to each Holder who
holds at least 250,000 shares of Series A Preferred Stock (a “Major
Investor”) a right of participation with respect to future sales by the Company
of its shares of, or securities convertible into or exercisable for any shares
of, any class of its capital stock (“Shares”).





 


             Each
time the Company proposes to issue and sell any Shares, the Company shall first
make an offering of such Shares to each Major Investor in accordance with the
following provisions:


                           (a)         
The
Company shall deliver a notice by certified mail (“Notice”) to the Major
Investors stating (i) its bona fide intention to offer such Shares, (ii) the
number of such Shares to be offered, and (iii) the price and terms, if any,
upon which it proposes to offer such Shares.


                           (b)        Withi
n
fifteen (15) calendar days after receiving the Notice, the Major Investor may
elect to purchase or obtain, at the price and on the terms specified in the
Notice, up to that portion of such Shares that equals the proportion that the
number of shares of common stock issued and held, or issuable upon conversion
of the Series A Preferred Stock then held, by such Major Investor bears to the
total number of shares of common stock issued and held, or issuable upon
conversion of all convertible or exercisable securities then held, by all the
Major Investors.


                           (c)         
If
not all Shares that Investors are entitled to obtain pursuant to this Section
2.3 (b) are elected to be obtained as provided in Section 2.3(b), the Company
may, during the one hundred twenty (120) day period following the expiration of
the period provided in Section 2.3(b) hereof, offer the remaining unsubscribed portion
of such Shares to any person or persons at a price not less than, and upon
terms no more favorable to the offeree than, those specified in the
Notice.  If the Company does not sell
such Shares or enter into an agreement for the sale of the Shares within such
period, or if such agreement is not consummated within sixty (60) days of the
execution thereof, the right provided hereunder shall be deemed to be revived
and such Shares shall not be offered unless first reoffered to the Major
Investors in accordance herewith.


                           (d)        The
right of participation set forth in this Section 2.3 shall not apply to Shares
issued or issuable: (i) upon conversion of shares of Series A Preferred
Stock; (ii) upon conversion of Class B Common Stock into Class A
Common Stock; (iii) to officers, directors or employees of, or consultants
to, the Company pursuant to stock option or stock purchase plans or agreements
on terms approved by the Board of Directors; (iv) in connection with
equipment financings or similar transactions, or in connection with strategic
investments or corporate partnering transactions, the terms of which are
approved by the Board of Directors of the Corporation; (v) as a dividend
or distribution on Series A Preferred Stock; (vi) under the terms of
the Convertible Note; (vii) for which adjustment of the Conversion Price
(as defined in the Company’s Statement of Rights and Preferences for the
Series A Preferred Stock (the “Statement of Rights and Preferences”)) is
made pursuant to the Statement of Rights and Preferences; (viii) in
connection with a Qualified IPO; (ix) pursuant to the acquisition of
another business entity or business segment of any such entity by the Company
by merger, purchase of substantially all the assets or other reorganization whereby
the Company will own more than fifty percent (50%) of the voting power of such
business entity or business segment of any such entity; (x) upon the
exercise, conversion or exchange of any security outstanding as of the date
hereof or securities issued or issuable pursuant to subsections (i)
through (ix) above; or (xi) any right, option or warrant to acquire any
security convertible into the securities issued or issuable pursuant to
subsections (i) through (x) above.





 


             The
right of first offer set forth in this Section 2.3 may not be assigned or
transferred, except that (a) such right is assignable by each Holder to any
wholly owned subsidiary or parent of, or to any corporation or entity that is,
within the meaning of the Act, controlling, controlled by or under common
control with, any such Holder, and (b) such right is assignable between and
among any of the Holders.


             2.4        Stock
Vesting.  All stock options
and other stock equivalents issued after the date of this Agreement to
employees, directors, consultants and other service providers shall be subject
to vesting as determined by the Board of Directors or a committee thereof
composed of non-employee directors.


             2.5        
Employee Non-Disclosure and Assignment of Inventions
Agreement.  Except as provided
in the Purchase Agreement, the Company and each of its employees shall have
entered into the Company’s standard form Employee Agreement, in substantially
the form provided to special counsel to the Investors.


