0000950116-01-501072.txt : 20011119 0000950116-01-501072.hdr.sgml : 20011119 ACCESSION NUMBER: 0000950116-01-501072 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 15 REFERENCES 429: gov.sec.edgar.dataobjects.object.PDSubFN429Data@95ee3525 FILED AS OF DATE: 20011106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIVERSAL DISPLAY CORP \PA\ CENTRAL INDEX KEY: 0001005284 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 232372688 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-72846 FILM NUMBER: 1776177 BUSINESS ADDRESS: STREET 1: THREE BALA PLAZA, SUITE 104E CITY: BALA CYNWYD STATE: PA ZIP: 19004 BUSINESS PHONE: 6106174010 MAIL ADDRESS: STREET 1: THREE BALA PLAZA EAST STREET 2: SUITE 104 CITY: BALA CYNWYD STATE: PA ZIP: 19004 S-3 1 s3.txt S-3 As filed with the Securities and Exchange Commission on November 6, 2001 Registration No.333- =============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------- FORM S-3 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ------------- UNIVERSAL DISPLAY CORPORATION (Exact name of registrant as specified in its charter) Pennsylvania 3575 23-2372688 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.) incorporation or organization) Classification No.)
375 Phillips Boulevard Ewing, New Jersey 08618 (609) 671-0980 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ------------- SHERWIN I. SELIGSOHN Chief Executive Officer and Chairman of the Board Universal Display Corporation 375 Phillips Boulevard Ewing, New Jersey 08618 (609) 671-0980 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------- Copies of all communications to: STEPHEN M. GOODMAN, ESQ. Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 (215) 963-5000 Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. |_| If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. |_|
---------------------------------------------------------------------------------------------------------------------- Proposed Maximum Proposed Maximum Title of Each Class Amount Offering Price Per Aggregate Offering Amount of of Securities to be Registered to be Registered Share(1) Price Registration Fee ---------------------------------------------------------------------------------------------------------------------- Common Stock, par value $0.01 per share 2,737,620 $ 7.98 $ 21,846,207 $ 5,462(1)(2) ----------------------------------------------------------------------------------------------------------------------
(1) Fee calculated in accordance with Rule 457(c) of the Securities Act of 1933, as amended. Estimated solely for the purpose of calculating the registration fee based on the average of the high and low prices per share of the Registrant's common stock on October 30, 2001, as reported on the Nasdaq National Market. In accordance with Rule 457(p) under the Securities Act of 1933, payment of the registration fee due with respect to this Registration Statement shall be made by offsetting the amount due hereunder against the $5,093 registration fee we paid in connection with the filing of our Registration Statement on Form S-3 (Commission File No. 333-69854), which registration statement was withdrawn prior to effectiveness on November 1, 2001. (2) Of this amount, $5,093 was paid on September 21, 2001. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. SUBJECT TO COMPLETION, DATED NOVEMBER 6, 2001 PROSPECTUS 2,737,620 Shares UNIVERSAL DISPLAY CORPORATION Common Stock The shareholders of Universal Display Corporation identified in this prospectus under "Selling Shareholders," or their pledgees or assignees, are offering up to 2,737,620 shares of our common stock for resale to the public. The selling shareholders will be selling shares of common stock (a) that they can acquire upon the conversion of preferred stock that they own or may acquire from us in the future and (b) that they can acquire by exercising warrants that they own. We will not receive any proceeds from the resale of shares of our common stock by the selling shareholders. We are paying the expenses of this offering. The primary market for our common stock is the Nasdaq National Market System, where it trades under the symbol "PANL." Our common stock is also traded on the Philadelphia Stock Exchange under the symbol "PNL." On November 1, 2001, the last reported sale price of our common stock on the Nasdaq National Market was $8.40 per share. An investment in our common stock involves significant risks. You should carefully consider the risk factors described on pages 5 to 13 before investing in our common stock. These securities have not been approved by the Securities and Exchange Commission or any state securities commission, nor have they determined if this prospectus is accurate or complete. Any representation to the contrary is a criminal offense. The information in this prospectus is not complete and may change. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. ----------------------- The date of this Prospectus is November 6, 2001 TABLE OF CONTENTS Page ---- Cautionary Statement Concerning Forward-Looking Statements............ 1 Universal Display Corporation......................................... 2 Risk Factors.......................................................... 5 The Offering ......................................................... 14 Use of Proceeds....................................................... 15 Selling Shareholders.................................................. 15 Plan of Distribution.................................................. 17 About this Prospectus................................................. 18 Where You Can Find More Information................................... 18 Legal Opinion......................................................... 19 Experts............................................................... 19 i CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements that involve a number of risks and uncertainties. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. A number of factors could cause our actual results, performance or achievements or those of the display technology industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, but are not limited to: o competition in the display technology industry in general and in our specific target markets; o changes in prevailing interest rates and the availability of and terms of financing to fund the growth of our business; o inflation; o changes in costs of goods and services; o economic conditions in general and in our specific target markets; o changes in consumer preferences and tastes; o demographic changes; o changes in, or failure to comply with, federal, state, local or foreign government regulation; o liability and other claims asserted against us; o changes in our commercialization strategy; o the ability to attract and retain qualified personnel; o changes in our capital expenditure plans; and o other factors referred to in this prospectus In addition, the forward-looking statements included in this prospectus are not meant to predict future events or circumstances and may not be realized. Forward-looking statements can be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seek," "pro forma," "anticipates," "intends," or "potential" or the negative of, or any other variations on, those terms or comparable terminology, or by discussion of strategy or intentions. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these forward-looking statements. We disclaim any obligation to update these factors or to announce the results of any revisions to any of the forward-looking statements contained in this prospectus publicly to reflect future events or developments. 1 UNIVERSAL DISPLAY CORPORATION This is a summary of information appearing elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. This summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements, including the notes to the financial statements, appearing elsewhere in this prospectus or in our annual and quarterly reports and other filings with the Securities and Exchange Commission. References in this prospectus to "we," "us," "Company" and "our" refer to Universal Display Corporation, together with its wholly-owned subsidiary, UDC, Inc. Our Company Universal Display Corporation is engaged in the research, development and commercialization of organic light emitting diode, or OLED, technology for use in flat panel displays, lasers and light generating devices. We expect the initial market for our technology to be in the electronic flat panel display industry. This industry includes such products as: o cellular phone displays; o portable personal digital assistants and Internet access-type devices; o laptop computers; and o television and computer monitors. Stanford Resources, Inc. estimated the size of the electronic display market to be approximately $41 billion in 2000. The flat panel part of this market was approximately $17 billion in 2000. We have the exclusive, perpetual, worldwide license to commercialize all OLED technology, intellectual property and know-how developed by Princeton University and the University of Southern California, subject to the terms of our Sponsored Research Agreement and License Agreement with those universities. To date, 51 patents have been issued in the United States. Approximately 71 patent applications (with corresponding foreign protection) have been filed, and additional patents are being filed monthly. We have also obtained a license, with rights to sublicense, to 70 US patents, approximately 4 US patent applications, and additional foreign patents related to OLED technology owned by Motorola, Inc. Our OLED Technology Organic light emitting diodes are made of material containing a carbon-based substance that has the capability to emit light when electric current is passed through it. We, in collaboration with our research and development partners, are working towards commercializing innovative OLED technology, including the following six proprietary OLED technology platforms: o TOLED(TM) Technology: Our transparent OLED can be used to create transparent displays for information displays on windshields, cockpit displays on aircraft and head mounted displays. Transparent organic light-emitting devices, or TOLEDs, can also be used in numerous portable electronic applications because of their bright colors, high contrast, low power requirements and top emission characteristics. o SOLED(TM) Technology: Unlike traditional side-by-side display architecture, which places the red, green and blue picture elements, or pixels, horizontally next to each other, our stacked OLED stacks the red, green and blue pixels vertically on top of each other. Thus, to display green in the conventional architecture, you turn off the red and blue pixels, leaving spaces between each of the illuminated 2 green pixels. With a stacked organic light emitting device, or SOLED, to display green, you turn off the red and blue sections of the stacked pixel component. The stacked architecture of the SOLED may increase the resolution of the display by a factor of three. o FOLED(TM) Technology: Unlike conventional displays, our flexible OLEDs can be built on flexible materials such as plastic. We believe that such displays will be lighter in weight and will have lower power requirements. The flexible organic light emitting device, or FOLED, also may provide the opportunity to apply low cost roll to roll (web processing) technologies to display fabrication, which can reduce the cost, and therefore expand the market, of electronic flat panel displays. o Organic Laser Technology: We and our research partners are attempting to develop a fourth technology platform based upon the ability to fabricate an organic laser utilizing OLED technology. In the September 25, 1997 issue of the scientific journal Nature, our research partners announced what they believed to be the first evidence of lasing from vacuum deposited thin films of organic molecules. We believe this is a significant first step towards the realization of electrically pumped, solid-state lasers based on organic thin films. o High Efficiency PHOLED(TM) Materials: A fifth technology platform respects the use of molecules that emit light through the process of phosphorescence. This class of molecules has the potential for higher efficiency, lower power and longer lifetimes than conventional OLED technology which involves the emission of light through the process of fluorescence. We and our research partners first announced this discovery in the September 10, 1999 issue of Nature. o Organic Vapor Phase Deposition: A sixth technology platform involves the use of a carrier gas stream in a hot walled reactor at low vacuum to precisely deposit the thin layers of organic materials used in OLED displays. Conventional OLED fabrication equipment evaporates the organic molecules at high vacuum. We have entered into a Development and License Agreement with Aixtron AG, a German company that manufactures precision semiconductor production equipment for LEDs, to further develop, commercialize and produce manufacturing equipment for OLEDs based on this technology. Our Research Partners Princeton and USC have been performing research on OLED technology for many years, and have continued that research for us since 1994. The sponsored research agreement between us and our research partners, which was originally executed in 1994, was extended in 1997 for five additional years and is subject to further extension by mutual agreement. Key members of our research team include Dr. Stephen Forrest at Princeton and Dr. Mark R. Thomson at USC. There are approximately 20 researchers at Princeton and USC who are engaged in OLED research. We also fund research in OLEDs at the Massachusetts Institute of Technology (MIT) and the Chitose Institute of Technology in Japan. Our Commercialization Strategy Our approach to developing technology and penetrating the electronic display market has four major components: o We are continuing to fund our research partners under the current sponsored research agreement and to obtain the worldwide exclusive rights to all intellectual property invented in the project. 3 o We are working on the development of reliable commercial prototypes and the optimization of the fabrication processes. In 1999, we moved into an 11,000 square foot space near Princeton, New Jersey to serve as a pilot line facility and technology transfer center. In 2001, we leased an additional 10,000 square feet in our building, which we plan to start occupying in the fourth quarter of this year. o We have entered into agreements with an equipment manufacturer, Aixtron AG; and an organic materials developer and supplier, PPG Industries, Inc., to further develop and commercialize our technology, and potentially obtain royalties from the sales of certain equipment and revenues from the sales of certain materials to OLED manufacturers. o We intend to license our proprietary OLED technology and enter into joint ventures and other strategic alliances with experienced manufacturers and users of display products for the volume manufacture, distribution and sale of products based upon this technology. We do not presently intend to become a volume manufacturer. Our Development Partners We have announced agreements with the following six companies: o Effective July 23, 2001, we entered into a Joint Development Agreement with Samsung SDI Co. Ltd. to develop low-power, full-color active matrix OLED displays. The initial focus of the agreement will be on the development of portable OLED displays for use in mobile telephones, personal digital assistants, electronic games and other consumer and industry electronics. Pursuant to the development program, we will combine our proprietary OLED materials and technology with Samsung's active matrix technology. o Effective April 19, 2001, we entered into a Development and License Agreement with Luxell Technologies, Inc. Under the agreement, the parties will cooperate in the development of one or more high-contrast, high-efficiency OLED displays integrating our TOLED technology and Luxell's Black Layer(TM) technology. Pursuant to the terms of the agreement, Luxell has obtained a royalty-bearing license to our TOLED technology and high efficiency materials for use in Black Layer TOLED displays that may be manufactured, marketed or sold. We will be the licensor of the combined Black Layer TOLED technology, and the parties will share in the revenues from such licensing activities. o Effective February 1, 2001, we entered into a Joint Development Agreement with Sony Corporation to develop active matrix OLED display devices for use in large area monitor applications. By combining our proprietary electrophosphorescent materials with Sony's proprietary low temperature poly silicon active matrix OLED technology, the parties will seek to develop high power efficiency OLED displays. o Effective October 1, 2000, we entered into a Development and License Agreement with PPG Industries, Inc. (PPG) to leverage our OLED flat panel display technology with PPG's expertise in organic materials development and manufacturing. A team of PPG scientists and engineers will assist us in developing and commercializing our proprietary OLED system. Present staffing levels will provide the full time services of 7 PPG employees, plus managerial services. Based upon current staffing levels, we anticipate issuing to PPG approximately 114,000 shares of common stock annually for the period from January 1, 2001 through December 31, 2005. In addition, we anticipate issuing to PPG annually warrants to purchase up to an additional 114,000 shares of our common stock over the period from January 1, 2001 through December 31, 2005. The amount of equity to be obtained by PPG under the agreement is subject to adjustment under certain circumstances. PPG's services have an estimated value of approximately $11 million. PPG also has the right to request that we grant royalty bearing licenses to PPG for use of our OLED technology in certain applications. 