**EMPLOYMENT AGREEMENT
 
**AGREEMENT made and entered into in Seattle, Washington, by and betweenMICROVISION, Inc. (the "Company"), a Delaware corporation with itsprincipal place of business in Seattle, Washington, and Alexander Y. Tokman("Executive"), effective as of the 7th day of April, 2009. 

 
**WHEREAS, subject to the terms and conditions hereinafter set forth,the Company wishes to employ Executive as its President and Chief ExecutiveOfficer and Executive wishes to accept such employment; 

 
**NOW, THEREFORE, in consideration of the foregoing premises and themutual promises, terms, provisions and conditions set forth in this Agreement,the parties hereby agree: 

 

1. Employment. Subject to the terms and conditions set forth in thisAgreement, the Company hereby offers, and Executive hereby accepts, employment.

 

2. Term. Subject to earlier termination as hereafter provided,Executive's employment hereunder shall be for a term of three (3) years,commencing as of the effective date of this Agreement, and ending on April 7,2012, ("Employment Term"), subject to earlier termination as set forthin Section 5 below. Following the expiration of the Employment Term, thisAgreement shall be automatically renewed for successive one (1) year periods("Renewal Term") unless, at least ninety (90) days prior to theexpiration of the Employment Term or the then current Renewal Term, either partyprovides the other with written notice of intention not to renew, in which casethis Agreement shall terminate as of the end of the Employment Term or theRenewal Term, as applicable. If this Agreement is renewed, the terms of thisAgreement during any Renewal Term shall be the same as the terms in effectimmediately prior to such renewal (including but not limited to, the provisionsset forth in Sections 4 and 5 below), subject to any changes or modifications asmutually may be agreed between the Parties as evidenced in a written instrumentsigned by both the Company and Executive.   "Term" as used in this Agreementwithout further modification shall mean the Employment Term together with anyRenewal Term.

 

3. Capacity and Performance. 

 

a. During the Term, Executive shall serve the Company as its President andChief Executive Officer, reporting to the Company's Board of Directors (the"Board"). In addition, and without further compensation, Executive may alsoserve as a member of the Board.  In addition, Executive may also serve as adirector and/or officer of one or more of the Company's Affiliates, if soelected or appointed from time to time. 

 

b. During the Term, Executive shall be employed by the Company on a full-timebasis and shall perform such duties as are intrinsic to his position and suchother duties and responsibilities on behalf of the Company and its Affiliates asmay reasonably be designated from time to time by the Board or by its designees.

 

c. During the Term, Executive shall devote his full business time and hisbest efforts, business judgment, skill and knowledge exclusively to theadvancement of the business and interests of the Company and its Affiliates andto the discharge of his duties and responsibilities hereunder. Executive shallnot actively engage in any other business activity during the Term, but mayparticipate in industry, trade, professional, charitable and communityactivities and manage personal investments so long as such activities, eitherindividually or in the aggregate, do not conflict with the interests of the Company and its Affiliatesor interfere with the discharge of Executive's responsibilities to the Companyand its Affiliates.  Executive may serve on the boards of directors ofother companies only with the prior express permission of the Board.  The Boardhas given its permission for Executive to serve on the Board of Endra, Inc.

 

4. Compensation and Benefits. As compensation for all servicesperformed by Executive under and during the Term and subject to performance ofExecutive's duties and of the obligations of Executive to the Company and itsAffiliates, pursuant to this Agreement or otherwise: 

 

a. Base Salary. Beginning with the effective date of this Agreement,the Company shall pay Executive a base salary at the rate of Three Hundred FortySeven Thousand Two Hundred Eighty Eight Dollars ($347,288) per year ("BaseSalary"), payable in accordance with the payroll practices of the Companyfor its executives and subject to annual review by the Board or a committeethereof and to such increases as the Board or a committee thereof, in its solediscretion, may from time to time determine.  No decreases may be made inExecutive's Base Salary without prior written consent by Executive. 

 

b. Bonus Compensation. During the Term, Executive will be eligible foran annual bonus opportunity (the "Bonus") at a level commensurate withhis position and responsibilities as Chief Executive Officer of the Company, asreasonably determined by the Board or a committee thereof.   The Parties agreethat the target equivalent of such Bonus will be no less than 50% of the BaseSalary.  The actual amount of the payment under any Bonus shall be determined bythe Board or a committee thereof, based on its assessment, in its solediscretion, of Executive's performance and that of the Company againstappropriate and reasonably attainable goals established by the Board or acommittee thereof after consultation with Executive, in the calendar yearfollowing the performance year.  To the extent consistent with bonusopportunities (and payments thereunder) awarded to other executive officers ofthe Company whose compensation is subject to Section 162(m) of the Code, theBoard or a committee thereof may structure any Bonus for Executive with theintent that it comply with the performance-based compensation exceptionrequirements under Section 162(m), provided that the target equivalent of theBonus shall not go below 50% of the Base Salary.   If so determined by the Boardor a committee thereof, after soliciting Executive's input, Bonus compensationmay be paid (i) in cash and/or in equity or (ii) in such form (cash or equity ora combination thereof) as Executive may elect, subject to such limitations onany such election as the Board or a committee thereof may impose.  Any Bonuscompensation earned by Executive shall be paid to Executive in the calendar yearfollowing the performance year, no later than bonus payments to other Executivesand in all events by December 31 of such following year. 

 

c. Long Term Incentives. During the Term, Executive will be eligiblefor stock or stock-based awards ("Stock Awards") at a level commensurate withhis position and responsibilities as Chief Executive Officer of the Company, asreasonably determined by the Board or a committee thereof, each such award to bemade under the Company's 2006 Equity Incentive Plan or any successor thereto.Subject to the terms of such Plan, the Board or a committee thereof shall havethe discretion to determine (i) the type of each Stock Award (*e.g.*, stockoption, restricted stock or restricted stock unit); (ii) the number and sharessubject to each Stock Award; (iii) the performance conditions, if any, and othervesting terms applicable to each Stock Award; and (iv) all other terms of eachStock Award; *provided*, that except as the Board or a committee thereofand Executive may otherwise agree, Stock Awards during the Term shall be grantedon a basis, as determined by the Board or a committee thereof, that isreasonably calculated to meet the objectives described in Exhibit A hereto. 

d. Vacations. During the Term, Executive shall be entitled to four (4)weeks of paid vacation per year to be taken at such times and intervals as shallbe determined by Executive, subject to the reasonable business needs of theCompany. Vacation shall otherwise be governed by the policies of the Company, asin effect from time to time; provided, however, that nothing in Company policyor practice shall prevent Executive from receiving pay for accrued but unusedvacation at the time of Executive's termination from employment pursuant to theterms of this Agreement. 

