SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

(Amendment No. [ ])

 

Filed by the Registrantx

Filed by a Party other than the Registrant¨

 

Check the Appropriate Box:

¨Preliminary Proxy Statement

¨Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

xDefinitive Proxy Statement

¨Definitive Additional Materials

¨Soliciting Material Under Rule 14a-12240.14a-12

 

VUZIX CORPORATION

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

xNo fee required
¨Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

 

¨Fee paid previously with preliminary materials:

 

¨Check box if any part of the fee is offset as providedFee computed on table in exhibit required by Item 25(b) per Exchange Act Rule 0-11(a)(2)Rules 14a6(i)(1) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.0-11

 

(1) Amount Previously paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed

 

 

 

VUZIX CORPORATION

25 Hendrix Road, Suite A

West Henrietta, New York 14586

(585) 359-5900

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held On June 20, 201615, 2022

Dear Stockholder:

 

You are cordially invited to attend the annual meeting of stockholders of Vuzix Corporation.TheCorporation. The meeting will be helda virtual online meeting and will take place on June 20, 201615, 2022 at 10:1:00 a.m. (localp.m. (Eastern time) at Vuzix corporate offices located at 25 Hendrix Road, Suite A, West Henrietta, New York, 14586,, for the following purposes:

 

1.To elect five (5)seven (7) directors to serve until the 20172023 Annual Meeting of Stockholders and until their successors are duly elected and qualified.

 

2.RatifyTo ratify the selection of Freed Maxick CPAs, P.C. as the independent registered public accounting firm of the Company for the year ending December 31, 2016.2022.

 

3.To conduct an advisory vote on executive compensation.

 

4.To transact such other business as may properly come before the meeting or any adjournment thereof.

 

The record date for the annual meeting is May 11, 2016.April 19, 2022. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof. Our transfer books will not be closed.closed.

 

 By Order of the Board of Directors
  
 /s/ Eric Black
 Eric Black
 Steven D. Ward,

Corporate Secretary

 (Acting)

 

Dated:April 29, 20162022
West Henrietta, New York

Rochester, New York

You are cordially invited to virtually attend the meeting in person. Whetheron June 15, 2022 by telephone, mobile device or not you expectInternet. We are furnishing proxy materials to attendsome of our shareholders via the meeting, please complete, date, signInternet by mailing a Notice of Internet Availability of Proxy Materials, instead of mailing or emailing copies of those materials. The Notice of Internet Availability of Proxy Materials directs shareholders to a website where they can access our proxy materials, including our proxy statement and return the enclosed proxy as promptly as possible in orderour annual report, and view instructions on how to ensure your representation at the meeting. Your vote is important, no matter how many shares you owned on the record date. A return envelope is enclosed for your convenience and needs no postage if mailed in the United States. If you wish, you may vote via the Internet, mobile device, or by telephone. Instructions for doing so are attachedIf you received a Notice of Internet Availability of Proxy Materials and would prefer to thisreceive a paper copy of our proxy materials, please follow the instructions included in the Notice of Internet Availability of Proxy Statement. Even if you have voted by proxy or via the Internet, you may still vote in person if you attend the meeting. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING TO BE HELD ON JUNE 20, 2016.Materials.

 

Our proxy statement and Annual Report on Form 10-K, which are enclosed with this mailing, are also available at www.edocumentview.com/vuzi.

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Table of Contents

 

Notice of Annual Meeting of Stockholders1
   
Proxy Statement for 20162022 Annual Meeting of Stockholders3
   
Questions and Answers about this Proxy Material and Voting4
   
Security Ownership of Certain Beneficial Owners and Management8
Proposal 1 – Election of Directors9
   
 Section 16(a) Beneficial Ownership Reporting ComplianceInformation Regarding the Board and its Committees9
Proposal 1 - Election of Directors129
   
 Information Regarding the BoardCorporate Governance and its CommitteesRelated Matters1015
   
Corporate Governance and Related Matters12
Proposal 2 – Ratification of the Company’s Independent Registered Public Accounting Firm13
Audit Committee Report1715
Compensation of Named Executive Officers and Directors16
   
 Named Executive OfficersAudit Committee Report1618
 
Director Compensation23
Transactions with Related Persons23
  
Proposal 3 - Advisory VoteTo conduct an advisory vote on Executive Compensationexecutive compensation2419
   
Compensation Discussion and Analysis21
Summary Compensation30
Director Compensation38
Transactions with Related Persons39
Other Matters2540

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VUZIX CORPORATION

25 Hendrix Road Suite A

West Henrietta, New York 14586

(585) 359-5900

 

PROXY STATEMENT

FOR 20162022 ANNUAL MEETING OF STOCKHOLDERS

 

This proxy statement is furnished to shareholders in connection with the solicitation of proxies by the Board of Directors of Vuzix Corporation (“Vuzix”, the “Company”, “we”, “our”, or “us”) in connection with the annual meeting of shareholders of the Company to be held on June 20, 201615, 2022 at 10:1:00 a.m.p.m., local time, at Vuzix corporate offices on 25 Hendrix Road, Suite A, West Henrietta, New York, 14586Eastern Time, virtually via the Internet (the "Meeting""Annual Meeting").A copy of the Company's Annual Report on Form 10-K for the year ended December 31, 2015,2021, filed with the Securities and Exchange Commission ("SEC") is available without charge upon written request to the Company's Secretary at the Company's corporate offices, or from the SEC's website at www.sec.gov.

 

Additional copiesThe Annual Meeting will be a completely virtual meeting of this proxy statement andstockholders, which will be conducted exclusively by webcast. You are entitled to participate in the Annual ReportMeeting only if you were a stockholder of the Company as of the close of business on Form 10-K, notice ofthe Record Date, or if you hold a valid proxy for the Annual Meeting. No physical meeting form of proxy, and directions towill be held.

You will be able to attend the Annual Meeting virtually online and submit your questions during the meeting andby visiting www.virtualshareholdermeeting.com/VUZI2022. You also will be able to vote in person, may be obtained from the Company's Secretary, 25 Hendrix Road, Suite A, West Henrietta, New York 14586. This proxy statement, together with the accompanying Annual Report on Form 10-K and form of proxy will first be sent to shareholders on or about May17, 2016 and will also be available on the Company’s website and at the Company’s transfer agent at www.envisionreports.com/VUZI.

Important Notice Regarding the Availability of Proxy Materials

foryour shares online by attending the Annual Meeting of Shareholders to be Held on June 20, 2016virtually by webcast.

 

ThisTo participate in the Annual Meeting, you will need to review the information included on your Notice, on your proxy statement, form ofcard or on the instructions that accompanied your proxy and the accompanying Annual Reportmaterials. Please note that you will need your 16-digit control number included on Form 10-K to shareholders are also available at www.vuzix.com.your proxy card.

 

If you hold your shares through an intermediary, such as a bank or broker, you must register in advance using the instructions below.

The online meeting will begin promptly at 1:00 p.m., Eastern Time. We encourage you to access the meeting prior to the start time leaving ample time for the check-in. Please follow the registration instructions as outlined in this proxy statement.

SOLICITATION AND REVOCABILITY OF PROXIES

 

The enclosed proxy for the Annual Meeting is being solicited by the directorsBoard of Directors of the Company. Shareholders of record may vote by mail, telephone, or via the Internet. The toll-free telephone number and Internet web site are listed on the enclosed proxy. If you vote by telephone or via the Internet you do not need to return your proxy card. If you choose to vote by mail, please mark, date and sign the proxy card, and then return it in the enclosed envelope (no postage is necessary if mailed within the United States). Any person giving a proxy may revoke it at any time prior to the exercise thereof by filing with the Secretary of the Company a written revocation or duly executed proxy bearing a later date. The proxy may also be revoked by a shareholder attending the Meeting, withdrawing the proxy and voting in person.person virtually by attending the meeting online and voting by webcast.

 

The expense of preparing, printing and mailing the form of proxy and the material used in the solicitation thereof will be borne by the Company. In addition to solicitation by mail, proxies may be solicited by the directors, officers and regular employees of the Company (who will receive no additional compensation therefor) by means of personal interview, e-mail, telephone or facsimile. It is anticipated that banks, brokerage houses and other institutions, custodians, nominees, fiduciaries or other record holders will be requested to forward the soliciting material to persons for whom they hold shares and to seek authority for the execution of proxies; in such cases, the Company will reimburse such holders for their charges and expenses.

 

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VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

 

The close of business on May 11, 2016April 19, 2022 has been fixed as the record date for determination of the shareholders entitled to notice of, and to vote at, the Annual Meeting. On that date, we anticipate there will bewere outstanding and entitled to vote 16,133,02963,691,909 shares of common stock, each of which is entitled to one vote on each matter at the Meeting, and 49,626 shares of Series A Preferred stock, convertible into 4,962,600 shares of common stock. Shares of the Series A Preferred Stock are entitled to vote on an as-converted basis with the common stock, such that each share of Series Preferred Stock is entitled to 100 votes on each matter at theAnnual Meeting.

 

Pursuant to the Company's bylaws and applicable provisions of the Delaware General Corporation Law, the vote of: (i) holders of a pluralitymajority of the shares of common stock and Series A Preferred Stock (on an as-converted basis) presentfor which votes are cast with respect to each director nominee (not including abstentions), in person (virtually in this case, by attending the meeting online and voting by webcast) or by properly executed proxy, and entitled to vote will be required to elect directors,members to the Board of Directors, and (ii) the affirmative vote of a majority of shares of common stock and Series A Preferred Stock (on as an-converted basis) either present in person or represented by proxy and entitled to votecast on this proposal (including abstentions) will be required to ratify the appointment of the independent auditors for 2016.auditors. The advisory votevotes on executive compensation will not be binding on either the Board of Directors or the Company. However, the Board of Directors and the Company’s Compensation Committee will take into account the outcome of the stockholder votevotes on this proposal at the Annual Meeting when considering future executive compensation arrangements.arrangements, as applicable. See “How many votes are needed to approve each Proposal?”

 

The presence, in person (virtually in this case, by attending the meeting online and voting by webcast) or by properly executed proxy, of the holders of shares of common stock and Series A Preferred Stock (on an as-converted basis) entitled to cast one-third of all the votes entitled to be cast at the Annual Meeting is necessary to constitute a quorum. Holders of shares of common stock and Series A Preferred Stock represented by a properly signed, dated and returned proxy will be treated as present at the Annual Meeting for purposes of determining a quorum. Proxies relating to "street name" shares that are voted by brokers will be counted as shares present for purposes of determining the presence of a quorum, but will not be treated as votes cast at the Annual Meeting as to any proposal as to which the brokers do not have voting instructions and discretion. These missing votes are known as “broker non-votes.”

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QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING

 

Why am I receiving these materials?

 

We are sending you this proxy statement and the enclosed proxy card because the boardBoard of directorsDirectors of Vuzix Corporation is soliciting your proxy to vote at the 20162022 Annual Meeting of Stockholders. We invite you to attend the annual meetingAnnual Meeting and request that you vote on the proposals described in this proxy statement. The meetingAnnual Meeting will be held virtually on Monday,Wednesday, June 20, 201615, 2022 at 10:1:00 a.m. (local time) at Vuzix corporate offices on 25 Hendrix Road, Suite A, West Henrietta, New York.p.m. Eastern Time. However, you do not need to attend the meeting to vote your shares. Instead, you may simply complete, date, sign and return the enclosed proxy card.card, or follow the instructions on the proxy card to vote by telephone or via the Internet.

 

We are mailingproviding this notice proxy statement and the accompanying proxy card and our Annual Report on Form 10-K for the year ended December 31, 2015 on or about May 17, 20163, 2022 to all stockholders of record entitled to vote at the annual meeting.Annual Meeting.

 

Who can vote at the annual meeting?

 

Only stockholders of record at the close of business on May 11, 2016,April 19, 2022, the record date for the meeting, will be entitled to vote at the annual meeting. On April 29, 2016,2022, the filing date of this proxy statement, there were 16,133,02963,691,909 shares of common stock (each entitled to one vote) outstanding and 49,626 shares of Series A Preferred Stock (each entitled to 100 votes) outstanding.

 

Stockholder of Record: Shares Registered in Your Name

 

If on May 11, 2016,April 19, 2022, your shares of Vuzix Corporation common stock were registered directly in your name with our transfer agent, Computershare Trust Company, then you are a stockholder of record. As a stockholder of record, you may vote in person at the meeting virtually by attending the meeting online and voting by webcast or vote by proxy. Whether or not you plan to virtually attend during the meeting, we urge you to fill out and return the enclosed proxy card to ensure your vote is counted.

 

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

 

If on May 11, 2016,April 19, 2022, your shares of Vuzix Corporation common stock were held in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the annual meeting.Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the annual meeting.Annual Meeting virtually. However, since you are not the stockholder of record, you may not vote your shares in person at the meeting virtually unless you request and obtain a signed letter or other valid proxy from your broker or other agent.

 

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What am I voting on?

 

There are three matters scheduled for a vote: (i) the election of five (5)seven (7) directors to serve until the 20172023 Annual Meeting of Stockholders;stockholders, (ii) the ratification of the selection of Freed Maxick CPAs, P.C. as our independent registered public accounting firm for the year ending December 31, 2016,2022, and (iii) the advisory vote on executive compensation. Our boardBoard of directorsDirectors does not intend to bring any other matters before the meeting and is not aware of anyone else who will submit any other matters tofor which a vote will be voted on.required. However, if any other matters properly come before the meeting,Annual Meeting, the people named on the proxy card, or their substitutes, will be authorized to vote on those matters in their own judgment.

 

How many votes do I have?

 

On each matter to be voted upon, you have one vote for each share of common stock or 100 votes for each share of Series A preferred stock you owned as of May 11, 2016.April 19, 2022.

 

What is the quorum requirement?

 

A quorum of stockholders is necessary to hold a valid meeting. A quorum will be present if at least one-third of the outstanding shares of common stock and Series A Preferred Stock (on an as-converted basis) entitled to vote are present at the meeting. Your shares are counted as present at the meeting if:

 

·You are present and vote in person at the meeting;meeting virtually by attending online and voting by webcast;

·You have properly submitted a proxy card; or

·You have voted via the Internet or by telephonetelephone.

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Your shares will be counted towards the quorum only if you submit a valid proxy card, have voted via the Internet, have voted via telephone, or vote in person at the meeting.meeting virtually by attending online and voting by webcast. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, a majority of the votes present at the meeting may adjourn the meeting to another date.

 

How do I vote?

 

The procedures for voting are set forth below:

 

Stockholder of Record: Shares Registered in Your Name

 

If you are a stockholder of record, you may vote in person at the annual meeting, vote by proxy using the enclosed proxy card, vote via the Internet or by telephone. Whether or not you plan to attend the meeting, we urge you to vote by proxy, via the Internet or by telephone to ensure your vote is counted. You may still attend the meeting and vote in person if you have already voted by proxy, via the Internet or by telephone.

·If you are a stockholder of record, you will be able to vote your shares online by attending the Annual Meeting virtually and voting by webcast.

 

·ToWhether or not you plan to attend the virtual meeting, we urge you to vote in person, come to the annual meeting and we will give you a ballot when you arrive.
·To vote using theby submitting your proxy card, simply complete, date and signvia the enclosed proxy card and return it promptly in the envelope provided. If you returnInternet or by telephone to ensure your signed proxy card to us before the annual meeting, we will vote your shares as you direct.is counted.

·To vote via the Internet or by telephone, follow the instructions on the enclosed proxy card.

 

Beneficial Owner: Shares Registered in the Name of Broker or Bank

 

If you hold your shares are held in “street name”street name and thus are a beneficial owneryou desire to vote online during the Virtual Annual Meeting, you should follow the instructions provided by your bank, broker or other holder of shares registeredrecord to be able to participate in the namemeeting.

Stockholders as of your broker, bank or other agent, you mustthe close of business on the Record Date may attend the Annual Meeting online, vote your shares inelectronically and submit your questions during the manner prescribedMeeting, by your broker or other nominee. Your broker or other nominee has enclosed or otherwise provided a voting instruction card for you to use in directing the broker or nominee how to vote your shares. Check the voting form used by that organization to see if it offers internet or telephone voting. To vote in person at the annual meeting, you must obtain a valid proxy from your broker, bank or other agent. Followfollowing the instructions fromon the Meeting website, www.virtualshareholdermeeting.com/VUZI2022.  You will need to have your broker16-Digit Control Number included on your notice of internet availability or bank included with theseyour proxy materials, or contact your broker or bankcard (if you received a printed copy of the proxy materials) to request a proxy form.join the Meeting. Online access to the Meeting, which will be an audio-only webcast, will begin at 1:00 p.m., Eastern Time, on June 15, 2022.

 

How are votes counted?

 

You may either vote “FOR” or “WITHHOLD” authority to vote“FOR,” “AGAINST,” OR “ABSTAIN” for each nominee for the boardBoard of directors.Directors. You may vote “FOR”, “AGAINST” or “ABSTAIN” on any other proposals.the proposal to ratify the selection of Freed Maxick CPAs, P.C. as the independent registered public accounting firm of the Company for the year ending December 31, 2022. You may vote “FOR”, “AGAINST” or “ABSTAIN” on the advisory vote on executive compensation.

 

If you submit your proxy, vote via the Internet or by telephone but abstain from voting or withhold authority to vote on one ofor more matters, your shares will be counted as present at the meetingAnnual Meeting for the purpose of determining a quorum. Your shares also will be counted as present at the meetingAnnual Meeting for the purpose of calculating the vote on ratification of the particular matter with respect to whichselection of the Company’s accounting firm if you abstained from voting or withheld authority to vote.

If you abstain from votingvote on a proposal,that matter, meaning your abstention has the same effect as a vote against that proposal, except, however, anproposal. An abstention has no effect on the election of directors ormembers to the advisory vote on executive compensation.Board of Directors. See “How many votes are needed to approve each Proposal?”

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If you hold your shares in street name and do not provide voting instructions to your brokerage firm, itthe brokerage firm may still be able to vote your shares with respect to certain “discretionary” (or routine) items, but it will not be allowed to vote your shares with respect to certain “non-discretionary” items. In the case of non-discretionary items, for which no instructions are received, the shares will be treated as “broker non-votes”. Shares that constitute broker non-votes will be counted as present at the meetingAnnual Meeting for the purpose of determining a quorum but will not be considered entitled to vote on the proposal in question. Your broker does not have discretionary authority to vote shares foron the election of directors,members to the Board of Directors or on the advisory vote on executive compensation, but will have discretionary authority to vote on the proposal relating to the ratification of the selection of the accounting firm. As a result, if you do not vote your street name shares, your broker has the authority to vote on your behalf with respect to Proposal 2 (the ratification of the selection of the accounting firm). We encourage you to provide instructions to your broker to vote your shares for the director nominees to the Board of Directors and on the advisory vote on the executive compensation.

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How many votes are needed to approve each Proposal?

 

·Proposal 1 -Election of directorsDirectors

 

DirectorsDirector nominees in uncontested director elections (when the number of director nominees does not exceed the number of board seats) are elected by the affirmative vote of the holders of a pluralitymajority of the votes represented by the shares of common stock and Series A Preferred Stock (on an as-converted basis) presentcast for this proposal (excluding abstentions) in person or virtually at the meeting in person(by attending online and voting by webcast) or by proxy. This means that the five (5)number of votes cast “For” a director nominees withnominee must exceed the most affirmativenumber of votes will be elected. Withheld votes, abstentionscast “Against” that nominee. Abstentions and broker non-votes will have no effect.

 

·Proposal 2 –Ratification of the selection of Freed Maxick CPAs, P.C. as the independent registered public accounting firm of the Company for the year ending December 31, 2016.2022.