4 We also entered into a Supply Agreement with PPG whereby PPG will be the exclusive supplier of our proprietary materials through December 31, 2007. PPG will sell the materials to us, and we will resell them to OLED manufacturers. o Effective September 29, 2000, we entered into a License Agreement with Motorola, Inc., whereby we obtained the rights, with the right to sublicense, to 70 US patents, 4 pending US patents, and certain foreign patents of Motorola, Inc., related to OLEDs. Our agreement with Motorola also includes the opportunity to meet with their product development group, although there are no assurances that Motorola will purchase any products from the Company or its licensees, or use any of the Company's technology in their products. In connection with the rights granted to the Company under the agreement, we issued to Motorola 200,000 shares of common stock, 300,000 shares of Series B Convertible Preferred Stock (each share convertible into one share of common stock, subject to adjustment under certain circumstances, and vesting 75,000 shares per year), and Warrants to purchase an additional 150,000 shares. o Effective July 19, 2000, we entered into a Development and License Agreement with Aixtron AG of Germany to further develop and commercialize manufacturing equipment for OLEDs based on our proprietary technology called Organic Vapor Phase Deposition (OVPD). Aixtron AG is a world leader in the production of manufacturing equipment for LEDs using MOCVD (Metal-organic chemical vapor deposition) technology. Under the agreement, the Company and Aixtron will engage in a joint development program to commercialize OVPD equipment. Aixtron has the exclusive license to produce equipment based on this technology, and we will receive a royalty from the sale of the equipment. Executive Offices Our executive offices are located at 375 Phillips Boulevard, Ewing, New Jersey 08618. Our phone number is (609) 671-0980. Our web site can be found at www.universaldisplay.com. RISK FACTORS An investment in our common stock involves a high degree of risk. In addition to the other information contained in this prospectus, you should carefully consider the following risk factors before making an investment decision concerning our common stock. You should not purchase our common stock if you cannot afford the loss of your entire investment. We do not expect to be profitable in the foreseeable future, and may never be profitable. Since inception, we have not generated any product revenues, and have incurred significant losses, resulting in an accumulated deficit of approximately $36.8 million, as of June 30, 2001. We expect to incur losses for the foreseeable future and until such time, if ever, as we are able to achieve sufficient levels of revenue from the commercial exploitation of the OLED technology to support our operations. You should note, however, that: o OLED technology may never become commercially viable; o markets for flat panel displays utilizing the OLED technology may be limited; and o we may never generate sufficient revenues from the commercial exploitation of the OLED technology to become profitable. Additionally, even if we find commercially viable applications for our OLED technology, we may never recover our research and development costs. 5 If we do not receive additional financing in the future, we will not be able continue the research, development and commercialization of our OLED technology. Our capital requirements have been and will continue to be significant. The completion of the research, development and commercialization of the OLED technology for potential applications will require significant additional effort and resources. Our cash on hand is not sufficient to meet all of our future obligations. When we need additional funds, such funds may not be available on commercially reasonable terms or at all. If we cannot obtain more money when we need it, our business might fail. Additionally, if we attempt to raise money in an offering of our common stock, the issuance of additional stock will dilute our then existing shareholders. If our OLED technology is not feasible for product applications, we may never generate significant revenues. At this time, we are unable to determine the feasibility of our OLED technology for the commercial viability of any potential applications. We must make substantial advances in our research and development efforts in a number of areas including: o reliability; o the development of more fully saturated colors for full color displays; o integration with drive electronics; and o issues related to scalability and cost effective fabrication technologies for product applications before products utilizing the OLED technology are manufactured and sold. The development of an electrically pumped laser is also necessary before products based on the organic laser research are manufactured and sold. Our efforts may never demonstrate the feasibility of our OLED technology, particularly for use in full color, large area, high resolution, high information content flat panel display applications. Our research and development efforts remain subject to all of the risks associated with the development of new products based on emerging and innovative technologies, including, without limitation, unanticipated technical or other problems and the possible insufficiency of the funds allocated to complete its development. Technical problems may result in delays and cause us to incur additional expenses that would increase our losses. If we cannot complete our research and development of the OLED technology successfully, or if we experience delays in completing our research and development of the OLED technology for use in potential applications, particularly after the occurrence of significant expenditures, our business may fail. Even if our technology is technically feasible, it may not be accepted by the market. The potential size, timing and viability of market opportunities targeted by us are uncertain at this time. Market acceptance of the OLED technology will depend, in part, upon such technology providing benefits comparable to CRT and LCD technology (the current standard for display quality) at an appropriate cost, and its adoption by consumers, neither of which have been achieved. Many potential licensees of the OLED technology manufacture flat panel displays utilizing competing technologies and may, therefore, be reluctant to redesign their products or manufacturing processes to incorporate the OLED technology. Potential licensees may never utilize the commercially viable OLED technology. If our research partners fail to make advances in their research, or if they terminate their relationship with us, we might not succeed in commercializing our OLED technology. Research and development of commercially viable applications for OLED technology is dependent on the success of the research efforts of our research partners conducted under our sponsored research agreement with them. We cannot assure you that our research partners will make additional advances in the research and development of the OLED technology. 6 Although we fund the OLED technology research, the scope of and technical aspects of the research as well as the resources and efforts directed to such research is subject to the control of our research partners. Our sponsored research agreement provides that if Dr. Forrest is unavailable to continue to serve as a principal investigator, either because he is no longer associated with Princeton or otherwise, and a successor acceptable to both us and Princeton is not available, Princeton has the right to terminate the sponsored research agreement. The 1997 sponsored research agreement, which expires in July 2002, may not be extended. The termination or expiration of the sponsored research agreement or the 1997 license agreement would materially and adversely affect our ability to research, develop and commercialize our OLED technology. If we cannot form strategic licensing relationships with companies that manufacture and use products that incorporate our OLED technology, our commercialization strategy will fail. Our strategic plan depends upon the development of strategic licensing relationships with high volume companies that will manufacture and use products incorporating its OLED technology. We have not yet entered into any such strategic relationships, although we have entered into o a Joint Development Agreement with Samsung SDI Co. Ltd.; o a Joint Development Agreement with Sony Corporation; o a Development and License Agreement with PPG Industries, Inc.; o a Development and License Agreement with Luxell Technologies Inc.; and o a Development and Licensing Agreement with Aixtron AG to develop and commercialize a new type of production equipment for OLEDs based upon our proprietary technology. Our agreement with Motorola also includes the opportunity to meet with their product development group, although there are no assurances that Motorola will purchase any products from us or our licensees. Our agreements with PPG provide us with the capability to sell chemicals to our licensees. In December 1999, we moved into a new facility which includes a prototype pilot line and technology transfer facility to accelerate the development and commercialization of our technology, We cannot assure you that such a facility will allow us to enter into such strategic relationships. Our prospects will be significantly affected by our ability to sublicense the OLED technology and successfully develop strategic alliances with third parties for incorporation of the OLED technology into flat panel displays manufactured by others. Strategic alliances may require financial or other commitments by us. We might not be able, for financial or other reasons, to enter into strategic alliances on commercially acceptable terms, or at all. Failure to do so would have a material adverse effect on us. If we cannot protect our intellectual property rights, or if our technology infringes the rights of others, our business will suffer. Our rights to the OLED technology are dependent on patents and other intellectual property rights relating to the OLED technology that are licensed to us by Princeton and USC. Fifty-one U.S. patents have already been issued, approximately 71 additional patent applications are pending in the United States and many corresponding international patent applications have been filed to cover major industrial countries. However, there can be no assurance that additional patents applied for will be obtained or that any such patents will afford us commercially significant protection of our OLED technology, or will be found valid if challenged. In connection with our license agreement with Motorola, Inc., we have obtained a license to 70 additional OLED-related U.S. patents, 4 patent applications, related foreign patents and applications, and the right to sublicense this technology. 7 The patent laws of other countries may differ from those of the United States as to the patentability of the OLED technology and the degree of protection afforded. Older companies and institutions may independently develop equivalent or superior technologies and may obtain patent or similar rights with respect thereto. There are a number of other companies and organizations that have been issued patents and are filing additional patent applications relating to OLED technology, including Eastman Kodak Corporation, which holds a number of patents related to OLED technology. There can be no assurance that the exercise of some aspects of our licensing rights respecting its OLED technology being developed by Princeton and USC or those licensed from Motorola, Inc. will not infringe on the patents of others, in which event we or our research partners may be required to obtain a license, pay damages, modify their products or method of operation or be prohibited from making, using, selling or offering to sell some or all products incorporating our OLED technology. We also might not have the financial or other resources necessary to enforce or defend a patent infringement action, and the licensors of our licensed technology might not enforce an action in a timely manner. If products incorporating our OLED technology are found to infringe upon the patent or other intellectual property rights of others, it could have a material adverse effect on us. The federal government has rights to our OLED technology that might prevent us from realizing its benefits. The United States government, through the Defense Advanced Research Projects Agency, has provided funding to Princeton and us for research activities related to certain aspects of its OLED technology. The federal government could obtain rights to this technology, which would affect our rights as follows: o If all or certain aspects of the OLED technology develop from our funding to Princeton, and those aspects are deemed to fall within the planned and committed activities of DARPA's funding, the federal government, pursuant to federal law, could have certain rights relating to the OLED technology. o If the federal government determines that we have not taken effective steps to achieve practical application of such technology in a field of use in a reasonable time, it may require us to grant licenses to other parties in any such field of use. o The federal government could restrict our ability to market the OLED technology to the federal government for military and other applications. o The federal government's continued funding of ours and Princeton's research activities may also give it rights to aspects of the OLED technology developed in the future. If so, we might not realize the benefits of that technology. Because many of our competitors have better name-recognition, and greater financial, technical, marketing and research capabilities than us, we may never be able to compete successfully in the flat panel display industry. The flat panel display industry is characterized by intense competition. The market is currently, and will likely continue to be, dominated by products utilizing LCD technology. Numerous companies are making substantial investments in, and conducting research to improve characteristics of, LCD technology. Several other flat panel display technologies have been, or are being, developed, including field emission, inorganic electroluminescence, polymeric light emitting diode, gas plasma and vacuum fluorescent displays. In addition, other companies are engaged in research and development activities with respect to technology using OLEDs. Advances in LCD technology or any of these developing technologies may overcome their limitations or become the leading technology for flat panel displays, either of which could limit the potential market for flat panel displays utilizing the Company's OLED technology. 8 Substantially all of these competitors have better name recognition and greater financial, technical, marketing, personnel and research capabilities than us. Our competitors may succeed in developing technologies and applications that are more cost-effective or have fewer display limitations than our OLED technology. We may never be able to compete successfully or develop commercial applications for our OLED technology. If we cannot keep our key employees or hire other talented persons as we grow, our business might not succeed. Our performance is substantially dependent on the continued services of senior management and other key personnel, and its ability to offer competitive salaries and benefits to its employees. We do not have employment agreements with any of our management or key personnel. Additionally, competition for highly skilled technical, managerial and other personnel is intense. We might not be able to attract, hire, train, retain and motivate the highly skilled managers and employees we need to be successful. If we fail to attract and retain the necessary technical and managerial personnel, we will suffer and might fail. We can issue shares of preferred stock that can adversely affect your rights as a shareholder. Our articles of incorporation authorize us to issue up to 5,000,000 shares of preferred stock with designations, rights and preferences determined from time-to-time by our board of directors. Accordingly, our board is empowered, without shareholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights superior to those of our common shareholders. For example, an issuance of shares of preferred stock could: o adversely affect the voting power of the common shareholders; o make it more difficult for a third party to gain control of us; o discourage bids for our common stock at a premium; or o otherwise adversely affect the market price of the common stock. Our board has designated and issued: (a) 200,000 shares of Series A Preferred Stock, all of which are held by an entity controlled by Sherwin Seligsohn; (b) 300,000 shares of Series B Convertible Preferred Stock; (c) 5,000 shares of Series C Convertible Preferred Stock, all of which have been exchanged for shares of Series C-1 Convertible Preferred Stock; and (d) 5,000 shares of Series C-1 Convertible Preferred Stock. All of the shares of Series A Stock, Series B Stock and Series C-1 Stock are convertible into shares of our common stock in accordance with our articles of incorporation. In addition, our board has designated 5,000 shares of Series D Convertible Preferred Stock that we expect to issue following the effective date of this Registration Statement. The Series D Stock will be convertible into shares of our common stock in accordance with our articles of incorporation. The Series C-1 Stock and Series D Stock will automatically convert into common stock on the 5th trading day after the effective date of this Registration Statement, subject to the satisfaction of certain conditions. See the risk factor under the heading "This offering, as well as the issuance of other publicly traded shares, could drive our stock price down" for more information regarding the Series C-1 Stock and Series D Stock. We may issue additional shares of our authorized preferred stock at any time in the future. The market price of our common stock might be highly volatile. The market price of our common stock might be highly volatile, as has been the case with the securities of other emerging growth companies. Factors such as: o our operating results; o announcements by us or our competitors of technological developments, new product applications or license arrangements; and 9 o other factors affecting the flat panel display industry generally may have a significant impact on the market price of our common stock. In recent years, the stock market has experienced a high level of price and volume volatility and market prices for the stock of many companies, particularly small and emerging-growth companies. If our shares are delisted, you might not be able to sell your investment in our company. Our common stock is listed on the Nasdaq National Market System. To continue to be listed on that market, however, we must maintain, with certain exceptions, maintenance criteria, including: o specified levels for total assets; o market value of the public float; o total capital and surplus; and o a minimum bid price per share. The failure to meet such maintenance criteria in the future may result in the delisting of our common stock from the Nasdaq National Market System. Thereafter, trading, if any, in our common stock would be conducted in the non-Nasdaq over-the-counter market. As a result of such delisting, you could find it more difficult to dispose of, or to obtain accurate quotations as to the market value of, our common stock. If our shares are delisted, trading in our common stock may become subject to additional regulation that could further limit the liquidity of your investment. If our common stock were to become delisted from trading on Nasdaq and the trading price of the common stock were to remain below $5.00 per share, trading in the common stock would also be subject to the requirements of additional rules under the Exchange Act. These rules require additional disclosure by broker-dealers in connection with any trades involving any non-Nasdaq equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such rules require the delivery, prior to any so-called penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated with it, and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. The broker-dealer also must disclose the commissions payable to the broker-dealer, current bid and offer quotations for the penny stock and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Such information must be provided to the customer orally or in writing prior to effecting the transaction and in writing before or with the customer confirmation. Monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market liquidity of your investment. This offering, as well as the issuance of other publicly traded shares, could drive our stock price down. On August 22, 2001, we completed a private placement transaction in which we sold shares of our convertible preferred stock, three-year convertible promissory notes