 

e. Other Benefits. During the Term and subject to any contributiontherefore generally required of employees of the Company, Executive shall beentitled to participate in any and all employee benefit plans from time to timein effect for employees of the Company generally, except to the extent suchplans provide a category of benefit (for example, but without limitation,severance) otherwise provided to Executive pursuant to this Agreement. Suchparticipation shall be subject to the terms of the applicable plan documents andgenerally applicable Company policies. The Company may alter or terminate itsemployee benefit plans at any time, as it, in its sole judgment, determines tobe appropriate. 

 

f. Business Expenses. The Company shall pay or reimburse Executive forall reasonable business expenses incurred or paid by Executive in theperformance of his duties and responsibilities hereunder, subject to suchpolicies as may be established by the Company from time to time, any maximumannual limit or other restrictions on such expenses and to provision of suchreasonable substantiation and documentation as may be specified by the Companyfrom time to time.   Any such payment or reimbursement that could constitute"nonqualified deferred compensation" subject to Section 409A of the Code shallbe subject to the requirements that: (i) the amount of expenses eligible forpayment or reimbursement during any calendar year may not affect the expenseseligible for payment or  reimbursement in any other taxable year, (ii) thepayment or reimbursement must be made, if at all, not later than December 31 ofthe calendar year following the calendar year in which the expense was incurred,and (iii) any right that Executive may have to reimbursement shall in no eventbe subject to liquidation or exchange for any other benefit.

 

5. Termination of Employment and Severance Benefits. Notwithstandingthe provisions of Section 2 hereof, Executive's employment hereunder shallterminate prior to the expiration of the Term under the following circumstances:

 

a. Death. In the event of Executive's death during the Term,Executive's employment hereunder shall immediately and automatically terminate.In such event, the Company shall pay to Executive's designated beneficiary or,if no beneficiary has been designated by Executive, to his estate: (i) anyearned and unpaid Base Salary, payable on the Company's next regular pay dayfollowing termination, (ii) any vacation time earned but not used through thedate of termination, payable on the Company's next regular pay day following thetermination, (iii) any bonus compensation earned for the Bonus Yearpreceding that in which the termination occurs and unpaid on the date oftermination ("Awarded Bonus"), payable in accordance with Section 4.bhereof, (iv) subject to Section 4(f) above, any reimbursable business expensesincurred by Executive but not yet reimbursed on the date of termination,provided that such expenses and required substantiation and documentation aresubmitted within sixty (60) days of termination, with reimbursement being madepromptly after receipt of documentation (amounts provided in (i) through (iv),"Final Payment"); and (v) payment for a pro-rata portion ofExecutive's Bonus for the Bonus Year in which the termination occurs in theevent that bonuses are paid to other officers of the Company for the same BonusYear and provided that the timing of such pro-rata bonus payment will be made inthe same form of consideration and at the same time as the bonus payments madeto other officers.  The Company shall also make provision, in a mannerconsistent with Section 409A of the Code, such that for a period of up toeighteen (18) months following Executive's death Executive's surviving spouse,if any, and his surviving dependents, if any, if they are eligible for and electcontinuation of health coverage pursuant to the so-called "COBRA" coverage-continuation provisions applicable to the Company's group health plan, shall berequired to contribute to such coverage only so much as they would havecontributed for comparable family coverage had Executive continued to beemployed.  The Company shall have no further obligations to Executive. 

 

b. Disability. 

 

i. To the extent permitted by applicable law, the Company may terminateExecutive's employment hereunder, upon notice to Executive, in the event thatExecutive becomes disabled during his employment hereunder through any illness,injury, accident or condition of either a physical or psychological nature and,as a result, is unable to perform substantially all of his duties andresponsibilities hereunder, with or without reasonable accommodation as requiredby law, for a period of more than one hundred twenty (120) days during anyperiod of three hundred and sixty-five (365) consecutive calendar days. In theevent of such termination, the Company shall pay Executive the Final Payment andpayment for a pro-rata portion of Executive's Bonus for the Bonus Year in whichthe termination occurs in the event that bonuses are paid to other officers ofthe Company for the same Bonus Year and provided that the timing of such pro-rata bonus payment will be made in the same form of consideration and at thesame time as the bonus payments made to other officers.  The Company shall alsomake provision, in a manner consistent with Section 409A of the Code, such thatfor a period of up to eighteen (18) months following such termination Executiveand his family members, to the extent they are eligible for and electcontinuation of health coverage (including pursuant to the so-called "COBRA"coverage-continuation provisions applicable to the Company's group health plan),shall be required to contribute to such coverage only so much as they would havecontributed for comparable family coverage had Executive continued to beemployed.  The Company shall have no further obligations to Executive.

ii. Prior to termination as provided at clause i. above, the Board maydesignate another employee to act in Executive's place during any period ofExecutive's disability. Notwithstanding any such designation, Executive shallcontinue to receive the compensation and benefits in accordance with Sections4.a through 4.d and benefits in accordance with Section 4.e, to the extentpermitted by the then-current terms of the applicable benefit plans, untilExecutive becomes eligible for disability income benefits under the Company'sdisability income plan or until the termination of his employment, whichevershall first occur.

 

iii. While receiving disability income payments under the Company'sdisability income plan, Executive shall not be entitled to receive any BaseSalary under Section 4.a hereof, but shall continue to participate in Companybenefit plans in accordance with Section 4.e and the terms of such plans, untilthe termination of his employment. 

