-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TmaUjN1qSjMCeUvmEQrJpFJm6uhqwB7u0dErs6X2v6qVfS29XzM51tW4gc4w6efd cHJdDvhqMuKwz/8AU3XshA== 0000927016-98-003026.txt : 19980812 0000927016-98-003026.hdr.sgml : 19980812 ACCESSION NUMBER: 0000927016-98-003026 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980627 FILED AS OF DATE: 19980811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOPIN CORP CENTRAL INDEX KEY: 0000771266 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 042833935 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19882 FILM NUMBER: 98682259 BUSINESS ADDRESS: STREET 1: 695 MYLES STANDISH BLVD CITY: TAUNTON STATE: MA ZIP: 02780 BUSINESS PHONE: 5088246696 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 27, 1998 Commission file number 0-19882 KOPIN CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 04-2833935 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 695 MYLES STANDISH BLVD., TAUNTON, MA 02780-1042 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (508) 824-6696 Not Applicable Former name, former address, and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or l5(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Applicable only to corporate issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of July 31, 1998 ----- ------------------------------- Common Stock, par value $ .01 12,185,048 KOPIN CORPORATION INDEX ----- Page No. -------- PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets at 3 June 27, 1998 and December 31, 1997 Consolidated Statements of Operations for the 4 Three and Six months ended June 27, 1998 and June 28, 1997 Consolidated Statements of Stockholders' Equity for the 5 Six months ended June 27, 1998 and June 28, 1997 Consolidated Statements of Cash Flows for the 6 Six months ended June 27, 1998 and June 28, 1997 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition 8 and Results of Operations PART II - OTHER INFORMATION Item 4. Submissions of Matters to a Vote of Security-Holders 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 2 KOPIN CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 27, 1998 December 31, 1997 ------------- ----------------- ASSETS - ------ Current assets: Cash and equivalents $ 36,586,439 $ 14,425,400 Marketable securities 1,500,000 4,620,884 Accounts receivable, net of allowance of $158,700 and $152,700: Billed 2,733,169 3,209,482 Unbilled 916,985 1,091,806 Inventory 3,314,741 2,720,843 Prepaid expenses and other current assets 877,761 798,867 ------------- ------------- Total current assets 45,929,095 26,867,282 Equipment and improvements: Equipment 27,171,494 22,954,885 Leasehold improvements 808,884 772,717 Furniture and fixtures 347,319 331,955 Equipment under construction 388,402 1,904,198 ------------- ------------- 28,716,099 25,963,755 Accumulated depreciation and amortization 16,732,494 14,869,251 ------------- ------------- 11,983,605 11,094,504 Other assets 4,354,851 3,372,692 Intangible assets 2,111,519 2,059,918 ------------- ------------- Total assets $ 64,379,070 $ 43,394,396 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Note payable $ -- $ 450,000 Accounts payable 2,015,588 2,683,671 Accrued payroll and expenses 1,512,363 725,187 Current portion of long-term obligations 2,456,106 1,542,818 ------------- ------------- Total current liabilities 5,984,057 5,401,676 Deferred rent -- 165,166 Long-term obligations, less current portion 5,033,631 1,958,968 Minority interest 383,583 -- Stockholders' equity: Preferred stock, par value $.01 per share: Authorized, 3,000 shares; none issued and outstanding Common stock, par value $.01 per share: Authorized, 20,000,000 shares; issued 12,172,936 shares in 1998 and 11,122,143 shares in 1997 121,729 111,221 Additional paid-in capital 108,173,874 90,514,233 Deferred compensation (198,505) (231,955) Accumulated other comprehensive gain (loss) 185,547 (6,001) Accumulated deficit (55,304,846) (54,518,912) ------------- ------------- Total stockholders' equity 52,977,799 35,868,586 ------------- ------------- Total liabilities and stockholders' equity $ 64,379,070 $ 43,394,396 ============= ============= See notes to consolidated financial statements.
3 KOPIN CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Six Months Ended ------------------ ---------------- June 27, June 28, June 27, June 28, 1998 1997 1998 1997 ---- ---- ---- ---- Revenue: Product revenues $ 5,666,895 $ 3,117,474 $ 10,327,579 $ 5,999,551 Research and development revenues 1,017,042 763,800 1,822,905 1,595,736 ------------- ------------- ------------- ------------- 6,683,937 3,881,274 12,150,484 7,595,287 ------------- ------------- ------------- ------------- Costs and expenses: Cost of product revenues 3,511,627 1,971,820 6,234,865 4,083,185 Research and development 2,682,216 2,749,320 5,232,221 5,553,298 General, administrative and selling 961,432 1,102,102 1,953,127 2,188,146 Other 95,731 75,612 187,630 151,224 ------------- ------------- ------------- ------------- 7,251,006 5,898,854 13,607,843 11,975,853 ------------- ------------- ------------- ------------- Loss from operations (567,069) (2,017,580) (1,457,359) (4,380,566) Other income and expense: Interest and other income 548,349 385,844 927,584 700,741 Interest expense (156,189) (56,986) (256,159) (110,515) ------------- ------------- ------------- ------------- Net loss ($ 174,909) ($ 1,688,722) ($ 785,934) ($ 3,790,340) ============= ============= ============= ============= Net loss per share - basic and diluted ($ .01) ($ .15) ($ .07) ($ .35) ======= ======= ======= ======= Weighted average number of common shares outstanding 12,158,768 10,952,879 11,915,323 10,943,782 ========== ========== ========== ==========
See notes to consolidated financial statements. 4 KOPIN CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY SIX MONTHS ENDED JUNE 27, 1998 AND JUNE 28, 1997 (UNAUDITED)
Common Stock Additional Accumulated ------------ Paid-in Deferred Comprehensive Shares Amount Capital Compensation Gain (loss) Deficit Total ------ ------ ------- ------------ ------------- ------- ----- Balance, December 31, 1996 10,931,408 $109,314 $88,605,451 ($227,706) $ 44,933 ($48,261,143) $40,270,849 Exercise of stock options 37,996 380 356,848 -- -- -- 357,228 Amortization of compensation relating to grant of stock options -- -- -- 36,360 -- -- 36,360 Net unrealized gain on marketable securities -- -- -- -- 20,212 -- 20,212 Net loss for the six month period ended June 28, 1997 -- -- -- -- -- (3,790,340) (3,790,340) ---------- -------- ----------- ---------- --------- ------------ ----------- Balance, June 28, 1997 10,969,404 $109,694 $88,962,299 ($191,346) $ 65,145 ($52,051,483) $36,894,309 ========== ======== =========== ========== ========= ============ =========== Balance, December 31, 1997 11,122,143 $111,221 $90,514,233 ($231,955) ($ 6,001) ($54,518,912) $35,868,586 Issuance of common stock, net of issuance costs of $1,829,000 1,000,000 10,000 17,161,418 -- -- -- 17,171,418 Exercise of stock options 50,793 508 498,223 -- -- -- 498,731 Amortization of compensation relating to grant of stock options -- -- -- 33,450 -- -- 33,450 Net unrealized gain on other comprehensive income -- -- -- -- 191,548 -- 191,548 Net loss for the six month period ended June 27, 1998 -- -- -- -- -- (785,934) (785,934) ---------- -------- ----------- ---------- --------- ------------ ----------- Balance, June 27, 1998 12,172,936 $121,729 $108,173,874 ($198,505) $ 185,547 ($55,304,846) $52,977,799 ========== ======== =========== ========== ========= ============ ===========
See notes to consolidated financial statements. 5 KOPIN CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six Months Ended ---------------- June 27, June 28, 1998 1997 ---- ---- Cash flows from operating activities: Net loss ($ 785,934) ($ 3,790,340) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 2,047,303 1,726,596 Amortization of compensation relating to grant of stock options 33,450 36,360 Decrease in unearned revenue -- (46,002) Decrease in deferred rent (165,166) (108,000) Changes in assets and liabilities: Accounts receivable 649,970 1,834,901 Inventory (595,020) 126,411 Prepaid expenses and other current assets (79,287) 247,725 Intangible assets (235,399) (207,981) Accounts payable and accrued expenses 119,639 (2,637,815) ------------ ------------ Net cash provided by (used in) operating activities 989,556 (2,818,145) ------------ ------------ Cash flows from investing activities: Marketable securities 3,126,885 4,248,505 Other assets (982,170) (593,241) Capital expenditures (2,761,651) (1,735,617) ------------ ------------ Net cash provided by (used in) investing activities (616,936) 1,919,647 ------------ ------------ Cash flows from financing activities: Net proceeds from issuance of common stock 17,171,418 -- Net proceeds from issuance of subsidiary stock 582,981 -- Proceeds from notes payable -- 450,000 Principal payment on notes payable (450,000) (500,000) Proceeds from long-term obligations 5,000,000 -- Principal payment on long-term obligations (1,012,049) (961,161) Proceeds from exercise of stock options 498,731 357,228 ------------ ------------ Net cash provided by (used in) financing activities 21,791,081 (653,933) ------------ ------------ Effect of exchange rate changes on cash (2,662) -- ------------ ------------ Net increase (decrease) in cash and equivalents 22,161,039 (1,552,431) Cash and equivalents, beginning of period 14,425,400 16,511,291 ------------ ------------ Cash and equivalents, end of period $36,586,439 $14,958,860 ============ ============ Non-cash investing and financing transactions: Other comprehensive income $ 191,548 $ 20,212 Supplementary information -Interest paid in cash $ 191,651 $ 110,515
See notes to consolidated financial statements. 6 KOPIN CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION --------------------- The financial statements for the six month periods ended June 27, 1998 and June 28, 1997 are unaudited and include all adjustments which, in the opinion of management, are necessary to present fairly the results of operations for the periods then ended. All such adjustments are of a normal recurring nature. Certain reclassifications have been made to the June 28, 1997 amounts to conform to the 1998 presentation including the presentation of interest income, other income and interest expense shown as Other Income and Expense. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission (File No. 0-19882) for the year ended December 31, 1997. The results of the Company's operations for any interim period are not necessarily indicative of the results of the Company's operations for any other interim period or for a full fiscal year. The consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany transactions and balances have been eliminated. 2. NET LOSS PER SHARE ------------------ Net loss per share is computed using the weighted average number of common shares outstanding during the period. Common share equivalents have not been included because the effect would be anti-dilutive. The Company has adopted Statement of Financial Accounting Standards (SFAS) No.128, "Earnings Per Share," which became effective during the fourth quarter of 1997. The new pronouncement's requirements had no impact on the Company's previously reported loss per share. 3. LONG-TERM OBLIGATIONS --------------------- In March 1998, the Company entered into a $5,000,000 term loan which requires the Company to make quarterly principal payments of $250,000 plus interest at a floating rate based upon LIBOR. This term loan is secured by the Company's accounts receivable. 4. STOCKHOLDERS' EQUITY -------------------- In February 1998, the Company completed a 2,000,000 share public offering of its common stock at a price of $19.00 per share. Of the total shares sold, 1,000,000 shares were sold by Kopin and the other 1,000,000 shares were sold by Telecom Holding Co., Ltd. of Thailand. Net proceeds to the Company totaled approximately $17,171,000. 5. RECENT PRONOUNCEMENTS --------------------- In January 1998, the Company adopted SFAS No.130, "Reporting Comprehensive Income," which became effective during the first quarter. SFAS No. 130 requires reporting of comprehensive income, which in the case of the Company, is a combination of reported net loss , the change in the marketable securities valuation, and changes in foreign currency translation adjustments. SFAS No. 130 has no impact on the Company's net loss. Comprehensive loss for the quarters ended June 27, 1998 and June 28, 1997 was $594,386 and $3,770,128. In January 1998, the Company adopted SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," which will become reportable during the fourth quarter. The impact of SFAS No. 131 on the Company has not yet been determined. 