and warrants to purchase shares of our common stock to two of the selling shareholders, Pine Ridge Financial Inc. and Strong River Investments, Inc. In addition, Pine Ridge and Strong River agreed to purchase additional shares of convertible preferred stock from us. As part of that transaction, we are currently registering for resale the shares issuable upon the conversion of the preferred stock (including the preferred stock that we 10 have not yet sold) and the exercise of the warrants. Sales of substantial amounts of common stock in the public market as a result of this offering could reduce the market price of our common stock and make it more difficult for us and our shareholders to sell our equity securities in the future. Following the effectiveness of this Registration Statement, the 2,737,620 shares of common stock offered by the selling shareholders will become freely salable in the public market. This includes 533,502 shares that may be issuab1e upon the conversion of outstanding shares of our Series C-1 Convertible Preferred Stock, 529,100 shares that may be issuable upon the conversion of shares of Series D Convertible Preferred Stock to be sold by us after the effectiveness of this Registration Statement, 930,566 shares that may be issuable upon the exercise of outstanding warrants, and an additional 744,452 shares that may be issuable upon the exercise of warrants granted to Pine Ridge and Strong River, if adjustments are made to the exercise prices of such warrants. All outstanding shares of Series C-1 Stock and Series D Stock will automatically convert into common stock on the 5th trading day after the effective date of this Registration Statement, if the following conditions are met on that date: o we have a sufficient number of authorized but unissued and otherwise unreserved shares of our common stock available to issue upon the conversion of the Series C-1 Stock and the Series D Stock; o our common stock is listed or quoted on the Nasdaq National Market or other national stock exchange; o the issuance of our common stock upon the conversion of the Series C-1 Stock and Series D Stock is permitted in full without violating the rules of the Nasdaq National Market; o the issuance of our common stock upon the conversion of the Series C-1 Stock and Series D Stock would not result in Pine Ridge and Strong River then beneficially owning in excess of 9.999% of the number of shares of our common stock then outstanding; and o we are not in default of a material provision of an agreement entered into or security issued as part of the August 22, 2001 private placement transaction. If the conditions set forth above are not satisfied on the 5th trading day after the effective date of this Registration Statement, then the shares of Series C-1 Stock and Series D Stock shall automatically convert into shares of common stock on the first date thereafter on which these conditions are satisfied. If, however, the conditions set forth above are not satisfied by the third anniversary of the respective original issuance date of the Series C-1 Stock and Series D Stock, then the holders of the Series C-1 Stock and Series D Stock, as applicable, may require us to repurchase their shares of Series C-1 Stock and Series D Stock for an amount equal to the aggregate stated value of such shares. The number of shares offered by the selling shareholders includes substantially more than the number of shares to which they are currently eligible to receive upon the exercise of the warrants. We are registering for resale more shares than are currently issuable under the warrants pursuant to contractual obligations with certain selling shareholders and to ensure that a sufficient number of shares is registered in the event that adjustments, if any, are made to the exercise prices of the warrants. See "THE OFFERING" on page 14. Material terms of the preferred stock and warrants are explained below. Series C-1 Convertible Preferred Stock We issued 5,000 shares of our Series C Convertible Preferred Stock in the private placement transaction completed on August 22, 2001. All of the Series C Shares were subsequently exchanged for shares of our Series C-1 Convertible Preferred Stock. Holders of Series C-1 Stock are not entitled to voting rights except as otherwise required by law. Each share of Series C-1 Stock has an initial stated value of $1,008.32, which increases by $4.16 for each month that such share is outstanding. The number of shares of our common stock issuable upon conversion of a share of Series C-1 Stock equals the quotient obtained by dividing the stated value of one share of Series C-1 Stock by the then-applicable conversion price 11 thereof. The initial conversion price of the Series C-1 Stock is $9.45, which may change in the future based on certain anti-dilution and other adjustments explained below. All outstanding shares of Series C-1 Stock will automatically convert into common stock on the 5th trading day after the effective date of this Registration Statement, subject to the satisfaction of certain conditions. Series D Convertible Preferred Stock If the conditions described below are met, on the 3rd trading day after this Registration Statement is declared effective by the SEC, Pine Ridge and Strong River will purchase an aggregate of 5,000 shares of a new series of our preferred stock, which will be called Series D Convertible Preferred Stock. None of the conditions to the sale of the Series D Stock are within the control of either Pine Ridge or Strong River. In the event, however, that any of the following conditions has not been satisfied or waived by Pine Ridge or Strong River on or before the closing date of the sale of the Series D Stock, then Pine Ridge and Strong River, as applicable, will not be obligated to purchase any shares of Series D Stock: o No change of control of the Company shall have occurred since August 22, 2001; o If any shares of Series C-1 Stock or convertible promissory notes sold in the August 22, 2001 private placement had been converted, or if any warrants granted to the investors in the August 22, 2001 private placement had been exercised, we must have timely delivered any shares of common stock issuable thereunder; o We must have filed an amendment to our articles of incorporation designating the rights and preferences of the Series D Stock; and o We will not need to obtain approval from our shareholders in order to issue the aggregate number of shares of common stock issuable upon the conversion of our Series C-1 Stock, Series D Stock and convertible promissory notes and upon the exercise of the warrants that were issued and sold in the August 22, 2001 private placement. Pine Ridge and Strong River may elect to not purchase the Series D Stock if this Registration Statement has not been declared effective by the SEC by December 12, 2001. The initial conversion price of the Series D Stock will equal $9.45. The initial conversion price of the Series D Stock may change in the future based on certain anti-dilution and other adjustments explained below. Holders of Series D Stock will not be entitled to voting rights except as otherwise required by law. Each share of Series D Stock will have a stated value of $1,000, which will increase by $4.16 for each month that such share is outstanding. All outstanding shares of Series D Stock will automatically convert into common stock on the 5th trading day after the effective date of this Registration Statement, subject to the satisfaction of certain conditions. Warrants o Warrants to purchase 429,492 shares of our common stock have an exercise price of $15.24 per share, which may change in the future based on certain anti-dilution and other adjustments explained below, and expire on August 21, 2011. These warrants were granted as part of a private placement transaction undertaken for capital raising purposes. While these warrants are exercisable immediately, they may not be exercised to the extent that a holder thereof would then own, together with its affiliates, more than 4.999% of our common stock then outstanding. A warrant holder may waive the 4.999% limitation on ownership by giving us 61 days' prior written notice. In no event, however, can the warrants be exercised to the extent that Pine Ridge or Strong River would then own, together with its respective affiliates, more than 9.999% of the shares of our common stock then outstanding. 12 o Warrants to purchase 314,960 shares of our common stock have an exercise price of $9.9225 per share, which may change in the future based on certain anti-dilution and other adjustments explained below, and expire on August 21, 2011. These warrants were granted as part of a private placement transaction undertaken for capital raising purposes. Of these warrants, warrants to purchase 157,480 shares of common stock are exercisable commencing on the earlier of (x) the closing of the sale of the Series D Stock or (y) August 22, 2004. The remaining warrants to purchase 157,480 shares of common stock are exercisable immediately. However, the warrants may not be exercised to the extent that a holder thereof would then own, together with its affiliates, more than 4.999% of our common stock then outstanding. A warrant holder may waive the 4.999% limitation on ownership by giving us 61 days' prior written notice. In no event, however, can the warrants be exercised to the extent that Pine Ridge or Strong River would then own, together with its respective affiliates, more than 9.999% of the shares of our common stock then outstanding. o Warrants to purchase 186,114 shares of our common stock have an exercise price of $15.24 per share, which may change in the future based on certain anti-dilution and other adjustments explained below, and expire on August 21, 2008. These warrants were granted as placement agent fees. Adjustment Features of Conversion and Exercise Prices If we sell stock at a price per share that is below either the then-applicable conversion price of the preferred stock or convertible notes, or below the exercise price of the warrants issued in the August 22, 2001 private placement transaction, then the conversion or exercise price, as applicable, of these shares of preferred stock, notes and warrants may adjust downward. The number of additional shares of common stock to which the holders of these securities would be entitled depends on the price at which we sell our stock. In addition, if we require a holder of a convertible promissory note to convert more than $1.5 million of the principal amount of its note, then the exercise price of warrants to purchase 429,492 shares at an exercise price of $15.24 per share may be reduced to equal 110% of the then-applicable conversion price of the relevant note. Finally, if we require the conversion of the promissory notes, the conversion price of the notes will be reduced to the lower of (x) the then-applicable conversion price or (y) an amount equal to 87% of the average of the VWAP for the 12 consecutive trading days ending on the last trading day immediately prior to the date on which such conversion is effectuated (subject to a floor equal to the product of (A) .87 and (B) 90% of the VWAP on the date on which we notified the holder of our election to require conversion of the notes). As a result of the foregoing, we may be required to issue more shares of common stock upon the conversion and exercise of the securities issued or issuable as part of the August 22, 2001 private placement transaction. If the price of our common stock decreased substantially and we sold shares at a price lower than the conversion or exercise prices of the securities issued or issuable as part of the August 22, 2001 private placement, the issuance of a greater number of shares under those securities could have an effect on the control of our company. However, these securities cannot be converted or exercised to the extent that Pine Ridge or Strong River would then own, together with its respective affiliates, more than 9.999% of the shares of our common stock then outstanding. Although the sale of these additional shares to the public might increase the liquidity of our shareholders' investments, the increase in the number of shares available for public sale could drive the price of our common stock down, thus reducing the value of your investment and perhaps hindering our ability to raise additional funds in the future. In addition, to the extent other restricted shares become freely salable, whether through an effective registration statement or under Rule 144 of the Securities Act, or we issue additional shares that might be or become freely salable, you could expect our stock price to decrease. 13 If our stock price goes down, we may have to issue more shares than we anticipate under the terms of a license and development agreement. Pursuant to the development and license agreement we entered into with PPG Industries, Inc., we are required to issue to PPG, for the services they expect to render to us during a particular calendar year during the term of the agreement, shares of common stock based on the value of such services at the beginning of the year. If, at the time of issuance, the price of our common stock has declined materially since the date we executed the agreement with PPG, we may be required to issue to PPG more shares of common stock than we initially anticipated. This increase in the number of shares available for public sale could cause people to sell our shares, including in short sales, which could drive the price of our common stock down, thus reducing the value of your investment and perhaps hindering our ability to raise additional funds in the future. In addition, this increase in the number of shares outstanding would further dilute our existing stockholders. Our executive officers and directors own a large percentage of our voting stock and could exert significant influence over matters requiring shareholder approval after this offering, including takeover attempts. Our executive officers and directors, and their respective affiliates, own as of October 30, 2001 approximately 12.3% of our outstanding common stock. Moreover, Pine Ridge Financial Inc. and Strong River Investments, Inc. assigned to management of the Company their rights to vote the shares of common stock issuable upon the conversion of the preferred stock, notes and warrants issued or to be issued to them in a August 22, 2001 private placement transaction. Accordingly, these shareholders and members of management may, as a practical matter, be able to exert significant influence over matters requiring approval by our shareholders, including the election of directors and the approval of mergers or other business combinations. This concentration could also have the effect of delaying or preventing a change of control. THE OFFERING The 2,737,620 shares of our common stock being offered by the selling shareholders. These shares consist of the following shares: o 533,502 shares of common stock that may be issuable upon the conversion of the Series C-1 Stock; o 529,100 shares of common stock that may be issuable upon the conversion of the Series D Stock; o 930,566 shares of common stock that may be issuable upon the exercise of outstanding warrants; and o 744,452 shares that may be issuable upon the exercise of warrants granted to Pine Ridge and Strong River, if adjustments are made to the exercise prices of such warrants. We previously issued the warrants in a private placement transaction on August 22, 2001. We also issued shares of Series C Convertible Preferred Stock in the August 22, 2001 private placement, all of which were subsequently exchanged for shares of our Series C-1 Stock on November 2, 2001. Pursuant to the terms of the private placement, if certain conditions are met, two of the selling shareholders, Pine Ridge and Strong River, are obligated to purchase shares of Series D Stock on the 3rd trading day after the effective date of this Registration Statement. Of the 2,737,620 shares of our common stock being offered by the selling shareholders, Pine Ridge and Strong River are offering an aggregate of 2,551,506 shares. The number of shares offered by Pine River and Strong River, however, includes substantially more than the number of shares currently issuable to Pine Ridge and Strong River upon: (a) the conversion of shares of Series C-1 Stock; (b) the conversion of shares of Series D Stock; and (c) the 14 exercise of the warrants because, pursuant to our contractual obligations with Pine Ridge and Strong River, we are registering more than the number of shares currently issuable under the warrants. Pine Ridge and Strong River may receive more shares than they are currently entitled to receive upon exercise of the warrants because the exercise prices of the warrants are subject to anti-dilution and other adjustments. The selling shareholders pursuant to this prospectus may sell the shares of common stock offered for resale in a secondary offering. Under the terms of the transactions described above, we are contractually required to register all of the shares of common stock that are described above. USE OF PROCEEDS The selling shareholders will receive the proceeds from the resale of the shares of common stock. We will not receive any proceeds from the resale of the shares of common stock by the selling shareholders. SELLING SHAREHOLDERS The following table sets forth information regarding the beneficial ownership of shares of common stock by the selling shareholders as of October 30, 2001, and the number of shares of common stock covered by this prospectus. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. The shares of common stock issuable upon (i) conversion of preferred stock, (ii) conversion of convertible notes, or (iii) exercise of warrants, currently convertible or exercisable within 60 days after October 30, 2001, are deemed outstanding and to be beneficially owned by the selling shareholders holding such preferred stock, convertible notes or warrants. However, Pine Ridge Financial, Inc. and Strong River Investments, Inc. are prohibited from using any shares of preferred stock, convertible notes or warrants to acquire shares of common stock to the extent that such acquisition would result in Pine Ridge and/or Strong River, together with any of their respective affiliates, beneficially owning in excess of 9.999% of our common stock outstanding after such acquisition. Except as otherwise noted below, none of the selling stockholders has held any position or office, or has had any other material relationship with us or any of our affiliates within the past three years. The percentage of ownership for each selling shareholder disclosed in this table is based on 17,047,080 shares of common stock outstanding as of October 30, 2001, plus any common stock equivalents held by that holder. Both the number of shares listed as being offered by the selling shareholders in the table and the holders' respective percentages of share ownership after the offering are based on the assumptions that all of the shares being offered are sold pursuant to this offering, and that no other shares of common stock are acquired or disposed of by the selling shareholders prior to the termination of this offering. Because the selling shareholders may sell all, some or none of their shares or may acquire or dispose of other shares of common stock, we cannot estimate the aggregate number of shares that will be sold in this offering or the number or percentage of shares of common stock that each selling shareholder will own upon completion of this offering.
