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Company: Vuzix Corp
SEC CIK: 1463972
SEC Type: EX-10.4
SIC Code: 3663
Date Filed: 2013-04-02

Date Filed: 




THIS DEFERRED COMPENSATION DEFERREAL AND CONVERSION OPTION AGREEMENT (this "Agreement"), is entered into as of March 27, 2013, by and between PAUL J TRAVERS, a senior office of Vuzix Corporation, with the titles of President and Chief Executive Officer ("Executive") and VUZIX CORPORATION, a Delawarecorporation ("Company").


WHEREAS, the parties entered into various letters and agreements of employment and understandings between the periods of May 2000 to December 31, 2008 where the Executive was to receive a regular payment of salary as compensation for his services and


WHEREAS, due to the Company's cash flow at various times not all monies owed were paid when due pursuant to such letters and agreements, but were accrued along with an annual interest of 8%;


WHEREAS, the unpaid salary amounts as of June 2009 were $246,632 along with accrued interest of $128,290;


WHEREAS, pursuant to the Company's initial public offering (the "IPO"), the Company caused the Executive to agree that all outstanding amounts would remain unpaid and further deferred until after the first anniversary of the closing of the IPO, which amounts remain unpaid as of the date of this Agreement;


WHEREAS, the parties entered into an employment agreement dated August 2009 (the "Employment Agreement") pursuant to which the Executive is entitled to receive a base minimum salary of $175,000 per annum, which was to increase by a minimum of $100,000 to $300,000, effective immediately upon the closing of the Company's IPO;


WHEREAS, the Company notified the Executive that it did not raise enough funds in its IPO to begin paying in cash to the Executive his contractual post-IPO minimum salary of $275,000 per annum and that it had to defer the payment of the required $100,000 per annum increase for calendar 2010, and annually thereafter, until such time as it can financially afford to make such payments on a regular basis;


WHEREAS, the Company confirms to Executive that the outstanding balance of the total unpaid salary amount as of December 31, 2012 was $815,168, consisting of $546,632 and unpaid accrued interest totaling $268,536, collectively referred to herein as "Deferred Compensation; and


WHEREAS, in order to attract new investors, meet minimum listing requirements for the Company's shares of common stock on additional public stock exchanges and make financing opportunities more attractive to potential investors, the Company has requested that the Executive agree to (i) defer making a payment demand regarding the Deferred Compensation until April 1, 2014, and (ii) at his discretion convert, in whole or in part, the Deferred Compensation into shares of the Company's common stock, par value $.001 per share ("Common Stock"), pursuant to the terms set forth herein.


NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements of the parties hereinafter set forth, the parties hereto hereby agree as follows:




a. The Company and Executive acknowledge that the Company does not have sufficient free cash flow to commence a repayment of the Deferred Compensation amounts owed on the date of this Agreement.
b. The Company will continue to accrue interest at 8% per annum, compounded monthly on all amounts of Deferred Compensation owing.


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c. The Company agrees that commencing on April 1, 2014 it will begin equal monthly repayments (principal and interest) of the Deferred Compensation amounts owed to the Executive which has not been converted, over a maximum of 12 months.




(a) Executive may, subject to the conditions set forth herein, convert, in whole or in part, any unpaid portion of the Deferred Compensation into shares of Common Stock (such shares to be issued to the Executive, the "Conversion Shares") at a conversion price equal to the per share offering price of the Company's shares in its proposed secondary offering underwritten by Aegis Capital, as further described in Section 5 (b), and subject to the approval of the TSX Venture Exchange ("TSXV").


(b) The Company shall comply with all applicable legal requirements and take such other actions as may be necessary to effectuate the Deferred Compensation conversion at the Executive's option, including, but not limited to, providing notices to, and responding to queries from, all applicable regulatory authorities and stock exchanges and obtaining all necessary regulatory and third party consents.


(c) Subject to the terms and conditions set forth herein, this Agreement will become effective on the day that the Company shall have obtained the necessary approvals for the listing of its Common Stock on the NASDAQ Capital Market and shall have consummated a public offering of the securities as described in its Registration Statement on Form S-1, filed with the SEC on December 21, 2012.


(d) In the event that as a result of the Deferred Compensation conversion, fractions of shares would be required to be issued, such fractional shares shall be rounded up to the nearest whole share. The Company shall pay any documentary, stamp or similar issue or transfer tax due on such Deferred Compensation Conversion.


3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to Executive as follows:


(a) As of the date hereof, the Company has 700,000,000 shares of Common Stock authorized, of which 3,536,865 shares of Common Stock are issued and outstanding, and 500,000 shares of preferred stock authorized, of which no shares are issued and outstanding. As of the date hereof, the Company has reserved for issuance 849,371 shares of Common Stock (as may be adjusted for reclassifications, stock dividends, spin-offs or distributions, share combinations or other similar changes affecting the Common Stock as a whole) upon exercise of all outstanding options and warrants. All of the issued and outstanding shares of the Company's Common Stock are, and all shares reserved for issuance will be, upon issuance in accordance with the terms specified in the instruments or agreements pursuant to which they are issuable, duly authorized, validly issued, fully paid and nonassessable. The Conversion Shares to be issued and delivered to Executive upon conversion, if any, of the Deferred Compensation have been duly authorized and when issued upon such Deferred Compensation conversion and in accordance with this Agreement, will be validly issued, fully-paid and non-assessable. The Conversion Shares will be "restricted securities" as defined under Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act").


(b) The Company has full legal power to execute and deliver this Agreement and to perform its obligations hereunder. All acts required to be taken by the Company to enter into this Agreement and to carry out the transactions contemplated hereby have been properly taken, and this Agreement constitutes a legal, valid and binding obligation of the Company, enforceable in accordance with its terms, except to the extent limited by laws relating to bankruptcy or insolvency, laws affecting the rights of creditors generally and principles of equity, and does not conflict with, result in a breach or violation of or constitute (or with notice of lapse of time or both constitute) a default under any instrument, contract or other agreement to which the Company or its subsidiaries is a party.


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(c) None of the Company's Certificate of Incorporation, as amended, or Bylaws, any agreement to which the Company is a party, or the laws of Delaware, restrict the Company's ability to enter into this Agreement or consummate the transactions contemplated by this Agreement or would limit any of Executive's rights following consummation of the transactions contemplated by this Agreement.


(d) The Company has delivered or made available through EDGAR and SEDAR to Executive prior to the execution of this Agreement true and complete copies of all periodic reports, registration statements and proxy statements filed by it with the U.S Securities and Exchange Commission ("Commission" or "SEC") since December 10, 2009. Each of


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