7 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS ----------------------------------------------------------------------- OF OPERATIONS ------------- Kopin is a leading developer and manufacturer of advanced semiconductor materials and small form factor displays. The Company was incorporated in 1984 to further develop and commercialize certain semiconductor expertise developed at MIT. Historically, the Company has derived most of its revenues from research and development contracts with agencies of the United States government. Beginning in 1995, the Company experienced a significant increase in revenues from sales of its device wafers, and in 1996, revenues from such sales for the first time exceeded revenues from research and development contracts. More recently, the Company has commenced sales of CyberDisplay products. The Company has been unprofitable since inception and, at June 27, 1998, the Company had an accumulated deficit of $55,304,846. RESULTS OF OPERATIONS REVENUES. The Company's total revenues were $6,683,937 and $12,150,484 for the three and six months ended June 27, 1998 compared to $3,881,274 and $7,595,287 during the corresponding periods in 1997, an increase of $2,802,663 or 72.2% for the three months and $4,555,197 or 60.0% for the six months ended June 27, 1998. The Company's product revenues were $5,666,895 and $10,327,579 for the three and six months ended June 27, 1998 compared to $3,117,474 and $5,999,551 for the three and six months ended June 28, 1997, increases of $2,549,421 or 81.8% and $4,328,028 or 72.1%, respectively. Product revenues from sales of the Company's device wafers were $4,551,678 for the three months ended June 27, 1998 compared to $2,830,949 during the corresponding period in 1997, an increase of $1,720,729. Product revenues from sales of the Company's device wafers were $8,937,678 for the six months ended June 27, 1998 compared to $5,656,623 during the corresponding period in 1997, an increase of $3,281,055. The increase in product revenues was due to an increase in sales of HBT device wafers and display products over the corresponding period in the prior year. The increase in sales of the Company's device wafers was primarily due to the increased use of these wafers in various wireless telecommunications products, particularly by the Company's major customer, Rockwell International. Research and development revenues increased 33.2% to $1,017,042 for the three months ended June 27, 1998 compared to $763,800 during the corresponding period in 1997 and increased 14.2% to $1,822,905 for the six months ended June 27, 1998 compared to $1,595,736 for the same period in the prior year. As a result of the expirations of multi-year contracts with the federal government and the Company's increased emphasis on product revenues, the Company believes that research and development revenues will decline as a percentage of total revenues for the near future. COST OF PRODUCT REVENUES. Cost of product revenues, which is comprised of materials, labor and manufacturing overhead related to the Company's products, was $3,511,627, or 62.0% of product revenues, for the three months ended June 27, 1998 compared to $1,971,820, or 63.3% of product revenues, for the same period in the prior year. Cost of product revenues was $6,234,865, or 60.4% of product revenues, for the six months ended June 27, 1998 compared to $4,083,185, or 68.1% of product revenues, for the same period in the prior year. The improvement in cost of product revenues as a percentage of product revenues in 1998 was primarily due to increased sales of device wafers resulting in lower unit costs. RESEARCH AND DEVELOPMENT. Research and development expenses include expenses incurred in support of internal development programs and programs funded by agencies of the federal government, including development programs for display devices and products, device wafers, circuit design costs, staffing, purchases of materials and laboratory supplies, and fabrication and packaging of the Company's display products. Funded research and development expenses were $1,260,016 and $2,316,150 for the three and six months ended June 27, 1998 compared to $660,699 and $1,584,559 for the same period in the prior year, increases of $599,317 and $731,591, respectively. Internal research and development expenses were $1,422,200 and $2,916,071 for the three and six months ended June 27, 1998 compared to $2,088,621 and $3,968,739 during the corresponding period in 1997. The decrease in internal research and development expenses was primarily a result of reduced development costs incurred for fabrication and packaging of the Company's display products. GENERAL, ADMINISTRATIVE AND SELLING. General, administrative and selling expenses consist of the expenses incurred by the Company's business development and sales personnel, marketing expenses, and administrative and general corporate expenses. General, administrative and selling expenses were $961,432 for the three months ended June 27, 1998 compared to $1,102,102 during the corresponding period in 1997, a decrease of $140,670. General, administrative and selling expenses were $1,953,127 for the six months ended June 27, 1998 compared to $2,188,146 during the corresponding period in 1997, a decrease of $235,019. The decrease in general, administrative and selling expenses in 1998 was primarily 8 due to changes in personnel and related expenses. In addition, general, administrative and selling expenses include non-cash charges for compensation expense of $33,450 for the six months ended June 27, 1998 compared to $36,360 in the for the six months ended June 28, 1997 relating to the issuance of certain stock options. OTHER. Other expenses were $95,731 and $187,630 for the three and six months ended June 27, 1998 compared to $75,612 and $151,224 during the corresponding period in 1997. OTHER INCOME, NET. Other income, net was $392,160 and $671,425 for the three and six months ended June 27, 1998 compared to $328,858 and $590,226 during the corresponding period in 1997. The increase was primarily due to increased interest income of $162,505 to $548,349 for the three months ended June 27, 1998 from $385,844 for the corresponding period in 1997 and $226,843 to $927,584 for the six months ended June 27, 1998 from $700,741, resulting from higher cash balances in 1998. These increases were partially offset by increases in interest expense of $99,203 and $145,644 for the three and six months ended June 27,1998 from the corresponding period in 1997 due to additional debt funding obtained by the Company. LIQUIDITY AND CAPITAL RESOURCES The Company has financed its operations primarily through public and private placements of its equity securities, research and development contract revenues, and sales of its device wafers and display devices and products. In February 1998, the Company completed a 2,000,000 share public offering of its common stock at a price of $19.00 per share. Of the total shares sold, 1,000,000 shares were sold by Kopin and the other 1,000,000 shares were sold by Telecom Holding Co., Ltd. of Thailand. Net proceeds to the Company totaled approximately $17,171,000. As of June 27, 1998, the Company had cash and equivalents and marketable securities of $38,086,439 and working capital of $39,945,038 compared to $19,046,284 and $21,465,606, respectively, as of December 31, 1997. The increase in cash and equivalents and marketable securities was primarily due to the public offering of common stock resulting in net proceeds to the Company of $17,171,000 and the receipt of a term loan facility of $5,000,000, offset by an increase in other assets of $982,170, capital expenditures of $2,761,651, and principal payments on notes payable and long-term obligations of $1,462,049. The Company also has approximately $710,000 of marketable securities held in escrow as equipment financing collateral which is shown in other assets. The Company periodically enters into various long-term debt arrangements to finance equipment purchases and other activities. As of June 27, 1998, long-term debt obligations totaled $7,489,737, of which $2,456,106 is payable in the next twelve months. In March 1998, the Company entered into a $5,000,000 term loan which requires the Company to make quarterly principal payments of $250,000 plus interest at a floating rate based upon LIBOR. This term loan is secured by the Company's accounts receivable. In October 1993, the Company entered into a lease for a 74,000 square foot manufacturing facility. This facility, which includes 10,000 square feet of environmentally controlled clean rooms, is used primarily for the Company's production of display devices. This facility is occupied under a lease that expires in October 2000, with renewable options for up to four additional years at the Company's election. The Company will make lease payments of approximately $1.0 million per year over the remaining term of the lease. The Company expects to expend approximately $5,000,000 on capital expenditures over the next twelve months, primarily for the acquisition of equipment relating to the manufacturing, packaging and testing of CyberDisplay products and production of the Company's device wafers. RECENT ACCOUNTING PRONOUNCEMENTS In January 1998, the Company adopted SFAS No.130, "Reporting Comprehensive Income," which became effective during the quarter. SFAS No. 130 requires reporting of comprehensive income, which in the case of the Company, is a combination of reported net loss, the change in the marketable securities valuation, and changes in foreign currency 9 translation adjustments. SFAS No. 130 has no impact on the Company's net loss. Comprehensive loss for the quarters ended June 27, 1998 and June 28, 1997 was $594,386 and $3,770,128. In January 1998, the Company adopted SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," which will become reportable during the fourth quarter. The impact of SFAS No. 131 on the Company has not yet been determined. FUTURE OPERATING RESULTS The Company is conducting a review of its computer systems to identify those areas that could be affected by the "Year 2000" issue and is developing an implementation plan to resolve the issue. The Company presently believes, with modification to existing software and converting to new software, the Year 2000 problem will not pose significant internal operational problems. However, even if the internal systems of the Company are not materially affected by the Year 2000 problem, the Company could be affected through disruptions in the operation of the enterprises with which the Company interacts. As such, there can be no assurance that the Year 2000 problem will not have a material adverse effect on the Company's business, financial condition or results of operations. Certain of the statements contained in this Form 10-Q, including Management's Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements that involve risks and uncertainties. In addition to the risks and uncertainties set forth in this Form 10-Q, other factors that could cause actual results to differ materially include the following: general economic and business conditions and growth in the flat panel display industry and the gallium arsenide integrated circuit and materials industries, the impact of competitive products and pricing, availability of third party components, availability of integrated circuit fabrication facilities, cost and yields associated with production of the Company's CyberDisplay imaging devices and device wafers, loss of significant customers, acceptance of the Company's products, continuation of strategic relationships, Year 2000 matters, and the risk factors and cautionary statements listed from time to time in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission, including but not limited to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. 10 PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS On May 21, 1998, the Company held an Annual Meeting of Stockholders to consider and vote upon the following three proposals: (1) A proposal to elect seven directors of the Company to serve until the next Annual Meeting of Stockholders and until their successors are duly elected and qualified. (2) A proposal to ratify the amendment to the Company's 1992 Stock Option Plan increasing the number of shares authorized for issuance under the Plan. (3) A proposal to ratify the appointment of Deloitte & Touche LLP as independent accountants of the Company for the current fiscal year. Results with respect to the voting on each of the proposals were as follows:
For Withheld Authority --------- ------------------ Proposal 1: John C.C. Fan 9,851,601 410,033 David E. Brook 9,854,301 407,333 Andrew H. Chapman 9,854,301 407,333 Morton Collins 9,852,451 409,183 Chi Chia Hsieh 9,682,671 578,963 Michael A. Wall 9,854,301 407,333 Vallobh Vimolvanich 9,678,571 583,063