Beneficial Ownership Prior to Beneficial Ownership After Resale of Shares Resale of Shares ----------------------------- ------------------------------- Number of Name of Number of Shares Being Number of Selling Shareholder Shares Percent Offered Shares Percent ------------------- --------- ------- ------------ --------- ------- Gerard Klauer Mattison & Co., Inc. 186,114(1) 1.1% 186,114(1) 0 0.0% Pine Ridge Financial Inc.(2) 1,876,112(3) 9.9% 1,275,753(4,5) 1,235,630(9) 6.2% Strong River Investments, Inc.(2) 1,876,112(6) 9.9% 1,275,753(7,8) 1,235,630(9) 6.2% --------- --------- Totals 2,737,620
15 ------------- (1) Represents shares issuable upon the exercise of warrants. (2) Pine Ridge and Strong River are deemed to be affiliates. (3) Includes: (a) 533,502 shares that may be issuable upon the conversion of shares of Series C-1 Stock (266,751 to each of Pine Ridge and Strong River); (b) 744,452 shares that may be issuable upon the exercise of warrants (372,226 to each of Pine Ridge and Strong River); (c) 1,073,730 shares that may be issuable upon the conversion of convertible promissory notes (536,865 to each of Pine Ridge and Strong River); and (d) 529,100 shares that may be issuable upon the conversion of shares of Series D Stock (264,550 to each of Pine Ridge and Strong River). Also includes 161,900 shares owned by Strong River. However, Pine Ridge is not currently deemed to be the beneficial owner of all the shares described above because it cannot convert its promissory notes or shares of Series C-1 Stock or Series D Stock, nor may it exercise its warrants to the extent that it would then own, together with its affiliates, more than 9.999% of the shares of our common stock then outstanding. (4) The number of shares offered by Pine Ridge includes substantially more than the number of shares currently issuable to Pine Ridge upon: (a) the conversion of shares of Series C-1 Stock; (b) the conversion of shares of Series D Stock; and (c) the exercise of the warrants because, pursuant to our contractual obligations with Pine Ridge, we are registering more than the number of shares issuable under the warrants to ensure that a sufficient number of shares is registered for resale. Pine Ridge may receive more shares than it is currently entitled to receive upon exercise of the warrants because the exercise prices of the warrants are subject to anti-dilution and other adjustments. (5) Does not include any shares offered by Strong River. (6) Includes: (a) 533,502 shares that may be issuable upon the conversion of shares of Series C-1 Stock (266,751 to each of Pine Ridge and Strong River); (b) 744,452 shares that may be issuable upon the exercise of warrants (372,226 to each of Pine Ridge and Strong River); (c) 1,073,730 shares that may be issuable upon the conversion of convertible promissory notes (536,865 to each of Pine Ridge and Strong River); and (d) 529,100 shares that may be issuable upon the conversion of shares of Series D Stock (264,550 to each of Pine Ridge and Strong River). Also includes 161,900 shares owned by Strong River. However, Strong River is not currently deemed to be the beneficial owner of all the shares described above because it cannot convert its promissory notes or shares of Series C-1 Stock or Series D Stock, nor may it exercise its warrants to the extent that it would then own, together with its affiliates, more than 9.999% of the shares of our common stock then outstanding. (7) The number of shares offered by Strong River includes substantially more than the number of shares currently issuable to Strong River upon: (a) the conversion of shares of Series C-1 Stock; (b) the conversion of shares of 16 Series D Stock; and (c) the exercise of the warrants because, pursuant to our contractual obligations with Strong River, we are registering more than the number of shares issuable under the warrants to ensure that a sufficient number of shares is registered for resale. Strong River may receive more shares than it is currently entitled to receive upon exercise of the warrants because the exercise prices of the warrants are subject to anti-dilution and other adjustments. (8) Does not include any shares offered by Pine Ridge. (9) Includes (a) 1,073,730 shares that may be issuable upon the conversion of convertible promissory notes (536,865 to each of Pine Ridge and Strong River) and (b) 161,900 shares owned by Strong River. PLAN OF DISTRIBUTION The selling shareholders and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of common stock on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. The selling shareholders may use any one or more of the following methods when selling shares: o ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; o block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; o purchases by a broker-dealer as principal and resale by the broker-dealer for its account; o an exchange distribution in accordance with the rules of the applicable exchange; o privately negotiated transactions; o to cover short sales effected after the date hereof; o broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated price per share; and o any combination of any of the above methods. The selling shareholders may also sell shares under Rule 144 under the Securities Act of 1933, if available, rather than under this prospectus. The selling shareholders may also engage in short sales against the box, puts and calls and other transactions in our securities or derivatives of our securities and may sell or deliver shares in connection with these trades. The selling shareholders may pledge their shares to their brokers under the margin provisions of customer agreements. If a selling shareholder defaults on a margin loan, the broker may, from time to time, offer and sell the pledged shares. Broker-dealers engaged by the selling shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The selling shareholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved. 17 The selling shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. The selling shareholders will be subject to prospectus delivery requirements of the Securities Act. We have informed the selling shareholders that the anti-manipulative provisions of Regulation M promulgated under the Securities Exchange Act of 1934 may apply to their sales in the market. We are required to pay all fees and expenses incident to the registration of the shares, including fees and disbursements of counsel to the selling shareholders, up to $25,000. We have agreed to indemnify the selling shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. Brokerage commissions and similar selling expenses, if any, attributable to the sale of shares by the selling shareholders will be borne by the selling shareholders. The selling shareholders may agree to indemnify brokers, dealers or agents that participate in sales by the selling shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. ABOUT THIS PROSPECTUS You should only rely on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of common stock. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any reports, statements or other information we file at the SEC's public reference rooms located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 6066. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at "http://www.sec.gov." We have filed a Registration Statement on Form S-3, of which this prospectus forms a part, to register the resale of the shares with the SEC. As allowed by SEC rules, this prospectus does not contain all the information you can find in the Registration Statement or the exhibits to the Registration Statement. The SEC allows us to "incorporate by reference" information into this prospectus, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for any information superseded by information in this prospectus. This prospectus incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about us, our business and our finances. The documents that we are incorporating by reference are: o Our Annual Report on Form 10-K for the year ended December 31, 2000; o Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and June 30, 2001; 18 o Our Current Report on Form 8-K filed with the SEC on March 19, 2001, as amended on March 21, 2001; o Our Current Report on Form 8-K filed with the SEC on September 6, 2001; o Our Current Report on Form 8-K filed with the SEC on September 26, 2001; and o The description of our common stock that is contained in our Registration Statement on Form SB-2 filed with the SEC on June 30, 1999, as amended August 25, 1999. Any documents which we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus but before the end of any offering of securities made under this prospectus will also be considered to be incorporated by reference. If you request, either orally or in writing, we will provide you with a copy of any or all documents which are incorporated by reference. We will provide such documents to you free of charge, but will not include any exhibits, unless those exhibits are incorporated by reference into the document. You should address written requests for documents to Sidney D. Rosenblatt, Executive Vice President, Chief Financial Officer, Treasurer and Secretary, Universal Display Corporation, 375 Phillips Boulevard, Ewing, New Jersey 08618. LEGAL OPINION Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, will pass on the validity of the shares. EXPERTS The audited financial statements incorporated by reference in this prospectus and elsewhere in this Registration Statement, to the extent and for the periods indicated in their reports, have been audited by Arthur Andersen LLP, independent public accountants, and are included herein in reliance upon the authority of said firm as experts in giving said reports. 19 =============================================================================== 2,737,620 Shares UNIVERSAL DISPLAY CORPORATION Common Stock --------------- PROSPECTUS --------------- November __, 2001 =============================================================================== PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution The estimated expenses payable by the Registrant in connection with the issuance and distribution of the securities being registered are as follows: SEC Registration fee $ 5,462 Transfer agent and registrar fees $ 1,500 Printing and engraving fees $ 5,000 Legal fees $22,000 Blue Sky fees and expenses $ 5,000 Accounting fees $10,000 Miscellaneous $ 6,038 ------- Total $55,000 The selling shareholders described in the prospectus included herewith will not pay any of the expenses of this offering. Item 15. Indemnification of Directors and Officers Chapter 17, Subchapter D of the Pennsylvania Business Corporation Law of 1988, as amended (the "PBCL") contains provisions permitting indemnification of officers and directors of a business corporation in Pennsylvania. Sections 1741 and 1742 of the PBCL provide that a business corporation may indemnify directors and officers against liabilities and expenses they may incur as such in connection with any threatened, pending or completed civil, administrative or investigative proceeding, provided that the particular person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. In general, the power to indemnify under these sections does not exist in the case of actions against a director or officer by or in the right of the corporation if the person otherwise entitled to indemnification shall have been adjudged to be liable to the corporation unless it is judicially determined that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnification for specified expenses. Section 1743 of the PBCL provides that the corporation is required to indemnify directors and officers against expenses they may incur in defending actions against them in such capacities if they are successful on the merits or otherwise in the defense of such actions. Section 1746 of the PBCL grants a corporation broad authority to indemnify its directors and officers for liabilities and expenses incurred in such capacity, except in circumstances where the act or failure to act giving rise to the claim for indemnification is determined by a court to have constituted willful misconduct or recklessness. Section 1747 of the PBCL permits a corporation to purchase and maintain insurance on behalf of any person who is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a representative of another corporation or other enterprise, against any liability asserted against such person and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify the person against such liability under Chapter 17 Subchapter D of the PBCL. II-1 The Registrant's Bylaws provide a right to indemnification to the full extent permitted by law, for expenses (including attorney's fees), damages, punitive damages, judgments, penalties, fines and amounts paid in settlement, actually and reasonably incurred by any director or officer whether or not the indemnified liability arises or arose from any threatened, pending or completed proceeding by or in the right of the Registrant (a derivative action) by reason of the fact that such director or officer is or was serving as a director, officer, employee or agent of the Registrant or, at the request of the Registrant, as a director, officer, partner, fiduciary or trustee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, unless the act or failure to act giving rise to the claim for indemnification is financially determined by a court to have constituted willful misconduct or recklessness. The Bylaws provide for the advancement of expenses to an indemnified party upon receipt of an undertaking by the party to repay those amounts if it is finally determined that the indemnified party is not entitled to indemnification. The Registrant's Bylaws authorize the Registrant to take steps to ensure that all persons entitled to indemnification are properly indemnified, including, if the Board of Directors so determines, purchasing and maintaining insurance. Item 16. List of Exhibits The exhibits filed as part of this Registration Statement are as follows: Exhibit Number Description ------- ----------- Exhibit Number Exhibit Title -------------- ------------- 4.1 Statement of Designations, Preferences and Rights of Series C-1 Convertible Preferred Stock (2) 4.2 Statement of Designations, Preferences and Rights of Series D Convertible Preferred Stock (2) 4.3 Convertible Promissory Note dated as of August 22, 2001 payable to the order of Pine Ridge Financial Inc. (1) 4.4 Convertible Promissory Note dated as of August 22, 2001 payable to the order of Strong River Investments, Inc. (1) 4.5 Amended and Restated Warrant of Strong River Investments, Inc. to Purchase 78,740 Shares of Common Stock dated as of August 22, 2001 (2) 4.6 Amended and Restated Warrant of Pine Ridge Financial Inc. to Purchase 78,740 Shares of Common Stock dated as of August 22, 2001 (2) 4.7 Amended and Restated Warrant of Strong River Investments, Inc. to Purchase 78,740 Shares of Common Stock dated as of August 22, 2001 (2) 4.8 Amended and Restated Warrant of Pine Ridge Financial Inc. to Purchase 78,740 Shares of Common Stock dated as of August 22, 2001 (2) 4.9 Amended and Restated Warrant of Strong River Investments, Inc. to Purchase 214,746 Shares of Common Stock dated as of August 22, 2001 (2) 4.10 Amended and Restated Warrant of Pine Ridge Financial Inc. to Purchase 214,746 Shares of Common Stock dated as of August 22, 2001 (2) 4.11 Warrant of Gerard Klauer Mattison & Co., Inc. to Purchase 186,114 Shares of Common Stock dated as of August 22, 2001 (1) 5.1 Opinion of Morgan, Lewis & Bockius LLP (2) II-2 Exhibit Number Exhibit Title -------------- ------------- 10.1 Securities Purchase Agreement dated as of August 22, 2001 among the Company, Pine Ridge Financial Inc. and Strong River Investments, Inc. (1) 10.2 Registration Rights Agreement dated as of August 22, 2001 among the Company, Pine Ridge Financial Inc. and Strong River Investments, Inc. (1) 10.3 Voting Agreement dated as of August 22, 2001 among the Company, Pine Ridge Financial Inc. and Strong River Investments, Inc. (1) 10.4 Pledge Agreement dated as of August 22, 2001 by UDC, Inc. in favor of First Union National Bank (1) 10.5 Control Agreement dated as of August 22, 2001 among First Union National Bank, in its capacity as the issuer of two standby letters of credit, UDC, Inc. and First Union National Bank, in its capacity as custodian (1) 10.6 Guaranty and Suretyship Agreement dated as of August 22, 2001 made by the Company in favor of First Union National Bank (1) 10.7 Irrevocable Standby Letter of Credit issued by First Union National Bank in favor of Pine Ridge Financial Inc. (1) 10.8 Irrevocable Standby Letter of Credit issued by First Union National Bank in favor of Strong River Investments, Inc. (1) 10.9 First Amendment to Securities Purchase Agreement dated as of September 20, 2001 among the Company, Pine Ridge Financial Inc. and Strong River Investments, Inc. (2) 10.10 Second Amendment to Securities Purchase Agreement dated as of November 1, 2001 among the Company, Pine Ridge Financial Inc. and Strong River Investments, Inc. (2) 10.11 First Amendment to Registration Rights Agreement dated as of November 1, 2001 among the Company, Pine Ridge Financial Inc. and Strong River Investments, Inc. (2) 10.12 Exchange Agreement dated as of November 2, 2001 among the Company, Pine Ridge Financial Inc. and Strong River Investments, Inc. (2) 23.1 Consent of Morgan, Lewis & Bockius LLP (included in its opinion filed as Exhibit 5.1 hereto) (2) 23.2 Consent of Arthur Andersen LLP (2) 24.1 Powers of Attorney (included in the signature pages hereto) (2) ------------ (1) Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on September 6, 2001 and incorporated herein by reference. (2) Filed herewith. Item 17. Undertakings (a) The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933 (the "Securities Act"); (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total II-3 dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) That, insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Ewing, New Jersey, on November 5, 2001. UNIVERSAL DISPLAY CORPORATION By: /s/ Steven V. Abramson -------------------------------------- Steven V. Abramson President and Chief Operating Officer In accordance with the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated. Each person in so signing also makes, constitutes and appoints Steven V. Abramson and Sidney D. Rosenblatt, and each of them acting alone, his or her true and lawful attorney-in-fact, with full power of substitution, to execute and cause to be filed with the Securities and Exchange Commission pursuant to the requirements of the Securities Act of 1933, as amended, any and all amendments and post-effective amendments to this Registration Statement, and including any registration statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act, with exhibits thereto and other documents in connection therewith, and hereby ratifies and confirms all that said attorney-in-fact or his or her substitute or substitutes may do or cause to be done by virtue hereof. II-5
Signature Title Date --------- ----- ---- /s/ Sherwin I. Seligsohn Chief Executive Officer and Chairman of the November 5, 2001 -------------------------- Board (principal executive officer) Sherwin I. Seligsohn /s/ Steven V. Abramson President, Chief Operating Officer and November 5, 2001 -------------------------- Director Steven V. Abramson /s/ Sidney D. Rosenblatt Executive Vice President, Chief Financial November 5, 2001 -------------------------- Officer, Treasurer, Secretary and Director Sidney D. Rosenblatt (principal financial and accounting officer) /s/ C. Keith Hartley Director November 5, 2001 -------------------------- C. Keith Hartley /s/ Elizabeth H. Gemmill Director November 5, 2001 -------------------------- Elizabeth H. Gemmill /s/ Lawrence Lacerte Director November 5, 2001 -------------------------- Lawrence Lacerte /s/ Leonard Becker Director November 5, 2001 -------------------------- Leonard Becker