             2.6        IRS
Ruling.  Before distributing any stock of the Company to
the shareholders of Microvision, Inc. (“Parent”), Parent will use its
reasonable best efforts to obtain a favorable ruling from the Internal Revenue
Service that the distribution qualifies for tax-free treatment under Section
355 of the Internal Revenue Code.


             2.7        Termination of
Covenants




                           (a)         
The
covenant set forth in Section 2.1, Section 2.2, Section 2.3 and
Section 2.5 shall terminate as to each Holder and be of no further force
or effect (i) immediately prior to the consummation of a Qualified IPO, or (ii)
when the Company shall sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any other transaction or series of related transactions in which more
than fifty percent (50%) of the voting power of the Company is disposed of,
provided that this subsection (ii) shall not apply to a merger effected
exclusively for the purpose of changing the domicile of the Company and which
does not affect the percentage equity interests of securityholders of the
Company in and to the Company.


                           (b)        The
covenants set forth in Sections 2.1 and 2.2 shall terminate as to each Holder
and be of no further force or effect when the Company first becomes subject to
the periodic reporting requirements of Sections 13 or 15(d) of the Exchange
Act, if this occurs earlier than the events described in Section 2.7(a)
above.





3.          Miscellaneous.


             3.1        Successors and Assign
s.  Except as otherwise
provided in this Agreement, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective permitted successors
and assigns of the parties (including transferees of any of the Series A Preferred
Stock or any Class A Common Stock issued upon conversion thereof).  Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.


             3.2        Amendments and Waivers
.  Any term of this
Agreement may be amended or waived only with the written consent of the Company
and the holders of a majority of the Registrable Securities then outstanding.
Any amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder or Holder of any Registrable Securities then
outstanding, each future holder or Holder of all such Registrable Securities,
and the Company.


             3.3        Notices.  Unless otherwise
provided, any notice required or permitted by this Agreement shall be in
writing and shall be deemed sufficient upon delivery, when delivered personally
or by overnight courier or sent by telegram or fax, or forty-eight (48) hours
after being deposited in the U.S. mail, as certified or registered mail, with
postage prepaid, and addressed to the party to be notified at such party’s
address or fax number as set forth below or on Exhibit A hereto or as
subsequently modified by written notice.


             3.4        Severability
.  If one or more
provisions of this Agreement are held to be unenforceable under applicable law,
the parties agree to renegotiate such provision in good faith. In the event
that the parties cannot reach a mutually agreeable and enforceable replacement
for such provision, then (a) such provision shall be excluded from this
Agreement, (b) the balance of the Agreement shall be interpreted as if such
provision were so excluded and (c) the balance of the Agreement shall be
enforceable in accordance with its terms.


             3.5        Governing
Law.  This Agreement and all acts and transactions
pursuant hereto shall be governed, construed and interpreted in accordance with
the laws of the State of Washington, without giving effect to principles of
conflicts of laws.


             3.6        Counterparts
.  This Agreement may be
executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument.


             3.7        Titles and Subtitles
.  The titles and
subtitles used in this Agreement are used for convenience only and are not to
be considered in construing or interpreting this Agreement.


             3.8        Aggregation of Stock
.  All shares of the
Preferred Stock held or acquired by (i) affiliated entities or persons or (ii)
persons or entities under common investment management, shall be aggregated
together for the purpose of determining the availability of any rights as a
Holder under this Agreement.


             3.9        Specific Enforcement
.  It is agreed and
understood that monetary damages would not adequately compensate an injured
party for the breach of this Agreement by any party, that this Agreement shall
be specifically enforceable, and that any breach or threatened breach of this
Agreement shall be the proper subject of a temporary or permanent injunction or
restraining order.  Further, each party
hereto waives any claim or defense that there is an adequate remedy at law for
such breach or threatened breach.





 


             The
parties have executed this Investors’ Rights Agreement as of the date first
above written.


	COMPANY:	 	INVESTORS:
	 	 	 
	LUMERA
  CORPORATION	 	 
	 	 	 
	By:

	 	By:


	 	 	Name:


	 	 	(print)
	 	 	Title:













EXHIBIT A


INVESTORS


 


             Name/Address/Fax
No.