Proposal 2: 9,281,927 votes for; 939,098 votes against; 40,609 abstentions; and 0 broker non-votes. Proposal 3: Proposal 3: 10,213,570 votes for; 25,850 votes against; and 22,214 abstentions; and 0 broker non-votes. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.44 Amendment to 1992 Stock Option Plan 10.45 Joint Venture Agreement, by and among the Company, Kowon Technology Co., Ltd., and Korean Investors, dated as of March 3, 1998 10.46 Amended and Restated Employment Agreement between the Company and Dr. John C.C. Fan, dated as of February 20, 1998 27 Financial Data Schedule (b) Reports on Form 8-K None 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. KOPIN CORPORATION (Registrant) Date: August 7, 1998 By: /s/ John C.C. Fan __________________________ John C.C. Fan President, Chief Executive Officer and Chairman of the Board of Directors Date: August 7, 1998 By: /s/ Kathleen A. Ellison __________________________ Kathleen A. Ellison Controller 12 EX-10.44 2 AMENDMENT TO 1992 STOCK OPTION PLAN EXHIBIT 10.44 KOPIN CORPORATION 1992 STOCK OPTION PLAN AMENDMENT Kopin Corporation the ("Company"), pursuant to authority reserved in Section 18 of the 1992 Stock Option Plan, as amended, of the Company (the "1992 Plan"), hereby amends the 1992 Plan as follows: Effective as of April 7, 1998, the date of the adoption by the Board of Directors of the Company of the amendment provided hereby, the first sentence of Section 5 of the 1992 Plan is deleted in its entirety and is replaced with the following: 5. Stock Subject to the Plan. The Plan covers 3,100,000 shares of Stock; ------------------------- provided, that the number of shares purchased pursuant to the exercise -------- of Options granted under the Plan and options granted under the Old Plan and the number of shares subject to outstanding Options granted under the Plan and options granted under the Old Plan shall be charged against the shares covered by the Plan; but shares subject to Options granted under the Plan or options granted under the Old Plan which terminated without being exercised shall not be so charged. IN WITNESS WHEREOF, the Company has adopted this Amendment as of the 21st day of May, 1998 to be effective as hereinabove provided. KOPIN CORPORATION BY: /s/John C. C. Fan ----------------------------- The following does not form part of this Amendment but is included solely for information purposes: Date of Board Approval: April 7, 1998 Date of Shareholder Approval: May 21, 1998 EX-10.45 3 JOINT VENTURE AGREEMENT DATED 3/3/1998 EXHIBIT 10.45 ------------- JOINT VENTURE AGREEMENT ----------------------- THIS AGREEMENT, made and entered into this day _______of March, 1998, by and among: Kopin Corporation, a corporation organized and existing under the laws of the State of Delaware, having its principle place of business at Taunton, Massachusetts, U.S.A. ("Foreign Investor"), Kowon Technology Co., Ltd., a corporation organized and existing under the laws of the Republic of Korea, having its principle place of business at 142-8, Kimryangjang-dong, Yongin-si, Kyunggi-do, Korea ( the "JVC"), and Korean Shareholders listed in Schedule A hereto, all being the current shareholders of the JVC, being either citizens of the Republic of Korea or corporations organized and existing under the laws of the Republic of Korea with the addresses set forth in Schedule A opposite their names ("Korean Investors"), represented by one of such Korean Investors, Kim Young-Sook ("Kim"), WITNESSETH THAT: WHEREAS, Foreign Investor is engaged in the development, manufacture and distribution of certain semiconductor materials and devices in the worldwide market; and WHEREAS, the JVC was incorporated by the Korean Investors with the business purposes to engage in the manufacture and marketing of certain semiconductor materials and device products in Korea; WHEREAS, the Korean Investors are currently the shareholders of the JVC; and WHEREAS, Foreign Investor and Korean Investors desire to operate the JVC's business as a joint venture and thus, Foreign Investor desires to subscribe for certain shares to be newly issued by the JVC and the JVC and the Korean Investors agree to issue the additional shares to Foreign Investor as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the parties agree as follows: 2 Article 1. Definitions ---------- ----------- 1.1 The terms defined in this Article shall have the meaning ascribed to them herein whenever they are used in this Agreement, unless otherwise clearly indicated by the con- text. 1.2 An "affiliate" shall mean any corporation, association, or other entity which, directly or indirectly, controls a party hereto or is controlled by said party or is under common control with said party, where "control" means power and ability to direct the management and policies of the con- trolled enterprise through ownership of voting shares of the controlled enterprise or by contract or otherwise. 1.3 "Government Approval" of any action to be taken by either party or by the JVC herein shall mean such approval of, confirmation of, or consent to said action, together with such licenses, permits, or other permissions reasonably required for said action, all as the statutes, decrees, regulations, and rulings of governmental authority (collec- tively "legal authority") within Korea may require to be obtained in connection with said action from such govern- mental authority or from political subdivisions thereof. Whenever any form of "Government Approval" is used herein, it shall be interpreted and construed to include the re- quirement that such approval be in form and substance ac- ceptable to the parties hereto. 1.4 "Product" shall mean semiconductor materials and devices to be agreed upon by the parties from time to time as the products to be manufactured and sold by the JVC. 1.5 "Party" or "Parties" shall mean the Korean Investors or the Foreign Investors acting as if they were a single entity, respectively, or the both Investors acting so. Article 2. Purpose of the Agreement --------- ------------------------ The purpose of this Agreement is to provide for the ownership, and operation by the parties of the JVC. Article 3. Purpose of the JVC ---------- ------------------ 3.1 The purpose of the JVC will be to engage in the following business activities: 3 (a) the manufacture, sale, export and distribution of semiconductor materials and devices; and (b) any and all acts, things, business and activities which are related, incidental or conducive directly or indirectly to the attainment of the foregoing objectives. 3.2 The JVC's Articles of Incorporation shall be as agreed to by and between the parties, and the parties shall cause them to be amended from time to time as may be required to ensure that they at all times conform with the terms and conditions of this Agreement and any amendments to this Agreement. 3.3 The duration of the JVC shall be perpetual subject to the provisions of the Articles of Incorporation and of this Agreement. Article 4. Subscription for and Issuance of Shares ---------- --------------------------------------- 4.1 Subject to the Government Approval of this Agreement, the JVC shall issue to Foreign Investors and Foreign Investors shall acquire from the JVC, the shares of the JVC in accordance with terms and conditions hereunder. 4.2 The total initial investment and the total number of common shares to be initially subscribed for by the Foreign Investors under this Agreement shall be 1.8 billion Won in exchange for 114,000 common shares of the JVC, five thousand (5,000) Won par value per share. 4.3 The total initial investment amount of Foreign Investor set forth in Article 4.2 above shall be paid within twenty-four (24) months from receipt of Government Approval of this Agreement. The schedule of the initial investment by Foreign Investor shall be mutually agreed upon by Foreign Investor and the Korean Investors. 4.4 Upon completion of the initial investment by the Foreign Investor as contemplated in Article 4.2 above, the parties will hold shares of the JVC as follows: Korean Investors: 120,000 shares (51%) Foreign Investor: 114,000 shares (49%) Unless the parties otherwise agree in writing, each party (together with such lawful transferees as are permitted 4 herein) shall hold, throughout the life of the JVC, the above- mentioned proportion of the voting common shares of the JVC. 4.5 All shares to be issued to Foreign Investor by the JVC pursuant to this Agreement shall be common shares of one class registered in nominative form evidenced by share certificates and shall rank pari passu in all respects with all other common shares issued by the JVC. 4.6 Any shares of stock subscribed for and accepted by Foreign Investor shall be fully paid for prior to issuance thereof. Cash amounts payable by any party shall be paid by wire transfer of funds to such bank accounts as the JVC (or its promoters) shall by writing designate. 4.7 During 'the term of the Agreement, each stock certificate issued hereunder will bear the following words: "Sale, transfer or pledge of the shares of stock represented by this certificate is restricted subject to the Joint Venture Agreement dated ______________________, 1998, between Kopin Corporation and Korean Individual Investors, a copy of which is on file at the principal office of the Company." 4.8 Future financing needs of the JVC shall be met primarily through a combination of equity borrowing and application of internally generated funds consistent with a general philo-sophy of maintaining a prudent capital structure. 4.9 The parties shall have the preemptive right to subscribe for any shares to be issued by the JVC in proportion to their shareholding ratio. In the event that additional capital contributions by the parties are needed above and beyond those set forth in Article 4.2 above, each Foreign Investor and each Korean Investor will have the right to contribute sufficient capital to keep the percentage of its ownership interest in JVC constant. 4.10 Notwithstanding anything contained in this Article 4 to the contrary (including without limitation Articles 4.4, 4.8 and 4.9), following the completion of the initial investment by the Foreign Investor as contemplated in Article 4.2 above, the Foreign Investor will have the right to subscribe for an additional 108,858 common shares (or to acquire notes of the JVC convertible into such number of common shares) in exchange for 1.2 billion Won. The parties will use their best efforts to obtain Government Approval of such 5 additional investment promptly following the initial investment by the Foreign Investor. Following receipt of Government Approval, the schedule of the additional investment by Foreign Investor shall be mutually agreed upon by Foreign Investor and the Korean Investors. Upon completion of the additional investment by the Foreign Investor as contemplated by this Article 4.10, the parties will hold shares of the JVC as follows: Korean Investors: 120,000 shares (35%) Foreign Investors: 222,858 shares (65%) In the event that Foreign Investor is unable to complete the additional investment contemplated hereby for any reason (other than due to the election by the Foreign Investor or a breach of Foreign Investor's obligations hereunder) within six (6) months following the completion of its initial investment under Article 4.2, then Foreign Investor will have the right to sell and transfer, and the JVC will purchase, all or a portion of Foreign Investor's shares in the JVC at the fair market price of the shares to be determined by an appraiser mutually acceptable to the parties concerned. The JVC will pay the Foreign Investor promptly following the final determination of the purchase price in cash or at its election by delivery of a promissory note having a maturity of not more than two years from the closing, bearing a commercial rate of interest and secured by a pledge of the sold shares. Article 5. Representations and Warranties of the Parties ---------- ---------------------------------------------- 5.1 The JVC and Korean Investors hereby jointly make each of the representations, warranties and agreements set forth in Schedule B attached to this Agreement. 5.2 Foreign Investor hereby makes each of the representations, warranties and agreements set forth in Schedule C to this Agreement. Article 6. Conditions Precedent to Issuance of Shares ---------- ------------------------------------------ All obligations of the JVC to issue to Foreign Investor, and of Foreign Investor to acquire from the JVC, shares pursuant to the provisions of Article 4 hereof are subject to and conditioned upon fulfillment of each of the following conditions: 6 (a) All Government Approvals of this Agreement have been obtained in form and substance satisfactory to Foreign Investor and the Korean Investors; (b) Korean Investors are satisfied that all representations and warranties made by Foreign Investor under Article 5.2 above, as set forth in Schedule C hereto, were true when made and are true and accurate in all respects at the time of the JVC's issuance of shares under Article 4.1 hereof; and (c) Foreign Investor is satisfied that all representations and warranties made by the JVC or and the Korean Investors under Article 5.1 above, as set forth in Schedule B hereto, were true when made and are true and accurate in all respects at the time of its subscription for shares under Article 4.1 hereof. (d) New Articles of Incorporation of the JVC in the form and substance agreed upon by the parties should have been adopted by the JVC prior to the subscription of the shares by the Foreign Investor. Article 7. Indemnification ---------- --------------- 7.1 Each of the Korean Investors and the JVC, jointly and sever-ally, agrees to indemnify, defend and hold harmless Foreign Investor (and its directors, officers, employees, affiliates, agents, representatives, successors and assigns) from and against any and all losses, liabilities, damages, deficiencies, demands, claims, actions, judgments or causes of action, assessments, costs or expenses (including, with-out limitation, bonds, interest, penalties and reasonable attorneys' fees and disbursements) ("Losses") based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of any representation, warranty, covenant or agreement of the Korean Investors contained in this Agreement or any Schedule hereto, or any document or other papers delivered by the Korean Investors to Foreign Investor in connection with this Agreement. 