II-6 EX-4.1 3 ex4-1.txt EX-4.1 STATEMENT OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES C-1 CONVERTIBLE PREFERRED STOCK OF UNIVERSAL DISPLAY CORPORATION UNIVERSAL DISPLAY CORPORATION, a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (the "Company"), hereby certifies that the following resolutions were adopted by the Board of Directors of the Company pursuant to the provisions of Section 1522 of the Pennsylvania Business Corporation Law, as amended (the "BCL"): RESOLVED, that pursuant to the authority vested in the Board of Directors pursuant to the provisions of the BCL and the Company's Articles of Incorporation, as amended, the Corporation is authorized to issue, out of the 5,000,000 shares of preferred stock, $.01 par value per share, of the Corporation authorized in the Company's Articles of Incorporation, as amended, a series of preferred stock to be designated as "Series C-1 Convertible Preferred Stock," $.01 par value per share, with the following preferences, limitations, and special rights: 1. Designation, Amount and Par Value. The series of preferred stock shall be designated as the Company's Series C-1 Convertible Preferred Stock (the "Preferred Stock"), and the number of shares so designated shall be 5,000. Each share of Preferred Stock shall have a par value of $.01 per share and a stated value initially equal to $1,008.32 as increased from time to time pursuant to Section 4 below (the "Stated Value"). 2. Definitions. In addition to the terms defined elsewhere in this Certificate of Designations, (a) the terms set forth in Exhibit A hereto shall have the meanings indicated therein, and (b) the following terms have the meanings indicated: "Company" means Universal Display Corporation, a Pennsylvania corporation. "Conversion Price" means $9.45, as adjusted pursuant to Section 15 hereof. "Equity Conditions" means, with respect to a specified issuance of Common Stock, that each of the following conditions is satisfied: (i) the number of authorized but unissued and otherwise unreserved shares of Common Stock is sufficient for such issuance; (ii) such shares of Common Stock are registered for resale by the Holders pursuant to an effective Conversion Shares Registration Statement or all such shares may be sold without volume restrictions pursuant to Rule 144(k) under the Securities Act; (iii) the Common Stock is listed or quoted (and is not suspended from trading) on an Eligible Market; (iv) such issuance would be permitted in full without violating Section 16 hereof or the rules or regulations of any Trading Market; and (v) the Company is not in default with respect to any material obligation hereunder or under (A) any other agreement between the Company and any Holder, dated as of August 22, 2001, as may hereafter be amended; including, without limitation, the Purchase Agreement and the Notes or (B) any instrument or security issued pursuant to any of the agreements referred to in the preceding clause (A). "Holder" means any holder of Preferred Stock. "Junior Securities" means the Common Stock and all other equity or equity equivalent securities of the Company other than those securities that are outstanding on the Original Issue Date and are explicitly senior in dividend rights or liquidation preference to the Preferred Stock; except that any shares of Series C Convertible Preferred Stock and any shares of Series D Convertible Preferred Stock issued pursuant to the provisions of the Purchase Agreement shall not be Junior Securities but shall rank pari passu with the Preferred Stock. "Original Issue Date" means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates that may be issued to evidence such Preferred Stock. "Purchase Agreement" means the Securities Purchase Agreement, dated August 22, 2001, among the Company and the original purchasers of the Preferred Stock. 3. Dividends. (a) Holders shall not be entitled to receive dividends on the Preferred Stock. 4. Stated Value. The "Stated Value" shall be increased by $4.16 on the last day of each month beginning on November 30, 2001. 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall be entitled to receive an amount equal to $1,000 for each share of Preferred Stock, payable out of the assets of the Company, whether such assets are capital or surplus, and before any distribution or payment may be made to the holders of any Junior Securities. If the assets of the Company are insufficient to pay such amounts in full, then the entire amount of assets to be distributed shall be distributed among the Holders ratably in accordance with the amount each Holder would have received if such assets were sufficient to pay all such amounts in full. The Company shall provide notice of any Liquidation or Change of Control to each record Holder on the earlier of the day on which the Company (a) publicly announces such event or proposed action, or (b) notifies its shareholders of such event or proposed action. At the request of any Holder, which must be delivered prior to the effective date of a Change of Control (or, if later, within five Trading Days after such Holder receives notice of such Change of Control from the Company), such Change of Control will be treated as a Liquidation with respect to such Holder. 2 6. No Payments on Junior Securities. So long as any Preferred Stock is outstanding, (i) neither the Company nor any Subsidiary shall, directly or indirectly, redeem, purchase or otherwise acquire any Junior Securities or set aside any monies for such a redemption, purchase or other acquisition, and (ii) the Company shall not pay or declare any dividend or make any distribution on any Junior Securities, except stock dividends on the Common Stock payable in additional shares of Common Stock and dividends due and paid in the ordinary course on preferred stock of the Company at such times as the Company is in compliance with its payment and other obligations hereunder. 7. Registration of Preferred Stock. The Company shall register shares of the Preferred Stock, upon records to be maintained by the Company for that purpose (the "Preferred Stock Register"), in the name of the record Holders thereof from time to time. The Company may deem and treat the registered Holder of shares of Preferred Stock as the absolute owner thereof for the purpose of any conversion hereof or any distribution to such Holder, and for all other purposes, absent actual notice to the contrary. 8. Registration of Transfers. The Company shall register the transfer of any shares of Preferred Stock in the Preferred Stock Register, upon surrender of certificates evidencing such shares to the Company at its address specified herein. Upon any such registration or transfer, a new certificate evidencing the shares of Preferred Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Holder. 9. Conversion. (a) Conversion at Option of Holder. At the option of any Holder, any Preferred Stock held by such Holder may be converted into Common Stock based on the then-applicable Conversion Price. A Holder may convert Preferred Stock into Common Stock pursuant to this paragraph at any time and from time to time after the Original Issue Date and prior to August 22, 2004, by delivering to the Company a conversion notice, in the form attached hereto as Exhibit B (a "Conversion Notice"), appropriately completed and duly signed, and the date any such Conversion Notice is delivered to the Company (as determined in accordance with the notice provisions hereof) is a "Conversion Date." A Holder shall simultaneously deliver a copy of the Conversion Notice to the Transfer Agent; provided, however, a Holder's failure to deliver such a copy shall not render such Conversion Notice invalid or ineffective. (b) Conversion at Option of Company. If, at any time after the Effective Date, the Closing Price for twenty (20) consecutive Trading Days exceeds 135% of the Conversion Price (the "Threshold Price"), the Company may require the Holders to convert all of the Preferred Stock into Common Stock based on the then-applicable Conversion Price. The Company may require a conversion pursuant to this paragraph by delivering irrevocable written notice 3 of such election to the Holders, and the thirtieth Trading Day after the date any such notice is delivered to the Holders (as determined in accordance with the notice provisions hereof) will be the "Conversion Date" for such required conversion. Notwithstanding the foregoing, the Company may not require any conversion under this paragraph (and any notice thereof will be void), unless from the beginning of the period of twenty consecutive Trading Days through the Conversion Date, the Equity Conditions (except for the condition set forth in Section 16(a), which need not be satisfied for this purpose) are satisfied with respect to all of the Underlying Shares then issuable upon conversion in full of all outstanding Preferred Stock. (c) Automatic Conversion. Notwithstanding Section 16(a) hereof or any other provision to the contrary contained herein, but subject to the satisfaction of the Equity Conditions and the provisions of Section 16(b) hereof, on the second Trading Day after the Original Issuance Date of the Series D Convertible Preferred Stock, all the shares of Preferred Stock shall be converted as if the Holder had delivered a Conversion Notice with respect to such shares on such day. In the event the Equity Conditions (other than the requirements set forth in Section 16(a)) are not satisfied on the second Trading Day after the Original Issuance Date of the Series D Convertible Preferred Stock, then all the shares of Preferred Stock shall be converted on the first date thereafter on which the Equity Conditions (other than the requirements set forth in Section 16(a)) are satisfied as if the Holder had delivered a Conversion Notice with respect to such shares on such day, provided that such date occurs on or prior to the third anniversary of the Original Issue Date. In the event the Equity Conditions (other than the requirements set forth in Sections 16(a) and 16(b), which need not be satisfied for this purpose) are not satisfied on the third anniversary of the Original Issue Date, the Holder, at its option, may require the Company to repurchase the Preferred Stock for an amount equal to the Stated Value of the Preferred Stock on such date. The Holder shall exercise this option by delivering to the Company written notice to that effect and the Company shall repurchase the Preferred Stock on the fifth Business Day following the receipt of such notice against delivery of the Preferred Stock. 10. Mechanics of Conversion. (a) The number of Underlying Shares issuable upon any conversion of a share of Preferred Stock hereunder shall equal the Stated Value on the Conversion Date of such share of Preferred Stock to be converted, divided by the Conversion Price in effect on the Conversion Date. (b) Upon conversion of any Preferred Stock, the Company shall promptly (but in no event later than four Trading Days after the Conversion Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate (i) a certificate for the Underlying Shares issuable upon such conversion, free of restrictive legends unless a registration statement covering the resale of the Underlying Shares and naming the Holder as a selling stockholder thereunder is not then effective and such Underlying Shares are not then freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act, and (ii) a bank check in the amount of all accrued and unpaid dividends on the Preferred Stock so converted (if the Company has elected or is required to pay such accrued dividends in cash). Within three Trading Days after receipt thereof, the Holder will deliver the original certificate(s) evidencing the Preferred Stock so converted to the Company, unless the Holder is awaiting receipt of a new certificate evidencing such shares from the Company 4 pursuant to another provision hereof. The Holder, or any Person so designated by the Holder to receive Underlying Shares, shall be deemed to have become holder of record of such Underlying Shares as of the Conversion Date. The Company shall, upon request of the Holder, use its best efforts to deliver Underlying Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. (c) If a Holder is converting less than all shares of Preferred Stock represented by the certificate or certificates delivered by such Holder to the Company in connection with such conversion, or if such conversion cannot be effected in full for any reason, the Company shall promptly deliver to such Holder a new certificate representing the number of shares of Preferred Stock not converted. (d) The Company's obligations to issue and deliver Underlying Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by any Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by any Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by any Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to any Holder in connection with the issuance of such Underlying Shares. 11. Voting Rights. Except as otherwise provided herein or as required by applicable law, the Holders shall not be entitled to vote on any matters. So long as any shares of Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the Holders of two-thirds (2/3) of the shares of Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) except for Series D Convertible Preferred Stock, authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation senior to or otherwise pari passu with the Preferred Stock, (c) amend its certificate or articles of incorporation or other charter documents so as to affect adversely any rights of the Holders, or (d) increase the authorized number of shares of Preferred Stock. 12. Charges, Taxes and Expenses. Except as otherwise provided in this Section 12, issuance of certificates for shares of Preferred Stock and for Underlying Shares issued on conversion of (or otherwise in respect of) the Preferred Stock shall be made without charge to the Holders for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall be entitled to withhold any applicable taxes with respect to the actual or deemed payment of any dividends on the Preferred Stock (whether in cash or shares of stock) and with respect to the payment of any cash in lieu of the issuance of fractional shares pursuant to Section 17 hereof; and further 5 provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Common Stock or Preferred Stock in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Preferred Stock or receiving Underlying Shares in respect of the Preferred Stock. 13. Replacement Certificates. If any certificate evidencing Preferred Stock or Underlying Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for such certificate, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 14. Reservation of Underlying Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Underlying Shares as required hereunder, the number of Underlying Shares which are then issuable and deliverable upon the conversion of (and otherwise in respect of) all outstanding Preferred Stock (taking into account the adjustments of Section 15), free from preemptive rights or any other contingent purchase rights of persons other than the Holder. The Company covenants that all Underlying Shares so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 15. Certain Adjustments. The Conversion Price is subject to adjustment from time to time as set forth in this Section 15. (a) Stock Dividends and Splits. If the Company, at any time while Preferred Stock is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock (other than regular dividends on the Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any other shares of capital stock, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clauses (ii), 6 (iii) or (iv) of this paragraph shall become effective immediately after the effective date of such subdivision, combination or reclassification. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event. (b) Pro Rata Distributions. If the Company, at any time while Preferred Stock is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then, at the request of any Holder delivered before the 90th day after the record date fixed for determination of stockholders entitled to receive such distribution, the Company will deliver to such Holder, within five Trading Days after such request (or, if later, on the effective date of such distribution), the Distributed Property that such Holder would have been entitled to receive in respect of the Underlying Shares for which such Holder's Preferred Stock could have been converted immediately prior to such record date. If such Distributed Property is not delivered to a Holder pursuant to the preceding sentence, then upon any conversion of Preferred Stock that occurs after such record date, such Holder shall be entitled to receive, in addition to the Underlying Shares otherwise issuable upon such conversion, the Distributed Property that such Holder would have been entitled to receive in respect of such number of Underlying Shares had the Holder been the record holder of such Underlying Shares immediately prior to such record date. (c) Fundamental Transactions. If, at any time while Preferred Stock is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then upon any subsequent conversion of Preferred Stock, each Holder shall have the right to receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the "Alternate Consideration"). For purposes of any such conversion, the determination of the Variable Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then each Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new series of preferred stock consistent with the 7 foregoing provisions and evidencing the Holders' right to convert such preferred stock into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. (d) Subsequent Equity Sales. (i) If, at any time while Preferred Stock is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common Stock Equivalents" and together with Common Stock sometimes hereinafter called "CS Securities") at an effective price per share of Common Stock (the "Effective Price") less than the Conversion Price (as adjusted hereunder to such date), then the Conversion Price shall be reduced to equal the Effective Price. For purposes of the foregoing adjustment, in connection with any issuance of any Common Stock Equivalents, (x) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (y) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock, divided by the Deemed Number, and (z) no further adjustment shall be made to the Conversion Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. (ii) If, at any time while Preferred Stock is outstanding, the Company or any Subsidiary has outstanding any Common Stock Equivalents with an Effective Price that floats or resets or otherwise varies or is subject to adjustment based on market prices of the Common Stock (a "Floating Price Security"), then for purposes of applying the preceding paragraph in connection with any subsequent conversion, the Effective Price will be determined separately on each Conversion Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire shares of Common Stock on such Conversion Date (regardless of whether any such holder actually acquires any shares on such date). (iii) Notwithstanding the foregoing, no adjustment will be made under this Section 13(d) in respect of (a) any grant of options to 8 employees, officers, directors or consultants of the Company pursuant to any stock option plan duly adopted by the Company's board of directors (provided, that the number of shares of Common Stock which are the subject of any such plan may not exceed 2,800,000, subject to annual increases of up to 40% of the shares authorized under such plans during the immediately preceding year), (b) the issuance of CS Securities upon exercise of any such options, (c) the issuance of CS Securities under the PPG Agreement or the Motorola Agreement (d) up to 1,000,000 of CS Securities issued in connection with any contractual strategic alliances approved by the Company's Board of Directors; (e) the issuance of any CS Securities representing or convertible into up to 50,000 shares of Common Stock in any single transaction; provided that this subsection (e) shall only apply to the first 50,000 shares in the aggregate issued in any consecutive 12 month period and 150,000 in the aggregate; (f) CS Securities issued or issuable pursuant to the Notes, Preferred Stock, Warrants or any other Transaction Document or pursuant to the anti-dilution provisions thereof; (g) any CS Securities issuable upon the exercise of, or pursuant to the anti-dilution provisions contained within, any options, restricted stock awards, preferred stock or warrants outstanding on the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 3.1(g) to the Purchase Agreement, a copy of which is on file at the offices of the Company and which will be made available to any Holder upon request; or (h) any Common Stock issued upon the conversion of exercise of any Common Stock Equivalents outstanding as of the date hereof (but not to the extent amended hereafter) all of which are set forth on; Schedule 3.1(g) to the Purchase Agreement, a copy of which is on file at the offices of the Company and which will be made available to any Holder upon request; (e) Calculations. All calculations under this Section 15 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. (f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 15, the Company at its expense will promptly compute such adjustment in accordance with the terms hereof and prepare a certificate describing in reasonable detail such adjustment and the transactions giving rise thereto, including all facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to each Holder and to the Transfer Agent. (g) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to each Holder a notice 9 describing the material terms and conditions of such transaction, on the earlier of the day on which the Company (a) publicly announces such proposed action or (b) notifies its Shareholders of such proposed action, and the Company will take all steps reasonably necessary in order to insure that each Holder is given the practical opportunity to convert its Preferred Stock prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 16. Limitation on Conversion. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by any Holder upon any conversion of Preferred Stock (or otherwise in respect of the Preferred Stock) shall be limited to the extent necessary to insure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of a Conversion Notice by a Holder will constitute a representation by such Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Underlying Shares requested in such Conversion Notice is permitted under this paragraph. By written notice to the Company, any Holder may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to such Holder and not to any other Holder. (b) Notwithstanding anything contained to the contrary herein, the number of shares of Common Stock that may be acquired by any Holder upon any conversion of Preferred Stock (or otherwise in respect of the Preferred Stock) shall be limited to the extent such conversion would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of this Note after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section 14(b) will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section 14(b) applies, the determination of the extent to which the Preferred Stock is 10 convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice or the Company is requiring conversion pursuant to Section 9(b) in either case, that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum amount permitted to be converted on such Conversion Date. 17. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Underlying Shares on conversion of Preferred Stock. If any fraction of an Underlying Share would, except for the provisions of this Section, be issuable upon conversion of Preferred Stock, the Company shall pay an amount in cash equal to the average of the Closing Prices of the Common Stock for the five Trading Days immediately prior to (but not including) the Conversion Date multiplied by such fraction; provided that, unless a Holder requests otherwise, no payment shall be required to be made to a Holder pursuant to this sentence until the aggregate amount payable to such Holder in connection with such conversion (together with unpaid amounts from prior conversions) exceeds $1,000, at which time all previously deferred payments shall be made. 18. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, or (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service.. The addresses for such communications shall be: (i) if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618, facsimile: (609) 671-0995, Attention Sidney Rosenblatt, or (ii) if to a Holder, to the address or facsimile number appearing on the Company's stockholder records or such other address or facsimile number as such Holder may provide to the Company in accordance with this Section. 19. Miscellaneous. (a) The headings herein are for convenience only, do not constitute a part of this Certificate of Designations and shall not be deemed to limit or affect any of the provisions hereof. (b) No waiver of any default with respect to any provision, condition or requirement of this Certificate of Designations shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. 11 EXHIBIT A ADDITIONAL DEFINITIONS "Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder. "Business Day" means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. "Change of Control" means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of more than one-half of the voting rights or equity interests in the Company, (ii) a replacement of more than one-half of the members of the Company's board of directors that is not approved by those individuals who are members of the board of directors on the date hereof in one or a series of related transactions, (iii) a merger or consolidation of the Company or any Subsidiary or a sale of all or substantially all of the assets of the Company in one or a series of related transactions, unless following such transaction or series of transactions, the holders of the Company's securities prior to the first such transaction continue to hold at least a majority of the voting rights and equity interests in of the surviving entity or acquirer of such assets, or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii). "Closing Price" means, for any date the VWAP for such date (or the nearest preceding date) all as reported by Bloomberg L.P. or any successor to its function for reporting VWAP. "Common Stock" means the common stock of the Company, par value $.01 per share. "Conversion Shares Registration Statement" means a registration statement covering the resale of the Underlying Shares by the Holders and any additional registration statements with respect thereto, including (in each case) the Prospectus included in such registration statement and in any amendments and supplements to such registration statement or prospectus including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Effective Date" means the date that a Conversion Shares Registration Statement is declared effective by the Commission. 12 "Eligible Market" means the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Motorola Agreement" means collectively the License Agreement dated as of September 29, 2000 between the Company and Motorola, Inc., the Stock Purchase Warrant granted to Motorola, Inc. on September 29, 2000 and the Securities Purchase Agreement, dated as of September 29, 2000 between the Company and Motorola, Inc. "Notes" means $15,000,000 in aggregate principal amount of Convertible Promissory Notes due August 22, 2004 issued by the Company to the Holders. "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "PPG Agreement" means collectively, the Development and License Agreement dated as of October 1, 2000 between the Company and PPG Industries, Inc., as amended, and the Stock Purchase Warrant granted to PPG Industries, Inc. on October 1, 2000. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiary" means any subsidiary of the Company. "Trading Day" means (a) any day on which the Common Stock is traded on its primary Trading Market, or (b) if the Common Stock is not then listed or quoted on any national securities exchange, market or trading or quotation facility, then a day on which trading occurs on the New York Stock Exchange (or any successor thereto). "Trading Market" means the NASDAQ National Market System or any other national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted. "Transfer Agent" means American Stock Transfer & Trust Company or such other entity that the Company shall designate as its transfer agent from time to time, provided that the Company has given notice to the Holder that it has designated a new Transfer Agent. "Underlying Shares" means the shares of Common Stock issuable upon conversion of the Preferred Stock. "VWAP" means Volume Weighted Average Price of a share of Common Stock. 13 EXHIBIT B FORM OF CONVERSION NOTICE (To be executed by the registered Holder in order to convert shares of Preferred Stock) The undersigned hereby elects to convert the number of shares of Series C-1 Convertible Preferred Stock indicated below into shares of common stock, par value $.01 per share (the "Common Stock"), of Universal Display Corporation, a Pennsylvania corporation (the "Company"), according to the conditions hereof, as of the date written below. ------------------------------------------------------------- Date to Effect Conversion ------------------------------------------------------------- Number of shares of Preferred Stock owned prior to Conversion ------------------------------------------------------------- Number of shares of Preferred Stock to be Converted ------------------------------------------------------------- Stated Value of shares of Preferred Stock to be Converted ------------------------------------------------------------- Number of shares of Common Stock to be Issued ------------------------------------------------------------- Applicable Conversion Price ------------------------------------------------------------- Number of shares of Preferred Stock subsequent to Conversion The undersigned hereby covenants and agrees that the undersigned (i) will not sell or otherwise dispose of the shares of Common Stock to be delivered pursuant to this Conversion Notice (the "Shares") except pursuant to an effective registration statement (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), (ii) will sell the Shares only in accordance with the Plan of Distribution set forth in the prospectus forming a part of the Registration Statement (the "Prospectus"), (iii) will comply with the requirements of the Act when selling or otherwise disposing of the Shares, including, but not limited to, the prospectus delivery requirements of the Act, (iv) will not sell or otherwise dispose of, and will return immediately to the Company for the purpose of placing a restrictive legend thereon, the Shares (and any certificates representing the Shares, if applicable) upon notice from the Company that the Prospectus may not be used for the sale of the Shares, and (v) will indemnify and hold harmless the Company, its directors, officers, agents and employees, each person who controls the Company (within the meaning of Section 15 of the Act and Section 20 of the Securities Exchange Act of 1934, as amended), and the directors, officers, agents or employees of such controlling persons, to the fullest extent permitted by applicable law, from and against all Losses (as defined in the Registration Rights Agreement dated August 22, 2001 by and between the Company and the investors signatory thereto) arising out of or based upon any breach by the undersigned of any of the covenants contained herein. ---------------------------------------- Name of Holder By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- 14 EX-4.2 4 ex4-2.txt EX-4.2 STATEMENT OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES D CONVERTIBLE PREFERRED STOCK OF UNIVERSAL DISPLAY CORPORATION UNIVERSAL DISPLAY CORPORATION, a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (the "Company"), hereby certifies that the following resolutions were adopted by the Board of Directors of the Company pursuant to the provisions of Section 1522 of the Pennsylvania Business Corporation Law, as amended (the "BCL"): RESOLVED, that pursuant to the authority vested in the Board of Directors pursuant to the provisions of the BCL and the Company's Articles of Incorporation, as amended, the Corporation is authorized to issue, out of the 5,000,000 shares of preferred stock, $.01 par value per share, of the Corporation authorized in the Company's Articles of Incorporation, as amended, a series of preferred stock to be designated as "Series D Convertible Preferred Stock," $.01 par value per share, with the following preferences, limitations, and special rights: 1. Designation, Amount and Par Value. The series of preferred stock shall be designated as the Company's Series D Convertible Preferred Stock (the "Preferred Stock"), and the number of shares so designated shall be 5,000. Each share of Preferred Stock shall have a par value of $.01 per share and a stated value initially equal to $1,000 as increased from time to time pursuant to Section 4 below (the "Stated Value"). 2. Definitions. In addition to the terms defined elsewhere in this Certificate of Designations, (a) the terms set forth in Exhibit A hereto shall have the meanings indicated therein, and (b) the following terms have the meanings indicated: "Company" means Universal Display Corporation, a Pennsylvania corporation. "Conversion Price" means $9.45, as adjusted pursuant to Section 15 hereof. "Equity Conditions" means, with respect to a specified issuance of Common Stock, that each of the following conditions is satisfied: (i) the number of authorized but unissued and otherwise unreserved shares of Common Stock is sufficient for such issuance; (ii) such shares of Common Stock are registered for resale by the Holders pursuant to an effective Conversion Shares Registration Statement or all such shares may be sold without volume restrictions pursuant to Rule 144(k) under the Securities Act; (iii) the Common Stock is listed or quoted (and is not suspended from trading) on an Eligible Market; (iv) such issuance would be permitted in full without violating Section 16 hereof or the rules or regulations of any Trading Market; and (v) the Company is not in default with respect to any material obligation hereunder or under (A) any other agreement between the Company and any Holder, dated as of August 22, 2001, as may hereafter be amended; including, without limitation, the Purchase Agreement and the Notes or (B) any instrument or security issued pursuant to any of the agreements referred to in the preceding clause (A). "Holder" means any holder of Preferred Stock. "Junior Securities" means the Common Stock and all other equity or equity equivalent securities of the Company other than those securities that are outstanding on the Original Issue Date and are explicitly senior in dividend rights or liquidation preference to the Preferred Stock; except that any shares of Series C Convertible Preferred Stock issued pursuant to the provisions of the Purchase Agreement shall not be Junior Securities but shall rank pari passu with the Preferred Stock. "Original Issue Date" means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates that may be issued to evidence such Preferred Stock. "Purchase Agreement" means the Securities Purchase Agreement, dated August 22, 2001, among the Company and the original purchasers of the Preferred Stock. 3. Dividends. (a) Holders shall not be entitled to receive dividends on the Preferred Stock. 4. Stated Value. The "Stated Value" shall be increased by $4.16 on the last day of each month beginning on November 30, 2001. 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall be entitled to receive an amount equal to $1,000 for each share of Preferred Stock, payable out of the assets of the Company, whether such assets are capital or surplus, and before any distribution or payment may be made to the holders of any Junior Securities. If the assets of the Company are insufficient to pay such amounts in full, then the entire amount of assets to be distributed shall be distributed among the Holders ratably in accordance with the amount each Holder would have received if such assets were sufficient to pay all such amounts in full. The Company shall provide notice of any Liquidation or Change of Control to each record Holder on the earlier of the day on which the Company (a) publicly announces such event or proposed action, or (b) notifies its shareholders of such event or proposed action. At the request of any Holder, which must be delivered prior to the effective date of a Change of Control (or, if later, within five Trading Days after such Holder receives notice of such Change of Control from the Company), such Change of Control will be treated as a Liquidation with respect to such Holder. 2 6. No Payments on Junior Securities. So long as any Preferred Stock is outstanding, (i) neither the Company nor any Subsidiary shall, directly or indirectly, redeem, purchase or otherwise acquire any Junior Securities or set aside any monies for such a redemption, purchase or other acquisition, and (ii) the Company shall not pay or declare any dividend or make any distribution on any Junior Securities, except stock dividends on the Common Stock payable in additional shares of Common Stock and dividends due and paid in the ordinary course on preferred stock of the Company at such times as the Company is in compliance with its payment and other obligations hereunder. 7. Registration of Preferred Stock. The Company shall register shares of the Preferred Stock, upon records to be maintained by the Company for that purpose (the "Preferred Stock Register"), in the name of the record Holders thereof from time to time. The Company may deem and treat the registered Holder of shares of Preferred Stock as the absolute owner thereof for the purpose of any conversion hereof or any distribution to such Holder, and for all other purposes, absent actual notice to the contrary. 8. Registration of Transfers. The Company shall register the transfer of any shares of Preferred Stock in the Preferred Stock Register, upon surrender of certificates evidencing such shares to the Company at its address specified herein. Upon any such registration or transfer, a new certificate evidencing the shares of Preferred Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Holder. 9. Conversion. (a) Conversion at Option of Holder. At the option of any Holder, any Preferred Stock held by such Holder may be converted into Common Stock based on the then-applicable Conversion Price. A Holder may convert Preferred Stock into Common Stock pursuant to this paragraph at any time and from time to time after the Original Issue Date and prior to August 22, 2004, by delivering to the Company a conversion notice, in the form attached hereto as Exhibit B (a "Conversion Notice"), appropriately completed and duly signed, and the date any such Conversion Notice is delivered to the Company (as determined in accordance with the notice provisions hereof) is a "Conversion Date." A Holder shall simultaneously deliver a copy of the Conversion Notice to the Transfer Agent; provided, however, a Holder's failure to deliver such a copy shall not render such Conversion Notice invalid or ineffective. (b) Conversion at Option of Company. If, at any time after the Effective Date, the Closing Price for twenty (20) consecutive Trading Days exceeds 135% of the Conversion Price (the "Threshold Price"), the Company may require the Holders to convert all of the Preferred Stock into Common Stock based on the then-applicable Conversion Price. The Company may require a conversion pursuant to this paragraph by delivering irrevocable written notice of such election to the Holders, and the thirtieth Trading Day after the date any such notice is delivered to the Holders (as determined in accordance with the notice provisions hereof) will be the "Conversion Date" for such required conversion. Notwithstanding the foregoing, the Company may not require any 3 conversion under this paragraph (and any notice thereof will be void), unless from the beginning of the period of twenty consecutive Trading Days through the Conversion Date, the Equity Conditions (except for the condition set forth in Section 16(a), which need not be satisfied for this purpose) are satisfied with respect to all of the Underlying Shares then issuable upon conversion in full of all outstanding Preferred Stock. (c) Automatic Conversion. Notwithstanding Section 16(a) hereof or any other provision to the contrary contained herein, but subject to the satisfaction of the Equity Conditions and the provisions of Section 16(b) hereof, on the second Trading Day after the Original Issuance Date, all the shares of Preferred Stock shall be converted as if the Holder had delivered a Conversion Notice with respect to such shares on such day. In the event the Equity Conditions (other than the requirements set forth in Section 16(a)) are not satisfied on the second Trading Day after the Original Issuance Date, then all the shares of Preferred Stock shall be converted on the first date thereafter on which the Equity Conditions (other than the requirements set forth in Section 16(a)) are satisfied as if the Holder had delivered a Conversion Notice with respect to such shares on such day, provided that such date occurs on or prior to the third anniversary of the Original Issue Date. In the event the Equity Conditions (other than the requirements set forth in Sections 16(a) and 16(b), which need not be satisfied for this purpose) are not satisfied on the third anniversary of the Original Issue Date, the Holder, at its option, may require the Company to repurchase the Preferred Stock for an amount equal to the Stated Value of the Preferred Stock on such date. The Holder shall exercise this option by delivering to the Company written notice to that effect and the Company shall repurchase the Preferred Stock on the fifth Business Day following the receipt of such notice against delivery of the Preferred Stock. 10. Mechanics of Conversion. (a) The number of Underlying Shares issuable upon any conversion of a share of Preferred Stock hereunder shall equal the Stated Value on the Conversion Date of such share of Preferred Stock to be converted, divided by the Conversion Price in effect on the Conversion Date. (b) Upon conversion of any Preferred Stock, the Company shall promptly (but in no event later than four Trading Days after the Conversion Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate (i) a certificate for the Underlying Shares issuable upon such conversion, free of restrictive legends unless a registration statement covering the resale of the Underlying Shares and naming the Holder as a selling stockholder thereunder is not then effective and such Underlying Shares are not then freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act, and (ii) a bank check in the amount of all accrued and unpaid dividends on the Preferred Stock so converted (if the Company has elected or is required to pay such accrued dividends in cash). Within three Trading Days after receipt thereof, the Holder will deliver the original certificate(s) 4 evidencing the Preferred Stock so converted to the Company, unless the Holder is awaiting receipt of a new certificate evidencing such shares from the Company pursuant to another provision hereof. The Holder, or any Person so designated by the Holder to receive Underlying Shares, shall be deemed to have become holder of record of such Underlying Shares as of the Conversion Date. The Company shall, upon request of the Holder, use its best efforts to deliver Underlying Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. (c) If a Holder is converting less than all shares of Preferred Stock represented by the certificate or certificates delivered by such Holder to the Company in connection with such conversion, or if such conversion cannot be effected in full for any reason, the Company shall promptly deliver to such Holder a new certificate representing the number of shares of Preferred Stock not converted. (d) The Company's obligations to issue and deliver Underlying Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by any Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by any Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by any Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to any Holder in connection with the issuance of such Underlying Shares. 11. Voting Rights. Except as otherwise provided herein or as required by applicable law, the Holders shall not be entitled to vote on any matters. So long as any shares of Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the Holders of two-thirds (2/3) of the shares of Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation senior to or otherwise pari passu with the Preferred Stock, (c) amend its certificate or articles of incorporation or other charter documents so as to affect adversely any rights of the Holders, or (d) increase the authorized number of shares of Preferred Stock. 12. Charges, Taxes and Expenses. Except as otherwise provided in this Section 12, issuance of certificates for shares of Preferred Stock and for Underlying Shares issued on conversion of (or otherwise in respect of) the Preferred Stock shall be made without charge to the Holders for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall be entitled to withhold any applicable taxes with respect to the actual or deemed payment of any dividends on the Preferred Stock (whether in cash or shares of stock) and with respect to the payment of any cash in lieu of the issuance of fractional shares pursuant to Section 17 hereof; and further provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any 5 certificates for Common Stock or Preferred Stock in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Preferred Stock or receiving Underlying Shares in respect of the Preferred Stock. 