 

To be approved, the ratification of the selection of Freed Maxick CPAs, P.C. as our independent auditors for our 20162022 fiscal year, must receive “For” votes from the holders of a majority of shares of common stock and Series A Preferred Stock (on an as-converted basis) present in person or by proxy and entitled to vote.  If you “Abstain” from voting, it will have the same effect as an “Against” vote.cast for this proposal, including abstentions. Broker non-votes will have no effect.

 

·Proposal 3 –Advisory vote on executive compensation.

The advisory vote on executive compensation (Proposal 3) will not be binding on either the Board of Directors or the Company. However, the Company’s Compensation Committee will take into account the outcome of the stockholder vote on this proposal at the Annual Meeting when considering future executive compensation arrangements. In addition,To the extent there is a significant negative vote, we would communicate directly with shareholders to better understand the concerns that influenced the vote. The Board and the Compensation Committee would consider constructive feedback obtained through this process in making future decisions about executive compensation programs. However, your non-binding advisory votes described in Proposal 3 will not be construed (1) as overruling any decision by the Board of Directors, any Board committee or the Company relating to the compensation of the named executive officers or (2) as creating or changing any fiduciary duties or other duties on the part of the Board of Directors, any Board committee or the Company.

  

With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the boardBoard of directorsDirectors or, if no recommendation is given, in their own discretion.

 

Can I change my vote after submitting my proxy, voting via the Internet or by telephone?

 

Yes. You can revoke your proxy at any time before the final vote at the meeting.Annual Meeting. If you are a stockholder of record, you may revoke your proxy in any one of three ways:

 

·You may submit another properly completed proxy card with a later date.

·You may send a written notice that you are revoking your proxy to our Corporate Secretary, Vuzix Corporation, 25 Hendrix Road, Suite A, West Henrietta, New York 14586.

·You may attend the annual meetingAnnual Meeting virtually and vote in person.online by webcast. Simply attending the meetingAnnual Meeting virtually will not, by itself, revoke your proxy.

 

If you hold your shares in street name, contact your broker or other nominee regarding how to revoke your proxy and change your vote.

 

How can I find out the results of the voting at the annual meeting?

 

Preliminary voting results will be announced at the annual meeting.Annual Meeting. Final voting results will be publisheddisclosed in our report on Form 8-K that we will file with the Securities and Exchange Commission (the “SEC”) within four (4) business days after the annual meeting.Annual Meeting.

  

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What does it mean if I receive more than one proxy card?

 

If you receive more than one proxy card, your shares are registered in more than one name or are registered in different accounts. Please complete, date, sign and return each proxy card, vote your shares via the Internet or by telephone for each proxy card you received to ensure that all of your shares are voted.

 

Who is paying for this proxy solicitation?

 

Vuzix Corporation will pay for the entire cost of soliciting proxies. In addition to these mailedthe proxy materials being provided, our directors, officers and employees may also solicit proxies in person, by telephone, or by other means of communication. We will not pay our directors, officers and employees any additional compensation for soliciting proxies. We may also reimburse brokerage firms, banks and other agents for the cost of forwarding proxy materials to beneficial owners.

 

When are stockholder proposals due for next year’s annual meeting?

 

At our annual meeting each year, our boardBoard of directorsDirectors submits to stockholders its nominees for election as directors.Directors and its selection of independent auditors for the current fiscal year. In addition, the boardBoard of directorsDirectors may submit other matters to the stockholders for action at the annual meeting.Annual Meeting.

 

Our stockholders also may submit proposals for inclusion in the proxy material. These proposals must meet the stockholder eligibility and other requirements of the SecuritiesSEC, and Exchange Commission (the “SEC”). Tofor these to be considered for inclusion in next year’s proxy materials, you must submit your proposal in writing by January 18, 2017December 31, 2022 to our Corporate Secretary, Vuzix Corporation, 25 Hendrix Road, Suite A, West Henrietta, New York 14586.

 

In addition, our by-lawsbylaws provide that a stockholder may present from the floor a proposal that is not included in the proxy statement if the stockholder delivers written notice to our Corporate Secretary not earlier than 120 days and not later 90 days before the first anniversary of the preceding year’s annual meeting. The notice must set forth yourthe stockholder’s name, address and number of shares of stock youthey hold, a description of the business to be brought before the meeting, the reasons for conducting such business at the annual meeting,Annual Meeting, any material interest youthey have in the proposal, and such other information regarding the proposal as would be required to be included in a proxy statement. We have received no such notice for the 2016 annual meeting.2022 Annual Meeting. For the 20172023 annual meeting of stockholders, written notice must be delivered to our Corporate Secretary at our principal office, 25 Hendrix Road, Suite A, West Henrietta, New York, 14586, between February 21, 201714, 2023 and March 22, 2017.21, 2023.

 

Our by-lawsbylaws also provide that if a stockholder intends to nominate a candidate for election as a director,member of the Board of Directors, the stockholder must deliver written notice of such intent to our Corporate Secretary. The notice must be delivered not earlier than 120 days and not later 90 days before the first anniversary of the preceding year’s annual meeting. The notice must set forth yourthe stockholder’s name and address and number of shares of stock youthey own, the name and address of the person to be nominated, a description of all arrangements or understandings between such stockholder and each nominee and any other person (naming such person) pursuant to which the nomination is to be made by such stockholder, the nominee’s business address and experience during the past five years, any other directorships held by the nominee, the nominee’s involvement in certain legal proceedings during the past ten years and such other information concerning the nominee as would be required to be included in a proxy statement soliciting proxies for the election of the nominee. In addition, the notice must include the consent of the nominee to serve as a directorDirector if elected. We have received no such notice for the 2016 annual meeting.2022 Annual Meeting. For the 20172023 annual meeting of stockholders, written notice must be delivered to our Corporate Secretary at our principal office, 25 Hendrix Road, Suite A, West Henrietta, New York 14586, between February 21, 201714, 2023 and March 22, 2017.21, 2023.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table shows the amount of our common stock beneficially owned as of April 29, 201619, 2022 by (i) each person or group as those terms are used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), believed by us to beneficially own more than 5% of our common stock, (ii) each of our directors, (iii) each of our executive officers named in the Summary Compensation Table, and (iv)directors, and (iii) all of our directors and executive officers as a group. Except as otherwise noted, each person named in the table has sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

 

Name and Addresses of
Beneficial Owner(1)		 Shares
Beneficially
Owned(2)		  Percent of Outstanding
Shares Beneficially
Owned(3)		 
Paul J. Travers  2,581,012(4)  16.0%
Grant Russell  977,091(5)  6.0%
Michael Scott  71,333(6)  * 
Alexander Ruckdaeschel  84,666(7)  * 
Edward Kay  10,000   * 
AIGH Investment Partners L.P.  907,181(8)  5.5%
Orin Hirschman  1,279,183(8)  7.7%
Intel Corporation  4,962,600(9)  23.5%
Directors and executive officers as a group (5 people)  3,724,102(10)  22.9%
Name and Addresses of
Beneficial Owner (1)		 Shares
Beneficially
Owned (2)		  Percent of Outstanding
Shares Beneficially
Owned (3)		 
Paul Travers  3,148,753(4)  4.9%
Grant Russell  1,370,121(5)  2.2%
Edward Kay  152,308   * 
Timothy Harned  123,481   * 
Peter Jameson  28,125   * 
Raj Rajgopal  19,493   * 
Azita Arvani  14,793   * 
Emily Nagle Green  14,793   * 
ARK Investment Management LLC  7,240,700(6)  11.3%
BlackRock, Inc  4,538,281(7)  7.1%
Directors and executive officers as a group (8 people)  4,871,867(8)  7.6%

 

*less than 1.0%

 

(1)The address for each person, unless otherwise noted, is c/o Vuzix Corporation, 25 Hendrix Road, Suite A, West Henrietta, New York, 14586.
(2)We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants, or, the conversion of convertible promissory notes or preferred stock, that are either immediately exercisable or convertible, or that will become exercisable within 60 days after April 29, 2016.19, 2022. These shares are deemed to be outstanding and beneficially owned by the person holding those options, warrants, convertible promissory notes or convertible preferred stock for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.
(3)The percentage of shares beneficially owned is based on 16,133,02963,691,909 shares of our common stock issued and outstanding, as of April 29, 2016.19, 2022.
(4)Includes (i) 1,692,5861,954,713 outstanding shares of common stock held by Mr. Travers, and (ii) 18,426312,916 shares of common stock issuable upon the exercise of options, granted under our 2014 option plan, (iii) 11,124 shares of common stock held by Travers Family Trust LLC, (iv) 609,000 shares of common stock held by Paul Travers Annuity Trust I dated May 14, 2015, (iv)(v) 182,700 shares of common stock held by Paul Travers Annuity Trust II dated May 14, 2015, and (v)(vi) 78,300 shares of common stock held by Paul Travers Annuity Trust III dated May 14, 2015.
(5)Includes
(5) Represents (i) 1,157,205 shares held by Mr. Russell’s sonRussell and his spouse and (i) 2,667shares issuable upon exercise of options granted under our 2009 option plan and (ii) 29,942212,916 shares of our common stock issuable upon the exercise of options granted under our 2014 option plan.options.
(6)Represents 35,000 shares held and (i) 16,333 shares issuable upon exercise of options granted under our 2009 option plan and (ii) 20,000 shares issuable to Mr. Scott upon exercise of options granted under our 2014 option plan.
(7)  Represents 35,000 shares held and (i) 19,666 shares issuable upon exercise of options granted under our 2009 option plan and (ii) 30,000 shares issuable to Mr. Ruckdaeschel upon exercise of options granted under our 2014 option plan.
(8)Based on Schedule 13G/A filed with the SEC on February 10, 2016. Beneficial ownership of AIGH Investment Partners L.P. (“AIGH LP”) includes 477,061 shares issuable upon conversion of convertible debt. Beneficial ownership of Orin Hirschman represents shares beneficially owned by AIGH LP and AIGH Investment Partners, L.L.C. (“AIGH LLC”) Orin Hirshman holds voting and dispositive power over shares held by AIGH LP and AIGH LLC. The beneficial ownership of Orin Hirschman includes 372,002 shares beneficially owned by AIGH LLC, including 12,002 shares issuable upon conversion of convertible debt.9, 2022. The address for this shareholderof the stockholder is 6006 Berkeley Avenue, Baltimore, MD 21209.3 East 28th Street, 7th Floor, New York, NY 10016.

(7)   Based on Schedule 13G filed on February 4, 2022. The address of the stockholder is State Street Financial Center, One Lincoln Street, Boston, MA 02111.
(9) Represents shares issuable upon conversion of outstanding shares of Series A Preferred Stock. Intel Corporation owns all of our outstanding shares of Series A Preferred Stock, which votes on an as-converted basis with the common stock.
(10)(8)Beneficial ownership for Paul J. Travers, Grant Russell, Michael Scott, Alexander Ruckdaeschel,Edward Kay, Timothy Harned, Peter Jameson, Raj Rajgopal, Azita Arvani, and Edward Kay.Emily Nagle Green.

 

 8 

 

 

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that our officers and directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership and changes in ownership with the SEC and with any exchange on which the Company’s securities are traded. Officers, directors and persons owning more than ten percent of such securities are required by SEC regulation to file with the SEC and furnish the Company with copies of all reports required under Section 16(a) of the Exchange Act. To our knowledge, based solely upon our review of the copies of such reports furnished to us, during the fiscal year ended December 31, 2015, all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with, except that, a Form 4 was filed late by Grant Russell in connection with purchases by his spouse, resulting in 2 transactions not being reported on a timely basis.

PROPOSAL 1

ELECTION OF DIRECTORS

 

The number of directors is established by the board and isBoard of Directors. Our Board currently fixedconsists of seven (7) members, all seven (7) of whom have been nominated by the Board for re-election to the Board of Directors at five (5). Atthe Annual Meeting.

Thus, at this annual meeting, five (5)Annual Meeting, seven (7) persons, comprising the entire membership of the Board of Directors, are to be elected. Each elected director will serve until the Company's next annual meeting of shareholders and until a successor is elected and qualified. Messrs.Our seven (7) current board members, Paul Travers, Grant Russell, Scott,Edward Kay, Timothy Harned, Raj Rajgopal, Azita Arvani, and RuckdaeschelEmily Nagle Green were elected by the stockholders at the last annual meeting. William Lee, who was also elected by the stockholders at the last annual meeting, passed away in March 2016.

 

The Company has outstanding 49,626 shares of Series A Preferred Stock, all of which are owned by Intel Corporation (the “Series A Purchaser”). The Series A Purchaser is entitled to nominate and elect 2 directors to the Company’s Board of Directors (the “Board Election Right”), at least one of whom will be required to qualify as an “independent” director, as that term is used in applicable exchange listing rules. The Board Election Right with respect to the independent director will terminate on such date as the number of shares of Series A Preferred Stock then outstanding is less than 40% of the original amount purchased by the Series A Purchaser. The Board Election Right with respect to the second director will terminate on such date as the number of shares of Series A Preferred Stock then outstanding is less than 20% of the original amount purchased by the Series A Purchaser. The Series A Purchaser has not yet exercised the Board Election Right. The Company also granted the Series A Purchaser the right to have a board observer at meetings of the Company’s Board of Directors and committees thereof. The Series A Purchaser has not yet exercised the Board Election Right or their right to appoint an observer.

It is intendedanticipates that the accompanying proxy will be voted in favor of the five (5)seven (7) persons listed below to serve as directors unless the stockholder indicates to the contrary on thesuch proxy. All nominees have consented to serve if elected. We expect that each of the nominees will be available for election, but if any of them is not a candidate at the time the election occurs, it is intended that such proxynomination will be voted fordeemed revoked and the election of another nominee todirector seat will be designatedvacant until filled by the board to fill any such vacancy.Board of Directors or vote of the stockholders at a meeting.

 

For the election of directors, only proxies and ballots, Internet votes ofor telephone votes, marked “FOR all nominees”, “WITHHELD for all nominees”“FOR” or specifying that votes be withheld for“AGAINST” one or more designated nominees are counted to determine the total number of votes cast; votes that are withheldcast. Abstentions are excluded entirely from the vote and will have no effect. Abstentions will have no effect on the vote for the election of directors. Directors are elected by a pluralitymajority of the votes cast. This means that the five (5) nominees who receivenumber of votes cast “for” a director nominee must exceed the most affirmativenumber of votes will be elected.cast “against” that nominee.

 

The term of office of each person elected as a director will continue until the next annual meeting or until his or her successor has been elected and qualified, or until the director’s death, resignation or removal.

 

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The Board of Directors unanimously recommends a vote FOR the election as directors the nominees listed below.

The board of directors considers diversity, including gender and ethnicity, in the makeup of the Board when evaluating director candidates. CharacteristicsQualifications that it considers include the nature and breadth of business experience, education, professional certification, and education .education.

The following table is a matrix of director skills, qualifications and demographic backgrounds. The Nomination Committee regularly evaluates the skills, qualifications, and demographic backgrounds desirable for our Board to best advance our business strategies and serve the interests of all our stakeholders.

 P.
Travers		G.
Russell		E. KayT.
Harned		E.
Nagle
Green		A.
Arvani		R.
Rajgopal
Governance Guidelines Criteria:       
Independent  YYYYY
Senior Leadership Experience (1)YYYYY Y
Industry Experience (2)YY YYYY
Board Experience (3)   Y YYY
Financial Expertise (4) YYY   
        
Tenure (years)241365111
Gender:       
  Female    YY 
  MaleYYYY  Y
  Non-Binary Gender       
Age60696657645961
Race/Ethnicity(5):       
Black of African American       
Hispanic or Latino       
WhiteYYYYYY 
Asian (including South Asian)      Y
Native American       
Two or More Races or Ethnicities       
LGBTQ+       
Did not Disclose Race/Ethnicity       

Notes:

1.Senior Leadership Experience – experience as president, CEO or in similar senior executive positions

2.Industry Experience – experience in the technology section, including software and hardware

3.Board Experience – prior or concurrent service on other U.S. public company boards

4.Financial Expertise – expertise in accounting, auditing, tax, banking, insurance or investments

5.Race/Ethnicity – based on each director’s self-identification in our 2022 Board questionnaire

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The names of thecurrent directors and director nominees, their ages as of April 29, 2016,2022, and certain information about them, including their business experience during the past five years and their directorships of other publicly held corporations, are set forth below.

 

Background of Current Directors and Director Nominees

 

 Paul Travers, age 60, is a co-founder of Vuzix and has served as our President and Chief Executive Officer since 1997 and as a member of our Board of Directors since November 1997. Prior to the formation of Vuzix, Mr. Travers founded both e-Tek Labs, Inc. and Forte Technologies Inc. He has been a driving force behind the development of our products. With more than 30 years’ experience in the consumer electronics field, and 26 years’ experience in the virtual reality and virtual display fields, he is a nationally recognized industry expert. He holds an Associate degree in engineering science from Canton, ATC and a Bachelor of Science degree in electrical and computer engineering from Clarkson University. Mr. Travers resides in Honeoye Falls, New York. Mr. Travers’ experience as our founder and Chief Executive Officer qualifies him to serve on our Board of Directors.

Paul J. Travers, age 55, was the founder of Vuzix and has served as our President and Chief Executive Officer since 1997 and as a member of our board of directors since November 1997. Prior to the formation of Vuzix, Mr. Travers founded both e-Tek Labs, Inc. and Forte Technologies Inc. He has been a driving force behind the development of our products. With more than 23 years’ experience in the consumer electronics field, and 20 years’ experience in the virtual reality and virtual display fields, he is a nationally recognized industry expert. He holds an Associate degree in engineering science from Canton, ATC and a Bachelor of Science degree in electrical and computer engineering from Clarkson University. Mr. Travers resides in Honeoye Falls, New York. Mr. Travers’s experience as our founder and Chief Executive Officer qualifies him to serve on our board of directors.

Grant Russell, age 69, is a co-founder and has served as our Chief Financial Officer and Executive Vice President since 2000 and as a member of our Board of Directors since April 2009. From 1997 to 2004, Mr. Russell developed and subsequently sold a successful software firm and a new concept computer store and cyber café. In 1984, he co-founded Advanced Gravis Computer (Gravis), which, under his leadership as President, grew to become the world’s largest PC and Macintosh joystick manufacturer with sales of $44 million worldwide and 220 employees. Gravis was listed on NASDAQ and the Toronto Stock Exchange. In September 1996 it was acquired by a US-based Fortune 100 company via a successful public tender offer. Mr. Russell holds a Bachelor of Commerce degree in finance from the University of British Columbia and is both a US Certified Public Accountant and a Canadian Chartered Professional Accountant. Mr. Russell resides in Vancouver, British Columbia, Canada and has a secondary residence in West Henrietta, New York. Mr. Russell’s business executive and financial experience qualifies him to serve on our Board of Directors.