7.2 Foreign Investor agrees to indemnify, defend and hold harmless the Korean Investors (and their agents, representatives, heirs, executors, administrators, successors and assigns) from and against any and all Losses based upon, arising out of or otherwise in respect of any inaccuracy in or any breach of any representation, warranty, covenant or agreement of Foreign Investor contained in this 7 Agreement or any Schedule hereto, or in any document or other papers delivered by Foreign Investor to the Korean Investors in connection with this Agreement. 7.3 Any material losses and any liabilities in any form whatsoever that arise in connection with acts or omissions of the JVC or any of its shareholders, directors, officers or employees prior to the date Foreign Investor first sub-scribes for shares of the JVC that are discovered within one (1) year from the date Foreign Investor first subscribes for shares of the JVC (whether actually paid or merely claimed or disclosed within that period), and that were not dis- closed fully and accurately in the representations and warranties of the JVC and Korean Investors set forth in Schedule B hereto, shall be at the Korean Investors' own expense and they shall fully and without delay satisfy all claims and hold harmless Foreign Investor and the JVC for any such losses or liabilities. Article 8. Transfer of Shares ---------- ------------------ 8.1 If either party hereto desires to sell, assign or other-wise transfer all or any portion of its shares in the JVC, such party ("selling party") shall offer all such shares by written notice first to the other party ("offeree party") specifying price, terms and conditions of sale; provided, however, that if, pursuant to the -------- -------- policies of the Korean Government, Foreign Investor is required to sell or transfer any portion of its shares of the JVC, Foreign Investor shall be free to sell or transfer such portion of its shares free of the restrictions of this Article 8.1; (a) If the offeree party does not accept the offer with- in sixty (60) days from the date of its dispatch ("acceptance period"), then the selling party shall thereafter be free to dispose of its shares within a period of sixty (60) days ("free sale period") after the expiration of said acceptance period; provided, however, that the selling party shall not sell such ------- shares to any third party either (i) at a lower price than the price at which such shares were offered to the offeree party, or (ii) on other terms or conditions more favorable than those on which shares were offered to the offeree party, except for such other terms and conditions as are reasonably necessary to meet foreign exchange or foreign investment regulations of Korea. (b) If the shares are not sold or transferred to third parties upon the terms established herein and within 8 the free sale period, then they shall automatically become subject once more to the terms of this Article as if they had never before been offered for sale. (c) The Foreign Investor shall have the right to designate a third party acceptable to the Korean Government who may exercise the right granted to the Foreign Investor as offeree party hereunder. 8.2 Notwithstanding the foregoing Article 8.1, (i) transfer or assignment of all or any portion of its shares in the JVC by any Foreign Investor to or among its affiliates or the other Foreign Investor, or (ii) transfer or assignment of all or any portion of its shares in the JVC by any Korean Investor to or among the other Korean Investors will not be subject to the restrictions or requirements under this Article 8. 8.3 In the event of the death, bankruptcy, insolvency, termination from the JVC employment, or mental or physical disability an individual JVC shareholder, his shares that are not otherwise subject to the JVC's repurchase right under Article 8.5 shall be offered in the first instance to the Foreign Investor, and in the second instance to the Korean Investors, at a purchase price equal to two times the individual JVC shareholder's purchase price for his shares. 8.4 Anything to the contrary notwithstanding, any sale or transfer contemplated by this Article 8 shall be subject to Government Approval, if required. If necessary, the ac-ceptance period and/or the free sale period referred to in Article 8.1 above shall be extended until such Approval has been obtained or officially and finally denied, provided that the party seeking to extend such -------- ---- acceptance period shall have used due diligence in soliciting such Approval. 8.5 Notwithstanding any other rights which may be granted by this Agreement or otherwise, each Korean Investor hereby agrees that he/it shall not sell or otherwise transfer, or cause to be sold or transferred, his/its ownership, or any part of his/its ownership, in the JVC to more than one individual, without the express prior approval of Foreign Investor. The shares of the JVC held by any such Korean investor who is an employee of the JVC (a "Founding Employee") shall be subject to a right of repurchase by the JVC or a party designated by the JVC at the price originally paid therefor by the Founding Employee. Such repurchase right shall be exercisable at any time within ninety (90) days after the termination of the Founding Employee's employment with the JVC for any reason by delivery to the Founding Employee or his or her estate, personal 9 representative, or beneficiary with a check in the amount of the purchase price for the shares being repurchased. 33 1/3% of each Founding Employee's shares shall be released from the repurchase option under this Article 8.5 on each of the next three (3) successive anniversaries of this Agreement. 8.6 If either party hereto shall sell or otherwise transfer all or any part of its shares to a third party (other than the offeree party's designee), such selling party shall cause the third party acquiring such shares, as a condition of such acquisition, to furnish a written undertaking to the other party and the JVC agreeing to observe and be bound by all provisions of this Agreement as if it had executed this Agreement in place of the party who sold the shares. In addition, such selling party shall (so long as it owns any shares in the JVC) be responsible to the offeree party in respect of such purchaser or transferee, to secure complete and timely observance of the provisions of this Agreement by such purchaser or transferee. 8.7 No party shall pledge or hypothecate the shares of the JVC nor otherwise use them as collateral nor for any other purpose which could result in an involuntary transfer or assignment of such shares to third parties, unless consent to such pledge, hypothecation or other such application has been received in writing from the other party. 8.8 Since damages arising from breach of the above-mentioned obligations under Article 8 may be difficult to compute with precision, the parties agree that any party found to have sold or transferred any shares in violation of the terms of this Article shall pay to the non-breaching party twice the value of the shares transferred in violation of this Article (as appraised by the Korea Appraisal Board) or twice the consideration received for said shares, whichever shall be greater. The parties agree that such computation of damages is fair and reasonable. Application of this provision shall not prevent a party hereto from enforcing its rights or augmenting its protection by such other remedies as may be available. Article 9. General Meetings of Shareholders ---------- -------------------------------- 9.1 The Board of Directors shall decide the time and place for convening all meetings of the shareholders subject to the Articles of Incorporation and applicable requirements of Korean law. 10 9.2 The Ordinary General Meeting of Shareholders shall be held within three (3) months after the end of each fiscal year. 9.3 An Extraordinary General Meeting of Shareholders may be held at any time in compliance with resolutions of the Board of Directors and applicable requirements of Korean law. 9.4 Except as otherwise required by Korean law, or by this Agreement, all actions and resolutions of the shareholders shall be adopted by the vote of a majority of the total number of shares issued and outstanding entitled to vote thereon. 9.5 Notwithstanding the foregoing Article 9.4, the following corporate actions shall be adopted by the vote of two-thirds or more of the total issued and outstanding shares of the JVC entitled to vote: (a) any change to the Articles of Incorporation of JVC (b) any increase of, or reduction in, the authorized share capital of JVC or variation of the rights attaching to any shares of JVC; (c) any reduction of the issued share capital of JVC; (d) the dissolution or liquidation of JVC or its merger into, or consolidation or amalgamation with, any other company; (e) the dismissal of a director or of a statutory auditor; (f) transfer or pledge of the whole or a substantial part of the assets or undertakings of JVC or the acquisition by JVC of the whole or part of the undertaking of any other person or entity, or the capital stock or loan capital of any company, or entry by JVC into any joint venture or partnership; (g) any other matters the adoption of which requires a special resolution of the shareholders at a general meeting under the Korean Commercial Code. 9.6 The Representative Director elected in accordance with Article 9.1 shall preside at all General Meetings of Share holders. In the event that the Representative Director is absent or fails to serve as Presiding Officer of any General Meeting of Shareholders, the directors shall elect someone from among themselves to preside in his place. 11 9.7 All General Meetings of Shareholders shall be conducted both in the English and Korean languages. All minutes of the General Meetings of Shareholders shall be prepared both in the English and Korean languages. In the event of any conflict between the English and Korean versions of the minutes, the English version shall prevail. Article 10. Board of Directors and Statutory Auditor ---------- ---------------------------------------- 10.1 Foreign Investor and Korean Investors will exercise their respective voting rights in JVC and take such other steps as are necessary to ensure: (a) that the Board of Directors of JVC consists of five (5) members; (b) that of such five (5) members, three (3) shall be nominated by Korean Investors and two (2) shall be nominated by Foreign Investor and that the parties shall procure the nomination and election of members nominated by the other parties, provided -------- that following completion of the additional investment ---- contemplated by Article 4.10 of this Agreement, Foreign Investor shall nominate (3) directors and Korean Investors shall nominate (2); (c) that if either party wishes to change its nominated directors with or without cause, the other party will vote accordingly; provided, however, that if such dismissal is without cause, the --------- -------- party proposing the dismissal shall indemnify and hold JVC and the other party harmless for any and all damages and other expen-ses that may arise from such action. 10.2 In case the position of a director of JVC becomes vacant for any reason, Korean Investors and Foreign Investor agree to cause their shares to be voted to elect as director a person nominated by the party who nominated the director whose office is vacant. 