13. Replacement Certificates. If any certificate evidencing Preferred Stock or Underlying Shares is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for such certificate, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 14. Reservation of Underlying Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Underlying Shares as required hereunder, the number of Underlying Shares which are then issuable and deliverable upon the conversion of (and otherwise in respect of) all outstanding Preferred Stock (taking into account the adjustments of Section 15), free from preemptive rights or any other contingent purchase rights of persons other than the Holder. The Company covenants that all Underlying Shares so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 15. Certain Adjustments. The Conversion Price is subject to adjustment from time to time as set forth in this Section 15. (a) Stock Dividends and Splits. If the Company, at any time while Preferred Stock is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock (other than regular dividends on the Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any other shares of capital stock, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clauses (ii), (iii) or (iv) of this paragraph shall become effective immediately after the effective date of such subdivision, combination or reclassification. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event. 6 (b) Pro Rata Distributions. If the Company, at any time while Preferred Stock is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then, at the request of any Holder delivered before the 90th day after the record date fixed for determination of stockholders entitled to receive such distribution, the Company will deliver to such Holder, within five Trading Days after such request (or, if later, on the effective date of such distribution), the Distributed Property that such Holder would have been entitled to receive in respect of the Underlying Shares for which such Holder's Preferred Stock could have been converted immediately prior to such record date. If such Distributed Property is not delivered to a Holder pursuant to the preceding sentence, then upon any conversion of Preferred Stock that occurs after such record date, such Holder shall be entitled to receive, in addition to the Underlying Shares otherwise issuable upon such conversion, the Distributed Property that such Holder would have been entitled to receive in respect of such number of Underlying Shares had the Holder been the record holder of such Underlying Shares immediately prior to such record date. (c) Fundamental Transactions. If, at any time while Preferred Stock is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then upon any subsequent conversion of Preferred Stock, each Holder shall have the right to receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the "Alternate Consideration"). For purposes of any such conversion, the determination of the Variable Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then each Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new series of preferred stock consistent with the foregoing provisions and evidencing the Holders' right to convert such preferred 7 stock into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. (d) Subsequent Equity Sales. (i) If, at any time while Preferred Stock is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common Stock Equivalents" and together with Common Stock sometimes hereinafter called "CS Securities") at an effective price per share of Common Stock (the "Effective Price") less than the Conversion Price (as adjusted hereunder to such date), then the Conversion Price shall be reduced to equal the Effective Price. For purposes of the foregoing adjustment, in connection with any issuance of any Common Stock Equivalents, (x) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (y) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock, divided by the Deemed Number, and (z) no further adjustment shall be made to the Conversion Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. (ii) If, at any time while Preferred Stock is outstanding, the Company or any Subsidiary has outstanding any Common Stock Equivalents with an Effective Price that floats or resets or otherwise varies or is subject to adjustment based on market prices of the Common Stock (a "Floating Price Security"), then for purposes of applying the preceding paragraph in connection with any subsequent conversion, the Effective Price will be determined separately on each Conversion Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire shares of Common Stock on such Conversion Date (regardless of whether any such holder actually acquires any shares on such date). (iii) Notwithstanding the foregoing, no adjustment will be made under this Section 13(d) in respect of (a) any grant of options to employees, officers ^, directors or consultants of the Company pursuant to any stock option plan duly adopted by the Company's board of directors (provided, that the number of shares of Common 8 Stock which are the subject of any such plan may not exceed 2,800,000, subject to annual increases of up to 40% of the shares authorized under such plans during the immediately preceding year), (b) the issuance of CS Securities upon exercise of any such options, (c) the issuance of CS Securities under the PPG Agreement or the Motorola Agreement (d) up to 1,000,000 of CS Securities issued in connection with any contractual strategic alliances approved by the Company's Board of Directors; (e) the issuance of any CS Securities representing or convertible into up to 50,000 shares of Common Stock in any single transaction; provided that this subsection (e) shall only apply to the first 50,000 shares in the aggregate issued in any consecutive 12 month period and 150,000 in the aggregate; (f) CS Securities issued or issuable pursuant to the Notes, Preferred Stock, Warrants or any other Transaction Document or pursuant to the anti-dilution provisions thereof; (g) any CS Securities issuable upon the exercise of, or pursuant to the anti-dilution provisions contained within, any options, restricted stock awards, preferred stock or warrants outstanding on the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 3.1(g) to the Purchase Agreement, a copy of which is on file at the offices of the Company and which will be made available to any Holder upon request; or ^(h) any Common Stock issued upon the conversion of exercise of any Common Stock Equivalents outstanding as of the date hereof (but not to the extent amended hereafter) all of which are set forth on; Schedule 3.1(g) to the Purchase Agreement, a copy of which is on file at the offices of the Company and which will be made available to any Holder upon request; (e) Calculations. All calculations under this Section 15 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. (f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 15, the Company at its expense will promptly compute such adjustment in accordance with the terms hereof and prepare a certificate describing in reasonable detail such adjustment and the transactions giving rise thereto, including all facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to each Holder and to the Transfer Agent. (g) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to each Holder a notice describing the material terms and conditions of such transaction, on the earlier of the day on which the Company (a) publicly announces such proposed action or 9 (b) notifies its Shareholders of such proposed action, and the Company will take all steps reasonably necessary in order to insure that each Holder is given the practical opportunity to convert its Preferred Stock prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 16. Limitation on Conversion. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by any Holder upon any conversion of Preferred Stock (or otherwise in respect of the Preferred Stock) shall be limited to the extent necessary to insure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of a Conversion Notice by a Holder will constitute a representation by such Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Underlying Shares requested in such Conversion Notice is permitted under this paragraph. By written notice to the Company, any Holder may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to such Holder and not to any other Holder. (b) Notwithstanding anything contained to the contrary herein, the number of shares of Common Stock that may be acquired by any Holder upon any conversion of Preferred Stock (or otherwise in respect of the Preferred Stock) shall be limited to the extent such conversion would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of this Note after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section 14(b) will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section 14(b) applies, the determination of the extent to which the Preferred Stock is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice or the Company is requiring conversion pursuant to Section 9(b) in either case, that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in 10 the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum amount permitted to be converted on such Conversion Date. 17. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Underlying Shares on conversion of Preferred Stock. If any fraction of an Underlying Share would, except for the provisions of this Section, be issuable upon conversion of Preferred Stock, the Company shall pay an amount in cash equal to the average of the Closing Prices of the Common Stock for the five Trading Days immediately prior to (but not including) the Conversion Date multiplied by such fraction; provided that, unless a Holder requests otherwise, no payment shall be required to be made to a Holder pursuant to this sentence until the aggregate amount payable to such Holder in connection with such conversion (together with unpaid amounts from prior conversions) exceeds $1,000, at which time all previously deferred payments shall be made. 18. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, or (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service.. The addresses for such communications shall be: (i) if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618, facsimile: (609) 671-0995, Attention Sidney Rosenblatt, or (ii) if to a Holder, to the address or facsimile number appearing on the Company's stockholder records or such other address or facsimile number as such Holder may provide to the Company in accordance with this Section. 19. Miscellaneous. (a) The headings herein are for convenience only, do not constitute a part of this Certificate of Designations and shall not be deemed to limit or affect any of the provisions hereof. (b) No waiver of any default with respect to any provision, condition or requirement of this Certificate of Designations shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. 11 EXHIBIT A ADDITIONAL DEFINITIONS "Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder. "Business Day" means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. "Change of Control" means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of more than one-half of the voting rights or equity interests in the Company, (ii) a replacement of more than one-half of the members of the Company's board of directors that is not approved by those individuals who are members of the board of directors on the date hereof in one or a series of related transactions, (iii) a merger or consolidation of the Company or any Subsidiary or a sale of all or substantially all of the assets of the Company in one or a series of related transactions, unless following such transaction or series of transactions, the holders of the Company's securities prior to the first such transaction continue to hold at least a majority of the voting rights and equity interests in of the surviving entity or acquirer of such assets, or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii). "Closing Price" means, for any date the VWAP for such date (or the nearest preceding date) all as reported by Bloomberg L.P. or any successor to its function for reporting VWAP. "Common Stock" means the common stock of the Company, par value $.01 per share. "Conversion Shares Registration Statement" means a registration statement covering the resale of the Underlying Shares by the Holders and any additional registration statements with respect thereto, including (in each case) the Prospectus included in such registration statement and in any amendments and supplements to such registration statement or prospectus including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Effective Date" means the date that a Conversion Shares Registration Statement is declared effective by the Commission. 12 "Eligible Market" means the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Motorola Agreement" means collectively the License Agreement dated as of September 29, 2000 between the Company and Motorola, Inc., the Stock Purchase Warrant granted to Motorola, Inc. on September 29, 2000 and the Securities Purchase Agreement, dated as of September 29, 2000 between the Company and Motorola, Inc. "Notes" means $15,000,000 in aggregate principal amount of Convertible Promissory Notes due August 22, 2004 issued by the Company to the Holders. "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "PPG Agreement" means collectively, the Development and License Agreement dated as of October 1, 2000 between the Company and PPG Industries, Inc., as amended, and the Stock Purchase Warrant granted to PPG Industries, Inc. on October 1, 2000. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiary" means any subsidiary of the Company. "Trading Day" means (a) any day on which the Common Stock is traded on its primary Trading Market, or (b) if the Common Stock is not then listed or quoted on any national securities exchange, market or trading or quotation facility, then a day on which trading occurs on the New York Stock Exchange (or any successor thereto). "Trading Market" means the NASDAQ National Market System or any other national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted. "Transfer Agent" means American Stock Transfer & Trust Company or such other entity that the Company shall designate as its transfer agent from time to time, provided that the Company has given notice to the Holder that it has designated a new Transfer Agent. "Underlying Shares" means the shares of Common Stock issuable upon conversion of the Preferred Stock. "VWAP" means Volume Weighted Average Price of a share of Common Stock. 13 EXHIBIT B FORM OF CONVERSION NOTICE (To be executed by the registered Holder in order to convert shares of Preferred Stock) The undersigned hereby elects to convert the number of shares of Series D Convertible Preferred Stock indicated below into shares of common stock, par value $.01 per share (the "Common Stock"), of Universal Display Corporation, a Pennsylvania corporation (the "Company"), according to the conditions hereof, as of the date written below. ------------------------------------------------------------ Date to Effect Conversion ------------------------------------------------------------ Number of shares of Preferred Stock owned prior to Conversion ------------------------------------------------------------ Number of shares of Preferred Stock to be Converted ------------------------------------------------------------ Stated Value of shares of Preferred Stock to be Converted ------------------------------------------------------------ Number of shares of Common Stock to be Issued ------------------------------------------------------------ Applicable Conversion Price ------------------------------------------------------------ Number of shares of Preferred Stock subsequent to Conversion The undersigned hereby covenants and agrees that the undersigned (i) will not sell or otherwise dispose of the shares of Common Stock to be delivered pursuant to this Conversion Notice (the "Shares") except pursuant to an effective registration statement (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), (ii) will sell the Shares only in accordance with the Plan of Distribution set forth in the prospectus forming a part of the Registration Statement (the "Prospectus"), (iii) will comply with the requirements of the Act when selling or otherwise disposing of the Shares, including, but not limited to, the prospectus delivery requirements of the Act, (iv) will not sell or otherwise dispose of, and will return immediately to the Company for the purpose of placing a restrictive legend thereon, the Shares (and any certificates representing the Shares, if applicable) upon notice from the Company that the Prospectus may not be used for the sale of the Shares, and (v) will indemnify and hold harmless the Company, its directors, officers, agents and employees, each person who controls the Company (within the meaning of Section 15 of the Act and Section 20 of the Securities Exchange Act of 1934, as amended), and the directors, officers, agents or employees of such controlling persons, to the fullest extent permitted by applicable law, from and against all Losses (as defined in the Registration Rights Agreement dated August 22, 2001 by and between the Company and the investors signatory thereto) arising out of or based upon any breach by the undersigned of any of the covenants contained herein. ---------------------------------------- Name of Holder By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- 14 EX-4.5 5 ex4-5.txt EX-4.5 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. UNIVERSAL DISPLAY CORPORATION AMENDED AND RESTATED WARRANT Warrant No. A-1 Dated: August 22, 2001 Effective November 1, 2001, this Amended and Restated Warrant ("Warrant") amends and restates Warrant No. A-1 that was originally issued by Universal Display Corporation to Strong River Investments, Inc. as of August 22, 2001 (the "Original Warrant") in connection with the execution of the Purchase Agreement (as such term is defined below). Universal Display Corporation, a Pennsylvania corporation (the "Company"), hereby certifies that, for value received, Strong River Investments, Inc. or its registered assigns (the "Holder"), is entitled to purchase from the Company up to a total of 78,740 shares of common stock, $.01 par value per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $9.9225 per share (as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time and from time to time from and after the date hereof and through and including August 22, 2011 (the "Expiration Date"), and subject to the following terms and conditions. 1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement, dated as of August 22, 2001, among the Company and the Purchasers identified therein (the "Purchase Agreement"). 2. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 3. Registration of Transfers. Subject to Section 12 hereof, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. 4. Exercise and Duration of Warrants. (a) This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the date hereof to and including the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value; provided that, if the Closing Price on the Expiration Date is greater than 102% of the Exercise Price on the Expiration Date, then this Warrant shall be deemed to have been exercised in full (to the extent not previously exercised) on a "cashless exercise" basis at 6:30 P.M. New York City time on the Expiration Date. (b) Subject to Section 12 hereof, a Holder may exercise this Warrant by delivering to the Company (i) an Exercise Notice, in the form attached hereto, appropriately completed and duly signed; (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised; and (iii) this Warrant (or a New Warrant, as described in Section 5(b)), unless the Holder is awaiting receipt of a New Warrant from the Company pursuant to another provision hereof. The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an "Exercise Date". 5. Delivery of Warrant Shares. (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than four Trading Days after the Exercise Date (the "Delivery Date")) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares as of the Exercise Date. The Company shall, upon request of the Holder, use its best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. 2 (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. (c) The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. (d) If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each Trading Day after the Delivery Date until such certificates are delivered. Nothing herein shall limit the Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon exercise within the period specified herein and the Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other provision hereof or under applicable law. (e) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, and if after such Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the lesser of (A) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue or (B) the number of shares of Common Stock so purchased, multiplied by (2) the Exercise Price of the Common Stock on the applicable Exercise Date, in which event the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements shall not be so issued. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In in connection with an attempted exercise of this Warrant with respect to which the Exercise Price of the Underlying Shares on the applicable Exercise Date multiplied by the number of Underlying Shares was equal to $2,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $9,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. 3 (f) The provisions of Sections 5(d) and 5(e) shall not apply to an exercise under Section 4(a). 