Edward Kay, age 66, has been a director of the Company since April 2016. Mr. Kay is a Certified Public Accountant who spent his 33-year career with PricewaterhouseCoopers LLP (PwC) working with companies in a wide variety of industries, including manufacturing, distribution, software and technology. Mr. Kay served as PwC’s Rochester, NY Office Managing Partner for 13 years from 1999 to 2012 and, for a time, Managing Partner of the firm’s Upstate NY practice and had been the Leader of PwC’s high technology practice in Dallas, TX from 1993 to 1999. Mr. Kay was formerly a Board member, Executive Committee member, and Audit Committee Chair of IEC Electronics (NYSE: IEC) from 2013 to 2015 and is currently on the board of a large private company in the product distribution business. During Mr. Kay’s tenure at PwC and through his service on other corporate boards, he accumulated extensive experience in financial, securities, and business matters, including significant leadership roles in addressing accounting and auditing matters related to public companies, which make Mr. Kay a financial expert and qualifies him to serve on our Board of Directors.
Timothy Harned, age 57, is an investment banking, corporate development, and financial advisory veteran with more than 30 years of experience in mergers and acquisitions, capital markets, and related activities. Mr. Harned has been a director of the Company since June 2017. Mr. Harned is also a technology specialist with more than 20 years of experience in various technology fields, including communications, mobility, and software, and another ten years working with consumer and industrial companies. He began his career at Lehman Brothers (1987 to 1992) within the mergers and acquisitions group. Upon receiving his Masters in Business Administration in 1994, Mr. Harned went on to serve as a corporate development executive (1994 to 1996) and later joined Banc of America Securities (1996 to 2000) where he became a Managing Director. Mr. Harned subsequently joined Morgan Stanley & Co. (2000 to 2002) where he served as Executive Director focused on mergers and acquisitions and capital markets advisory for technology companies. From 2003 to 2016, Mr. Harned served in leadership positions at several technology-focused financial and strategic advisory boutiques. In 2016, Mr. Harned founded 8Nineteen Advisory, LLC where he served as Managing Partner and CEO while functioning as a strategic C-suite consultant regarding growth matters and providing financial advisory services, with a specialty in mergers and acquisitions and corporate and business development. He led 8Nineteen Advisory from December 2016 until it was acquired by Progress Partners, Inc. in May 2021. Since that time, he has served as Managing Director at Progress Partners in their Boston headquarters. Over his career, Mr. Harned has led strategic transactions for both Fortune 500 companies as well as earlier stage high growth enterprises. In addition, he has successfully completed multiple cross-border transactions for U.S. acquirers entering the markets of both established and developing countries. Mr. Harned' s capital markets, corporate development, mergers and acquisitions, and strategic and financial advisory experience in the technology and consumer fields qualifies him to serve on our Board of Directors.

 

 911 

 

 

Azita Arvani, age 59, is a customer-focused Hi-Tech leader who delivers innovation-led revenue growth. Ms. Arvani has served as a director of the Company since June 2021. With over two decades in digital industries, she brings extensive experience in leveraging disruptive technologies such as 5G, AI, IoT, cloud, and AR/VR, commercializing innovations, and building partnerships and ecosystems. She currently serves as General Manager of Rakuten Mobile Americas where she drives the development, strategy and deployment of the business in the Americas. Prior to joining Rakuten in February 2020, she worked at Nokia, most recently as Head of Innovation Partner & Venture Management. She led the company’s leading-edge global team where she discovered, partnered with, and mentored hundreds of rapid-growth innovative companies. She has deep experience in both established Fortune 500 companies and rapid-growth startups. She is an avid evangelist of true digital transformation for telecommunication companies, as well as other industries. Ms. Arvani has been on the Board of Directors of the Tennant Company (NYSE: TNC) since October 2012 with a focus on innovation and serves on the Compensation and Governance Committees. Her experience in technology markets and innovation and especially in AR/VR use cases is particularly valuable as Vuzix evolves its business to the next level and accelerates its market expansion. For these reasons, Ms. Arvani is qualified to serve on our Board of Directors.

Grant Russell, age 63, has served as our Chief Financial Officer since 2000 and as a member of our board of directors since April 3, 2009. From 1997 to 2004, Mr. Russell developed and subsequently sold a successful software firm and a new concept computer store and cyber café. In 1984, he co-founded Advanced Gravis Computer (Gravis), which, under his leadership as President, grew to become the world’s largest PC and Macintosh joystick manufacturer with sales of $44,000,000 worldwide and 220 employees. Gravis was listed on NASDAQ and the Toronto Stock Exchange. In September 1996 it was acquired by a US-based Fortune 100 company in a successful public tender offer. Mr. Russell holds a Bachelor of Commerce degree in finance from the University of British Columbia and is both a US Certified Public Accountant and a Canadian Chartered Professional Accountant. Mr. Russell resides in Vancouver, British Columbia, Canada. Mr. Russell’s business executive and financial experience qualifies him to serve on our board of directors.

Emily Nagle Green, age 64, is a long-time executive in the technology sector, with over 30 years of experience in introducing and scaling a wide variety of advanced technologies. Ms. Green has served as a director of the Company since June 2021. Following completion of a M.S. Engineering in computer graphics and artificial intelligence, she began her professional career developing special-effects software for supercomputers; later she led marketing for a fiber-optic communications technology firm. She served for 8 years with Forrester Research, a leading technology advisory firm, where she predicted consumer technology adoption, advised executives, and later built the firm’s European operations. She was the CEO and later Chairman of Yankee Group Research, and the launching CEO of Smart Lunches, a fast-growing ecommerce startup. She is an accomplished author and currently serves on the boards of Casella Waste Systems (NASD: CWST) and Centerspace Residential (NYSE: CSR), chairing the Nominating & Governance committees for both companies. Since 2015, she has professionally coached over 30 CEOs in the tech sector on strategy, leadership, and board management. In the non-profit sector she leads the Boston Chapter of All Raise, the national organization that supports women founders and funders. She is a member of NACD and Women Corporate Directors. We believe Ms. Green’s success in scaling advanced technologies, her experience as a CEO, and the breadth of her public board experience particularly in governance qualify her to serve on our Board of Directors.

Raj Rajgopal, age 61, is a seasoned industry executive with over 30 years of experience working with large enterprises implementing digital strategies and driving transformational growth. Mr. Rajgopal has served as a director of the Company since June 2021. He is currently the President of RR Advisory Services, LLC, an advisory firm he founded in 2019 that offers due diligence and consulting services to venture capital and private equity investors. Prior to that, he served in various leadership roles at Virtusa Corporation, including President, where he successfully led the company’s growth from under $50 million to a leading digital solutions provider with revenues of more than $1 billion. During his tenure as President at Virtusa, he supported the company’s 28 consecutive quarters of growth and led due diligence efforts on a number of successful acquisitions. Prior to Virtusa, he held multiple leadership roles in both the U.S. and the U.K. at Capgemini, a global leader in consulting, technology services and digital transformation. At Capgemini, he helped technology and telecommunication clients build differentiated strategies to scale their business. He was also a Director of Advanced Technologies at BGS Systems, Inc. He has an undergraduate degree in Mechanical Engineering and advanced degrees in Computer Science, Industrial Engineering and Business. Mr. Rajgopal currently serves as a member of the Directors at CTG Corporation (Nasdaq: CTG) and as a Board Observer at Wevo Conversion. His deep knowledge of enterprise markets, expertise in digital transformation, experience rapidly scaling a small enterprise and his relevant degrees in engineering and business, qualify him to serve on our Board of Directors.

RECOMMENDATION OF THE BOARD FOR PROPOSAL 1

 

Alexander Ruckdaeschel, age 43 joined our boardOur Board of directors in November 2012. Since March 2001, Mr. Ruckdaeschel has worked in the financial industry in the United States and Europe and as a co- founder, partner and or in senior management. Mr. Ruckdaeschel cofounded Herakles Capital Management and AMK Capital Advisors in 2008. Mr. Ruckdaeschel has also been a partner with Alpha Plus Advisors, from 2006 to 2010, and Nanostart AG, from 2002 to 2006, where he was the head of their U.S. group. Mr. Ruckdaeschel has significant experience in startup operations as the manager of DAC Nanotech-Fund and Biotech-Fund from 2002 to 2006. Following service in the German military, Mr. Ruckdaeschel was a research assistant at Dunmore Management focusing on intrinsic value identifying firms that were undervalued and had global scale potential. From October 1992 to October 2000 Mr. Ruckdaeschel was in the German military and supported active operations throughout the Middle East while also participating as a professional biathlon athlete. Mr. Ruckdaeschel’s financial experience qualifies him to serve on our board of directors.Directors unanimously recommend A VOTE FOR THE ELECTION
AS DIRECTORS OF THE NOMINEES LISTED ABOVE

 

Michael Scott, age 70, is a Professor of Law at the Southwestern Law School in Los Angeles, CA. Previously, he was Partner at various legal firms specializing in Technology and IP Practices, including Perkins Coie LLP, and Graham & James. He previously served on the board of Sanctuary Woods Multimedia, Inc., a NASDAQ publicly traded company. He is the author of 7 books on Technology Law as well as the writer of numerous legal IP-related articles published in journals, newspapers and magazines. He is the Founder and Editor-in-Chief of the E-Commerce Law Report and the Cyberspace Lawyer. Mr. Scott’s technology and intellectual property experience qualify him to serve on our board of directors.

Edward Kay, age 60, is a Certified Public Accountant who spent his 33-year career with PricewaterhouseCoopers LLP (PwC) working with companies in a wide variety of industries, including manufacturing, distribution, software and technology. Mr. Kay served as the PwC’s Rochester NY Office Managing Partner for 13 years from 1999 to 2012) and, for a time, Managing Partner of the firm’s Upstate NY practice and had been the Leader of their high technology practice in Dallas, TX from 1993 to 1999. Mr. Kay was formerly on the Board, Executive Committee member, and Audit Committee Chair of IEC Electronics (NYSE: IEC) from 2013 to 2015, and is currently on the board of a $1 billion private company in the product distribution business. During Mr. Kay’s tenure at PwC and through his service on other corporate boards, he accumulated extensive experience in financial, securities, and business matters, including significant leadership roles in dealing with accounting and auditing matters related to public companies, which make Mr. Kay a financial expert and enable him to be a valuable contributor to the Vuzix board.

Information Regarding the Board and its Committees

 

Director Meeting and Attendance

 

During 2015,2021, our boardBoard of Directors held two (2)one (1) in-person and five (5) conference call regular meeting, sixteen (16)meetings, seven (7) additional conference-call meetings, and acted twenty-eight (28)five (5) times by unanimous written consent. In addition, the directors considered Company matters and had frequent communication with each other apart from the formal meetings. No board member attended fewer than 75% of the total board meetings or of meetings held by all committees on which hesuch member served during 2015.2021.

 

Board Independence

 

Our boardBoard of Directors has determined that each of our current directors and director nominees, other than Mr. Travers and Mr. Russell, is an independent director as defined by Rule 10A-3 promulgated by the Securities and Exchange CommissionSEC pursuant to the Securities Exchange Act of 1934, as amended.and NASDAQ rules. We believe that we are compliant with the independence criteria for boards of directors under applicable laws and regulations and the NASDAQ Stock Market. The board has met and may continue to meet independently of management as required. Although they are permitted to do so, the independent directors have not held separately scheduled meetings but have had executive sessions at the conclusion of the regularly scheduled meetings at which non-independent directors and members of management are not in attendance.

12

 

Board Committees

 

We have an audit committee,Audit Committee, a compensation committeeCompensation Committee, a Nominating Committee and a nominating committee.an Acquisition Committee.

 

10

Audit Committee

 

Our audit committee in 2015 consistedAudit Committee consists of William Lee, Michael ScottEdward Kay, Timothy Harned, and Alexander Ruckdaeschel,Emily Nagle Green, each of whom wasis a non-employee director. Mr. Lee was the chairpersonOur Board of our audit committee up until his death in March 2016. Our audit committee currently consists of Michael Scott, Alexander Ruckdaeschel and our recent board appointee Edward Kay effective April 2016. Our board of directorsDirectors has determined that each member of our audit committeeAudit Committee is an independent director as defined by Rule 10A-3 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended and meets the requirements of financial literacy under SEC rules and regulations and the NASDAQ Stock Market. Mr. Lee served as our audit committee financial expert, as defined under SEC rules. Our audit committee met five (5) times during 2015. Mr. Kay was appointed in April 2016 asis the new chairperson of our audit committeeAudit Committee and is considered an independent director as defined by Rule 10A-3 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended and meets the requirements of financial literacy under SEC rules and regulations and the NASDAQ Stock Market. Mr. Kay serves as our audit committeeAudit Committee financial expert, as defined under SEC rules. Our Audit Committee met six (6) times during 2021.

 

Our audit committeeAudit Committee is responsible for, among other things:

 

·selecting and hiring our independent auditors, and approving the audit and non-audit services to be performed by our independent auditors;

·evaluating the qualifications, performance and independence of our independent auditors;

·monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financial statements or accounting matters;

·reviewing the adequacy and effectiveness of our internal control policies and procedures;

·discussing the scope and results of the audit with the independent auditors and reviewing with management and the independent auditors our interim and year-end operating results; and

·preparing the audit committeeAudit Committee report that the SEC requires in our annual proxy statement.

 

Our boardBoard of directorsDirectors has adopted a written charter for our audit committee,Audit Committee, which is available on the investor relations section of our website (www.vuzix.com).

 

Compensation Committee

 

Our compensation committee in 2015 consistedCompensation Committee consists of Alexander Ruckdaeschel, William LeeEmily Nagle Green, Edward Kay and Michael Scott,Timothy Harned, each of whom wasis a non-employee director. Mr. RuckdaeschelMs. Green is the chairperson of our compensation committee.Compensation Committee. Our compensation committee currently consistsBoard of Messrs. Ruckdaeschel, Scott, and our recent board appointee Mr. Kay effective April 2016. Our board of directorsDirectors has determined that each member of our compensation committeeCompensation Committee is an independent director as defined by Rule 10A-3 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended and under the current rules of the NASDAQ Stock Market. Our compensation committeeCompensation Committee met six (6) times in 2015.2021.This year the Committee will be reviewing the Charter to ensure that it encapsulates all of the responsibilities surrounding human capital management, workforce engagement, DEI (diversity, equity and inclusion in the workplace), and talent management. The Committee recognizes the importance of all of these aspects in the long-term success and growth of Vuzix.

 

Our compensation committeeCompensation Committee is responsible for, among other things:

 

·reviewing and approving compensation of our executive officers including annual base salary, annual incentive bonuses, specific goals, equity compensation, employment agreements, severance and change in controlchange-in-control arrangements, and any other benefits, compensation or arrangementsarrangements;

·reviewing and recommending compensation goals, bonus, and stock compensation criteria for our employees;

·preparing any compensation committeeCompensation Committee report required by the rules of the SEC to be included in our annual proxy statement; and

·administering, reviewing and making recommendations with respect to our equity compensation plans.

 

Our compensation committee may not delegate anyBoard of its authority to any other person. The base compensation paid to our named executive officers for the first 4 months of 2015 was determined by the employment agreements we entered into with those executives in August 2007. See “Compensation of Named Executive Officers and Directors – Employment Agreements.”A compensation consultant was engaged to determine or recommend the amount or form of compensation paid to our executive officers in 2015.

Our board of directors has adopted a written charter for our compensation committee,Compensation Committee, which is available on the investor relations section of our website (www.vuzix.com).

 

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2021, no member of our Compensation Committee was one of our officers or employees. Moreover, none of our executive officers served as a member of the Board of Directors, or as a member of the compensation or similar committee, of any entity that has one or more executive officers who served on our Board of Directors or Compensation Committee during 2021.

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Nominating Committee

 

Our nominating committee in 2015 consistedNominating Committee consists of Alexander Ruckdaeschel, William LeeTimothy Harned, Azita Arvani and Michael Scott,Raj Rajgopal, each of whom wasis a non-employee member of our boardBoard of directors.Directors. Mr. ScottHarned is the chairperson of our nominating committee.Nominating Committee. Our current nominating committee consistsBoard of Messrs. Ruckdaeschel, Scott, and our recent board appointee Mr. Kay effective April 2016. Our board of directorsDirectors has determined that each member of our nominating committeeNominating Committee is an independent director as defined by Rule 10A-3 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended and under the current rules of the NASDAQ Stock Market. Our boardNominating Committee met three (3) times in 2021. This year the Committee will be reviewing its Charter to ensure that it encapsulates all of the responsibilities surrounding Board of Director and committee talent management, DEI (diversity, equity and inclusion), and ESG (Environmental, Social and Governance).

Our Nominating Committee is responsible for, among other things:

·presenting a list of individuals recommended for nomination for election to the Board of Directors at the annual meeting of shareholders;

·reviewing the composition of each committee and present recommendations for committee membership to the Board of Directors as needed;

·establishing and reviewing on an annual basis the nominating committee’s policy with regard to the consideration of any director candidates recommended by the Company’s shareholders, including the procedures to be followed by the Company’s shareholders in submitting such recommendations; and

·evaluating and reporting to the Board on the performance and effectiveness of the Board to facilitate the directors fulfilling their responsibilities in a manner that serves the interests of the Company’s shareholders.

Our Board of Directors has adopted a written charter for our nominating committee,Nominating Committee, which is available on our website (www.vuzix.com). Our nominating committee met once in 2015.

11

Code of Ethics and Business Conduct

We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors. The full text of our code of business conduct and ethics is posted on the investor relations section of our website (www.vuzix.com).

 

Nominating Process

 

The process followed by the nominating and governance committeeNominating Committee to identify and evaluate candidates includes requests to board members, the chief executive officer, and others for recommendations, meetings from time to time to evaluate any biographical information and background material relating to potential candidates and their qualifications, and interviews of selected candidates. Nominations of persons for election to our boardBoard of Directors may be made at a meeting of stockholders only (i) by or at the direction of the board; or (ii) by any stockholder who has complied with the notice procedures set forth in our bylaws and in the section entitled “Questions and Answers About This Proxy Material and Voting – When are stockholder proposals due for next year’s annual meeting?” In addition, stockholders who wish to recommend a prospective nominee for the nominating and governance committee’sNominating Committee’s consideration should submit the candidate’s name and qualifications to our Corporate Secretary, 25 Hendrix Road, Suite A, West Henrietta, New York 14586.

 

In evaluating the suitability of candidates to serve on the boardBoard of directors,Directors, including stockholder nominees, the nominating committeeNominating Committee seeks candidates who are independent as defined by Rule 10A-3 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended and the rules of the NASDAQ Stock Market, and who meet certain selection criteria established by the committee. The committee also considers an individual’s skills, character and professional ethics, judgment, leadership experience, business experience and acumen, familiarity with relevant industry issues, and other relevant criteria that may contribute to our success. This evaluation is performed in light of the skill set and other characteristics that would most complement those of the current directors, including the diversity, maturity, skills and experience of the boardBoard of Directors as a whole. The board seeks the best director candidates based on the skills and characteristics required without regard to race, color, national origin, religion, disability, marital status, age, sexual orientation, gender gender identity and expression, or any other basis protected by federal, state or local law.

 

TheAcquisition Committee

Our Acquisition Committee consists of Timothy Harned, Edward Kay and Raj Rajgopal, each of whom is a non-employee member of our Board of Directors. Mr. Harned is the chairperson of our Acquisition Committee. Our Board of Directors has determined that each member of our Acquisition Committee is an independent director as defined under the rules of the NASDAQ Stock Market. Our Acquisition Committee met six (6) times in 2021.

Our Acquisition Committee is responsible for, among other things:

Review acquisition, divestiture and investment strategies and performance with the Company’s management, including how such activities align with and advance the Company’s overall growth strategy and objectives.

Investigate and oversee the due diligence of transaction candidates on behalf of the Board, and otherwise support and assist with evaluation of proposed transactions.

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Review, provide support and assistance, and recommend for authorization and approval by the Board of acquisition, divestiture and investment transactions proposed by the Company’s management in which the total consideration to be paid or received by the Company, has outstanding 49,626 sharesin cash, stock or other consideration, meets certain requirements that may be established by the Board from time to time.

Review and recommend for approval by the Board performance objectives for acquisitions or investments as proposed by Management, and from time-to-time review actual performance of Series A Preferred Stock, all of which are owned by Intel Corporation (the “Series A Purchaser”). The Series A Purchaser is entitledacquisitions or investments relative to nominate and elect 2 directorspre-set objectives.

Have full access to the Company’s executives and other members of the management team involved in corporate development as necessary to carry out its responsibilities.

Consider strategic objectives and risks associated with the Company’s acquisition, divestiture and investment activities, including assessment of the strategy, business model, financial performance, capital needs and projections of transaction candidates.