10.3 Ordinary meetings of the Board of Directors shall be held immediately following the Ordinary General Meeting of Shareholders each fiscal year. Upon the request of any director, the JVC shall convene additional meetings of the Board of Directors upon due notice as required by the Articles of Incorporation and law. 10.4 Except as otherwise provided in this Agreement, all important corporate matters, including but not limited to 12 the following, shall require a resolution by the Board of Directors to be adopted by an affirmative vote of at least three (3) directors in office including each of the members nominated by the Foreign Investor: (a) increase of the paid-in capital of the JVC; (b) approval or modification of the annual and multi-year business (budget and operational) plan, approval modi-fication of financing, accounting and pricing policies or practices; (c) approval of annual financial statements and any recom-mendation to the shareholders regarding allocation of net profit, including declaration of dividends or other form of distribution to shareholders; (d) entering into a contract or contracts during any 3 month period for: (i) capital expenditures in excess of an aggregate amount of US$50,000; (ii) any acquisition or disposition of assets in excess of an aggregate amount of US$50,000; and (iii) any expenditure in excess of the approved capital budget; (f) any arrangement relating to the creation of indebted-ness of JVC for borrowed money; (g) establishing any pledge, mortgage, or encumbrance on the JVC's assets or entering into an agreement to bind the JVC on any surety or guarantee; (h) addition of new product lines; (i) filing a suit against or entering into a settlement with any third party with respect to any claim in excess of US$15,000; (j) redemption, repurchase or other acquisition of any shares of the JVC; (k) any of the matters described in Article 9.5; and (1) any grant of stock options. 13 10.6 All meetings of the Board of Directors shall be conducted both in the English and Korean languages. All minutes of the meetings of the Board of Directors shall be prepared both in the English and Korean languages. In the event of any conflict between the English and Korean versions of the minutes, the English version shall prevail. 10.7 The parties shall nominate, by mutual agreement, the statutory auditor to perform the legally required functions of the office as defined by the statutes. It is understood that the statutory auditor shall not replace or serve as the Independent Public Accountant of JVC. Article 11. The Representative Director and Other Officers ----------- ----------------------------------------------- 11.1 The Board of Directors shall elect from its members a Representative Director of JVC who shall be nominated by Foreign Investor. The Representative Director shall also hold the title of President and shall have the authority to manage day-to-day operations of the JVC. 11.2 The Board of Director shall elect from its members a Vice President who shall be nominated by Korean Investors. 11.3 Managers of the JVC shall be nominated by Korean Investors and appointed by the Board of Directors. 11.4 The duties and powers of the officers shall be specified in the Articles of Incorporation or internal regulations of JVC. The Board of Directors shall approve internal regula-tions and job descriptions that specify in detail the areas of responsibility of the executive officers. Article 12. Compensation of Officers and Employees ----------- --------------------------------------- 12.1 In principle, only directors serving in a management capacity ("standing directors") will be compensated, provided, however, that --------- -------- non-standing directors may be reimbursed for such travel and other expenses as may reasonably be incurred by them in the performance of their duties to the JVC. 12.2 Salaries, bonuses and other emoluments of directors, au-ditors and employees of the JVC shall be reviewed annually by the parties in consultation with the directors of the JVC, and the general practice current in Korea shall be taken into consideration. 14 Article 13. Operating Committee ----------- ------------------- The JVC may have an Operating Committee to be formed by members designated by the Board of Directors. The Operating Committee will have such powers, authorities, and obligations as determined and delegated by the Board of Directors. The Board of Directors may not, however, delegate any powers and authorities with respect to the matters set forth in Articles 7.4 and 7.5 above. Article 14. Accounts and Auditing ----------- --------------------- 14.1 The JVC shall keep its accounting books and records at the head office of the JVC for inspection by the parties or their representatives upon request of either party. 14.2 The parties agree to cause the books and records of JVC to be audited at the end of each fiscal year during the term of this Agreement by an independent public accounting firm of international reputation which is mutually acceptable to the parties. The Independent Public Accountant shall yearly provide the parties with a financial report ("Annual Re-port") in the English and Korean languages in accordance with generally accepted Korean accounting principles and practices no later than 45 days after the end of the fiscal year in question. Copies of such Annual Report shall be provided to both parties hereto at JVC's expense. Subject to the approval of an ordinary general meeting of shareholders, such Annual Audits shall be final and binding upon the parties as to the revenue, cost, fees, expenses, losses and profits of JVC, in the absence of manifest error or fraud. 14.3 In addition to the Annual Report, the JVC shall submit the shareholders, on a quarterly basis, within a reasonable period of time following each quarter, a summary financial report with copies of the balance sheet and income statement in Korean and English. 14.4 In addition to the Annual Report and quarterly reports, the JVC shall submit to the shareholders on a monthly basis, within 25 days of the end of each month, financial statements as of the end of such month in the form customarily prepared by managers for internal use. 14.5 The fiscal year of JVC shall commence on January 1 and end on December 31 of each year. 15 Article 15. Dividends ----------- --------- The shareholders shall amicably discuss and unanimously agree upon disposition of profits that ZVC earns in any year, taking into account the capital requirements of JVC, requirements of the annual budget and operational plan approved by the Board of Directors and future growth of JVC. Article 16. 0peration of the JVC ----------- -------------------- 16.1 The JVC will have the right to sell the Products in Korea and other countries of the Pacific Rim as agreed upon by the parties hereto. 16.2 The JVC shall purchase adequate insurance to insure those business risks as are customarily covered in the industry in Korea, including but not limited to product liability. Article 17. Support of the JVC ----------- ------------------ 17.1 Foreign Investor shall assist the JVC with its expertise in research & development, designing, prototyping, tooling and manufacturing the Products, and equipment and plant layout, etc. in accordance with a Technical Assistance Agreement. As soon as possible after incorporation of the JVC, the parties shall cause the JVC to enter into a Technical Assistance Agreement with Foreign Investor. 17.2 Korean Investors shall assist the JVC with their expertise in plant engineering, maintenance, plant building, environmental issues, finance, human resources, and sales and marketing of the Product. 17.3 The JVC and the Korean Investors shall not and JVC shall assure that its employees do not, disclose to any third party any information, data or technology or any other proprietary information of Foreign Investor provided to JVC under this Agreement. JVC shall, during and after the term of this Agreement, keep such proprietary information strict-ly in confidence for use solely as authorized under this Agreement and the Technical Assistance Agreement contemplated hereunder. 16 Article 18. Term and Termination ----------- --------------------- 18.1 This Agreement shall continue in effect until terminated pursuant to the provisions of this Agreement or by mutual agreement of the parties hereto. 18.2 This Agreement shall be terminable forthwith upon sending notice in writing upon the occurrence of one or more of the following events: (a) by either party hereto, if Government Approval of this Agreement has not been obtained within six (6) months of the date this Agreement has been signed by both parties hereto or if Government Approval for all ac-tions to be taken by either party or JVC herein, as reasonably required for the conduct of JVC's business as contemplated herein and for enjoyment of the bene-fits to be secured by each party herein, fails to be obtained or is withdrawn; or if any subsequent enact-ment of law or regulation or any subsequent act of governmental authority in Korea or in Canada shall, in the reasonable opinion of the party desiring to ter-minate this Agreement, (i) make performance of this Agreement impossible or unreasonably expensive or unreasonably difficult for said party, or (ii) materially alter the rights and obligations of the parties from those agreed and contemplated by this Agreement, or (iii) materially interfere with the benefits contemplated herein to be received by said party; (b) by either party hereto, if the other party shall be or becomes incapable for a period of one hundred twenty (120) days of performing any of its said obligations under this Agreement because of force majeure, as provided in Article 22 hereof; (c) by either party hereto, if the other party commits a breach of any of its obligations under this Agreement that is not remedied within sixty (60) days from the giving of written notice requiring said breach to be remedied; (d) by either party (the "misled party"), if the warranties or representations made to the misled party in this Agreement are found to be false or misleading in any material respect, or if any of the covenants made therein for the benefit of the misled party are not complied with; 17 (e) by either party hereto, if the other party (the "embarrassed party") or its creditors or any other eligi-ble party shall file for said embarrassed party's liquidation, bankruptcy, reorganization, compulsory composition, or dissolution, or if the embarrassed party is unable to pay any debts as they become due, has explicitly or implicitly suspended payment of any debts as they became due (except those debts which are contested in good faith), or if the creditors of the embarrassed party have taken over its management, or if the relevant financial institutions have suspended the embarrassed party's clearing house privileges, or if any material or significant part of the embarrassed party's undertaking, property, or assets shall be intervened in, expropriated, or totally or partially confiscated by action of any government; (f) by Foreign Investor, if at any time the Foreign Invest-or' collective ownership of shares of the JVC falls below thirty- four (34%) percent unless otherwise agreed to by Foreign Investor in writing or unless Foreign Investor voluntarily sells or transfers its shares; or Article 19. Consequences of Termination ----------- --------------------------- 19.1 Termination of this Agreement shall be without prejudice to the accrued rights and liabilities of the parties at the date of termination, unless waived in writing by mutual agreement of the parties. 19.2 Upon termination of transfer of all of the shares of Foreign Investor in the JVC, Korean Investors shall take all steps necessary to ensure that the name of the JVC is immediately limited so that it no longer contains any reference to any tradename or trademark then owned by Foreign Investor or any of its affiliates nor the Korean equivalent of any such name or mark. 19.3 If this Agreement is terminated by Foreign Investor for any reason except those specified in Articles 18.2 (a) and (b) of this Agreement, then (a) Foreign Investor shall enjoy the right to secure, at the JVC's expense, an appraisal of the fair market value of the JVC's shares from the Korea Appraisal Board or from another appraiser mutually acceptable to the parties; and 18 (b) Foreign Investor shall have the following rights (with-out prejudice to any right it may have to receive damages in consequence of breach of this Agreement) and Korean Investors shall have corresponding obligations: (i) the right to require Korean Investors to purchase all or any portion of the shares of the JVC owned by Foreign Investor at their value as thus appraised. (ii) the right to require Korean Investors to sell all of its shares of the JVC to Foreign Investor or its designee at the value as thus appraised; or (iii) the right to require Korean Investors to join with Foreign Investor and vote to cause the JVC to go into liquidation; and contract for the sale and purchase of shares shall be deemed to have been entered into upon the dispatch of written notice to Korean Investors of the election of Foreign Investor to exercise either of the options set forth in (b) (i) or (b) (ii) above, and payment for the shares shall be due within sixty (60) days of the completion of the appraisal of the shares or of the issuance of any Government Approval requi-red for the sale and purchase, whichever occurs later. 19.4 If this Agreement is terminated by Korean Investors for any reasons except those specified in Articles 18.2 (a) and (b) of this Agreement, then Korean Investors shall have the rights and privileges granted to Foreign Investor in Article 19.3 above, mutatis mutandis. ------- -------- 19.5 If this Agreement is terminated by Korean Investors or Foreign Investor for the reason specified in Article 18.2 (a) and (b) of this Agreement, then the party terminating the agreement has the right to require the other party or its heir(s) to join with such terminating party and vote to cause the JVC to go into liquidation. Article 20. Non Waiver/Other Remedies ----------- -------------------------- 20.1 Failure of either party hereto to insist upon the strict and punctual performance of any provision hereof shall not constitute waiver of or estoppel against asserting the right to require such performance, nor does a waiver or estoppel in one case constitute a waiver or estoppel with respect to a later breach whether of similar nature or otherwise. 