 

iv. If any question shall arise as to whether during any period Executive isdisabled through any illness, injury, accident or condition of either a physicalor psychological nature so as to be unable to perform substantially all of hisduties and responsibilities hereunder, a determination of whether Executive hasa disability shall be made by Executive's health care provider. In the event theCompany questions the medical opinion of Executive's health care provider, theCompany may require Executive to obtain a second opinion from a different healthcare provider chosen by the Company at its own expense. If there is a conflictbetween the opinion of Executive's health care provider and the opinion of theCompany's selected health care provider, the Company may require Executive toobtain a third opinion from a health care provider jointly approved by theCompany and Executive at the Company's expense, and this third opinion shall bebinding on Executive and the Company. Any such determination of disability underthis Section 5.b.iv is not intended to alter any benefits any party may beentitled to receive under any long-term disability insurance policy carried byeither the Company or Executive with respect to Executive, which benefits shallbe governed solely by the terms of any such insurance policy. If the Executivefails to submit to a medical examination at the request of the Company asprovided above, the Company's determination of the issue shall be binding onExecutive. 

 

c. By the Company for Cause. The Company may terminate Executive'semployment hereunder for Cause at any time upon notice to Executive settingforth in reasonable detail the nature of such Cause. The following, asdetermined by the Board in its reasonable judgment, shall constitute Cause fortermination: (i) Executive's repeated willful failure to perform, or grossnegligence in the performance of, his duties and responsibilities to the Companyor any of its Affiliates; (ii) fraud, embezzlement or other dishonesty withrespect to the Company or any of its Affiliates; (iii) breach of any of hisobligations under Section 7, 8 or 9 hereof or (iv) commission of a felony orother crime involving moral turpitude. Upon termination of Executive'semployment hereunder for Cause, the Company shall have no further obligations toExecutive other than to pay Executive the Final Payment. 

 

d. By the Company Other than for Cause. The Company may terminateExecutive's employment hereunder other than for Cause at any time upon notice toExecutive. In the event of such termination during the Employment Term or aRenewal Term, then, the Company (i) shall pay Executive (A) the Final Paymentand (B) severance pay in an amount equal to eighteen (18) months of Base Salary,at the rate in effect at the date of termination, plus an amount equal to (I)Executive's target Bonus amount for  the year of termination, or (II) if no suchtarget has been fixed for the year of termination, the actual bonus paid orpayable to Executive for the most  recently completed fiscal year of the Companyfor which an annual bonus was paid or is payable to Executive; *provided*,that in the case of any termination under this subsection (d) occurring afterDecember 31, 2009, in lieu of the amount described in (I) above there shall bepaid to Executive the actual bonus paid or payable to him for the most  recentlycompleted fiscal year of the Company for which an annual bonus was paid or ispayable to him; and (ii) shall continue, while Executive is receiving severancepay hereunder, to contribute to the premium cost of participation by Executiveand his eligible dependents in the Company's group medical and dental plans,provided that Executive is entitled to continue such participation underapplicable law and plan terms and pays the remainder of the premium cost frommonth to month in accordance with the schedule established by the Company. Anyobligation of the Company to Executive under clause (i) or (ii) hereof, however,shall be reduced by any other payments from the Company to which Executive isentitled as a result of termination (exclusive of any Final Payment due) and isconditioned on Executive signing and delivering to the Company, not later thanthe earlier of (i) sixty (60) days after termination of employment or (ii) thedeadline for consideration and execution thereof specified in the form ofrelease of claims attached hereto as Exhibit B, together with the end ofany applicable revocation period (the "Release Deadline"), a releasein such form (the "Employee Release").  Severance pay and Target Bonusto which Executive is entitled hereunder shall be payable pro-rata at theCompany's regular payroll periods during the eighteen (18) month periodimmediately following termination of Executive's employment, with the firstpayment being made on the Company's next regular payday following the ReleaseDeadline, but retroactive to the next business day following the date oftermination of employment; *provided*, that no payment will be made priorto the effective date of the Employee Release in the form attached hereto asExhibit B and that if at the relevant time Executive is a Specified Employee, somuch of the amounts payable hereunder as constitutes nonqualified deferredcompensation subject to Section 409A of the Code and that would be payableduring the six-month period following Executive's termination shall instead beaccumulated and paid in a single sum upon the day after the conclusion of suchsix-month period.  

 

e. By Executive for Good Reason. Executive may terminate hisemployment hereunder for Good Reason provided that (A) he give notice to theCompany within ninety (90) days of the initial occurrence of the event orcondition constituting Good Reason, setting forth in reasonable detail thenature of such Good Reason; (B) the Company fails to cure within thirty(30) days following such notice; and (C) Executive terminates his employmentwithin thirty (30) days following the end of the thirty (30)-day cure period (ifthe Company fails to cure).  The following shall constitute Good Reason fortermination by Executive: (i) failure of the Company to continue Executive inthe position of Chief Executive Officer; (ii) substantial diminution in thenature and scope of Executive's responsibilities, duties, authority, andreporting up requirements of Executive, provided, however, that the Company'sfailure to continue Executive's appointment or election as a director or officerof one of the Company's Affiliates and any diminution of the business at theCompany or any of its Affiliates shall not constitute "Good Reason";(iii) material failure of the Company to provide Executive with the Base Salaryand benefits in accordance with the terms of Section 4 hereof; or (iv)relocation of Executive's office more than thirty-five (35) miles from the then-current location of the Company's principal offices without his consent. In theevent of termination in accordance with this Section 5.e during the EmploymentTerm or Renewal Term, then Executive will be entitled to the same pay andbenefits he would have been entitled to receive had Executive been terminated bythe Company other than for Cause in accordance with Section 5.d above; providedthat Executive satisfies all conditions to such entitlement, including withoutlimitation the timely signing of an effective Employee Release in the formattached hereto as Exhibit B, in accordance with the requirements set forth inSection 5.d.  

 

f. By Executive Other than for Good Reason. Executive may terminatehis employment hereunder at any time upon sixty (60) days' notice to theCompany. In the event of termination by Executive pursuant to this Section 5.f,the Board may elect to waive the period of notice, or any portion thereof, and,if the Board so elects, the Company will pay Executive the Base Salary for thenotice period (or for any remaining portion of the period) and the FinalPayment. The Company shall have no further obligation to Executive. 