At least annually, review and assess the adequacy of this Charter and evaluate the performance of the Committee, and recommend any proposed changes to the Board.

Report regularly to the full Board on the Committee’s actions and activities.

Our Board of Directors (the “Board Election Right”), at least onehas adopted a written charter for our Acquisition Committee, which is available on the investor relations section of whom will be required to qualify as an “independent” director, as that term is used in applicable exchange listing rules. The Board Election Right with respect to the independent director will terminate on such date as the number of shares of Series A Preferred Stock then outstanding is less than 40% of the original amount purchased by the Series A Purchaser. The Board Election Right with respect to the second director will terminate on such date as the number of shares of Series A Preferred Stock then outstanding is less than 20% of the original amount purchased by the Series A Purchaser. The Series A Purchaser has not yet exercised the Board Election Right. The Company also granted the Series A Purchaser the right to have a board observer at meetings of the Company’s Board of Directors and committees thereof. The Series A Purchaser has not yet exercised the Board Election Right or their right to appoint an observer.our website (www.vuzix.com).

 

Code of Ethics and Business Conduct

We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors. The full text of our code of business conduct and ethics is posted on the investor relations section of our website (www.vuzix.com).

Involvement in Certain Legal Proceedings

None of our directors or executive officers has been involved in any legal proceeding in the past 10 years that would require disclosure under Item 401(f) of Regulation S-K.

Corporate Governance and Related Matters

 

Board Leadership Structure

 

Our boardBoard of Directors is responsible for the selection of the chairmanChairman of the boardBoard and the chief executive officer.Chief Executive Officer. Our boardBoard does not have a policy on whether or not the roles of chief executive officerChief Executive Officer and chairmanChairman should be separate and, if they are to be separate, whether the chairman should be selected from the non-employee directors or be an employee. Currently our chief executive officerChief Executive Officer acts as chairman.Chairman. Our board believes that Paul J. Travers, our founder and chief executive officer,Chief Executive Officer, is best situatedsuited to act as chairmanChairman of the boardBoard because he is the director most familiar with the Company’s business and industry and is therefore best able to identify the strategic priorities to be discussed by the board.Board.

 

Our boardBoard believes that the most effective board structure is one that emphasizes board independence and ensures that the board’s deliberations are not dominated by management. FourFive of our fiveseven current directors qualify as independent directors within the meaning of Rule 10A-3 promulgated by the SEC pursuant to the Securities Exchange Act of 1934, as amended anddefined under NASDAQ rules and regulations. Each of our standing board committees is comprised of only independent directors, including our nominating committee,Nominating Committee, which is charged with annually evaluating and reporting to the board on the performance and effectiveness of the board. Our board, has not appointed aas necessary.

In 2022, we have also established the role of Lead Independent Director, who is elected by the Board of Directors annually. The current lead independent director.Director is Edward Kay. The Lead Independent Director is responsible for, among other things:

·Presiding at all meetings of the Board of Directors at which the Chairman is not present, and at all Executive Sessions of Board meetings.

·Presiding at all meetings of the independent Directors.

·Calling meetings of the independent Directors.

·Serving as the principal liaison between the Chairman and the independent Directors relative to all substantive discussions. While this role is not intended to impede in any way the degree and/or frequency of any direct communications between the Chairman and other independent Directors, it is expected that any substantive discussions that take place between the other independent Directors and Chairman will be communicated on a timely basis by the independent Director(s) to the Lead Independent Director, and vice versa.

 

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·Communicating, on behalf of the Independent Directors and Compensation Committee, the Board evaluation of the CEO’s performance.

·Guiding and assessing all information sent to the Board of Directors, including the quality, quantity, appropriateness, and timeliness of such information.

·Assisting the Chairman in the construct of meeting agendas.

·Helping establish the frequency of Board of Directors meetings and meeting schedules, ensuring there is sufficient time for adequate discussion of all agenda items.

·Recommending to the Nominating Committee and to the Chairman, selections for membership and chair for each Board Committee, though such recommendations are not necessarily binding in nature.

·Interviewing, along with the chair of the Nominating Committee, all Director candidates and making recommendations to the Nominating Committee.

·When appropriate, being available for consultation and direct communication with stockholders.

·Having the authority to select and retain (or approve in advance the selection and retention of) outside counsel, advisors, and/or consultants who report directly to the Board of Directors on Board-wide issues.

On an annual basis and in consultation with the independent Directors, the Lead Independent shall review this charter and recommend to the Board of Directors for approval any modifications or changes.

 

Our Board’s Role in Risk Oversight

 

Our management is responsible for risk management on a day-to-day basis. The role of our board and its committees includes overseeing the risk management activities of management. Our board oversees our risk management processes directly and through its committees. The audit committeeAudit Committee assists the board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements, and discusses policies with respect to risk assessment and risk management, including guidelines and policies to govern the process by which our exposure to risk is handled. The compensation committeeCompensation Committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks arising from our compensation policies and programs. The nominating committeeNominating Committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure, and succession planning for our directors. The Acquisition Committee assists the board in fulfilling its oversight responsibilities with respect to the management of risks associated with acquisitions, investments and divestitures, as the case may be.

 

Communications with the Board of Directors

 

Stockholders and other parties may communicate directly with the boardBoard of directorsDirectors or the relevant board member by addressing communications to:

 

Vuzix Corporation

c/o Corporate Secretary

25 Hendrix Road, Suite A

West Henrietta, New York 14586

 

All stockholder correspondence will be compiled by our corporate secretary and forwarded as appropriate.

 

Director Attendance at Annual Meetings

 

We have scheduled a boardBoard of directorsDirectors meeting in conjunction with our annual meeting of stockholders and, while we do not have a formal policy regarding attendance at annual meetings, we as a general matter we expect that the directors will attend the annual meeting. Threemeeting, except in the case of the five director nominees for 2016virtual online-only meetings. All of our directors attended our 20152021 annual meeting in person and one by teleconference.virtually.

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PROPOSAL 2

RATIFICATION OF THE SELECTION OF THE COMPANY’S

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 20162022

 

The audit committeeAudit Committee has selected the accounting firm of Freed Maxick CPAs, P.C. (“Freed Maxick”) to serve as the Company’s independent registered public accounting firm for the year ending December 31, 2016.2022. Freed Maxick has served as the Company’s independent registered public accounting firm since October 2014 and is considered by the audit committee,Audit Committee, the boardBoard of Directors, and management of the Company to be well qualified. Previously, EFPR Group, LLP (“EFPR”) (and its predecessors, EFP Rotenberg, LLP and Rotenberg & Co., LLP) served as the Company’s independent registered public accounting firm from August 2009 to September 2014, and was considered by the audit committee, the board and management of the Company to be well qualified. EFPR had informed the Company it made a strategic decision in 2014 to serve public companies in roles other than as the independent auditor and it cooperated and assisted with an orderly transition of audit firms to Freed Maxick. On October 3, 2014 the Company engaged Freed Maxick as the Company’s independent registered public accounting firm, and EFPR resigned as the Company’s independent registered public accounting firm. The decision to engage Freed Maxick was approved by the audit committee of the Company’s board of directors.

EFPR’s reports on the financial statements of the Company for the years ended December 31, 2013 and 2012 have neither contained an adverse opinion or a disclaimer of opinion, nor been qualified or modified as to uncertainty, audit scope or accounting principles, except that, the reports included an explanatory paragraph with respect to the uncertainty as to the Company’s ability to continue as a going concern. During the years ended December 31, 2013 and 2012 and in the subsequent interim period through October 3, 2014, there were (i) no disagreements with EFPR on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of EFPR, would have caused it to make reference to the subject matter of the disagreements in connection with its reports, and (ii) there were no reportable events (as that term is defined in Item 304(a)(1)(v) of Regulation S-K), except that, EFPR advised the Company that there were material weaknesses in its internal controls over financial reporting, which the Company agreed with and disclosed in its Form 10-K’s for the years ended December 31, 2013, and 2012, respectively.

The Company provided EFPR with a copy of the disclosures made in the Company’s Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on October 9, 2014 and requested that EFPR furnish a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the disclosures. A copy of such letter was filed as Exhibit 16.1 to such Current Report.

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The stockholders are being asked to ratify the audit committee’sAudit Committee’s appointment of Freed Maxick CPAs, P.C. for the year ending December 31, 2016.2022. If the stockholders fail to ratify this appointment, the audit committeeAudit Committee may, but iswill not be required to, reconsider whether to retain that firm. Even if the appointment is ratified, the audit committeeAudit Committee in its discretion may direct the appointment of a different accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders. A representative of Freed Maxick, CPAs, P.C. will be present at the annual meeting virtually and will be given the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions.

 

Fees Paid to Freed Maxick CPAs, P.C.

 

The following table shows the fees that were billed by Freed Maxick CPAs, P.C. to the Company for professional services rendered in 20152021 and 2014.2020.

 

 2015 2014  2021 2020 
Audit Fees(1) $124,770  $96,000  $326,821  $241,500 
Audit-Related Fees(2)  3,500   4.043  46,250 - 
Tax Fees(3)  17,920   0  67,243 18,400 
All Other Fees(3)(4)  0   0   8,800  - 
Total Freed Maxick CPAs, P.C. Fees $146,190  $100,043  $449,114 $259,900 

 

(1) Audit fees primarily represent amounts billed for the audit of our annual consolidated financial statements for such fiscal year and quarterly reviews of our consolidated financial statements.

 

(2) Audit-related fees represent fees for services rendered in connection with reviewing our SEC filings.

Fees Paidwork related to EFPR Group, LLP

The following table shows the fees that were billed by EFPR Group, LLP for professional services rendered in 2015 and 2014.

  2015  2014 
Audit Fees(1) $0  $30,170 
Audit-Related Fees(2)  8,000   5,652 
Tax Fees  0   6,500 
All Other Fees(3)  0   4,434 
Total EFP Rotenberg, LLP Fees $8,000  $46,756 

(1) Audit fees primarily represent amounts billed for the quarterly reviews of our consolidated financial statements and fees for consents and comfort letters.

(2) Audit-related fees represent fees for services rendered in connection with consents and comfort letters and with our August 5, 2013 public stock offering and subsequent registration statements.statements in the fiscal year noted above.

 

(3) All other fees in 2014 consisted of interest charged.Professional services billed for tax compliance and planning.

 

(4) Professional services billed for due diligence work performed.

Pre-Approval of Fees by Audit Committee

 

In accordance with applicable laws, rules and regulations, our audit committeeAudit Committee charter and pre-approval policies established by the audit committeeAudit Committee require that the audit committeeAudit Committee review and approve in advance and pre-approve all audit and permitted non-audit fees for services provided to us by our independent registered public accounting firm. The services performed by, and the fees to be paid to, Freed Maxick CPAs, P.C. in 20152021 and 20142020 were approved by the audit committee. The services performed by, and the fees to be paid to, EFPR Group, LLP in 2015 and 2014 were approved by the audit committee.Audit Committee.

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Independence Analysis by Audit Committee

 

The audit committeeAudit Committee has considered whether the provision of the services described above was compatible with maintaining the independence of Freed Maxick CPAs, P.C. and determined that the provision of such services was compatible with such firm’s independence. For 20152021 and 2014,2020, Freed Maxick CPAs, P.C. provided no services other than those services described above.

The audit committee has considered whether the provision of the services described above was compatible with maintaining the independence of EFP Rotenberg, LLP and determined that the provision of such services was compatible with such firm’s independence. For each of 2015 and 2014, EFP Rotenberg, LLP provided no services other than those services described above.

 

Required Vote

 

The affirmative vote of the holders of a majority of the shares of common stock and Series A Preferred Stock (on an as-converted basis) present in person or represented by proxy at the Annual Meeting and entitled to votecast on the matter is needed to ratify the appointment of Freed Maxick CPAs, P.C. as our independent registered public accounting firm for the year ending December 31, 2016.2022. An abstention will have the same legal effect as a vote against the ratification of Freed Maxick CPAs, P.C., and broker non-votes will have no effect on the outcome of the ratification of the independent registered public accounting firm.

 

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RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 2:

Our Board of Directors unanimously recommend that the

stockholders vote FOR ratification of the appointment of FREED MAXICK CPAS,

P.C. as our
independent registered public accounting firm

for the year ending December 31, 2016.2022.

 

AUDIT COMMITTEE REPORT1

 

Membership and Role of Audit Committee

 

The audit committeeAudit Committee of our boardBoard of Directors is responsible for providing independent, objective oversight and review of our accounting functions, internal controls and financial reporting process. Currently, the audit committeeAudit Committee is comprised of Messrs. Scott, Ruckdaeschel, and our recent board appointee, Edward Kay, effective April 2016.Timothy Harned and Emily Nagle Green. The audit committeeAudit Committee operates pursuant to a written charter adopted by the boardBoard of directorsDirectors in December 2009, as subsequently amended, which may be found on the investor relations section of our website www.vuzix.com(www.vuzix.com) under the “Investors-Corporate Governance” section. We believe that each of the members of the audit committeeAudit Committee is independent as defined by applicable laws and regulations.

 

Management has the primary responsibility for the financial statements and the reporting process, including our system of internal controls, and for the preparation of the consolidated financial statements in accordance with generally accepted accounting principles. Our independent accountants are responsible for performing an independent audit of those financial statements in accordance with generally accepted auditingthe standards of the Public Company Accounting Oversight Board (PCAOB) and to issue a report thereon. The audit committee’sAudit Committee’s responsibility is to monitor and oversee these processes on behalf of the board. ThreeBoard of Directors. Two of the fourthree members of the audit committeeAudit Committee are not professional accountants or auditors and their functions are not intended to duplicate or certify the activities of management and the independent auditors. Edward Kay, a professional accountantCertified Public Accountant, is chair of the audit committee.Audit Committee.

 

Review of our Audited Financial Statements

 

In fulfilling its oversight responsibilities, the audit committeeAudit Committee reviewed the audited financial statements in our Annual Report on Form 10-K with management and discussed the quality and acceptability of our accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in our financial statements.

 

The audit committeeAudit Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the quality and acceptability of our accounting principles and such other matters as are required to be discussed with the committee under generally accepted auditingthe standards of the Public Company Accounting Oversight Board (PCAOB), including Auditing Standard No. 161301 (Communications with Audit Committees). In addition, the audit committeeAudit Committee has discussed with the independent auditors the auditors’ independence from management and us, including the matters in the written disclosures required by Independence Standards Board Standard No. 1 (Independent Discussions with Audit Committees), which were submitted to us, and considered the compatibility of non-audit services with the auditors’ independence.

 

The Audit Committee discussed with our independent auditors the overall scope and plans for their audit. The Audit Committee met with the independent auditors, with and without management present, to discuss the results of their examination, their evaluation of our internal controls, and the overall quality of our financial reporting.

 

In reliance on these reviews and discussions, the Audit Committee recommended to our Board of Directors (and our board has approved) that our audited financial statements for the year ended December 31, 2021 be included in the Annual Report on Form 10-K for the year ended December 31, 2021 for filing with the Securities and Exchange Commission.

1

The Audit Committee selects the Company’s independent registered public accounting firm annually and has submitted such selection for the year ending December 31, 2022 for ratification by stockholders at the Company’s annual meeting.

The Audit Committee currently consists of Mr. Kay (Chairperson), Mr. Harned and Ms. Green.

The material in this report is not deemed to be “soliciting material,” or to be “filed” with the Securities and Exchange Commission and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filings.

 

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PROPOSAL 3

ADVISORY VOTE ON EXECUTIVE COMPENSATION

The audit committee discussed withDodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires the Company’s stockholders to have the opportunity to cast a non-binding advisory vote regarding the approval of the compensation disclosed in this Proxy Statement of the Company’s executive officers who are named in the Summary Compensation Table below (“named executive officers”). The Company has disclosed the compensation of the named executive officers pursuant to rules adopted by the SEC.

We believe that our independent auditorscompensation policies for the overall scopenamed executive officers are designed to attract, motivate and plans for their audit. The audit committee metretain talented executive officers and are aligned with the independent auditors,long-term interests of the Company’s stockholders. This advisory stockholder vote, commonly referred to as a “say-on-pay vote,” gives you as a stockholder the opportunity to approve or not approve the compensation of the named executive officers that is disclosed in this Proxy Statement by voting for or against the following resolution (or by abstaining with respect to the resolution):

RESOLVED, that the stockholders of Vuzix Corporation approve all of the compensation of the Company’s executive officers who are named in the Summary Compensation Table of the Company’s 2022 Proxy Statement, as such compensation is disclosed in the Company’s 2022 Proxy Statement pursuant to Item 402 of Regulation S-K, which disclosure includes the Proxy Statement’s Summary Compensation Table and without management present, to discuss the results of their examination, their evaluation of our internal controls,other executive compensation tables and the overall quality of our financial reporting.related narrative disclosures.

 

In reliance2019, our stockholders voted on these reviews and discussions, the audit committee recommended to our board of directors (and our board has approved) that our audited financial statementsexecutive compensation program (also known as “Say-on-Pay”) for the year ended December 31, 2015 be includedsecond time and of the 14,377,373 votes that voted for, against, or abstained on the proposal, 13,329,683, or 93% approved it (there were also 11,753,111 broker non-votes on the proposal). The Committee considered the stockholders’ endorsement of the Committee’s decisions and policies for our overall executive compensation program in continuing the Annual Report on Form 10-K for the year ended December 31, 2015 for filing with the Securities and Exchange Commission.pay-for-performance program that is currently in place. 

 

Although the vote is non-binding, our Board and the Compensation Committee will review the voting results. To the extent there is a significant negative vote, we would communicate directly with shareholders to better understand the concerns that influenced the vote. The auditBoard and the Compensation Committee would consider constructive feedback obtained through this process in making future decisions about executive compensation programs. However, your non-binding advisory votes described in this Proposal 3 will not be construed: (1) as overruling any decision by the Board of Directors, any Board committee selectsor the Company relating to the compensation of the named executive officers, or (2) as creating or changing any fiduciary duties or other duties on the part of the Board of Directors, any Board committee or the Company.

RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 3:

Our Board of Directors unanimously recommend that the

stockholders vote FOR approval of the compensation disclosed in this Proxy Statement of the Company’s independent registered public accounting firm annually and has submitted such selection for the year ending December 31, 2016 for ratification by stockholders at the Company’s annual meeting.NAMED executive officers

 

The Audit Committee currently consists of Edward Kay, Michael Scott and Alexander Ruckdaeschel.

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COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS AND DIRECTORS

 

Named Executive Officers

 

This proxy statement contains information about the compensation paid to our Named Executive Officers (“NEOs”) during 2015.2021. For 2015,2021, we determined that the following officers were our named executive officers for purposes of this proxy statement:

  

·Paul J. Travers - chief executive officerChief Executive Officer and presidentPresident
·Grant Russell - Chief Financial Officer and Executive Vice President
·Peter Jameson - Chief Operating Officer

Biographical information regarding Mr. Travers and Mr. Russell is provided under Proposal No. 1 above.

Peter Jameson was named Chief Operating Officer (COO) of Vuzix in January 2022, having served as General Manager since joining the Company in January 2021. Mr. Jameson brings a wealth of operating experience to his new position. He previously served as COO of Osterhout Design Group (ODG), a leading wearable technology company that developed and manufactured mobile, self-contained and lightweight head-worn mixed reality smart glasses with photo-realistic imagery. Prior to ODG, Mr. Jameson was a 20-year executive at Eastman Kodak where he was a founding leader of Kodak’s multi-billion-dollar Digital Camera Business including General Manager and VP of the Digital SLR and Professional Digital Capture Group that created the world’s first digital SLR cameras, General Manager of Kodak’s Commercial Imaging Business in Europe, Africa and the Middle East and General Manager and VP of Kodak’s Digital Devices Group. He holds a Bachelor of Science Electrical Engineering degree from Union College and a Master of Business Administration degree from the University of Rochester’s Simon School of Business.