19 20.2 Nothing in this Agreement shall prevent a party from enforcing its rights by such remedies as may be available in lieu of termination. Article 21. Unenforceable Terms ----------- ------------------- In the event any term or provision of this Agreement is for any reason found invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the validity of any remaining portion, which shall remain in full force and effect as if the invalid portion was never a part of this Agreement when it was executed. If the severance of any such part of this Agreement materially affects any rights and obligations of the parties hereunder, the parties hereto will negotiate in good faith to amend this Agreement in a manner satisfactory to the parties. If there is no agreement on such amendment, either party may, by notice in writing, terminate this Agreement forthwith subject to the provisions of this Agreement relating to consequences of termination. Article 22. Force Majeure ----------- ------------- 22.1 The failure or delay of either party hereto to perform any obligation under this Agreement solely by reason of acts of God, acts of government (except as otherwise enumerated herein), riots, wars, strikes, lockouts, accidents in transportation or other causes beyond its control shall not be deemed to be a breach of this Agreement; provided, however, that the party so prevented from -------- ------- complying herewith shall continue to take all actions within its power to comply as fully as possible herewith. 22.2 Except where the nature of the event shall prevent it from doing so, the party suffering such force majeure shall notify the other party in writing within fourteen (14) days after the occurrence of such force majeure and shall in every instance, to the extent it is capable of doing so, use its best efforts to remove or remedy such cause with all reasonable dispatch. Article 23. Agency ----------- ------- 23.1 This Agreement shall not be deemed to constitute either party hereto the agent of the other party hereto, nor shall it constitute JVC an agent of either party hereto. 20 23.2 Each of the Korean Investors other than Kim hereby agrees with Foreign Investor that it has conferred full and irrevocable power and authority upon Kim to act on its behalf in all matters relating to execution, performance and enforcement of this Agreement, and any agreements referred to in this Agreement, and that Foreign Investor may rely and act upon any representation by or agreement of Kim on behalf of such Korean Investor as fully as though made by such Korean Investor itself. Article 24. Government Approval ----------- ------------------- 24.1 Korean Investors shall use their best efforts to assist Foreign Investor in obtaining Government Approval of this Agreement. Korean Investors, however, shall apprise Foreign Investor of any and all actions it plans to take with Korean governmental authorities well in advance of the proposed action, and shall take no action to which Foreign Investor objects. If such Approval is conditioned upon changes in the terms and conditions of this Agreement, such changes shall be effective only if accompanied by a formal amendment hereto executed by both parties. No provision of this Agreement shall be construed to require either party to enter into any such amendment. 24.2 If, after the Effective Date of this Agreement as hereinafter defined, further government review and approval of this Agreement or of any amendment thereto is required under the laws or regulations or other legal authority of the Republic of Korea, Korean Investors shall use their best efforts to assist Foreign Investor in obtaining such approv-al. Korean Investors shall provide Foreign Investor with copies of all correspondence and documents transmitted to and received from the governmental authorities relating to such approval. Article 25. Dispute Resolution Arbitration ----------- ------------------------------- 25.1 It is agreed that in case any controversy or claim arises out of or in relation to this Agreement or with respect to breach thereof, the parties shall seek to solve the matter amicably through discussions between the parties. Only if the parties fail to resolve such controversy, claim or breach within thirty (30) days by amicable arrangement and compromise, may the aggrieved party seek arbitration as set forth below. 21 25.2 Any controversy or claim arising out of or in relation to this Agreement, or breach hereof, shall be finally settled by arbitration. (a) Arbitration shall be conducted in Boston, Massachusetts. (b) Arbitration shall be conducted before one arbitrator in accordance with the Rules of Arbitration and Concilia-tion of the International Chamber of Commerce then in effect. (c) The proceedings shall be conducted in English, and the arbitrator shall be conversant in and have a thorough command of the English language. (d) Both parties shall be bound by the award rendered by the arbitrators and judgment thereon may be entered in any court of competent jurisdiction. (e) Notwithstanding any other provision of this Agreement, either party shall be entitled to seek preliminary injunctive relief from any court of competent jurisdiction pending the final decision or award of the arbitrator. Article 26. Assignability ----------- -------------- This Agreement and each and every covenant, term and condition hereof shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, devisees and successors, but neither this Agreement nor any rights hereunder shall be assignable directly or indirectly by any party hereto without the prior written consent of the other party. Article 27. Execution by the JVC ----------- -------------------- Promptly after organization of the JVC, the parties shall cause the JVC to become a party to this Agreement. In addition, the parties shall take whatever actions or steps are necessary to permit or require the JVC to carry out and perform the various terms of this Agreement. Such actions or steps shall include voting their shares of the JVC and causing their representatives on the Board of Directors of the JVC to effect such necessary actions or steps. 22 Article 28. Expenses and Enforcement Costs ----------- ------------------------------ Korean Investors shall pay the expenses and costs incurred in connection with the preparation for an incorporation of the JVC. Article 29. Notice ----------- ------ 29.1 All written notices, requests, demands, and other communications under this Agreement or in connection herewith shall be given by letter (delivered by hand, by air courier, or by registered air mail) or by cable, telex, or facsimile transmission confirmed by such a letter, which shall be addressed to the respective parties as follows: To: Korean Investors 142-8, Kimryangjang-dong, Yongin-si, Kyunggi-do, Korea Facsimile Transmission No.: To: Foreign Investor Attention: John C.C. Fan Facsimile Transmission No.: 508-822-1381 29.2 Either party may change the address at any time by written notice to the other party. Article 30. Language ----------- -------- This Agreement is written in the English language and executed in two (2) counterparts, each of which shall be deemed an original. The English- language text of the Agreement shall prevail over any translation thereof. Article 31. Entire Agreement ----------- ---------------- 31.1 This Agreement shall, as of the date of execution hereof, supersede all previous representations, understandings or agreements, oral or written, between the parties with re-spect to the subject matter hereof, and together with the Attachments hereto and the agreements and documents con-templated hereby, contains the entire understanding of the parties as to the terms and conditions of their relation-ship. 31.2 Terms included herein may not be contradicted by evidence of any prior oral or written agreement or of a contemporaneous oral or written agreement. 23 31.3 No changes, alterations or modifications hereto shall be effective unless in writing and signed by authorized representative of all parties hereto and, if required, upon approval by the competent authorities of the relevant government. 31.4 Headings of Articles in this Agreement are for convenience only and do not substantively affect the terms of this Agreement. IN WITNESS WHEREOF, the authorized representatives of the parties hereto have set their hands or their names and seals, the day and year first above written. 24 Foreign Investor Korean Shareholders By. /s/ John C.C. Fan By: /s/ Jhang Lee ----------------- --------------- Name. John C.C. Fan Title: CEO and President JVC By: /s/ Jhang Lee --------------- Name: Jhang Lee Title: President 25 SCHEDULE A KOREAN INVESTORS ----------------
================================================================================ Name Address Number of Shares and Equity Ratio - -------------------------------------------------------------------------------- 1 Kim, Yong-Suk 66,000 - -------------------------------------------------------------------------------- 2 Oh, Yong-Kuk 6,000 - -------------------------------------------------------------------------------- 3 Lee, Chang-Woo 30,000 - -------------------------------------------------------------------------------- 4 Lee, Sang-Won 6,000 - -------------------------------------------------------------------------------- 5 Lee, Sang-Yun 6,000 - -------------------------------------------------------------------------------- 6 Han, Man-Chun 3,000 - -------------------------------------------------------------------------------- 7 Lee, Sung-Woo 3,000 - -------------------------------------------------------------------------------- ================================================================================
26 SCHEDULE B REPRESENTATIONS AND WARRANTIES ------------------------------- OF THE JVC AND KOREAN INVESTORS ------------------------------- The JVC and the Korean Investors hereby represent and warrant to Foreign Investor that the following are true as of the date hereof and will be true at the time when the JVC issues shares to Foreign Investor under Article 4.1 of the Joint Venture Agreement (the "Agreement") except as otherwise provided herein or in the Agreement. a. The JVC is a joint stock company (chusik hoesa) duly organized and validly existing under and by virtue of the laws of the Republic of Korea, with corporate power and all necessary licenses, franchises and permits to own its properties and to conduct its business as now conducted and as contemplated in Article 3 of this Agreement. b. The total issued paid-in capital shares of the JVC as of the date of the initial investment by Foreign Investor consist of 120,000 shares having a par value of 5,000 Won per share, all of which shares are common shares of one class. The JVC has no other class of capital shares authorized, issued or outstanding other than the common shares described above. c. The JVC has full legal right, power and authority to enter into and perform this Agreement, which constitutes a valid and binding agreement of the JVC. Each of the Korean Investors has full legal rights, power and authority to enter into and perform the Agreement, which constitutes a valid and binding Agreement of each of the Korean Investors. d. All of the issued and outstanding shares of the JVC, as of he date of Foreign Investor's initial investment, are held by the Korean Investors free and clear of all liens, charg-es, security interests, adverse claims, pledges, encumbranc-es and demands whatsoever. e. No person, entity or corporation has any agreement or option, or any right, privilege or preemptive right (whether contractual or by law) capable of becoming an agreement or option, including (but not limited to) convertible securi-ties, warrants or convertible obligations of any nature, for the subscription, allotment or issuance any unissued shares in the capital of the JVC, or for the purchase of any issued shares of the JVC from the Korean Investors. 