 

g. Upon a Change of Control. 

 

i. If a Change of Control occurs and the Company terminates Executive'semployment hereunder other than for Cause during the Employment Term or RenewalTerm and within two (2) years following such Change of Control or Executiveterminates his employment hereunder for any reason during the Employment Term orRenewal Term and within two (2) years following such Change of Control, then, inlieu of any payments to or on behalf of Executive under Section 5.d or 5.ehereof, the Company, in addition to providing Executive the Final Payment, (A)shall pay Executive an amount equal to two times the sum of one year of BaseSalary at the rate in effect at the date of termination or, if higher, on thedate of the Change of Control plus a payment equal to the Target Bonus for whichExecutive is eligible, which amount shall be payable in a single lump sum withinten (10) business days following the later of the effective date of the EmployeeRelease in the form attached hereto as Exhibit B  or the date it is received bythe Company and (B) shall pay the full cost of Executive's continuedparticipation in the Company's group health and dental plans for two years or,if less, for so long as Executive remains entitled to continue suchparticipation under applicable law. In addition, 100% of those Options which arenot exercisable, and which have not been exercised and have not expired or beensurrendered or cancelled, shall become exercisable upon such termination andshall otherwise be and remain exercisable in accordance with the terms of theOptions subject to the Option Agreement. The obligations of the Companyhereunder, however, other than for the Final Payment, if any, are subject toExecutive signing a timely and effective Employee Release in the form attachedhereto as Exhibit B in accordance with the rules specified in subsection (d)above.   Notwithstanding the generality of the foregoing, (i) if the Change ofControl is not a "change in control event" (as that term is defined at Section1.409A-3(i)(5) of the Treasury Regulations), so much of the amounts described inthis paragraph as does not exceed the amounts that would have been payable toExecutive under Section 5.d. or Section 5.e., as the case may be, hadtermination occurred prior to the Change of Control, and that constitutesnonqualified deferred compensation subject to Section 409A of the Code, shall bepaid in the same manner and on the same schedule as described in Sections 5.d.and 5.e., and (ii) if at the relevant time Executive is a Specified Employee, somuch of the amounts payable hereunder as constitutes nonqualified deferredcompensation subject to Section 409A of the Code and that would be payableduring the six-month period following Executive's termination shall instead beaccumulated and paid in a single lump sum upon the day after the conclusion ofsuch six-month period. 

 

ii. Certain Additional Payments by the Employer. 

 

(A) Payments under this Agreement shall be made without regard to whether thedeductibility of such payments (or any other payments or benefits to or for thebenefit of Executive) would be limited or precluded by Section 280G of the Code("Section 280G") and without regard to whether such payments (or anyother payments or benefits) would subject Executive to the federal excise taxlevied on certain "excess parachute payments" under Section 4999 ofthe Code (the "Excise Tax"). If any portion of the payments orbenefits to or for the benefit of Executive (including, but not limited to,payments and benefits under this Agreement but determined without regard to thisparagraph) constitutes an "excess parachute payment" within themeaning of Section 280G (the aggregate of such payments being hereinafterreferred to as the "Excess Parachute Payments"), the Company shallpromptly pay (and to the extent practicable, no later than ten (10) days priorto the date Executive is required to make any Excise Tax payment to the InternalRevenue Service) to Executive an additional amount (the "gross-uppayment") that after reduction for all taxes (including but not limited tothe Excise Tax) with respect to such gross-up payment equals the Excise Tax withrespect to the total of the Excess Parachute Payments and the Gross-Up Payment.In no event shall the gross-up payment be made later than by the deadlinespecified in the regulations under Section 409A of the Code for the payment ofgross-up amounts.

 

(B) The determination as to whether Executive's payments and benefits includeExcess Parachute Payments and, if so, the amount of such payments, the amount ofany Excise Tax owed with respect thereto, and the amount of any gross-up paymentshall be made at the Company's expense by PricewaterhouseCoopers LLP or by suchother certified public accounting firm as the Committee may designate prior to aChange of Control (the "accounting firm"). Notwithstanding theforegoing, if the Internal Revenue Service shall assert an Excise Tax liabilitythat is higher than the Excise Tax (if any) determined by the accounting firm,the Company shall, promptly (and to the extent practicable, no later than ten(10) days prior to the date Executive is required to make any Excise Tax paymentto the Internal Revenue Service) augment the gross-up payment to address suchhigher Excise Tax liability. 

 

iii. "Change of Control" means the occurrence of any of thefollowing events after the effective date hereof: 

 

(A) The acquisition by any Person or group of the ultimate beneficialownership (within the meaning of Rule 13d-3 promulgated under the SecuritiesExchange Act of 1934, as amended (the "Exchange Act")) of more than50% of the then outstanding securities of the Company entitled to vote generallyin the election of directors; excluding, however, the following: (i) anyacquisition directly from the Company (other than any acquisition by virtue ofthe exercise of an exercise, conversion or exchange privilege unless thesecurity being so exercised, converted or exchanged was itself acquired directlyfrom the Company); (ii) any acquisition by the Company; (iii) any acquisition byan employee benefit plan (or related trust) sponsored or maintained by theCompany or by any corporation controlled by the Company; (iv) any acquisition byExecutive, by all Executive Related Party (as defined herein) or by a group ofwhich the Executive is a member; or (v) any acquisition by any corporationpursuant to a transaction which complies with clauses (i), (ii) and (iii) ofthis subsection g.(iii)(A); or 

 

(B) Individuals who, as of the date hereof, constitute the Board (the"Incumbent Board") cease for any reason to constitute at least amajority of the Board; provided, however, that any individual becoming adirector subsequent to the date hereof whose election, or nomination forelection, by the Company's shareholders, was approved by a vote of at least amajority of the directors then comprising the Incumbent Board shall beconsidered as though such individual were a member of the Incumbent Board, butexcluding, for this purpose, any such individual whose initial assumption ofoffice occurs as a result of an actual or threatened election contest withrespect to the election or removal of directors or other actual or threatenedsolicitation of proxies or consents by or on behalf of a Person other than theBoard; or 