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

·Overview of Company Strategy
·Grant Russell – chief financial officerAlignment of Strategy and executive vice presidentPay
·2021 and 2022 Compensation and Governance Enhancements
·Succession Planning

Compensation Philosophy and Process

·Compensation Philosophy
·Role of Compensation Committee, Management, Consultants
·Peer Group

Elements of Executive Compensation

·Overview
·Base Salary
·Annual Incentive Plan
·Long-term Incentive Plan

Additional Compensation and Governance

·Benefits and Perquisites
·

Stock Ownership Policy

·Clawback Policy
·Hedging/Pledging
·CEO Pay Ratio

Statement on Executive Compensation

 

Executive Summary

Overview of Company Strategy

As Vuzix embarks upon the next phase of its development, the Company continues to grow as a leader in the growing AR and Smart Glasses market. We believe Vuzix is one of the few pure near-eye display companies in the world, with a wide range of products and related optical and other technologies. The Board believes that it is on a path that, with proper execution, could result in Vuzix becoming a highly valued player in the technology sector. We believe that the products and technology of the Company thatand their evolution are critical to our future growth, such as our smartgrowth. Smart glasses, wearable computing and waveguide optics are still evolving rapidly and accordingly we attemptwith varying degrees of enterprise and consumer adoption. The market for skilled personnel in the technology industry is very competitive, and skilled talent in the field of optics is even more competitive. Our ability to strike a balance between longer term strategic initiativescompete and short-term financial metrics as performance indicators. As such, we believe it is important to reward not just financial achievement but progresssucceed in our strategic initiatives such asmarket is directly correlated to our ability to recruit, incentivize, and retain talented individuals in the areas of product development, sales, marketing, and general and administrative functions.

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Alignment of new products and/or technology. AsStrategy and Pay

To recruit and retain talent and to reinforce Vuzix’ strategy, the Company has designed a result, wepay-for-performance compensation program to ensure alignment with Vuzix’ product and technology growth strategy and shareholder value creation. Key elements include:

·Increased emphasis on both short- and long-term performance for executives

·Enhanced annual performance plan to focus on objective key financial and strategic drivers of the Company’s long-term success including new products and/or technologies

·A new long-term performance-based incentive plan tied to increasingly strong internal financial and relative external market metrics

We strive to counterbalancecreate an acceptable balance of our employee retention objectives andwith pay-for-performance objectives. Historically weWe believe we have accomplishedaccomplish this by compensating our executives with a combination of base salary and performance bonus awards and long-term equity-based retentionincentive compensation. Our primary compensation vehicle is our equity award program, which we use to motivate long-term performance and strongly align the interests of our executives with those of our stockholders.

We are committed to a strong pay and performance culture, where executives’ awards are aligned with shareholder experience. A significant portion of our CEO and CFO’s awards are at-risk, meaning that unless we achieve certain levels of financial, operational, and stock price performance, our executives could receive no incentive payouts. 2021 was a good year of progress for Vuzix with a number of successes, including solid year-over-year growth in smart glasses revenue, further developments in our intellectual properties, and a significantly strengthened balance sheet, which will allow us to execute upon strategic investments to continue to grow our business. However, our FY2021 financial and operational results fell below our target goals that were set at the beginning of the year. As a result, the committee determined that it would not pay out any annual bonuses to our CEO and CFO. Furthermore, we have implemented a long-term incentive plan (LTIP) intended to reward our top executives for achieving certain challenging milestones based on market capitalization, EBITDA margin, and revenue goals over a multi-year period. For more information on the LTIP, please refer to the section titled “Leadership LTIP”.

2021 and 2022 Compensation and Governance Enhancements

Over the past few years as Vuzix has redefined its strategy and restructured the Company’s financing and investor pool, the focus has been on ensuring that the Company’s compensation and governance practices continue to evolve to support the Company’s growth. In 2021, we expanded our Board to include three new Directors who provide additional expertise as public company board members. In addition, we periodically use benchmarkshired an independent compensation consultant in 2022 to assess our compensation and peer group comparisonsgovernance practices and to assist uscreate a plan to have better alignment with industry best practices.

The Management Team and Board of Directors have recognized the importance of formalizing and better defining many of their programs and as a result have made many changes that are consistent with Shareholder feedback and best practices.

Key Changes to Compensation and Governance 2021 and 2022

Shareholder Feedback/Best PracticesKey Changes 2021 and 2022
Shareholders were concerned with non-independent CEO/COB with no Lead Independent Director to oversee and maintain independence of the Board·2022 – Board approved a Lead Independent Director who is elected annually, but is expected to serve for three consecutive years. Responsibilities of the Lead Independent Director are discussed in detail in the Corporate Governance section.
Shareholders requested more frequent Say on Pay (SOP) votes·2022 – Board has determined that annual SOP votes are appropriate and will incorporate this in each proxy going forward starting with 2022

22

Lack of gender diversity on Board, and concerns about Board and Committee Independence·2021 – Nominating Committee renewed its focus on gender and racial diversity of its Board members and appointed three new members to the Board including 2 women and 1 underrepresented minority, all of whom bring significant technology, senior management, and public company board experience
·Board is majority independent and only independent Directors serve on the Board’s key Committees
Increasing focus by institutional owners on ESG·2021 – Board appointed new Compensation Committee Chair
and Board accountability·2022 – Board asked Management to begin formulation of ESG reporting to the Board for 2022
·2022 – Board is evaluating and expanding Committee roles to ensure that all areas of ESG are covered. For example, the Nominating Committee will be updating their charter in 2022 to include elements of DEI and ESG, and the Compensation Committee will be updating the Committee Charter to include Human Capital Management and workforce, DEI, and talent management
Expectations of increased transparency on programs/process·2022 – Company has spent significant amount of time ensuring that programs and plans are disclosed in a manner that is understandable and focuses on key objectives
Questions on Company’s peer group·2022 – Company worked with its compensation consultant to define a peer group that reflects Vuzix’ industry, performance, business model, customer base, global presence and good governance, to ensure upcoming compensation comparisons are appropriate (new peer group companies are named in CD&A section)
Increase objective performance-based metrics in short-term incentives·Enhanced STI performance focus
·2021 – Continued to enhance STI plan and provide more formalized approach. The Company did not meet financial goals in 2021 and, as a result, the Committee did not pay out annual incentives to NEOs for 2021 performance
·2022 – Evolved STI plan to be tied to a mix of financial and strategic metrics that drive Company’s long-term success with limited Board discretion
Performance-based long-term incentive·2021 – Introduced performance-based equity for all NEOs to:
üHelp Vuzix grow and achieve its mission and goals, which would enable the creation of significant stockholder value
üStrengthen leadership with incentives that strongly align their interests with those of Vuzix and other stockholders
üProvide strong pay-for-performance linkage as the awards can only vest with significant achievements in market cap, EBITDA margin and revenues
üProvide strong retentive value, given the potential wealth creation linked to financial and shareholder value creation
Company has not had a formal equity ownership policy for NEOs or Directors·While insiders have maintained an unspoken focus on not selling the Company stock, the Board and Company determined that this was the appropriate time to implement formalized stock ownership policy for NEOs and Directors to:
üFoster a culture of ownership
üProvide an example to the rest of the organization that senior management and Directors’ equity interests are tied to the Company’s long-term success
üAlign the long-term interests of executives and shareholders
üReduce excessive risk taking that could drive short-term returns to the detriment of the long-term
Enhance Clawbacks·2022 – The Company is putting into place a comprehensive compensation clawback policy in the first half of 2022 which will cover any compensation programs that do not already have their own clawback language
Hedging/Pledging·2022 – The Company is expanding the elements of its current Hedging/Pledging policy in the first half of 2022 to ensure all components meet best practices
Succession Planning·2022 – The Compensation Committee has added two elements regarding ensuring succession planning for senior management: explicit succession & development planning goals for all current NEOs, and an annual review by the Committee of those goals and progress towards them
Director Compensation·2022 – The Board has approved changes in Director compensation to better manage the expense and has set a formal limit in place for total annual Director compensation

Compensation Philosophy and Process

As our business success is driven by our products, technology, and go-to-market strategies, and given that the market for talent is highly competitive in determining whether our industry, Vuzix’ compensation philosophy has evolved, and our current focus is to:

·Attract recruit, retain and incentivize the most highly qualified executives to manage each of our business functions
·Incorporate incentive programs that fit with and drive our business strategy and align the interests of our NEOs with those of our shareholders
·Balance short- and long-term drivers of growth and shareholder value
·Reward for progress in our strategic initiatives such as the development of new products and technologies
§Create a greater pay-for-performance alignment, providing upside leverage for greater performance and wealth creation

To support our compensation philosophy and objectives, the Compensation Committee has designed the executive compensation program with a balance between annual and long-term compensation, as well as between fixed and at-risk pay. We provide our executives a combination of base salary and performance bonus awards and long-term equity-based compensation. Our primary compensation vehicle is appropriate in lightour equity award program, which we use to motivate long-term performance and strongly align the interests of our compensationexecutives with those of our shareholders. The equity program is performance and market-based and at-risk based upon the Company’s financial, strategic and market performance objectives and philosophy. We currently have no pre-established policy forwith aggressive goals over the allocation between either cash or non-cash compensation but we do emphasize long term results over annual achievements.term.

 

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Role of the Compensation Committee

 

The Compensation Committee of our boardBoard of directorsDirectors sets our executive compensation policies and determines the amounts and elements of compensation for our executive officers. As set forth in the Compensation Committee’s written charter, its responsibilities include establishing compensation policies for our directors and executive officers; reviewing and approving the CEO’s, CFO’s and CFO’sCOO’s annual compensation; approving employment agreements or arrangements with executive officers; administering our 2014 Equity Incentive Plan and approving grants under this Incentivethe 2014 Plan; and making recommendations regarding any other incentive compensation or equity-based plans. The Compensation Committee may delegate certain authority with respect to compensation matters to our executive officers. This year the Committee will be reviewing the Charter to ensure that it encapsulates all of the responsibilities surrounding human capital management, workforce engagement, DEI, and talent management. The Committee recognizes the importance of all of these aspects to the long-term success and growth of Vuzix.

 

For all executive officers other than our CEO, CFO and CFO,COO, the Compensation Committee establishes and approves the base salary compensation based onupon recommendations from the CEO.

With respect to compensation of our CEO, CFO and CFO,COO, the Compensation Committee establishes and approves the compensation determinations based onupon the Compensation Committee’s evaluation and performance reviews of our CEO, CFO and CFO.COO.

 

A copy of the Compensation Committee charter is posted on the investor relations section of our website, (www.vuzix.com), under the heading “Investors: Corporate Governance.”Governance”. In 2021, our Compensation Committee consisted of Emily Green (Chair), Timothy Harned and Edward Kay, each of whom is an independent director as determined by our Board of Directors, based upon the NASDAQ Rules and our independence guidelines.

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The Role of Management

 

At the request of the Compensation Committee, the Name Executive OfficersNEOs of the Company may be present at Compensation Committee meetings for discussion purposes. However, they have no involvement in the decisions made by the Committee, nor do they have a vote on any matters brought before the Committee. The Compensation Committee meets with the CEO to discuss his performance and compensation package, but ultimately decisions regarding his compensation package are made solely based upon the Committee’s deliberations, as well as input from the compensation consultant, as requested. The Compensation Committee considers recommendations from the CEO, as well as input from the compensation consultant, as requested, to make decisions regarding any other NEOs.NEO.

 

Role of the Compensation Consultant

 

The Compensation Committee is comprised exclusively of independent outside directors. In making its determinations with respect to executive compensation, the Compensation Committee has the authority to engage its own advisors to assist in carrying out its responsibilities. The engagement of services from the compensation consultant provides input on trends in executive compensation and an outside perspective on our executive compensation practices and assists with our peer group benchmarking analysis. The Compensation Committee uses the consultant to assist in various analyses it sees fit, including the identification and selection of peer companies for purposes of comparing compensation practices, to provide guidance regarding the amount and types of compensation that we provide to our executives and boardto members of directors,our Board of Directors, and other compensation-related matters.

In making its determinations with respect to executive compensation, the Compensation Committee has periodically engaged the services of a compensation consultant to provide input on trends in executive compensation and to obtain an outside perspective on our executive compensation practices and assist with our peer group benchmarking analysis. In 2021, the Committee worked with The Burke Group for compensation advice. In 2022 following the change in Compensation Committee leadership, the Committee surveyed appropriate firms, conducted a thorough RFP process, and engaged Farient Advisors LLC (“Farient”) as the compensation consultant. Services have or may include:

·Recommend changes to the peer group of comparable companies;

·Provide a competitive assessment of executive and Director compensation levels for 2023;

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·Provide assistance with our future short-term and long-term incentive strategy;

·Provide best practices on executive compensation practices and governance;

·Assist with the draft of the proxy statement; and

·Provide general executive compensation advice.

The compensation consultant reports directly to the Compensation Committee and carries out responsibilities as assigned by the Committee. The Compensation Committee has the sole authority to retain and terminate the compensation consultant and to approve the compensation consultant’s fees and all other terms of the engagement. The Committee exercised this authority to engage Farient as its independent compensation consultant in 2022 and has direct access to the compensation consultant throughout the year. Farient serves as an advisor to the Compensation Committee on topics primarily related to Board and executive compensation. Farient does not provide us with any services other than the services provided at the request of the Compensation Committee.

The Compensation Committee regularly reviews the services provided by its outside consultants and believes that both Farient and Burke (its previous compensation consultant) are independent in providing executive compensation consulting services. The Compensation Committee conducted a specific review of its relationship with Farient in 2022 and determined that Farient’s work for the Compensation Committee did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and by the SEC and the Nasdaq Stock Market. The Compensation Committee previously conducted a specific review of its relationship with Burke in 2021, consistent with the guidance provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and by the SEC and the Nasdaq Stock Market.

Peer Group

In 2022 Vuzix updated the Company’s peer group to better reflect the company’s new strategy. Criteria included relevant industry, size and performance, fit with company’s business model, customer base and global presence. Companies included are: Aehr Test Systems, CEVA, Inc., CyberOptics Corporation, Digimarc Corporation, Identive, Inc., Immersion Corporation, Kopin Corporation, Lantronix, Microvision, Ouster, Inc., PDF Solutions, Inc., Pixelworks, Inc., and Rekor Systems, Inc.

 

Elements of Executive Compensation

 

TheOur compensation level of our executives generally reflects their level of experience andprogram is designed to be simple, straightforward and fair. We use the following compensation and benefits elements to provide an overall competitive compensation and benefits package that is tied to creating stockholder value and supporting the execution of our business strategies:

Base salary;

Annual incentive (cash or restricted stock or short-term equity awards); and

Long-term incentives.

The combination and allocation of the components and the target amount of each component is influenced by the role of the executive officer, individual performance, expected contributions, market practices, and the total value of all the compensation and benefits available to positively affectthe individual executive officers. The Compensation Committee reviews and considers each component for each executive officer before making compensation decisions. Consistent with our future operating performancehistorical practice, we weighted the mix of compensation more towards base salary and shareholder value.long-term equity incentive plans and to a lesser extent short-term cash bonuses or short-term equity awards as discussed below.

 

In making determinations with respect to amounts and elements of executive compensation, theThe Compensation Committee evaluates ourthe overall performance of the NEOs during the year against annual budgets; evaluates the Chief Executive Officer’sCEO’s achievements against the Board’s expectations; obtains input from the Chief Executive OfficerCEO on the performance reviews of the other executive officers; evaluates the potential for future contributions by each executive to our long-term success; and periodically compares our executive compensation against a benchmarking analysis of a group of peer companies.

 

Base Salary.

Base salary is the primary fixed element in the Company’s compensation program and is intended to provide an element of certainty and security to the Company’s executive officers on an ongoing basis. Two of the Company’s executive officers had employment agreements with the Company as of December 31, 2014 and their initial salaries are set by contract. Salaries are based on the executive’s level of experience, functional specialty, and responsibility. Executive salaries are reviewed on an annual basis by the Compensation Committee. Any increases in salary are based on an evaluation of the individual’s performance, level of responsibility and, when such information is available, the level of pay compared to the salaries paid to persons in similar positions in the Company’s peer group or as shown in survey data.

 

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The Compensation Committee approves all option grants with input and recommendations

In the four-year period from the CEO, with the exception that the2017 to 2020, Vuzix’ CEO and CFO received no increases in salary. Due to the exceptional work in driving the company’s results in 2021, the Board increased the CEO’s and CFO’s base salary in that year. These have been delegated authoritykept the same for 2022. With the promotion of Peter Jameson to approve initial grants made to newly hired employees. New employees may receive a stock option grant when hiredCOO, he has received an increase in order to immediately align their interests with us and may be eligiblesalary for additional option grants going forward.2022. 

 

Bonus. Any short termThe following table summarizes the annualized base salaries in effect as of December 31, 2021, 2020 and 2019 for the named executive officers:

Officer 2021 Salary  2020 Salary  Percent
Change
‘21 vs ‘20		  2019 Salary  Percent
Change
‘20 vs 19’		 
Paul Travers $575,000  $500,000   15.0% $500,000   0%
Grant Russell  450,000   425,000   5.9%  425,000   0%
Peter Jameson  300,000   —   NM   —   NM 

Annual Bonus

Generally, short-term bonuses or cash incentive awards to executive officers are tied to achieving performance metrics established by the Compensation Committee, at the beginning of each year, with input from the CEO whichand CFO, and are not re-setreset during the year, regardless of Company performance or economic conditions. The program creates incentive for the executive officers to direct their efforts toward achieving specified company goals and individual goals. We believe our executive officers are drawn in part to a smaller company such as ours for the potential wealth that can be created by growing our company. This potential wealth is more likely created through our equity-based incentive compensation plan. We therefore use annual incentive awards to provide some element of a more immediate reward to motivate our executives.

To further formalize compensation and governance programs, the Committee implemented a short-term incentive program for 2022 tied to financial and strategic drivers of the Company’s long-term success. These key financial drivers include revenues, earnings, product margins and objective strategic and leadership measures focused on driving the Company’s long-term growth. All components are capped at 100% of base pay and achievement at threshold results in 50% of target pay. The Committee may, in its sole and absolute discretion, adjust final bonus amounts paid to the participants, but is unlikely to do so barring major unexpected events.

To measure our 20152021 performance, the Compensation Committee established goals related to the Company’s financial performance, and attainment of strategic milestones and approved individual goals for executives. In 2015,2021, there were three elements to the Annual Bonus program which could have allowed the CEO and CFO to earn up to 50% of their base salary, with 50% of the bonus pool tied to achieving specified revenue and EBITDA performance metrics and the remaining 50% to be discretionary, as determined by the Compensation Committee. In 2021, given that the financial thresholds were not obtained, no incentive bonuses were paid to Messrs. Travers and Russell. Mr. Jameson, who was not part of the NEO Annual Bonus program for 2021, was paid a $25,000 hiring bonus during his first year as General Manager, as determined by the CEO.

Long-Term Incentives

We believe that including an equity-based incentive component of compensation is a critical tool for motivating our executives and certain employees. We believe that granting equity awards to our executives aligns executive compensation with long-term stockholder value. By awarding executive officers with equity awards that vest over time, we fell shortbelieve that our executive officers will have a continuing stake in our long-term success.