27 f. Annex 1 to this Schedule B is an accurate and full disclo-sure of the assets, liabilities (whether accrued, absolute, contingent or otherwise) and the financial condition of the JVC prepared in accordance with generally accepted Korean accounting principles consistently applied in sufficient detail to show profits and losses and the results of opera-tions of the JVC and all taxation and other actual or poten-tial liabilities and any adverse changes in the financial position of the JVC as of the execution date hereof. g. The JVC has observed and performed all terms and conditions on its part to be observed and performed under any previous contracts to third parties. The JVC will not hereafter be required to undertake any contracts except such as are set forth in Annex 2 to this Schedule B. h. Neither the JVC nor any of its officers, agents or employees (during the course of their duties in relation to the JVC) has committed or omitted to do any act or thing the commission or omission of which is or could be in contraven-tion of any law, ordinance, regulation or the like giving rise to any fine, penalty, default proceedings or other liability on the part of the JVC. i. Annex 3 to this Schedule B describes in detail all the claims, actions, suits or proceedings pending or (to the knowledge of the Korean Investors) relative to their owner-ship of shares in the JVC. Except as shown in Annex 3, the Korean Investors are not parties to any action, suit or proceeding as a party plaintiff, nor are they presently contemplating the initiation of any such action, suit or proceeding. j. The JVC is not a party to nor bound by any agreement of guarantee, indemnification, assumption or endorsement or any other like obligation or liability (contingent or otherwise) or indebtedness of any other person, entity or corporation except those identified in Annex 4 to this Schedule B. k. All company regulations and written policies, together with Rules of Employment and any and all labor employment agree-ments or collective bargaining agreements, of the JVC are attached to this Schedule B as Annex 5 and are current as of the date Foreign Investor first subscribes for shares of the JVC. A complete list of all directors, officers, and employees of the JVC is also attached to this Schedule B as Annex 6, and the annual compensation (including salary, bonuses, and benefits) to be paid to each director, officer, and employee and the number of years of continuous employ- ment of each director, officer and employee, as calculated 28 for severance pay purposes, is correctly set forth in the said list. l. The JVC is the lawful owner and has good and valid record and marketable title to all of the assets described on Schedule I attached hereto (the "Acquired Assets"), without any Encumbrances (as defined below). None of the property, real estate assets, undertaking, goodwill or capital equipment of the JVC is subject to any encumbrances not specifically identified in the relevant Schedules hereto (including, without limitation, easements, debentures, mortgages, charges, liens, deposits by way of security, bills of sale, lease, conditional sale agreements, credit-sale and other agreements for payment on deferred terms, "Encumbrances") or any agreement or commitment to give or create any of the foregoing not specifically identified in the relevant Schedules hereto but the same are the sole absolute property of the JVC free from Encumbrances. m. The JVC has duly, timely, correctly and properly filed all tax returns required to be filed by it and has paid all taxes and duties that are due and payable. It has paid all assessments and reassessments and all other taxes, governmental charges, penalties, surcharge interest and fines due and payable by it. There are no actions, suits, proceedings, investigations or claims now threatened or pending against the JVC in respect of taxes, duties, govern- mental charges or assessments, nor any matters under dis-cussion with any governmental authority relating to taxes, governmental charge or assessment asserted by any such authority. The JVC has withheld from all payments made to all persons, including but not limited to its officers, directors and employees, the amount of all taxes, including but not limited to income tax, and other deductions required to be withheld therefrom, and has paid the same to the proper tax or other receiving officers within the time required under applicable legislation. n. Neither the execution and delivery of this Agreement by the JVC and Korean Investors nor the consummation by the JVC and Korean Investors of the transactions contemplated hereby will constitute a violation of, or be in conflict with, or constitute or create a default under, or result in the creation or imposition of any Encumbrance upon any property of the JVC (including, without limitation, any of the Acquired Assets) pursuant to, (a) the charter documents or By-Laws of the JVC, each as amended to date; (b) any agreement or commitment to which the JVC and Korean Investors is a party or by which the JVC and Korean 29 Investors or any of their respective properties (including, without limitation, any of the Acquired Assets) is bound or to which the JVC and Korean Investors or any of such properties is subject; or (c) any statute or any judgment, decree, order, regulation or rule of any court or governmental authority. o. No action, suit, proceeding or investigation is pending or, to the knowledge of the JVC and Korean Investors, threatened, relating to or affecting any of the Acquired Assets or relating to or affecting the activities of the JVC and Korean Investors carried on with any of the Acquired Assets, or which questions the validity of this Agreement or challenges any of the transactions contemplated hereby, nor is there any basis for any such action, suit, proceeding or investigation. p. The JVC has complied with, and is in compliance with, (a) all laws, statutes, governmental regulations and all judicial or administrative tribunal orders, judgments, writs, injunctions, decrees or similar commands applicable to its business or any of the Acquired Assets (including, without limitation, any labor, environmental, occupational health, zoning or other law, regulation or ordinance), (b) all unwaived terms and provisions of all contracts, agreements and indentures to which the JVC is a party, or by which the JVC or any of the Acquired Assets is subject, and (c) its charter documents and By- Laws, each as amended to date. The JVC has not committed, been charged with, or been under investigation with respect to, nor does there exist, any violation of any provision of any federal, state or local law or administrative regulation in respect of its business or any of the Acquired Assets. q. Except as will be obtained prior to closing of the Foreign Investor's initial investment or as specifically contemplated under Article 4.10 with respect to any additional investment, the JVC and Korean Investors has no obligation to secure any consent from any third party in order to permit the consummation of the transactions contemplated by this Agreement. r. On or before the execution of this Agreement, each Founding Employee has executed and delivered a noncompetition, nondisclosure and invention ownership agreement with the JVC in form and substance reasonable satisfactory to the Foreign Investor. 30 s. None of this Agreement or any certificate, document or statement in writing which has been supplied by or on behalf of the Korean Investors or the JVC or by any of the JVC's officers or directors, in connection with the transactions contemplated hereby, contains any untrue statement of a material fact, or omits any statement of a material fact required to be stated or necessary in order to make the statements contained herein or therein not misleading. 31 SHAREHOLDERS AGREEMENT THIS SHAREHOLDERS AGREEMENT ("Agreement"), made and entered into this _______ day of April 1998, by and among: Kopin Corporation, a corporation organized and existing under the laws of the State of Delaware, having its principle place of business at Taunton, Massachusetts, U,S.A. ("Foreign Investor"), Kowon Technology Co., Ltd., a corporation organized and existing under the laws of the Republic of Korea, having its principle place of business at 142-8, Kimryangjang-dong, Yongin-si, Kyunggi-do, Korea ( the "JVC"), and Korean Shareholders listed in Schedule A of the Joint Venture Agreement entered into with respect to the JVC on March 3, 1998 (the "JVA"), being the citizens of the Republic of Korea with the addresses set forth in Schedule A opposite their names ("Korean Investors"), represented by Jhang Lee ("Lee"). WITNESSETH THAT. WHEREAS, the Parties have entered into the JVA on March 3, 1998 to jointly own and manage the JVC; and WHEREAS, Article 4.10 of the JVA contemplates an additional investment by the Foreign Investor into the JVC and the parties now wish for such investment to be completed. NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein and in the JVA, the parties agree as fol1ows: 1. Subscription for New Shares. The JVC shall issue and the ---------------------------- Foreign Investor shall subscribe for 108,858 new common shares (the "New Shares") of the JVC at a purchase price of 1.2 billion Won. Upon completion of this additional investment into the JVC by the Foreign Investor, the parties will hold shares of the JVC as follows: Korean Investors: 120,000 shares (35%) Foreign Investor: 222,858 shares (65%) 32 2. Amendment to the Articles of Incorporation. The parties ------------------------------------------ shall cause the Articles of Incorporation of the JVC to be amended to provide that the Board of Directors may allocate all of the New Shares to the Foreign Investor. 3. Replacement of Director. Following the Foreign Investor's ------------------------ subscription for the New Shares, at the request of the Foreign Investor, the Korean Investors ehaI1 cause one of the directors nominated by them to resign. This director shall be replaced by a director nominated by the Foreign Investor. 4. Miscellaneous. In the event of any conflict between the -------------- provisions of this Agreement and the JVA, the provisions of this Agreement shall supersede the conflicting JVA provisions. In all other respects, the JVA shall remain in full force and effect, and any disputes arising from this Agreement shall be resolved pursuant to the JVA's terms. IN WITNESS WHEREOF, the authorized representatives of the parties hereto have set their hands or their names and seals, on the day and year first above written. Foreign Investors Korean Investors By:/s/John C.C. Fan By:/s/Jhang Lee - ------------------- --------------- Name: John C. C. Fan Name: Jhang Lee Title: CFO and President JVC By: /s/Jhang Lee - ---------------- Name: Jhang Lee 33 SCHEDULE C REPRESENTATIONS AND WARRANTIES OF FOREIGN INVESTOR -------------------------------------------------- a. Foreign Investor is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, U.S.A., with the requisite corporate power and author-ity to make, execute, deliver and perform this Agreement. b. Foreign Investor is not subject to any charter, by-law, mortgage, lien, lease, agreement, instrument, order, law, rule, regulation, judgment or decree, or any other restriction of any kind or character, which would prevent consummation of the transactions contemplated by this Agreement or compliance by the Foreign Investor with the terms, conditions and provisions of this Agreement or any other agreement entered into by the Foreign Investor in connection with the transaction contemplated hereby. The execution and delivery of this Agreement by Foreign Investor and the consummation of the transactions contemplated hereby have been duly authorized by all required corporate action. This Agreement has been duly and validly authorized, executed and delivered by Foreign Investor and constitutes a valid and binding agreement of Foreign Investor enforceable against it in accor-dance with its terms, subject to applicable bankruptcy, insolven-cy, fraudulent conveyance, reorganization, moratorium, and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity). c. Foreign Investor will acquire the shares for its own account for investment and not with a view toward any resale or distribu-tion thereof. d. No consent, approval or authorization of, or declaration or registration with, any governmental or regulatory authority is required in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. e. None of this Agreement or any certificate, document or statement in writing which has been supplied by or on behalf of the Foreign Investor or by any of the Foreign Investor's direc-tors or officers, in connection with the transactions contemplat-ed hereby, contains any untrue statement of a material fact, or omits any statement of a material fact required to be stated or necessary in order to make the statements contained herein or therein not misleading. EX-10.46 4 AMEND & RESTATED EMPLOYMENT AGREMNT DATED 2/20/98 EXHIBIT 10.46 ------------- AMENDED AND RESTATED -------------------- EMPLOYMENT AGREEMENT -------------------- THIS AGREEMENT, entered into as of the 20th day of February, 1998, amends and restates the Agreement, dated as of the 20th day of February, 1992, by and between KOPIN CORPORATION, a Delaware corporation with its principal place of business at 695 Myles Standish Boulevard, Taunton MA 02780 (the "Employer"), and John C. C. Fan, an individual residing at 881 West Roxbury Parkway, Chestnut Hill, MA 02167 (the "Employee"), as amended and restated as of May 1, 1995. (S)1. Freedom to Contract. The Employee represents that he is free to ------- -- -------- enter into this Agreement, that he has not made and will not make any agreements in conflict with this Agreement, and will not disclose to