 

(C) A reorganization, recapitalization, merger or consolidation (a"Corporate Transaction") of the Company, unless (i) securitiesrepresenting more than 50% of the then outstanding securities entitled to votegenerally in the election of directors of the Company or the corporationresulting from or surviving such Corporate Transaction (or the ultimate parentof the Company or such corporation after such Corporate Transaction) arebeneficially owned subsequent to such Corporate Transaction by the Person orPersons who were the beneficial owners of the outstanding securities of theCompany entitled to vote generally in the election of directors immediatelyprior to such Corporate Transaction, in substantially the same proportions astheir ownership immediately prior to such Corporate Transaction, (ii) no Person(excluding any corporation resulting from such Corporate Transaction or anyemployee benefit plan (or related trust) of the Company of such corporationresulting from such Corporate Transaction) ultimately beneficially owns,directly or indirectly, more than 50% of the then outstanding securitiesentitled to vote generally in the election of directors of the Company or thecorporation resulting from or surviving such Corporate Transaction (or theultimate parent of the Company or such corporation after such CorporateTransaction) except to the extent that such ownership existed prior to theCorporate Transaction; and (iii) at least a majority of the members of the boardof directors of the corporation resulting from such Corporate Transaction weremembers of the Incumbent Board at the time of the execution of the initialagreement, or of the action of the Board, providing for such CorporateTransaction; or 

 

(D) The sale, transfer or other disposition of all or substantially all ofthe assets of the Company; or 

 

(E) Approval by the shareholders of the Company of a complete liquidation ordissolution of the Company. 

 

For purposes of this definition, securities entitled to vote generally in theelection of directors that are issuable upon exercise of an exercise, conversionor exchange shall be deemed to be outstanding. In addition, for purposes of thisdefinition, the following terms have the meanings set forth below: 

 

A Person shall be deemed to be the "owner" of any securities ofwhich such Person would be the "beneficial owner," as such term isdefined in Rule 13d-3 promulgated by the Securities and Exchange Commissionunder the Exchange Act. 

 

"Person" has the meaning used in Section 13.d of the Exchange Act,except that "Person" does not include (i) the Executive, an ExecutiveRelated Party, or any group of which Executive or Executive Related Party is amember, or (ii) the Company or a wholly owned subsidiary of the Company or anemployee benefit plan (or related trust) of the Company or of a wholly ownedsubsidiary. 

 

An "Executive Related Party" means any affiliate or associate ofExecutive other than the Company or a subsidiary of the Company. The terms"affiliate" and "associate" have the meanings given in Rule12b-2 under the Exchange Act; the term "registrant" in the definitionof "associate" means, in this case, the Company. 

 

6. Effect of Termination. The provisions of this Section 6 shall applyto termination of employment pursuant to Section 5 or otherwise. 

 

a. Payment by the Company in accordance with the applicable terminationprovision of Section 5, if any, shall constitute the entire obligation of theCompany to Executive. Executive shall promptly give the Company notice of allfacts necessary for the Company to determine the amount and duration of itsobligations in connection with any termination pursuant to Section 5.d, 5.e or5.g hereof. 

 

b. Except for medical and dental plan coverage continued pursuant to Section5.d, 5.e or 5.g hereof, benefits shall terminate pursuant to the terms of theapplicable benefit plans based on the date of termination of Executive'semployment without regard to any payments to Executive following such date oftermination. 

 

c. Provisions of this Agreement shall survive expiration of the EmploymentTerm and any termination hereunder if so provided herein or if necessary ordesirable to accomplish the purposes of other surviving provisions, includingwithout limitation the obligations of Executive under Sections 7, 8 and 9hereof. The obligation of the Company to make payments to or on behalf ofExecutive under Section 5.d, 5.e or 5.g hereof is expressly conditioned uponExecutive's continued full performance of obligations under Sections 7, 8 and 9hereof. Executive recognizes that, except as expressly provided in Section 5.d,5.e or 5.g no compensation is earned after termination of employment. 

 

7. Confidential Information. 

 

a. Executive acknowledges that the Company and its Affiliates continuallydevelop Confidential Information, that Executive may in the future developConfidential Information for the Company or its Affiliates and that Executivehas in the past and may in the future learn of Confidential Information duringthe course of employment. Executive will comply with the policies and proceduresof the Company and its Affiliates for protecting Confidential Information andshall not use or disclose to any Person (except as required by applicable law orfor the proper performance of his duties and responsibilities to the Company andits Affiliates hereunder) any Confidential Information obtained by Executiveincident to his employment or other association with the Company or any of itsAffiliates. Executive understands that this restriction shall continue to applyafter his employment terminates, regardless of the reason for such termination.

 

b. All documents, records, tapes and other media of every kind anddescription relating to the business, present or otherwise, of the Company orits Affiliates and any copies, in whole or in part, thereof (the"Documents"), whether or not prepared by Executive, shall be the soleand exclusive property of the Company and its Affiliates. Executive shallsafeguard all Documents and shall surrender to the Company at the time hisemployment terminates, or at such earlier time or times as the Board or itsdesignee may specify, all Documents then in Executive's possession or control.

 

8. Assignment of Rights to Intellectual Property. 

 

a. Executive shall promptly and fully disclose all Intellectual Property tothe Company. Executive hereby assigns and agrees to assign to the Company (or asotherwise directed by the Company) Executive's full right, title and interest inand to all Intellectual Property. Executive agrees to execute any and allapplications for domestic and foreign patents, copyrights or other proprietaryrights and to do such other acts (including without limitation the execution anddelivery of instruments of further assurance or confirmation) requested by theCompany to assign the Intellectual Property to the Company and to permit theCompany to enforce any patents, copyrights or other proprietary rights to theIntellectual Property. Executive will not charge the Company for time spent incomplying with these obligations. All copyrightable works that Executive createsshall be considered "work made for hire." 