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We have historically sought to weight our total executive compensation towards restricted stock and option awards which either vest upon the achievement of reachingcertain performance milestones or vest over time. While our management can improve our financial performance through the sales of our current products, cost reduction efforts, process improvements and other short-term advancements, we believe that our executive officers’ focus on long-term achievements, particularly increasing our product and patent portfolios, will create the greatest stockholder value. We believe that by granting our executives meaningful levels of equity awards that either vest over the long-term or based upon the Company’s financialmarket capitalization, revenues, and adjusted EBITDA margins, as reflected in the previously announced March 17, 2021 performance goals. Other strategic milestones relatedstock option awards granted to the developmentexecutive officers, we will achieve the proper balance between incentivizing on the current fiscal year’s results while also factoring in the longer-term strategies and performance of certain technologies and attaining certain production milestones and certain individual milestones were not achieved.the Company.

 

Compensation Setting ProcessOn March 17, 2021, the Company implemented a new Leadership Long Term Incentive Plan, or LTIP. The primary objective of the Board of Directors in designing the LTIP is to help Vuzix grow, execute upon its mission, and achieve its goals, which would enable the creation of significant stockholder value. There are three main objectives in the LTIP’s design:

·Strengthen incentives and create greater pay-for-performance alignment with shareholder value creation

·Ensure senior leaderships’ continued service

·Spur the Co-Founders and Senior Management to achieve Vuzix’ aggressive strategic and financial objectives

With these objectives in mind, the Board implemented a 10-year performance award for its Co-Founders (Paul Travers and Grant Russell) that will incentivize their continued leadership of Vuzix over the long-term. In addition, based on suggestions of the Co-Founders, select other senior management team members were added to the program who volunteered to do so rather than receive a smaller standard time-based option grant. This award is fully aligned with Vuzix’ long-term ambitions and the interests of its stockholders. The operational and market-based milestones behind the LTIP are very challenging, requiring market capitalization of >$10B, revenues over $1.5B, and EBITDA margins of 16% for full vesting of the plan. If successful, these outcomes will create significant value for the Company’s shareholders.

This LTIP consists exclusively of stock options with performance tranches that vest only if one of the various market capitalization milestones and/or certain operational milestones are achieved. The LTIP Program consists of a 10-year grant of stock options and is designed to help ensure that Vuzix is executing well on both a top-line and bottom-line basis with EBITBA margin milestones. Of the option pool available, 50% is for the achievement of equity market capitalization targets ranging from $1 to $10 billion, 35% of the option pool is available for the achievement of annual revenue targets ranging from $25 million to $1.5 billion, and 15% of the options available is for the achievement of annual Adjusted EBITDA margins of 0% to 16%. Additionally, the Program is designed to help ensure that Vuzix is executing well on both a top-line and bottom-line basis against the milestones. If all the tranches ever become fully achieved, all LTIP participants will be collectively eligible to receive the number of stock options that corresponds to approximately 8.3% (or 5,409,000) of Vuzix’ current total outstanding shares eligible to be issued if the identified milestones are ultimately vested and exercised by the Program participants. Furthermore, the LTIP stock options were granted at $19/share, requiring the stock to be above $19/share for any value to be received by the executives.

LTIP stock options once earned and exercised may not be sold, transferred or disposed of during the twenty-four (24) month period following the date of vesting, except for the sale of shares to cover tax obligations; provided, however, such required holding period shall lapse with respect to one twenty-fourth (1/24) of such shares of Stock on each monthly anniversary of the date of vesting until all of such shares of Stock are transferable.

This resale holding period is to further align LTIP participants interests with Vuzix stockholders’ interests following option exercise (subject to early tax obligation sales).

 

The Compensation Committee compared the total direct compensationVuzix Co-Founders must also remain actively involved in Vuzix and be principally employed as a Vuzix Senior Officer or, as a member of the Company’s executive officersVuzix Board of Directors and actively involved with the total direct compensation paid today-to-day activities of the top executive officersVuzix, or in the case of other management participants be employed full-time with Vuzix, at the companiestime each milestone is met in order for the corresponding tranche to be earned and vest for the Program participants. This ensures the Co-Founders’ active leadership of Vuzix over the long-term and that they and other management participants in the peer group, as well as to compensation levels revealed in survey data provided by PM&P, for purposes of establishing 2015 salaries for our NEOs.LTIP remain employed at Vuzix.

 

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The compensation consultant reports directly to the Compensation Committee (composed entirely of independent board members) convened and carries out responsibilities as assigned bycarefully assessed and discussed the Committee. The Compensation Committee has the sole authorityitems below prior to retain and terminate the compensation consultant and to approve the compensation consultant’s fees and all other termsdiscussing at a full meeting of the engagement. The Committee exercisedBoard at which both Mr. Travers and Mr. Russell recused themselves.

(i)What performance milestones should be used in an award;

(ii)What the total size of an award should be and how that size would translate into increased ownership and value for the senior leadership team; and

(ii)How to balance the risks and rewards of a new award.

Throughout this authority to engage Pearl Meyer & Partners (PM&P) asprocess, the Board used the services of its previous independent compensation consultant, the Burke Group, and Harter Secrest & Emery LLP (HSE), which served as its special external legal counsel.

After engaging in February 2015this extended process and has direct access to the compensation consultant throughout the year. PM&P serves asconcluding that such an advisor to the Compensation Committee on topics primarily related to Boardaward would motivate and executive compensation. PM&P reports directly to the Compensation Committee Chair, takes direction from the Compensation Committee, and does not provide us with any services other than the services provided at the requestincentivize members of the senior leadership team to continue to lead the management of Vuzix over the long-term, the Board of Vuzix, with Mr. Travers and Mr. Russell recusing themselves, granted the LTIP with the understanding that the LTIP would be expanded to include additional members of the senior management team as appropriate and as approved by the Board’s Compensation Committee.

  

TheAdditional Compensation Committee regularly reviews the services provided by its outside consultants and believes that PM&P is independent in providing executive compensation consulting services. The Compensation Committee conducted a specific review of its relationship with PM&P in 2015 and determined that PM&P’s work for the Compensation Committee did not raise any conflicts of interest, consistent with the guidance provided under the Dodd-Frank Wall Street Reform and Consumer Protection Act, and by the SEC and the NASDAQ National Market, or Nasdaq.

Compensation DeterminationsGovernance Practices

 

Peer Group BenchmarkingPerquisites

In 2015 the Compensation Committee engaged PM&P to assist in selecting a peer group. The companies were selected as peers based on their being in a similar industry, primarily manufacturers of electronic components or electronic equipment and instruments, and of a generally similar size, based mainly on market capitalization revenue that approximated ours. A total of 13 companies were selected.

 

The Compensation Committee comparedCompany offers limited perquisites for the total direct compensationexclusive benefit of the Company’sNEOs. Our healthcare, insurance, and other welfare and employee-benefit programs are the same for all eligible domestic employees, including executive officers with the total direct compensation paid to the named executive officers at the companies in the peerofficers. Benefits provided include health and dental coverage, group as well as to compensation levels revealed in survey data provided by PM&P, for purposes of establishing 2015 salaries, which had previously been established back in 2007term life insurance, and before our Company went public. The Compensation Committee set Mr. Travers’s base salary under his amended employment contract at $425,000, which represents approximately a 41.6% increase over the salary of $300,000 that he had previously been earning since January 2010. The Compensation Committee set Mr. Russell’s base salary under his amended employment contract at $350,000, which represents approximately a 27.3% increase over the salary of $275,000 that he had previously been earning since January 2010. Both these increases became effective May 1, 2015. The Compensation Committee evaluated each of these executive officers’ performancedisability programs and recognized their achievements since the Company first went public in 2009 and the progress the Company has made.

Compensation Discussion and Analysis

The Compensation Committee believes that the Company’s “NEOs” play a critical role in the operational and financial performance of the Company that creates long-term value for our stockholders. Accordingly, the Company’s executive compensation philosophy is to reward our executives for individual performance and formatching contributions to our performance.401(k) plan. We share the cost of health and welfare benefits with our employees, a cost that is dependent upon the level of benefits coverage that each employee elects. The benefits provided to foreign employees are typically determined by the laws of the applicable country in which the employee resides or we reimburse their costs of obtaining equivalent benefit coverages. We have no outstanding loans of any kind to our executive officers.

Stock Ownership Policy

In April 2022, the Company adopted a stock ownership policy. The policy states that each NEO is required to own shares of our common stock as follows (provided that NEOs appointed after April 30, 2022 (the date the guidelines were adopted by our Compensation Committee believes that new products and IPBoard) and will have five years from the date of the Company are criticalhire or appointment to the Company’s future growth,attain such as upcoming and new wearable technology products and smart glasses, including waveguide optics models and accordingly wants to strike a reasonable balance between lead (strategic initiatives) and lag (financial metrics) performance indicators. And as the Company’s shares are now traded on NASDAQ it is important that the management team implement Sarbanes Oxley, or SOX and greatly reduce the deficiencies in the areas of financial reporting. As such, the Committee believes it is important to reward not just the achievement of financial goals but also progress in the Corporation’s strategic initiatives such as the development of new products and/or technology as well as improved financial reporting controls.

Accordingly, the Compensation Committee implemented a short-term incentive plan for the two NEOs for the Company’s 2015 fiscal year. This incentive plan was developed in consultation with the PM&P for 2015 and the following performance targets for each NEO:ownership levels):

 

·●Paul Travers – target incentive amount is 60% ofOur CEO must own shares with an aggregate fair value equal to three (3) times such executive’s annual base salary. Seventy-five percent (75%) of Mr. Travers’ target performance bonus will be based on the Company’s operating results and twenty-five percent (25%) related to new product introductions and technology objectives.

·●Grant Russell - target incentive amount is 50% ofAll NEOs other than our CEO must own shares with an aggregate fair value equal to one (1) time such executive’s annual base salary. Seventy-five percent (75%) of Mr. Russell’s target performance bonus will be based on the Company’s operating results and twenty-five percent (25%) related to implementing and verifying full SOX controls at the Company.

 

In 2015, while we were successful in advancing new products, key technologies, and in securing a major financing from key industry entity, neither NEO achieved their andFor purposes of these guidelines, an NEO’s stock ownership includes all shares of the Company’s targetscommon stock owned by such NEO outright or held in trust for such executive and his or her immediate family, but not an NEO’s unvested or unexercised equity (i.e. unvested restricted stock units or outstanding stock options). The value of the shares will be measured as a result no short-termthe greater of the then-current market price or the closing price of the Company’s common stock on the acquisition date.

All of our NEOs serving in executive positions meet the ownership requirements or still have time remaining to satisfy the requirements. The equity owned by each of our NEOs as of April 16, 2022, is set forth in the “Security Ownership of Certain Beneficial Owners and Management” table above.

The stock ownership policy also applies to independent members on our Board of Directors. Under this policy, each independent director of the Company is required to accumulate and hold an equivalent amount of shares with an aggregate fair value equal to three (3) times their annual cash incentives were paid in 2015.retainer.

Clawback Policy

 

In 2013, our stockholders voted2018, we adopted a Clawback Policy that provides that certain performance-based compensation is recoverable from an executive officer if the Company determines that an officer has engaged in knowingly or intentionally fraudulent or illegal conduct that caused or substantially caused the need for a restatement of the Company’s financial results. If the Board of Directors or an authorized committee determines that any such performance-based compensation would have been at a lower amount had it been based on our executivethe restated financial results, the Company will, to the extent practicable and permitted by applicable law, seek recoupment from such officer of the portion of such performance-based compensation that is greater than that which would have been awarded or earned had such compensation been calculated on the basis of the restated financial results.

In 2022, the Company has determined to add a more comprehensive Clawback Policy that will cover all compensation programs with the criteria set forth in the Clawback Policy, even if a specific compensation program (also known as “Say on Pay”) fordoes not already have clawback language incorporated into the first time and of the 1,842,079 votes present at the meeting, 1,490,824, or 80.2% approved it. The Committee considered the stockholders’ endorsement of the Committee’s decisions and policies for our overall executive compensation program in continuing the pay-for-performance program that is currently in place.itself.

 

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Hedging Policy

Under the terms of our insider trading policy, our NEOs, members of our Board of Directors (and their respective family members and any affiliated entities) and others considered an Insider of the Company, may not engage in hedging or monetization transactions involving Vuzix securities, such as zero-cost collars and forward sale contracts, or engage in short sales of Vuzix securities, including short sales “against the box.” Such activities may put the personal gain of an Insider in conflict with the interests of the Company and its stockholders. Consequently, no Insider may trade in options, warrants, puts and calls or similar derivative instruments based on the Company’s securities or buy the Company’s securities with the intention of quickly reselling them or sell the Company’s securities “short.” Any sale by an Insider of the Company’s securities that have not been held for investment for a period of at least 90 days shall be deemed to be considered speculative and prohibited. In addition, Insiders may not buy the Company’s securities on margin. Insiders may, of course, exercise stock options granted to them by the Company (including pursuant to a “cashless exercise” of stock options) and, subject to the restrictions discussed in the Company’s Insider Trading Policy, sell shares acquired through the exercise of such options.

In 2022, the Company plans to expand the elements of its current Hedging/Pledging policy to ensure all components meet industry best practices.

Prohibition against Certain Equity Transactions

Our Insider Trading and Disclosure Policy prohibits our NEOs, employees, directors, consultants, advisors, and contractors (as well as members of their immediate families and households, and family trusts (or similar entities) controlled by or benefiting such persons) from engaging in any short sale, “sale against the box,” or any equivalent hedging transaction involving the Company’s stock (or the stock of any of the Company’s business partners in any of the situations described above). A short sale involves selling shares that a person does not own at a specified price with the expectation that the price will go down so that such person can buy the shares at a lower price before such person has to deliver them. Many hedging transactions such as “cashless” collars, forward sales, equity swaps and other similar or related arrangements may indirectly involve a short sale, and the Company’s Insider Trading Compliance Officer will assess any such proposed transactions and determine whether such proposed transactions would violate the Insider Trading and Disclosure Policy. In addition, a person may not engage in a “hedging” transaction if the person is trading in Company stock pursuant to a “blind trust” or a Rule 10b5-1(c) trading program. The Company also recommends that a person not margin or pledge the Company stock to secure a loan and that a person not purchase Company stock “on margin” (that is, borrow funds to purchase stock, including in connection with exercising any Company stock options).

CEO Pay Ratio

We are providing the following information about the ratio of our CEO’s total compensation for 2021 to the total compensation of our median compensated employee for 2021 (our ‘‘CEO pay ratio’’) pursuant to Item 402(u) of Regulation S-K. The CEO pay ratio disclosed below represents a reasonable, good faith estimate, calculated in a manner consistent with SEC rules, based on our payroll and employment records and the methodology described below:

•  CEO total compensation: $42,966,518(1)

•  Median Employee total compensation: $94,177

•  Ratio of CEO to Median Employee: 456 to 1

(1) Of the total compensation of $42,966,518, $42,373,304 relates to the fair market value of the LTIP award the CEO received in 2021, of which $39,935,229 is considered unearned compensation as the associated market equity and performance-based milestones have not been achieved. Excluding the unearned compensation, the ratio of CEO to Median Employee would be 32 to 1.

All data included in the calculation is prepared in accordance with the requirements of Item 402(u) of Regulation S-K.

Methodology for Selecting the Median Employee

We prepared a list of all 102 U.S. employees, excluding the CEO and, utilizing the amount of annual base pay of all of our U.S. employees, determined the median employee total compensation. We excluded all non-U.S. employees in our foreign locations from our median calculation as they represent less than 5% of our total employee population. We selected December 31, 2021 as our determination date. The pay ratio is a reasonable estimate calculated based upon rules and guidance provided by the SEC. The SEC rules allow for varying methodologies for companies to identify their median employee total compensation; other companies may have different employment and compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. Consequently, the pay ratios reported by other companies are unlikely to be relevant or meaningful for purposes of comparison to our pay ratio as reported here.

29 

 

 

Other Considerations

Section 162(m) of the Internal Revenue Code of 1986, as amended, places a limit of $1.0 million on the amount of compensation that we may deduct as a business expense in any year with respect to certain of our most highly paid executive officers. While the Compensation Committee considers the deductibility of compensation as one factor in determining executive compensation, the Compensation Committee retains the discretion to award compensation that is not deductible as it believes that it is in the best interests of our stockholders to maintain flexibility in our approach to executive compensation in order to structure a program that we consider to be the most effective in attracting, motivating and retaining our executive officers.

Employment and Other Agreements

We typically do not offer employment agreements and the only current employees with such an agreement are our CEO and CFO, both of which were entered into in 2007, and which are still effective.

Our Equity Plan provides for the acceleration of the vesting of unvested stock options and restricted stock awards in the event of a change-in-control, unless the Administrator has made appropriate provision for the substitution assumptions, exchange or other continuation of the award pursuant to the Change-of-Control.

EXECUTIVE COMPENSATION

The Compensation Committee has reviewed and discussed with management this Compensation Discussion & Analysis and, based on such review and discussion, has recommended to the Board of Directors that the Compensation Discussion & Analysis be included in the Company’s 2021 Annual Report on Form 10-K and this Proxy Statement.

Submitted by the Compensation Committee:

·Emily Nagle Green – Chair
·Edward Kay – Member
·Timothy Harned - Member

SUMMARY COMPENSATION TABLE

 

The following table sets forth information concerning total compensation earned or paid to our named executive officers for 20152021, 2020 and 2014.2019. More detailed information is presented in the other tables and in the footnotes to the tables.

 

Name and Principal    Salary
Paid		  Bonus or
Commission		  Option
Awards		  Stock
Award		  All Other
Compensation		  Total 
Position Year  ($)  ($)  ($)  ($)  ($)  ($) 
Paul Travers, President  2021  $575,000(1) $—  $42,373,304(5) $—  $18,214(9) $42,966,518 
and Chief Executive Officer  2020   586,694(1)  120,000(4)  54,673(6)  92,250(8)  18,188   871,805 
   2019   500,000   —   —   —   18,023   518,023 
                             
Grant Russell, Chief Financial  2021   $450,000(2)  $—  $ 22,896,077(5) $ —  $17,245(10) $ 23,363,322 
Officer and Executive Vice  2020   503,302(2)  102,000(4)  54,673(6)  92,250(8)  19,263   771,488 
President  2019   425,000   —   —   —   20,797   445,797 
                             
Peter Jameson, Chief Operating Officer (formerly General Manager)  2021   $276,923(3)  $25,000  $ 5,668,033(7) $ —  $8,674(11) $ 5,978,630 

     Salary Paid  Bonus or
Commission		  Option Awards  Stock
Award		  All Other
Compensation		  Total 
Name and Principal Position Year  ($)  ($)(3)  ($)(4)  ($)(5)  ($)  ($) 
Paul J. Travers, President and  2015  $383,333(1) $—  $—  $500,000(5)  9,278(6) $892,612 
Chief Executive Officer  2014   300,000(1)  —   93,090   —   9,276(6)  402,366 
                             
Grant Russell, Chief Financial Officer  2015   325,000(2)  —   —   500,000(5)  19,700(7)  844,700 
and Executive Vice President  2014   275,000(2)  —   151,271   —   20,376(7)  446,647 

30

 

(1)Mr. Travers’s contract provides for an annual salary of $425,000$575,000 beginning on January 1, 2021 and it has previously been $500,000 since May 1, 2017. As part of our salary reduction program in 2015 and $300,000May 2020, Mr. Travers reduced his cash salary by $163,306 in 2014.exchange for company common stock with a fair market value of $250,000.
  
(2)Mr. Russell’s contract provides for an annual salary of $350,000$450,000 beginning on January 1, 2021 and it had previously been $425,000 since May 1, 2017. As part of our salary reduction program in 2015 and $275,000May 2020, Mr. Russell reduced his cash salary by $134,198 in 2014.  exchange for company common stock with a fair market value of $212,500.
  
(3)There were no bonuses paid in 2015Mr. Jameson's base salary was $300,000, effective January 25, 2021 upon joining the Company as General Manager. Effective January 10, 2022, Mr. Jameson was appointed the Chief Operating Officer of the Company and 2014.his base salary was increased to $425,000 per annum.
  
