Cree Invests $12.5 Million in Microvision Stock; Microvision Puts $10 Million into Cree for Laser and LED Development

Microvision, Inc.tics of business finance in public companies can be confusing on occasion; sometimes after the dust settles it's difficult to understand the net effect. Such a situation has cropped up with with Cree Research Inc(Durham, NC) and <%=company%> (Bothell, WA), where the cash is flowing like water. Ostensibly, Microvision has made a two-year, $10 million commitment to fund research and development activities at Cree, assisting the company in developing light-emitting diodes (LEDs) and continuous wave blue and green laser devices for use in mobile handsets and headsets for the wireless Internet market.

The agreement extends an initial commitment signed in May 1999, which provided for a one-year commitment of $2.6 million with a one-year extension of $2.5 million at Microvision's option (see Microvision Forges Links With Electro-Optics Leaders). Microvision has elected to extend its existing research contract with Cree into 2001, and has committed an additional $7.5 million to the project through May of 2002 for a total of $10 million over the next two years.

Meanwhile, Cree is buying $12.5 million in Microvision common stock from the company. The amendment of the development agreement will become effective upon the closing of the transaction. "We're buying into the company and the technology," says Cree's chief financial officer Cynthia Merrell. "They've got a great future if we're able to get the R&D done that we anticipate. We're making the equity investment to show good faith."

Merrell finds no inconsistency in the notion that Microvision is committing $10 million to Cree while simultaneously taking in $12.5 million in equity investment, stressing that the two transactions are separate and that the equity placement is a tangible investment for Cree. "We're making a long term investment with them because we believe in their product in a long term basis," she says. "The [Microvision] funding [in Cree] is to get us to work harder on the R&D for their products."

Long time Cree investor General Electric Pension Trust is also investing $12.5 million in Microvision stock. Microvision confirmed that each partner would purchase $12.5 million of Microvision common stock at $50 per share for a total of $25 million. The transaction will be completed upon effectiveness of a registration statement to be filed by the company. The transaction contains a provision that would allow the purchase price to be reset at closing in the event that the volume-weighted average for the 25 days preceding effectiveness is below $50. In no event would the price be less than $45 per share.

Edited by Kristin Lewotsky