 

b. For purposes of this Agreement, "Intellectual Property" meansinventions, discoveries, developments, methods, processes, compositions, works,concepts and ideas (whether or not patentable or copyrightable or constitutingtrade secrets) conceived, made, created, developed or reduced to practice byExecutive (whether alone or with others, whether or not during normal businesshours or on or off Company premises) during Executive's employment; provided,however, that the Company shall have no rights to any invention for which noequipment, supplies, facilities or trade secret information of the Company wasused and which was developed entirely on Executive's own time, unless (a) theinvention relates (i) directly to the business of the Company or (ii) to theCompany's actual or demonstrably anticipated research or development; or (b) theinvention results from any work performed by Executive for the Company. 

 

9. Restricted Activities. Executive agrees that some restrictions onhis activities during and after his employment are necessary to protect thegoodwill, Confidential Information and other legitimate interests of the Companyand its Affiliates: 

 

a. While Executive is employed by the Company and for the eighteen (18) monthperiod immediately following termination of his employment with the Company (the"Non-Competition Period"), Executive shall not, directly orindirectly, whether as owner, partner, investor, consultant, agent, employee,co-venturer or otherwise, compete with the Company anywhere worldwide.Specifically, but without limiting the foregoing, Executive agrees not to engagein any manner of any activity that is directly or indirectly competitive orpotentially competitive with the business of the Company as conducted at anytime during Executive's employment. For the purposes of this Section 9, thebusiness of the Company shall include all Products and Executive's undertakingshall encompass all items, products and services that may be used insubstitution for Products. The foregoing, however, shall not prevent Executive'spassive ownership of two percent (2%) or less of the equity securities of anypublicly traded company. 

 

 b.  Executive agrees that, during his employment with the Company, inaddition to complying with the limitations of Section 3.c., he will notundertake any outside activity, whether or not competitive with the business ofthe Company or its Affiliates, that could reasonably give rise to a conflict ofinterest or otherwise interfere with his duties and obligations to the Companyor any of its Affiliates and that would not otherwise be prohibited underSection 3.c.

 c.  Executive further agrees that while he is employed by the Company andfor twelve (12) months following termination of his employment (the "Non-Solicitation Period"), Executive will not solicit any employee of theCompany or encourage any customer or vendor of the Company to terminate ordiminish its relationship with the Company, or, in the case of a customer, toconduct with any Person any business or activity which such customer conductswith the Company. It shall not be a violation of this Agreement for Executive tohire, interview, recruit or otherwise discuss employment or other businessrelationship with any employee of the Company that (i) has been given notice ofinvoluntary termination by the Company, or (ii) response to a generaladvertisement or otherwise initiates contact with Executive for purposes ofseeking employment or other business relationship. For purposes of thisAgreement, an employee or customer of the Company is any Person who was acurrent employee or customer of the Company at the time Executive's employmentwith the Company ended. 

 

For purposes of this Section 9, "Company" shall include Affiliatesof the Company with which Executive has had involvement in the course of hisemployment or about which Affiliate or Affiliate's activities he has acquired orreceived any Confidential Information until a Change of Control has occurred,after such time Company shall not be broadened to include any new Affiliates.

 

10. Notification Requirement. Until the conclusion of the Non-Competition Period, Executive shall give notice to the Company of each newbusiness activity he plans to undertake that could reasonably be construed topotentially violate Section 7, 8 or 9 above, at least ten (10) business daysprior to beginning any such activity. Such notice shall state the name andaddress of the Person for whom such activity is undertaken and the nature ofExecutive's business relationship(s) and position(s) with such Person. Executiveshall provide the Company with such other pertinent information concerning suchbusiness activity as the Company may reasonably request in order to determineExecutive's continued compliance with his obligations under Sections 7, 8 and 9hereof.

 

11. Enforcement of Covenants. Executive acknowledges that he hascarefully read and considered all the terms and conditions of this Agreement,including the restraints imposed upon him pursuant to Sections 7, 8 and 9hereof. Executive agrees that said restraints are necessary for the reasonableand proper protection of the Company and its Affiliates (as defined in Section9) and that each and every one of the restraints is reasonable in respect tosubject matter, length of time and geographic area. Executive furtheracknowledges that, were he to breach any of the covenants contained in Sections7, 8 and 9 hereof, the damage to the Company would be irreparable. Executivetherefore agrees that the Company, in addition to any other remedies availableto it, shall be entitled to preliminary relief against any breach or threatenedbreach by Executive of any of said covenants, without having to post bond. Theparties further agree that, in the event that any provision of Sections 7, 8 or9 hereof shall be determined by any court of competent jurisdiction to beunenforceable by reason of its being extended over too great a time, too large ageographic area or too great a range of activities, such provision shall bedeemed to be modified to permit its enforcement to the maximum extent permittedby law. 

 

12. Conflicting Agreements. Executive hereby represents and warrantsthat the execution of this Agreement and the performance of his obligationshereunder will not breach or be in conflict with any other agreement to whichExecutive is a party or is bound and that Executive is not now subject to anycovenants against competition or similar covenants or any court order or otherobligation that would affect the performance of his obligations hereunder.Executive will not disclose to or use on behalf of the Company any proprietaryinformation of a third party without such party's consent. 

 

13. Arbitration. 

 

a. Any dispute, controversy or claim between the parties arising out of thisAgreement shall be settled by arbitration conducted in Seattle, Washington inaccordance with the rules and procedures of JAMS for the resolution ofemployment disputes (the "Rules") and the laws of the State ofWashington. 

 

b. In the event that a party requests arbitration (the "RequestingParty"), it shall serve upon the other party (the "Non-RequestingParty") within ninety (90) days of the date the Requesting Party knew, orreasonably should have known, of the facts on which the controversy, dispute orclaim is based, a written demand for arbitration stating the substance of thecontroversy, dispute or claim and the contention of the Requesting Party. Anarbitrator shall be selected in accordance with the Rules, with the RequestingParty initiating that process within thirty (30) days of the date it servesdemand for arbitration on the Non-Requesting Party (or such longer period towhich the parties shall agree in writing.). 