(4)Messrs. Travers and Russell received performance bonuses of $120,000 and $102,000, respectively, in 2020 for meeting certain target elements under the management incentive bonus program.
 
Represents(5)  Messrs. Travers and Russell received 3,260,000 and 1,750,000, respectively, stock option awards under the totalCompany's Long-term Incentive Plan (LTIP), which went into effect on March 17, 2021. Options awarded under this program vest upon the achievement of reaching certain market equity and performance-based milestones and have an exercise price of $19.00. The fair market value of stockthese options granted in 2014, which vest over 4 years, in accordance with FASB ASC Topic 718.upon grant date to Messrs. Travers and Russell were $42,373,304 and $22,896,077, respectively.  See Notes 1 and 15Note 14 of the consolidated financial statements included in our Form 10-K for the year ended December 31, 2015,2021, regarding assumptions underlying the valuation of these equity awards.
  
(6)  Messrs. Travers and Russell were each awarded 50,000 stock option awards to purchase common stock of the Company. The total fair market value of the stock options granted on May 6, 2020 was $109,347, which vest evenly over a 48-month period.  
  
(5)(7)  Represents

Mr. Jameson received 270,000 stock option awards under the Company's Long-term Incentive Plan (LTIP), which went into effect on March 17, 2021. Options awarded under this program vest upon the achievement of reaching certain market equity and performance-based milestones and have an exercise price of $19.00. The fair market value of these options upon grant date to Mr. Jameson was $3,626,137.  See Note 14 of the consolidated financial statements included in our Form 10-K for the year ended December 31, 2021, regarding assumptions underlying the valuation of these equity awards.

Mr. Jameson was awarded 150,000 stock option awards to purchase common stock of the Company. The total fair market value of the stock options granted on March 17, 2021 was $2,041,896, which vest monthly over a 48-month period.  

(8)  Messrs. Travers and Russell were each awarded 22,500 shares of common stock on September 28, 2020. The total fair market value of these stock awards granted in 2015, andwas $184,500, which was determined by multiplying the number of shares of restricted common stock granted uponby the closing of the Series A Preferred Stock offering on January 2, 2015, which was valued at its conversion price of $5.00 per share.our common stock as listed on NASDAQ on the day prior to grant.  
  
(6)(9)Consists of amounts paid to Mr. Travers as a car allowance (as per his employment contract). and for health and group life insurance.
  
(7)(10)Consists of amounts paid to Mr. Russell in reimbursement for the rental of an automobile in Rochester, New York, and direct travel to and from his primary residence in Vancouver, Canada to Rochester, New York.York, and for health and group life insurance.
(11)Consists of amounts paid to Mr. Jameson for health and group life insurance.

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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

 

The following table sets forth information concerning exercisable and unexercisableun-exercisable stock options held by the named executive officers at December 31, 2015.2021.

 

  Option Awards 
        Equity       
        Incentive Plan       
        Awards:       
  Number of  Number of  Number of       
  Securities  Securities  Securities       
  Underlying  Underlying  Underlying       
  Unexercised  Unexercised  Unexercised  Option    
  Options  Options  Unearned  Exercise  Option 
  (#)  (#)  Options  Price  Expiration 
Name Exercisable  Unexercisable  (#)  ($)  Date 
                     
Paul Travers(1)  18,426   21,574   —  $2.70   8/18/2024
Grant Russell(1)  29,942   35,058   —   2.70   8/18/2024
Grant Russell(2)  2,666   —   —   11.25   5/01/2019

  Option Awards 
        Equity       
        Incentive Plan       
        Awards:       
  Number of  Number of  Number of       
  Securities  Securities  Securities       
  Underlying  Underlying  Underlying       
  Unexercised  Unexercised  Unexercised  Option    
  Options  Options  Unearned  Exercise  Option 
  (#)  (#)  Options  Price  Expiration 
Name Exercisable  Un-exercisable  (#)  ($)  Date 
Paul Travers (1)  40,000   —   —  $2.70    8/18/2024 
Paul Travers (2)  19,791   30,209   —   1.71    5/6/2030 
Paul Travers (3)  250,000   —   3,010,000   19.00   3/17/2031 
Grant Russell (1)  65,000   —   —   2.70   8/18/2024 
Grant Russell (2)  19,791   30,209   —   1.71   5/6/2030 
Grant Russell (3)  125,000   —   1,625,000   19.00   3/17/2031 
Peter Jameson(4)  28,125   121,875   —   18.94   3/17/2031 
Peter Jameson(3)  —   —   270,000   19.00   3/17/2031 

  

(1)This optionThese options were granted under our 2014 option plan vests in equal monthly installments over four years from the date of grant.

(2)This option was granted under our 2009 option plan and itthey vested in equal monthly installments over four yearsforty-eight months from the date of grant.
(2)These options were granted under our 2014 option plan and they will vest in equal monthly installments over forty-eight months from the date of grant, May 6, 2020.
(3)These options were granted under our 2014 option plan and under the Company's Long-term Incentive Plan (LTIP), which went into effect on March 17, 2021. Options awarded under this program vest upon the achievement of reaching certain market equity and performance-based milestones and have an exercise price of $19.00. See Note 14 of the consolidated financial statements included in our Form 10-K for the year ended December 31, 2021, regarding assumptions underlying the valuation of these equity awards.
(4)These options were granted under our 2014 option plan and they will vest in equal monthly installments over forty-eight months from the date of grant, March 17, 2021.

 

 1932 

 

Grants of Plan-Based Awards in 2021

The following table presents information concerning each grant of an award made to a named executive officer in fiscal year 2021 under our Plan:

    Estimated Future Payouts Under Non-Equity
Incentive Plan Awards		  All Other
Stock Awards:
 Number of
 Shares of
Stocks or		  All Other
 Option
 Awards:
 Number of
Securities
Underlying		  Exercise or
 Base Price
 of Option
Awards		  Grant Date
 Fair Value of
Stock and
Option		 
Name Grant Date Threshold ($)  Target ($)  Maximum ($)  Units (#)  Options (#)  ($/Sh)  Awards ($) 
Paul Travers 3/17/2021(1)  -   -   -   -   3,260,000  $19.00   42,373,304 
Grant Russell 3/17/2021(1) -   -   -   -   1,750,000   19.00   22,896,077 
Peter Jameson 3/17/2021(2)  -   -   -   -   270,000   19.00   3,626,137 
Peter Jameson 3/17/2021(2)  -   -   -   -   150,000   18.94   2,041,896 

(1)Messrs. Travers and Russell received 3,260,000 and 1,750,000, respectively, stock option awards under the Company's Long-term Incentive Plan (LTIP), which went into effect on March 17, 2021. Options awarded under this program vest upon the achievement of reaching certain market equity and performance-based milestones and have an exercise price of $19.00. The fair market value of these options upon grant date to Messrs. Travers and Russell were $42,486,634 and $22,858,503, respectively.  See Note 14 of the consolidated financial statements included in our Form 10-K for the year ended December 31, 2021, regarding assumptions underlying the valuation of these equity awards.
(2)Mr. Jameson received 270,000 stock option awards under the Company's Long-term Incentive Plan (LTIP), which went into effect on March 17, 2021. Options awarded under this program vest upon the achievement of reaching certain market equity and performance-based milestones and have an exercise price of $19.00. The fair market value of these options upon grant date to Mr. Jameson was $3,594,455.  See Note 14 of the consolidated financial statements included in our Form 10-K for the year ended December 31, 2021, regarding assumptions underlying the valuation of these equity awards.

Mr. Jameson was awarded 150,000 stock option awards to purchase common stock of the Company. The total fair market value of the stock options granted on March 17, 2021 was $2,041,896, which vest monthly over a 48-month period.  

2021 Option Exercises and Stock Vested

The following table presents information concerning each exercise of stock options and vesting of stock awards during fiscal year 2021 for each named executive officer:

 
  Option Awards  Stock Awards 
Name Number of Shares
Acquired
on Exercise (#)		  Value Realized
on Exercise ($)		  Number of
Shares Acquired
on Vesting (#)		  Value Realized
on Vesting ($)(1)		 
 Paul Travers  -   -   8,748   132,066 
 Grant Russell  -   -   8,748   132,066 
 Peter Jameson  -   -   -   - 

(1)Reflects the weighted average of the shares vested multiplied by the market price of our common stock on the vesting date.

Further Detail on LTIP (Long-Term Incentive Plan) Options

On March 17, 2021, the Company granted options to purchase a total of 5,784,000 shares of common stock to its officers and certain other members of its management team. The options have an exercise price of $19.00, with 375,000 options vesting immediately and the remaining portion vesting only upon the achievement of certain equity market capitalization and revenue and EBITDA operational milestones.

The unvested remaining equity market capitalization and operational milestones under the LTIP with their total related option grants and criteria achievement weightings of the options available for meeting a target are shown in the following table. Of the total 5,409,000 unvested options outstanding as of December 31, 2021, there are 2,704,500 options unvested for the achievement of Equity Market Capitalization targets, 1,893,150 unvested options for the achievement of annual Revenue targets, and 811,350 unvested options for the achievement of annual EBITDA Margins Before Non-Cash Charges targets.

The following table summarizes the remaining performance criteria that must be achieved in order for the potential options to vest over the life of the LTIP:

Award PotentialCriteria Achievement Weighting
 50% of Options Available35% of Options Available15% of Options Available
Options Available
(Subject to Vesting)		Equity Market
Capitalization
Target		Annual Revenue
Target		Annual EBITDA
Margin before
Non-Cash
Charges Target
    
    
 686,000$ 2,000,000,000$ 25,000,0000.0%
 686,000 3,000,000,000 50,000,0002.0%
 686,000 4,000,000,000 100,000,0004.0%
 686,000 5,000,000,000 200,000,0006.0%
 586,000 6,000,000,000 300,000,0008.0%
 586,000 7,000,000,000 450,000,00010.0%
 561,000 8,000,000,000 675,000,00012.0%
 491,000 9,000,000,000 1,000,000,00014.0%
 441,000 10,000,000,000 1,500,000,00016.0%
 5,409,000   

  

Equity Compensation Plan Information

 

The Company has adopted the Vuzix 2007 Stock Option Plan (the “2007 Plan”), the Vuzix 2009 Stock Plan (the “2009 Plan”) and the Vuzix 2014 Incentive Stock Plan (the “2014 Plan” and, together with the 2007 and 2009 Plan, the “Plans”). UnderThe 2014 Plan, as amended, has an “evergreen provision”, under which the 2007 Plan, we have 37,447 options outstanding and none available for future use. Under the 2009 Plan, we have 120,842 options outstanding and none available for future use. The maximum number of shares of common stock that may be issued under the 2014 Plan was initially set at 1,000,000 and thereafter will automatically be increasedincreases each time the Company issues additional shares of common stock so that thestock. The total number of shares issuable thereunder will at all times is equal 10%to 20% of the then outstanding shares of stock, unless in any case the Board of Directors adopts a resolution providing that the number of shares issuable under this Plan will not be so increased. The Board of Directors have not adopted any resolution stating that the shares issuable will not be increased.common stock. As of April 29, 2016,December 31, 2021, the maximum numberauthorized shares issuableof common stock under the 2014 Plan, is 1,613,303. Under the 2014 Plan, we have 872,000 options outstanding and 741,303 options available for future issuance.as amended, totaled 12,734,454.

 

The purpose of the PlansPlan is to retain executives and selected employees and consultants and reward them for making contributions to our success.  These objectives are accomplished by makinggranting long-term incentive awards under thereby providing participants with a proprietary interest in our growth and performance. Each of the plans areThe plan is administered by our boardBoard of directors.Directors.

33

 

The following table summarizes information as of the close of business on December 31, 20152021 concerning the PlansPlan and the options outstanding.

 

Plan category 

Number of securities to be
issued upon exercise of

outstanding options
(a)

  

Weighted-average

exercise price of

outstanding options
(b)

  

Securities remaining available
for future issuance under equity
compensation plans (excluding
securities reflected in column (a))
(c)

 
Equity compensation plans approved by security holders  1,022,789  $4.59   744,295 
Equity compensation plans not approved by security holders  —   —     
Total  1,022,789  $4.59   744,295 

Plan category Number of
securities to be
issued upon
exercise of
Outstanding options
(a)		  Weighted-
average
Exercise price
of
Outstanding
options
(b)		  

Securities
remaining
available
for future
issuance under
equity
compensation
plans (excluding
securities

reflected in
column (a))
(c)

 
Equity compensation plan’s approved by security holders  8,607,634  $15.28   1,550,004 
Equity compensation plans not approved by security holders  —   —   — 
Total  8,607,634  $15.28   1,550,004 

 

Employment Agreements

 

Paul J. Travers

 

On August 1, 2007, we entered into an employment agreement with Paul J. Travers providing for his continued service as our Chief Executive Officer and President. Under the agreement, Mr. Travers is entitled to an initial annual base salary of $300,000 or such greater amount as shall be determined by the board of directors. Effective MayJanuary 1, 2015,2021, the Compensation Committee agreed to increaseincreased Mr. Travers’ annual base salary to $425,000.$575,000; it had previously been $500,000 since May 1, 2017. He is also eligible to receive such periodic, annual or other bonuses as the boardBoard of directorsDirectors in its sole discretion shall determine and to participate in all bonus plans established for our senior executives. The agreement also provides that Mr. Travers may be awarded, in the sole discretion of the boardBoard of directors,Directors, stock options and other awards under any plan or arrangement for which our senior executives are eligible. The level of his participation in any such plan or arrangement shall be determined by the boardBoard of directorsDirectors in its sole discretion. To the greatest extent permissible under the Internal Revenue Code (the Code) and the regulations thereunder, options granted to Mr. Travers shall be incentive stock options within the meaning of Section 422 of the Code. He is also eligible to participate in all employee benefit plans which are generally available to our senior executives and entitled to receive fringe benefits and perquisites comparable to those of our other senior executives.

 

Under his agreement, we are obligated to reimburse Mr. Travers for the costs of an automobile at the rate of $750 per month and for all actual, reasonable and customary expenses incurred in the course of his employment in accordance with our policies as then in effect. Mr. Travers is subject to certain restrictive covenants under the agreement, including a covenant not to compete for 24 months after his termination for any reason other than by him for good reason or by us without cause and for 48 months after his termination if such termination results in our obligation to pay him the change of controlchange-of-control payment described below.

20

 

Grant Russell

 

On August 1, 2007, we entered into an employment agreement with Grant Russell providing for his continued service as our Chief Financial Officer and Executive Vice President. Under the agreement, Mr. Russell is entitled to an initial annual base salary of $275,000 or such greater amount as shall be determined by the board of directors. Effective MayJanuary 1, 2015,2021, the Compensation Committee agreed to increaseincreased Mr. Russell’s annual base salary to $350,000.$450,000; it had previously been $425,000 since May 1, 2017. He is also eligible to receive such periodic, annual or other bonuses as the boardBoard of directorsDirectors in its sole discretion shall determine and to participate in all bonus plans established for our senior executives. The agreement also provides that Mr. Russell may be awarded, in the sole discretion of the boardBoard of directors,Directors, stock options and other awards under any plan or arrangement for which our senior executives are eligible. The level of his participation in any such plan or arrangement shall be determined by the boardBoard of directorsDirectors in its sole discretion. To the greatest extent permissible under the Code and the regulations thereunder, options granted to Mr. Russell shall be incentive stock options within the meaning of Section 422 of the Code. He is also eligible to participate in all employee benefit plans which are generally available to our senior executives and entitled to receive fringe benefits and perquisites comparable to those of our other senior executives.

 

Under his agreement, we are obligated to either reimburse Mr. Russell for the costs of an automobile at the rate of $750 per month or to bear all expenses associated with his lease of an automobile for his use while in Rochester, New York, to reimburse him for the costs of travel between Rochester, New York and his primary residence in Vancouver, British Columbia, Canada and to reimburse him for all actual, reasonable and customary expenses incurred in the course of his employment in accordance with our policies as then in effect. We provide Mr. Russell the option to receive a portion of his salary in the form of a housing allowance, at the rate prescribed by the Internal Revenue Service, for the maintenance of a second residence in Rochester, New York. Payment of such allowance is deductible by us for federal income tax purposes in the same manner as cash compensation. Mr. Russell is subject to certain restrictive covenants under the agreement, including a covenant not to compete for 24 months after his termination for any reason other than by him for good reason or by us without cause and for 48 months after his termination if such termination results in our obligation to pay him the change of controlchange-of-control payment described below.

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Potential Payments upon Termination or Change in ControlChange-in-Control

 

This section sets forth information regarding compensation and benefits that each of the named executive officersNEOs would receive in the event of a change in controlchange-in-control (as defined in the applicable employment agreement) or in the event of termination of employment under several different circumstances, including: (1) termination by Vuzix for cause (as defined in the applicable employment agreement); (2) a voluntary termination by the named executive officer; (3) termination by the named executive officer for good reason (as defined in the applicable employment agreement); (4) involuntary termination by Vuzix without cause; (5) death; or (6) disability (as defined in the applicable employment agreement).

 

Under the agreements of both Mr. Travers and Mr. Russell: (a) we shall have “cause” to terminate them as a result of their: (i) willfully engaging in conduct which is materially injurious to us; (ii) willful fraud or material dishonesty in connection with their performance as an employee; (iii) deliberate or intentional failure to substantially perform their duties as employees that results in material harm to us; or (iv) conviction for, or plea of nolo contendere to a charge of, or commission of, a felony; (b) they shall have “good reason” to terminate their employment upon: (i) a material diminution during the term of the agreements in their duties, responsibilities, position, office or title; (ii) a breach by us of the compensation and benefits provisions of their agreements; (iii) a material breach by us of any other terms of their agreements; or (iv) the relocation of their principal place of business at our request beyond 30 miles from its current location; and (c) they shall be deemed to be “disabled” if they shall be rendered incapable of performing their duties to us by reason of any medically determined physical or mental impairment that can be expected to result in death or that can reasonably be expected to last for a period of either (i) five or more consecutive months from the first date of their absence due to the disability or (ii) nine months during any 12-month period. Any termination by us for cause or by them for good reason is subject to a 30-day notice period and opportunity to cure.

 

Under their employment agreements, “change of control”“change-of-control” means: (i) the approval by our stockholders, and the completion of the transaction resulting from such approval, of (A) the sale or other disposition of all or substantially all of our assets or (B) our complete liquidation or dissolution; (ii) the sale, in a single transaction or in a series of related transactions, of all or substantially all of the outstanding shares of our capital stock; (iii) the approval by our stockholders, and the completion of the transaction resulting from such approval, of a merger, consolidation, reorganization or similar corporate transaction, whether or not we are the surviving corporation in such transaction, in which the outstanding shares of common stock are converted into (A) shares of stock of another company, other than a conversion into shares of voting common stock of the successor corporation (or a holding company thereof) representing fifty percent (50%) or more of the voting power of all capital stock thereof outstanding immediately after the merger or consolidation or (B) other securities (either ours or those of another company) or cash or other property; (iv) pursuant to an affirmative vote of a holder or holders of seventy fiveseventy-five percent (75%) of our capital stock of the entitled to vote on such a matter, the removal of a majority of the individuals who are at that time members of the boardBoard of directors;Directors; or (v) the acquisition by any entity or individual of one hundred percent (100%) of our capital stock.

 

The actual amounts that would be payable in such circumstances can only be determined at the date of termination or upon the change in control.change-in-control. The amounts included below are based on the following:

 

·We have assumed that the termination event occurred effective as of December 31, 2015,2021, the last day of 2015;2021;

·We have assumed that the value of our common stock was $7.59$8.73 per share, the US dollar closing market price of our common stock on December 31, 2015,2021, the last trading day of our common stock, and that all unvested options were exercised on December 31, 2015;2021; and

35

·Health benefits are included at the estimated value of continuation of this benefit.