the Employer, or use for the Employer's benefit, any trade secrets or confidential information now or hereafter in the Employee's possession which is the property of any other party. (S)2. Employment. The Employer hereby employs the Employee, and the ---------- Employee hereby accepts his employment by the Employer, upon the terms and conditions set forth herein. (S)3. Effective Date and Term. This Agreement shall take effect as of --------- ---- --- ---- February 20, 1998 (the "Effective Date"), and shall continue thereafter in full force and effect through February 20, 2000, unless terminated prior to such time in accordance with the provisions of this Agreement. (S)4. Title and Duties; Extent of Services. The Employee shall promote ----- --- ------ ------ -- -------- the business and affairs of the Employer as President and Chief Executive Officer of the Employer, with responsibility for performing such duties consistent with such position as the Board of Directors may from time to time designate. As long as he is employed hereunder, the Employee shall also continue to serve, if elected by the Shareholders, as a member of the Board of Directors of the Employer. (S)5. Termination Rights of the Parties. The employment of the Employee ----------- ------ -- --- ------- by the Employer under this Agreement may be terminated at any time by either the Employee or Employer upon 360 days' prior written notice of such termination to the other. (S)6. Compensation. Employee shall be paid a salary at an initial annual ------------ rate of Two Hundred Eighty Thousand Dollars ($280,000) through December 31, 1998. The Board of Directors, in its sole discretion, shall have the absolute right to determine the Employee's salary for each subsequent fiscal year during the term hereof, provided that in no event shall such salary be less than such initial annual rate. -2- (S)7. Inventions and Proprietary Information. ---------- --- ----------- ----------- (S)7.1. Inventions. Employee shall inform the Employer using the ---------- established procedures promptly and fully of all inventions, improvements, discoveries, know-how, designs, processes, formulae and techniques, and any related suggestions and ideas (hereinafter "Inventions"), whether patentable or not, which are solely or jointly conceived or made by Employee, during the period of Employee's employment by the Employer, whether during or out of Employee's usual hours of work. The Employer shall own all right, title and interest to those inventions (hereinafter "Employer Inventions") which are: (a) within the scope of the Employer's business, which includes areas in which research is being conducted and areas of technical or market investigation; and/or (b) related to work done for the Employer by Employee. Employee hereby assigns and agrees to assign to the Employer Employee's entire right, title and interest in all Employer Inventions and any patents, design patents, and any other forms of intellectual property resulting therefrom. Employee shall protect the Employer's right to patent Employee's Employer Inventions by keeping written records, which are witnessed and dated, concerning dates of conception and reduction to practice, and Employee shall not publish information concerning Employer Inventions without prior approval from the Employer. Employee shall also, during and after Employee's employment, execute such written instruments and render such other assistance as the Employer shall reasonably request to obtain and maintain patents, design patents, or other forms of protection on any Employer Inventions and to vest and confirm in the Employer its entire right, title and interest therein. In this regard, Employee shall be reimbursed by the Employer for actual expenses incurred and, if no longer an employee of the Employer, shall be reasonably compensated for assistance rendered. (S)7.2. Proprietary Information. (a) Employee understands that as a ----------- ----------- consequence of Employee's employment by the Employer, proprietary data and confidential information (both hereinafter referred to as "Information") relating to the business of the Employer may be disclosed to Employee or developed by Employee which is not generally known in the Employer's trade and which is of considerable value to the Employer. Such Information includes, without limitation, information about trade secrets, the Employer Inventions (as previously defined), patents, licenses, research projects, costs, profits, markets, sales, customer lists, plans for future development, and any other information of a similar nature to the extent not generally known in the trade. Employee -3- acknowledges and agrees that Employee's relationship to the Employer with respect to such Information shall be fiduciary in nature. Employee shall not make any use of any such Information except in the performance of Employee's work for the Employer; Employee shall maintain such Information in confidence; and Employee shall not disclose to any person not employed by the Employer any such Information at any time either during or after Employee's employment or use any such Information in connection with other employment, except as authorized, in writing, by a duly empowered officer of the Employer. (b) Employee shall deliver promptly to the Employer on termination of Employee's employment, or at any time the Employer so requests, all memoranda, notes, records, reports, manuals, drawings, blueprints, plans, customer lists, pricing and/or cost data, and all other property or materials belonging to the Employer, including all copies thereof, which Employee then possesses or has under Employee's control. (c) Employee covenants that there are no Inventions and/or patents within the scope of the Employer's business in which Employee held an interest prior to the date of this Agreement and which are not subject to this Agreement. (S)7.3. Remedies. Employee recognizes that irreparable injury may result -------- to the Employer, its business and property, in the event of a breach of any of the agreements, assurances and understandings contained herein. Employee further recognizes that in the event of such a breach, or the substantial likelihood that such a breach will occur, the Employer intends to take legal action, and to seek injunctive relief if available, in accordance with the language and spirit of this Agreement in order to protect fully its interests and property. (S)8. Covenant Not to Compete. -------- --- -- ------- (a) The Employee recognizes that the Employer is engaged in the development and sale of III-IV compounds used in semiconductors and related products in Massachusetts and throughout the United States and the world and in the development of liquid crystal electronic imaging devices and display products based thereon (collectively, the "Principal Business"). In the event of the termination of the Employee's employment hereunder, voluntarily or for cause (as defined in Section 8(f) below), the Employee agrees that, subject to the provisions of Section 8(d) below, for a period of twelve (12) months from the date of such termination, he will neither -4- (i) engage in the Principal Business directly for himself, or in conjunction with or on behalf of any commercial entity, or (ii) work as an employee in the Principal Business for any commercial entity, where either (A) the Employee's duties in the course of any such activities would be substantially similar to those he has performed for the Employer hereunder or (B) the Employee's duties in the course of such activities would involve disclosure or use of any confidential or proprietary information relating to the business of the Employer which he may in any way acquire by reason of his employment by the Employer. The Employee's obligation under this Section 8 shall extend to all geographical areas of the United States and the world in which the Employer, as set forth above, carries on business, either directly or indirectly, including, but not limited to, places where the Employer has a place of business, has employees or representatives, or has advertised or sold any products during the time period specified in this section. (b) Except as provided in Section 8(d) below, the Employee further agrees that for a period of twelve (12) months from the date of such termination, he will not on behalf of himself or any commercial competitor of the Employer, compete for, or engage in the solicitation of, with respect to the Company's products or services, any commercial customer of the Employer, that he has, during the one year immediately preceding such termination, solicited or serviced on behalf of the Employer or that has been so solicited or serviced, during such period, by any person under the Employee's supervision. (c) In the event of any violation of the foregoing provisions of this Section 8, the Employer shall be entitled, in addition to any other rights or remedies it may have, to injunctive relief, it being agreed that the damages which the Employer would sustain upon any such violation are difficult or impossible to ascertain in advance and that the Employee's violations may cause irreparable harm to the Employer. (d) [reserved] (e) [reserved] (f) The term "cause" shall mean termination due to an act or acts by the Employee in willful contravention of the written directions of the Board of Directors of the Employer. -5- (S)9. Provisions of General Application. --------------------------------- (S)9.1. Governing Law. This Agreement and the rights and obligations of --------- --- the parties hereunder shall be construed, interpreted and determined in accordance with the laws of the Commonwealth of Massachusetts. (S)9.2. Counterparts. This Agreement may be executed in any number of ------------ counterparts, each of which shall be an original and all of which, taken together, shall constitute one and the same instrument. In making proof of this Agreement it shall not be necessary to produce or account for more than one such counterpart. (S)9.3. Other Agreements. This Agreement represents the entire ----- ---------- understanding and agreement between the parties as to the subject matter hereof. No prior, concurrent or subsequent agreement, whether written or oral, shall be construed to change, amend, alter, repeal or invalidate this Agreement, unless this Agreement is specifically identified in and made subject to such other written agreement. (S)9.4. Amendment. This Agreement may be amended only by a written --------- instrument executed in one or more counterparts by the parties hereto. (S)9.5. Waiver. No consent to or waiver of any breach or default in the ------ performance of any obligation hereunder shall be deemed or construed to be a consent to or waiver of any other breach or default in the performance of any of the same or any other obligation hereunder. Failure on the part of either party to complain of any act or failure to act of the other party or to declare the other party in default, irrespective of the duration of such failure, shall not constitute a waiver or rights hereunder and no waiver hereunder shall be effective unless it is in writing, executed by the party waiving the breach or default hereunder. (S)9.6. Headings. The headings of sections and subsections of this -------- Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement or to affect the meaning of any of its provisions. (S)9.7. Severability. If any provision of this Agreement shall, in whole ------------ or in part, prove to be invalid for any reason, such invalidity shall affect only the portion of such provision which shall be invalid, and in all other respects this Agreement shall stand as if such invalid provision, or the invalid portion thereof, had not been a part hereof. -6- (S)9.8. Notices and Other Communications. All notices and other ------- --- ----- -------------- communications required hereunder shall be effective if in writing and if delivered or sent by certified or registered mail, return receipt requested (a) if to the Employee, at his residence address first set forth above, and (b) if to the Employer, at 695 Myles Standish Boulevard, Taunton MA, Attention: Chief Financial Officer, with a copy to John H. Chu, Esq., Chu, Ring & Hazel LLP, 253 Summer Street, Boston, Massachusetts 02210, or to such other persons or addresses as the parties hereto may specify by a written notice to the other from time to time. IN WITNESS WHEREOF, this Agreement has been executed by the Employer, by its duly authorized officer, and by the Employee, as of the date first above written. KOPIN CORPORATION By: /s/ Paul J. Mitchell /s/ John C.C. Fan ------------------------- --------------------- Paul J. Mitchell John C. C. Fan Chief Financial Officer and Treasurer EX-27 5 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1998 JAN-01-1998 JUN-27-1998 36,586,439 1,500,000 3,650,154 0 3,314,741 45,929,095 28,716,099 16,732,494 64,379,070 5,984,057 5,033,631 0 0 121,729 52,856,070 64,379,070 10,327,579 12,150,484 6,234,865 11,467,086 0 0 256,159 (785,934) 0 (785,934) 0 0 0 (785,934) (.07) (.07)
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