 

c. The function of the arbitrator shall be to determine the interpretationand application of the specific provisions of this Agreement to the issuessubmitted to arbitration. There shall be no right in arbitration to obtain, andno arbitrator shall have any authority to award or determine, any change in,addition to, or detraction from, any of the provisions of this Agreement. Thedecision of the arbitrator shall be in writing, shall set forth the basis forthe 

 

decision and shall be rendered within thirty (30) business days following thehearing. The decision of the arbitrator acting within the scope of his/herauthority shall be final and binding upon the parties and may be enforced andexecuted upon in any court having jurisdiction over the party against whomenforcement of such decision is sought. 

 

d. The parties involved in the dispute shall divide equally theadministrative charges, arbitrator's fees and related expenses of thearbitration, but each party shall pay its own legal fees and expenses incurredin connection with such arbitration. 

 

e. Nothing contained herein, however, shall limit the right of the Company toseek equitable or other relief from any court of competent jurisdiction forviolation of Section 7, 8 or 9 of this Agreement. 

 

14. Definitions. Words or phrases which are initially capitalized orare within quotation marks shall have the meanings provided in this Section 14and as provided elsewhere in this Agreement. For purposes of this Agreement, thefollowing definitions apply: 

 

a. "Affiliates" means any parent and subsidiaries of the Companyand any entities directly or indirectly controlling, controlled by or undercommon control with the Company, where control may be by either managementauthority or equity interest. 

 

b. "Code" means the U.S. Internal Revenue Code of 1986, as amended.

 

c. "Confidential Information" means any and all information of theCompany and its Affiliates that is not generally known by others with whom theycompete or do business, or with whom they plan to compete or do business.Confidential Information includes without limitation such information relatingto (i) the development, research, testing, manufacturing, marketing andfinancial activities of the Company and its Affiliates, (ii) the Products, (iii)the costs, sources of supply, financial performance and strategic plans of theCompany and its Affiliates, (iv) the identity and special needs of the customersof the Company and its Affiliates and (v) the people and organizations with whomthe Company and its Affiliates have business relationships and thoserelationships. Confidential Information also includes information that theCompany or any of its Affiliates have received belonging to others with anyunderstanding, express or implied, that it would not be disclosed. ConfidentialInformation does not include information which is in the public domain withoutfault by Executive or any third party. 

 

d. Exclusive of Section iii of this Agreement, "Person" means anindividual, a corporation, an association, a partnership, an estate, a trust andany other entity or organization, other than the Company or any of itsAffiliates. 

 

e. "Products" mean all products planned, researched, developed,tested, manufactured, sold, licensed, leased or otherwise distributed or putinto use by the Company, or prior to a change of Control, of its Affiliates withwhich Affiliate or Affiliate's activities Executive has had involvement in thecourse of his employment or about which he has acquired or received anyConfidential Information, together with all services provided or planned by theCompany, or prior to a change of Control, of its Affiliates with which Executivehas had involvement in the course of his employment or about which Affiliate orAffiliate's activities he has acquired or received any Confidential Information,during Executive's employment.

f.   References to termination of employment, retirement, separation fromservice and similar or correlative terms mean a "separation from service" (asdefined at Section 1.409A-1(h) of the Treasury Regulations) from the Company andfrom all other corporations and trades or businesses, if any, that would betreated as a single "service recipient" with the Company under Section 1.409A-1(h)(3) of the Treasury Regulations.

g.   "Specified employee" means an individual who is determined by theCompany to be a specified employee as defined in subsection (a)(2)(B)(i) ofSection 409A of the Code.  The Company may, but need not, elect in writing,subject to the applicable limitations under Section 409A of the Code, any of thespecial elective rules prescribed in Section 1.409A-1(i) of the TreasuryRegulations for purposes of determining "specified employee" status.  Any suchwritten election shall be deemed part of this Agreement.

 

15. Withholding. All payments made by the Company under this Agreementshall be reduced by any tax or other amounts required to be withheld by theCompany under applicable law. 

 

16. Assignment. Neither the Company nor Executive may make anyassignment of this Agreement or any interest herein, by operation of law orotherwise, without the prior written consent of the other; provided, however,that the Company may assign its rights and obligations under this Agreementwithout the consent of Executive to one of its Affiliates or to a Person withwhom the Company shall hereafter effect a reorganization, consolidation ormerger or to whom the Company transfers all or substantially all of its businessor assets. This Agreement shall inure to the benefit of and be binding upon theCompany and Executive, their respective successors, executors, administrators,heirs and permitted assigns. 

 

17. Severability. If any portion or provision of this Agreement shallto any extent be declared illegal or unenforceable by a court of competentjurisdiction, then the remainder of this Agreement; or the application of suchportion or provision in circumstances other than those as to which it is sodeclared illegal or unenforceable, shall not be affected thereby, and eachportion and provision of this Agreement shall be valid and enforceable to thefullest extent permitted by law. 

 

18. Waiver. No waiver of any provision hereof shall be effectiveunless made in writing and signed by the waiving party. The failure of eitherparty to require the performance of any term or obligation of this Agreement, orthe waiver by either party of any breach of this Agreement, shall not preventany subsequent enforcement of such term or obligation or be deemed a waiver ofany subsequent breach. 

 

19. Notices. Any and all notices, requests, demands and othercommunications provided for by this Agreement shall be in writing and shall beeffective when delivered in person, consigned to a national overnight courierservice or deposited in the United States mail, postage prepaid, and addressedto Executive at his last known address on the books of the Company or, in thecase of the Company, at its principal place of business, attention of theChairman of the Board, or to such other address as either party may specify bynotice to the other actually received. 

 

20. Entire Agreement. As of the effective date, this Agreementconstitutes the entire agreement between the parties and supersedes all priorcommunications, agreements and understandings, written or oral, with respect tothe terms and conditions of Executive's employment. 

 

21. Amendment. This Agreement may be amended or modified only by awritten instrument signed by Executive and by a expressly authorizedrepresentative of the Company. 

 

22. Headings. The headings and captions in this Agreement are forconvenience only and in no way define or describe the scope or content of anyprovision of this Agreement. 

 

23. Counterparts. This Agreement may be executed in two or morecounterparts, each of which shall be an original and all of which together shallconstitute one and the same instrument. 