 

21

Paul J. Travers

 

If Mr. Travers’s employment is terminated (i) by the Company without cause or (ii) by Mr. Travers for good reason or (iii) as a result of disability, Mr. Travers would be entitled to receive:

 

·two  times his annual base salary, payable in 24 equal monthly installments $850,000 two times his annual base salary, payable in 24 equal monthly installments $1,150,000 
·his annual incentive bonus, payable within 60 days of termination $- his annual incentive bonus, payable within 60 days of termination  - 
Total cash compensation upon termination $850,000 
Total cash compensation upon termination $1,150,000 

 

If Mr. Travers’s employment is terminated within one year of a change of controlchange-of-control for any reason other than by us for cause, or if he elects to terminate his employment (whether or not for good reason) during the period beginning 121 days after a change of controlchange-of-control and ending on the second anniversary thereof, Mr. Travers would be entitled to receive:

 

·four  times his annual base salary, payable in 48 equal monthly installments $1,700,000 four times his annual base salary, payable in 48 equal monthly installments $2,300,000 
·his annual incentive bonus, then in effect, payable within 60 days of termination $- his annual incentive bonus, then in effect, payable within 60 days of termination  - 
Total cash compensation upon change of control $1,700,000 Total cash compensation upon change-of-control $2,300,000 

 

Additionally, in either case Mr. Travers would also be entitled to:

 

·continuation of medical benefits throughout the 24 or 48-month period during which severance payments are made  or until he becomes eligible to receive medical benefits from subsequent employer  

$12,457 (for 24 months) or $24,914 (for 48 months)

 
·value of all unvested options, which would vest immediately $0 
·any accrued amounts owing to him    
·additionally in the event any severance payments under those existing agreements become subject in the future to IRS Section 280G excise taxes that lower the net amounts after tax those officers would otherwise receive, then the Company shall gross up such payments to these “disqualified individuals” (IRS definition) for the 20 percent excess tax if their currently existing severance arrangements are deemed excess parachute payment amounts    
·continuation of medical benefits throughout the 24 or 48-month period during which severance payments are made or until he becomes eligible to receive medical benefits from subsequent employer$18,928 (for 24 months) or $37,856 (for 48 months)
·any accrued amounts owing to him
·additionally, in the event any severance payments under those existing agreements become subject in the future to IRS Section 280G excise taxes that lower the net amounts after tax those officers would otherwise receive, then the Company shall gross-up such payments to these “disqualified individuals” (IRS definition) for the 20 percent excess tax if their currently existing severance arrangements are deemed excess parachute payment amounts

 

If Mr. Travers’s employment is terminated for cause or by Mr. Travers voluntarily, he will be entitled to receive only any accrued amounts owing him and will forfeit all unvested equity and unearned incentive payments.

 

Grant Russell

 

If Mr. Russell’s employment is terminated (i) by the Company without cause or (ii) by Mr. Russell for good reason or (iii) as a result of disability, Mr. Russell would be entitled to receive:

 

·two times his annual base salary, payable in 24 equal monthly installments $700,000 two times his annual base salary, payable in 24 equal monthly installments $900,000 
·his annual incentive bonus, payable within 60 days of termination $- his annual incentive bonus, payable within 60 days of termination  - 
Total cash compensation upon termination $700,000 
Total cash compensation upon termination $900,000 

 

If Mr. Russell’s employment is terminated within one year of a change of controlchange-of-control for any reason other than by us for cause, or if he elects to terminate his employment (whether or not for good reason) during the period beginning 121 days after a change of control and ending on the second anniversary thereof, Mr. Russell would be entitled to receive:

 

·four times his annual base salary, payable in 48 equal monthly installments $1,800,000 
·his annual incentive bonus, then in effect, payable within 60 days of termination  - 
 Total cash compensation upon change-of-control $1,800,000 

·four times his annual base salary, payable in 48 equal monthly installments $1,400,000 
·his annual incentive bonus, then in effect, payable within 60 days of termination $- 
Total cash compensation upon change of control $1,400,000 
36

 

Additionally, in either case Mr. Russell would also be entitled to:

 

·continuation of medical benefits throughout the 24 or 48-month period during which severance payments are made or until he becomes eligible to receive medical benefits from subsequent employer  

$4,321 (for 24 months) or $8,643 (for 48 months)

 
·value of all unvested options, which would vest immediately $0 
·any accrued amounts owing to him    
·additionally in the event any severance payments under those existing agreements become subject in the future to IRS Section 280G excise taxes that lower the net amounts after tax those officers would otherwise receive, then the Company shall gross up such payments to these “disqualified individuals” (IRS definition) for the 20 percent excess tax if their currently existing severance arrangements are deemed excess parachute payment amounts    

·continuation of medical benefits throughout the 24 or 48-month period during which severance payments are made or until he becomes eligible to receive medical benefits from subsequent employer 22$9,490 (for 24 months) or $18,980(for 48 months)
·any accrued amounts owing to him
·additionally, in the event any severance payments under those existing agreements become subject in the future to IRS Section 280G excise taxes that lower the net amounts after tax those officers would otherwise receive, then the Company shall gross-up such payments to these “disqualified individuals” (IRS definition) for the 20 percent excess tax if their currently existing severance arrangements are deemed excess parachute payment amounts 

 

If Mr. Russell’s employment is terminated for cause or by Mr. Russell voluntarily, he will be entitled to receive only any accrued amounts owing him and will forfeit all unvested equity and unearned incentive payments.

 

Director Compensation

How Directors are Compensated

 

Employee directors do not receive additional compensation for serving on the boardBoard of Directors beyond the compensation they received for serving as our officers, as described under “Executive Compensation.”

 

We use a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the board.Board of Directors. In setting non-employee director compensation levels the board considers the amount of time that directors expend in fulfilling their duties as members of our board and the skill-level we require of members of our board.

 

Historically, Directors have been paid an annual cash retainer for Board and Committee work with the Chairpersons receiving an incremental amount for the additional time and effort required. Additionally, Directors have been granted 15,000 shares of the Company’s stock annually on or about the Company’s Annual Meeting Date.

With the significant increase in Vuzix’ stock price in 2021, the Compensation Committee felt it was necessary to decrease the number of shares granted by 20% for 2021. It also recognized the need to conduct a market assessment and evaluate best practices so that Director compensation could be aligned with market practices. In 2022, Vuzix retained Farient Advisors to provide an overview of market best practices and approach to Director compensation.

After consideration, the Board approved a number of changes, which include the following:

§Equity grants (RSUs) to be set based on a fixed dollar value vs. number of shares to eliminate volatility in Director Compensation
§Cash retainers and Chair fees to remain unchanged, but Directors are offered the option to receive 50% or 100% of cash retainers in RSUs
§RSUs will vest annually, one-year following the grant date vs. monthly with the ability of each Director to receive such stock net of tax withholding
§A stock ownership policy that requires Directors to hold a minimum amount of Company stock (as outlined in the stock ownership policy section in the table immediately below)
§A limit on total annual Director compensation
§

Appointment of a Lead Independent Director

37

Changes to the Director Compensation Program for 2022 include:

Changes to Director Compensation

Compensation Element20212022
Board Cash Retainer$60,000$60,000

Incremental Chair Fees

§  Lead Independent Director

§  Audit

§  All other Committees

 

N/A

$12,000

$10,000

 

$15,000

$12,000

$10,000

Equity Grant (shares or RSU FMV)15,000 shares(1)The equivalent of $100,000 in RSUs

Stock Ownership Requirement

N/A

3x base cash retainer

Total Annual Director Compensation Limit

N/A$500,000 (cash and equity)

(1)Shares were reduced by 20% for 2021 to 11,834 shares due to increase in Vuzix stock price

DIRECTOR COMPENSATION — YEAR ENDED DECEMBER 31, 20152021

 

 Fees          
 Earned or          
 Paid in Stock Option All Other     Fees Paid in Stock Option All Other   
 Cash Awards Awards Compensation Total  Cash Awards Awards Compensation Total 
Name ($)  ($)(1)  ($)  ($)  ($)  ($) ($)(1) ($) ($) ($) 
           
William Lee  48,550   189,900   —   —   238,450 
Michael Scott  46,550   189,900   —   —   236,450 
Timothy Harned 62,000 199,995 — — 261,995 
Edward Kay 63,500 199,995 — — 263,495 
Alexander Ruckdaeschel  46,550   189,900   —   —   236,450  27,000 — — — 27,000 
Azita Arvani 30,000 250,002 — — 285,002 
Emily Nagle Green 35,000 250,002 — — 280,002 
Raj Rajgopal 30,000 250,002 — — 280,002 

 

(1)Represents the

Messrs. Harned, Kay, Rajgopal and Mses. Arvani and Green were each awarded 11,834 shares of common stock on June 16, 2021, as part of their annual retainer compensation. The total fair market value of these stock awards granted in 2015, andwas $199,995 each, which was determined by multiplying the number of shares of restricted common stock granted by the closing price of $16.90 of our common stock as listed on NASDAQ on the day prior to grant.

Mses. Arvani and Green and Mr. Rajgopal were each awarded 2,959 shares of grant. Twocommon stock on June 16, 2021, as part of their onboarding as new directors. The total fair market value of these stock awards were made in 2015, the first of 25,000 shares towas $50,007 each, external director upon the closing of the Series A Preferred Stock offering in January 2015, which was valued at its conversion pricedetermined by multiplying the number of $5.00 per share. A further 10,000 shares on July 15, 2015, when ourof common stock granted by the closing price of $16.90 of our common stock was $6.49, was grantedas listed on NASDAQ on the day prior to each external director upon their election to the Board of Directors at our 2015 Annual Meeting to serve until our 2016 Annual Meeting.grant.

 

During 2015 cash director fees were paid to non-management members of the board of directors and board committee chairs. Further the nonemployee directors were reimbursed for ordinary expenses incurred in connection with attendance at meetings of the board of directors.

38

 

For the period from January 1 to March 31, 2015, the non-management members of the board of directors were paid a monthly retainer of $1,200 per month and $1,250 per calendar quarter for non-management board of director members who were also a chairperson of a board committee, with the chair of the audit committee receiving $2,500 per quarter.

Effective April 1, 2015 the Company’s external board members receive annual retainer fees of $45,000. Further the chairpersons of the Company’s external Board Committees also began receiving the following annual retainer fees:

Audit Committee - $10,000.
Compensation Committee - $9,000.
Nomination Committee - $9,000

 

The Company will not pay any cash fees for any regular meetings of the Board or Committee meetings. In the event there are special circumstances that require the formation of any Special Committees and related special meetings the Board may consider further cash consideration for the external directors on such Special Committees.

TRANSACTIONS WITH RELATED PERSONS

 

Since January 1, 2014,2021, we have entered into the followingno transactions in which our directors, executive officers or holders of more than 5% of our capital stock had or will have a direct or indirect material interest. The following transactions do not include compensation, termination and change-in-control arrangements, which are described under “COMPENSATION AND OTHER INFORMATION CONCERNING NAMED EXECUTIVE OFFICERS AND DIRECTORS.” We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm’s-length transactions.

 

23

Warrant Exercises

On February 25, 2015, Grant Russell, our chief financial officer, exercised 364,080 warrants on a cashless basis for 313,885 shares of common stock. Also on February 25, 2015, Paul Travers, our chief executive officer, exercised 809,655 warrants on a cashless basis for 698,029 shares of common stock.

Indemnification Agreements

 

We have entered into indemnification agreements with each of our directors and executive officers. Under these agreements we are obligated to indemnify the indemnitee to the fullest extent permitted by applicable law for all reasonable expenses (including attorneys’ fees and disbursements), judgments, fines (including excise taxes and penalties) and amounts paid in settlement actually and reasonably incurred by the indemnitee arising out of or connected with the indemnitee’s service as a director or officer and indemnitee’s service in another capacity at our request or direction. We are also obligated to advance all reasonable and actual expenses incurred by the indemnitee in connection with any action, suit, proceeding or appeal with respect to which hesuch indemnitee is entitled to be indemnified upon our receipt of an invoice for such expenses. Our obligation to advance expenses is subject to the indemnitee’s execution, upon our request, of an agreement to repay all such amounts if it if is ultimately determined that hesuch indemnitee is not entitled to be indemnified by us under applicable law. If a claim for indemnification under this agreement may not be paid to the indemnitee under applicable law, then in any action in which we are jointly liable with the indemnitee, we are obligated to contribute to the amount of reasonable expenses (including attorneys’ fees and disbursements) actually and reasonably incurred by the indemnitee in proportion to the relative benefits received by us and the indemnitee from the transaction from which such action arose, and our relative fault and that of the indemnitee in connection with the events which resulted in such expenses. The rights of an indemnitee under the form of indemnification agreement are in addition to any other rights that the indemnitee may have under our certificate of incorporation or bylaws, any agreement, or any vote of our stockholders or directors. We are not obligated to make any payment under the form of indemnification agreement to the extent payment is actually made to the indemnitee under an insurance policy or any other method outside of the agreement.

 

PROPOSAL 3

ADVISORY VOTE ON EXECUTIVE COMPENSATION

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires the Company’s stockholders to have the opportunity to cast a non-binding advisory vote regarding the approval of the compensation disclosed in this Proxy Statement of the Company’s executive officers who are named above in the Summary Compensation Table (the “named executive officers”). The Company has disclosed the compensation of the named executive officers pursuant to rules adopted by the SEC.

We believe that our compensation policies for the named executive officers are designed to attract, motivate and retain talented executive officers and are aligned with the long-term interests of the Company’s stockholders. This advisory stockholder vote, commonly referred to as a “say-on-pay vote,” gives you as a stockholder the opportunity to approve or not approve the compensation of the named executive officers that is disclosed in this Proxy Statement by voting for or against the following resolution (or by abstaining with respect to the resolution):.

RESOLVED, that the stockholders of Vuzix Corporation approve all of the compensation of the Company’s executive officers who are named in the Summary Compensation Table of the Company’s 2016 Proxy Statement, as such compensation is disclosed in the Company’s 2016 Proxy Statement pursuant to Item 402 of Regulation S-K, which disclosure includes the Proxy Statement’s Summary Compensation Table and other executive compensation tables and related narrative disclosures.

In 2013, our stockholders voted on our executive compensation program (also known as “Say on Pay”) for the first time and of the 1,842,079 votes present at the meeting, 1,490,824, or 80.2% approved it. The Committee considered the stockholders endorsement of the Committee’s decisions and policies for our overall executive compensation program in continuing the pay-for-performance program that is currently in place.

Because your vote is advisory, it will not be binding on either the Board of Directors or the Company. However, the Company’s Compensation Committee will take into account the outcome of the stockholder vote on this proposal at the Annual Meeting when considering future executive compensation arrangements. In addition, your non-binding advisory votes described in this Proposal 3 and below in Proposal 4 will not be construed: (1) as overruling any decision by the Board of Directors, any Board committee or the Company relating to the compensation of the named executive officers, or (2) as creating or changing any fiduciary duties or other duties on the part of the Board of Directors, any Board committee or the Company.

 2439 

 

The Dodd-Frank Act requires the Company’s stockholders to have the opportunity to cast a non-binding advisory vote regarding how frequently the Company should seek from its stockholders a non-binding advisory vote (similar to this Proposal 3) on the compensation disclosed in the Company’s proxy statement of its executive officers who are named in the proxy statement’s summary compensation table for the year in question (the “named executive officers”).

The Board of Directors has determined that an advisory vote by the Company’s stockholders on executive compensation that occurs every three years is the most appropriate alternative for the Company and this frequency was approved by our stockholders in their advisory vote at the Company’s 2013 Annual Meeting. The Board of Directors may subsequently decide that it is in the best interests of the Company and its stockholders to hold an advisory vote on executive compensation that differs in frequency from every three years in the future.

RECOMMENDATION OF THE BOARD FOR PROPOSAL NO. 3:

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE TO APPROVE THE COMPENSATION
DISCLOSED IN THIS PROXY STATEMENT OF THE COMPANY’S EXECUTIVE OFFICERS WHO ARE NAMED IN
THIS PROXY STATEMENT’S SUMMARY COMPENSATION TABLE.

 

OTHER MATTERS

 

The boardBoard of directorsDirectors knows of no other matters that will be presented for consideration at the annual meeting,Annual Meeting, but if other matters properly come before the meeting, the persons named as proxies in the enclosed proxy will vote according to their best judgment. Stockholders are requested to vote by telephone or via the Internet, or date and sign the enclosed proxy and to mail it promptly in the enclosed postage-paid envelope. If you attend the annual meeting,Annual Meeting virtually, you may revoke your proxy at that time and vote in person virtually online by webcast, if you wish. Otherwise, your proxy will be voted for you.

 

 By Order of the Board of Directors  
  
 Steven D. Ward,/s/ Eric Black
 SecretaryEric Black,  

Corporate Secretary (Acting)

Dated:April 29, 20162022
West Henrietta, New York

Rochester, New York

We will make available at no cost, upon your written request, a copy of our annual report on Form 10-K for the year ended December 31, 2015 (without exhibits) as filed with the Securities and Exchange Commission. Copies of exhibits to our Form 10-K will be made available, upon your written request and payment to us of the reasonable costs of reproduction and mailing. Written requests should be made to: Corporate Secretary, Vuzix Corporation, 25 Hendrix Road, Suite A, West Henrietta, New York 14586.

 

 2540 

 

Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY D82405-P72589 1a. Paul Travers 1. To elect seven directors to serve until the 2023 Annual Meeting of Stockholders and until their successors have been duly elected and qualified. Nominees: 1d. Timothy Harned 1b. Grant Russell 1c. Edward Kay 1g. Azita Arvani 1e. Emily Nagle Green 1f. Raj Rajgopal 3. To approve, by non-binding vote, the compensation disclosed in the Proxy Statement of the Company's executive officers, who are named in the Proxy Statement Summary Compensation Table. NOTE: In their discretion, upon any other business that may properly come before the meeting or any adjournment thereof. For Against Abstain For Against Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! VUZIX CORPORATION The Board of Directors recommends a vote FOR all the named nominees as directors and FOR Proposals 2 and 3. VUZIX CORPORATION 25 HENDRIX ROAD WEST HENRIETTA, NY 14586 NOTE: Please sign EXACTLY as name(s) appear(s) on this proxy. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by the President or other authorized officer. If a partnership, please sign in partnership name by authorized person. 2. To ratify the appointment of Freed Maxick, CPAs, P.C. as the Company's independent registered public accounting firm for the year ending December 31, 2022. VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/VUZI2022 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. SCAN TO VIEW MATERIALS & VOTE w 

 

 

 

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com. D82406-P72589 Proxy – VUZIX CORPORATION PROXY FOR ANNUAL MEETING TO BE HELD VIRTUALLY ON JUNE 15, 2022 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder hereby appoints PAUL TRAVERS and GRANT RUSSELL or either of them (each with full power to act alone), as attorneys and proxies for the undersigned, with the power to appoint his substitute, to represent and to vote all the shares of common stock of Vuzix Corporation (the “Company”), which the undersigned would be entitled to vote, at the Company’s Virtual Annual Meeting of Stockholders to be held on June 15, 2022, at 1:00 p.m. Eastern Time and at any adjournments thereof, subject to the directions indicated on the reverse side hereof. In their discretion, the proxies are authorized to vote upon any other matter that may properly come before the meeting or any adjournments thereof. This proxy, when properly executed, will be voted in the manner directed on the reverse side by the undersigned stockholder. If no direction is made, this proxy will be voted FOR the election of the named nominees as directors and FOR Proposals 2 and 3. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. (IMPORTANT—This Proxy must be signed and dated)