 

24. Governing Law. This Agreement shall be construed and enforcedunder, and be governed in all respects by, the laws of the State of Washington,without regard to the conflict of laws principles thereof; provided, however,that in the event the Company relocates its principal place of business andExecutive's principal place of work to another state, the laws of that stateshall apply without regard to the conflict of laws principles thereof. 

 
**IN WITNESS WHEREOF, this Agreement has been executed as a sealedinstrument by Executive and by the Company, by its duly authorizedrepresentative, as of the date first above written. 

 
   **THE EXECUTIVE:
 **THE COMPANY:
/s/ Alexander Tokman

 
 
/s/ Jeff Wilson

Chief Finanical Officer

 
    
 

Exhibit A

Long-Term Incentive Award Objectives

The purpose of this Exhibit A is to set out the mutual understanding of theCompany and Executive as to the objectives underlying Stock Awards to be grantedto Executive during the Term pursuant to Section 4.c. of the Agreement.  ThisExhibit A is not intended, nor shall it be construed, as a requirement that anyspecific Stock Awards be granted or as a guarantee that the objectives set outbelow, or any of them, will be met.

The parties agree that it is in their mutual interest that Executive acquireand maintain, by the end of the Employment Term, equity ownership in the Companyrepresented by (i) the actual ownership of shares, whether or not vested, and/or(ii) share units, whether or not vested, entitling or conditionally entitlingExecutive to the future delivery of shares (but not including, for the avoidanceof doubt, unexercised stock options or stock appreciation rights), at a levelcommensurate with Executive's position as Chief Executive Officer of the Companyas reasonably determined by the Board or a committee thereof (the "shareownership objective").  The Board or a committee thereof shall give dueconsideration to the share ownership objective in determining the nature, amountand terms of Stock Awards to be granted to Executive pursuant to Section 4.c. ofthe Agreement.

In determining the nature, amount and terms of Stock Awards to be granted toExecutive, the Board or a committee thereof shall also give due consideration tothe objectives of (i) promoting shareholder value by conditioning vesting and/orthe delivery of shares on achievement by the Company of key performancemilestones; (ii) enabling Executive to share in any appreciation in the value ofthe Company's equity; and (iii) enabling Executive to capture any recognizedgain in a manner that as closely as possible harmonizes Executive's interestswith those of the Company.

 
**EXHIBIT B**
RELEASE OF CLAIMS

 

FOR AND IN CONSIDERATION OF the benefits to be provided me in connection withthe termination of my employment, as set forth in the agreement between me andMICROVISION, INC. (the "Company") dated as of****July 18, 2005 ****(the"Agreement"), which are conditioned on my signing this Release ofClaims and to which I am not otherwise entitled, and for other good and valuableconsideration, the receipt and sufficiency of which is hereby acknowledged, I,on my own behalf and on behalf of my heirs, executives, administrators,beneficiaries, representatives and assigns, and all others connected with me,hereby release and forever discharge the Company, its subsidiaries and otheraffiliates and all of their respective past, present and future officers,directors, trustees, shareholders, employees, agents, general and limitedpartners, members, managers, joint venturers, representatives, successors andassigns, and all others connected with any of them, both individually and intheir official capacities, from any and all causes of action, rights and claimsof any type or description, known or unknown, which I have had in the past, nowhave, or might now have, through the date of my signing of this Release ofClaims, in any way resulting from, arising out of or connected with myemployment by the Company or any of its subsidiaries or other affiliates or thetermination of that employment or pursuant to any federal, state or local law,regulation or other requirement (including without limitation Washington LawAgainst Discrimination (RCW 49.60), the Washington Prohibited EmploymentPractices Law (RCW 49.44), the Washington Minimum Wage Act (RCW 49.46),Washington's Little Norris-LaGuardia Act (RCW 49.32), the Civil Rights Act of1964 (including Title VII of that Act), the Equal Pay Act of 1963, the AgeDiscrimination in Employment Act of 1967 (ADEA), the Americans with DisabilitiesAct of 1990 (ADA), the Fair Labor Standards Act of 1938 (FLSA), the Family andMedical Leave Act of 1993 (FMLA), the Worker Adjustment and RetrainingNotification Act (WARN), the Employee Retirement Income Security Act of 1974(ERISA), the National Labor Relations Act (NLRA), and the fair employmentpractices laws of the state or states in which I have been employed by theCompany or any of the subsidiaries or other affiliates, each as amended fromtime to time). 

Excluded from the scope of this Release of Claims is (i) the Final Payment(as defined in the Agreement) owed to Executive pursuant to the Agreement; (ii)any claim arising under the terms of the Agreement after the effective date ofthis Release of Claim,  (iii) any right of indemnification or contribution thatI have pursuant to the Articles of Incorporation or By-Laws of the Company orany of its subsidiaries or other affiliates and (iv) any non-forfeitable rightsto accrued benefits, if any, arising under any applicable employee benefitplans. 

 

In signing this Release of Claims, I acknowledge my understanding that I maynot sign it prior to the termination of my employment, but that I may considerthe terms of this Release of Claims for up to twenty-one (21) days (or suchlonger period as the Company may specify) from the later of the date myemployment with the Company terminates or the date I receive this Release ofClaims.  I also acknowledge that I am advised by the Company and itssubsidiaries and other affiliates to seek the advice of an attorney prior tosigning this Release of Claims; that I have had sufficient time to consider thisRelease of Claims and to consult with an attorney, if I wished to do so, or toconsult with any other person of my choosing before signing; and that I amsigning this Release of Claims voluntarily and with a full understanding of itsterms.  

I further acknowledge that, in signing this Release of Claims, I have notrelied on any promises or representations, express or implied, that are not setforth expressly in the Agreement.  I understand that I may revoke this Releaseof Claims at any time within seven (7) days of the date of my signing by writtennotice to the**[Director, Human Resources]** of the Company and that thisRelease of Claims will take effect only upon the expiration of such seven-dayrevocation period and only if I have not timely revoked it.

Intending to be legally bound, I have signed this Release of Claims underseal as of the date written below.

Signature: _____________________________________________

Name (please print):  ____________________________________	        

Date Signed: ___________________________________________**************