6. Charges, Taxes and Expenses. Except as otherwise provided in this Section 6, issuance of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9. (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, 4 and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. (b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted (effective on such record date) to equal the product of such Exercise Price times a fraction of which the denominator shall be such Exercise Price and of which the numerator shall be such Exercise Price less the then fair market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the Company's independent certified public accountants that regularly examine the financial statements of the Company (an "Appraiser"). In such event, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case such fair market value shall be deemed to equal the average of the values determined by each of the Appraiser and such appraiser. (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate Consideration"). The aggregate Exercise Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder's request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a Change of Control and if upon the happening of such Change of Control (A) the Company or its 5 successors is not traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market, or (B) the Company or its successor, as the case may be, for the 90 day period prior thereto (1) had an average daily trading volume of its common stock of less than 100,000 shares or (2) had an average daily Closing Price of its common stock of less than $10 per share, then at the request of the Holder delivered before the 90th day after such Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such request. (d) Subsequent Equity Sales. (i) If, at any time while this Warrant is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common Stock Equivalents" and together with Common Stock hereinafter called the "CS Securities") at an effective price per share of Common Stock (the "Effective Price") less than the Exercise Price, then the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect immediately prior to such issuance of Common Stock or Common Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares of Common Stock which the aggregate Effective Price of the Common Stock issued (or deemed to be issued) would purchase at the Exercise Price, and the denominator of which is the aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately after such issuance. For purposes of the foregoing adjustment, in connection with any issuance of any Common Stock Equivalents, (x) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (y) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock, divided by the Deemed Number, and (z) no further adjustment shall be made to the Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. However, upon termination or expiration of any Common Stock Equivalents the issuance of which 6 resulted in an adjustment to the Exercise Price pursuant to this paragraph, the Exercise Price shall be recomputed to equal the price it would have been had the adjustments in this paragraph been made, at the time of issuance of such Common Stock Equivalents, only with respect to that number of shares of the Common Stock actually issued upon conversion, exercise or exchange of such Common Stock Equivalents and at the Effective Prices actually paid in connection therewith. (ii) If, at any time while this Warrant is outstanding, the Company or any Subsidiary has outstanding any Common Stock Equivalents with an Effective Price that floats or resets or otherwise varies or is subject to adjustment based on market prices of the Common Stock (a "Floating Price Security"), then for purposes of applying the preceding paragraph in connection with any subsequent exercise, the Effective Price will be determined separately on each Exercise Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire shares of Common Stock on such Exercise Date (regardless of whether any such holder actually acquires any shares on such date). (iii) Notwithstanding the foregoing, no adjustment will be made under this Section 9(d) in respect of (a) any grant of options to employees, officers, directors or consultants of the Company pursuant to any stock option plan duly adopted by the Company's board of directors (provided, that the number of shares of Common Stock which are the subject of any such plan may not exceed 2,800,000, subject to annual increases of up to 40% of the number of shares authorized under such plans during the immediately preceding year), (b) in respect of the issuance of CS Securities upon exercise of any such options, (c) the issuance of CS Securities under the PPG Agreement or the Motorola Agreement, (d) up to 1,000,000 CS Securities issued in connection with any contractual strategic alliances approved by the Company's Board of Directors, (e) the issuance of any CS Securities representing or convertible into up to 50,000 shares of Common Stock in any single transaction; provided that this subsection (e) shall only apply to the first 50,000 shares in the aggregate issued in any consecutive 12 month period and 150,000 in the aggregate, (f) CS Securities issued or issuable pursuant to the Notes, Preferred Stock, Warrants or any other Transaction Document or pursuant to the anti-dilution provisions thereof, (g) any CS Securities issuable upon the exercise of, or pursuant to the anti-dilution provisions contained within, any options, restricted stock awards, preferred stock or warrants outstanding on the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 1 hereto, or (h) any Common Stock issued upon the conversion of exercise of any Common Stock Equivalents outstanding as of the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 2 hereto. (e) Special Adjustment. Notwithstanding anything to the contrary that may be contained herein, if at any time on or after the date hereof, the Holder has pursuant to the Notes converted in excess of $1,500,000 of principal amount of such Notes on account of the Company having delivered a "Company Conversion Notice" pursuant to such Note, then upon each such conversion in excess of $1,500,000 (a "Subsequent Conversion") the Exercise Price shall be reduced (but not increased) to 110% of the Conversion Price in effect for each such Subsequent Conversion. 7 (f) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased, as the case may be, proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. (g) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company; provided, however, the provisions of this Section 9 shall apply to any sale, issuance, distribution or disposition of any such shares by the Company. (h) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's Transfer Agent. (i) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company; then in each case, the Company shall on the earlier of the day on which the Company (A) publicly announces such proposed action, or (B) notifies its shareholders of such proposed action deliver to the Holder a notice describing the material terms and conditions of such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 10. Payment of Exercise Price. The Holder shall pay the Exercise Price by delivering to the Company immediately available funds. 11. Limitation on Exercise. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any 8 other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph. The Company's obligation to issue shares of Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. By written notice to the Company, the Holder may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the Holder and not to any other holder of Warrants. (b) Notwithstanding anything to the contrary contained herein, this Warrant may not be exercised to the extent such exercise would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon exercise of this Warrant after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of an exercise hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section 11(b) will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section 11(b) applies, the determination of the extent to which this Warrant is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered an Exercise Notice for a number of Warrant Shares that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the Exercise Notice to the extent of the maximum number of Warrant Shares permitted to be purchased at such Exercise Date pursuant to the provisions of this Section 11(b). 12. Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the shares of Common Stock issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the 9 Company to the effect that such exercise, transfer or exchange may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. 13. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the Company shall pay an amount in cash equal to the average of the Closing Prices of the Common Stock for the five Trading Days immediately prior to (but not including) the Exercise Date multiplied by such fraction; provided that, unless the Holder requests otherwise, no payment shall be required pursuant to this sentence until the aggregate amount payable exceeds $1,000, at which time all previously deferred payments shall be made. 14. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day or (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service. The addresses for such communications shall be: (i) if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618; facsimile: (609) 671-0995; attention Sidney Rosenblatt, Chief Financial Officer, or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section. 15. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 16. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, 10 remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder. (b) The corporate laws of the Commonwealth of Pennsylvania shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. The Company and the Holder hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. Each of the Company and the Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under this instrument and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. (c) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. (e) This Warrant shall not entitle the Holder to any voting or other rights as a stockholder of the Company, except to the extent the Holder has purchased any Warrant Shares. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] 11 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. UNIVERSAL DISPLAY CORPORATION By: /s/ Sidney D. Rosenblatt ------------------------ Name: Sidney D. Rosenblatt Title: Chief Financial Officer FORM OF EXERCISE NOTICE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To: Universal Display Corporation The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of Universal Display Corporation, a Pennsylvania corporation (the "Company"), evidenced by Warrant No. A-1 issued by the Company to the undersigned (the "Warrant"). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant. 1. Payment of Exercise Price. The holder shall pay the sum of $___________________ to the Company in accordance with the terms of the Warrant. 2. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant. If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the remaining shares of Common Stock be issued in the name of and delivered to (please print name and address): ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- Dated: __________, ____ Name of Holder: (Print) --------------------------------- By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Warrant) FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of Universal Display Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Universal Display Corporation with full power of substitution in the premises. Dated: _______________, ____ ------------------------------------------ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) ------------------------------------------ Address of Transferee ------------------------------------------ ------------------------------------------ In the presence of: -------------------------- EX-4.6 6 ex4-6.txt EX-4.6 EXHIBIT 4.6 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. UNIVERSAL DISPLAY CORPORATION AMENDED AND RESTATED WARRANT Warrant No. A-2 Dated: August 22, 2001 Effective November 1, 2001, this Amended and Restated Warrant ("Warrant") amends and restates Warrant No. A-2 that was originally issued by Universal Display Corporation to Pine Ridge Financial Inc. as of August 22, 2001 (the "Original Warrant") in connection with the execution of the Purchase Agreement (as such term is defined below). Universal Display Corporation, a Pennsylvania corporation (the "Company"), hereby certifies that, for value received, Pine Ridge Financial, Inc. or its registered assigns (the "Holder"), is entitled to purchase from the Company up to a total of 78,740 shares of common stock, $.01 par value per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $9.9225 per share (as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time and from time to time from and after the date hereof and through and including August 22, 2011 (the "Expiration Date"), and subject to the following terms and conditions. 1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement, dated as of August 22, 2001, among the Company and the Purchasers identified therein (the "Purchase Agreement"). 2. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 3. Registration of Transfers. Subject to Section 12 hereof, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. 4. Exercise and Duration of Warrants. (a) This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the date hereof to and including the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value; provided that, if the Closing Price on the Expiration Date is greater than 102% of the Exercise Price on the Expiration Date, then this Warrant shall be deemed to have been exercised in full (to the extent not previously exercised) on a "cashless exercise" basis at 6:30 P.M. New York City time on the Expiration Date. (b) Subject to Section 12 hereof, a Holder may exercise this Warrant by delivering to the Company (i) an Exercise Notice, in the form attached hereto, appropriately completed and duly signed; (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised; and (iii) this Warrant (or a New Warrant, as described in Section 5(b)), unless the Holder is awaiting receipt of a New Warrant from the Company pursuant to another provision hereof. The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an "Exercise Date". 5. Delivery of Warrant Shares. (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than four Trading Days after the Exercise Date (the "Delivery Date")) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares as of the Exercise Date. The Company shall, upon request of the Holder, use its best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. 2 (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. (c) The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. (d) If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each Trading Day after the Delivery Date until such certificates are delivered. Nothing herein shall limit the Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon exercise within the period specified herein and the Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other provision hereof or under applicable law. (e) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, and if after such Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the lesser of (A) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue or (B) the number of shares of Common Stock so purchased, multiplied by (2) the Exercise Price of the Common Stock on the applicable Exercise Date, in which event the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements shall not be so issued. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In in connection with an attempted exercise of this Warrant with respect to which the Exercise Price of the Underlying Shares on the applicable Exercise Date multiplied by the number of Underlying Shares was equal to $2,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $9,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. 3 (f) The provisions of Sections 5(d) and 5(e) shall not apply to an exercise under Section 4(a). 6. Charges, Taxes and Expenses. Except as otherwise provided in this Section 6, issuance of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9. (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the 4 determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. (b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted (effective on such record date) to equal the product of such Exercise Price times a fraction of which the denominator shall be such Exercise Price and of which the numerator shall be such Exercise Price less the then fair market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the Company's independent certified public accountants that regularly examine the financial statements of the Company (an "Appraiser"). In such event, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case such fair market value shall be deemed to equal the average of the values determined by each of the Appraiser and such appraiser. (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate Consideration"). The aggregate Exercise Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder's request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and 5 insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a Change of Control and if upon the happening of such Change of Control (A) the Company or its successors is not traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market, or (B) the Company or its successor, as the case may be, for the 90 day period prior thereto (1) had an average daily trading volume of its common stock of less than 100,000 shares or (2) had an average daily Closing Price of its common stock of less than $10 per share, then at the request of the Holder delivered before the 90th day after such Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such request. (d) Subsequent Equity Sales. (i) If, at any time while this Warrant is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common Stock Equivalents" and together with Common Stock hereinafter called the "CS Securities") at an effective price per share of Common Stock (the "Effective Price") less than the Exercise Price, then the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect immediately prior to such issuance of Common Stock or Common Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares of Common Stock which the aggregate Effective Price of the Common Stock issued (or deemed to be issued) would purchase at the Exercise Price, and the denominator of which is the aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately after such issuance. For purposes of the foregoing adjustment, in connection with any issuance of any Common Stock Equivalents, (x) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (y) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock, divided by the Deemed Number, and (z) no further adjustment shall be made to the Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. However, upon termination or expiration of any Common Stock Equivalents the issuance of which resulted in an adjustment to the Exercise Price pursuant to this paragraph, the Exercise Price shall be recomputed to equal the price it would have been had the adjustments in this paragraph been made, at the time of issuance of such Common Stock Equivalents, only with respect to that number of shares of the Common 6 Stock actually issued upon conversion, exercise or exchange of such Common Stock Equivalents and at the Effective Prices actually paid in connection therewith. (ii) If, at any time while this Warrant is outstanding, the Company or any Subsidiary has outstanding any Common Stock Equivalents with an Effective Price that floats or resets or otherwise varies or is subject to adjustment based on market prices of the Common Stock (a "Floating Price Security"), then for purposes of applying the preceding paragraph in connection with any subsequent exercise, the Effective Price will be determined separately on each Exercise Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire shares of Common Stock on such Exercise Date (regardless of whether any such holder actually acquires any shares on such date). (iii) Notwithstanding the foregoing, no adjustment will be made under this Section 9(d) in respect of (a) any grant of options to employees, officers, directors or consultants of the Company pursuant to any stock option plan duly adopted by the Company's board of directors (provided, that the number of shares of Common Stock which are the subject of any such plan may not exceed 2,800,000, subject to annual increases of up to 40% of the number of shares authorized under such plans during the immediately preceding year), (b) in respect of the issuance of CS Securities upon exercise of any such options, (c) the issuance of CS Securities under the PPG Agreement or the Motorola Agreement, (d) up to 1,000,000 CS Securities issued in connection with any contractual strategic alliances approved by the Company's Board of Directors, (e) the issuance of any CS Securities representing or convertible into up to 50,000 shares of Common Stock in any single transaction; provided that this subsection (e) shall only apply to the first 50,000 shares in the aggregate issued in any consecutive 12 month period and 150,000 in the aggregate, (f) CS Securities issued or issuable pursuant to the Notes, Preferred Stock, Warrants or any other Transaction Document or pursuant to the anti-dilution provisions thereof, (g) any CS Securities issuable upon the exercise of, or pursuant to the anti-dilution provisions contained within, any options, restricted stock awards, preferred stock or warrants outstanding on the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 1 hereto, or (h) any Common Stock issued upon the conversion of exercise of any Common Stock Equivalents outstanding as of the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 2 hereto. (e) Special Adjustment. Notwithstanding anything to the contrary that may be contained herein, if at any time on or after the date hereof, the Holder has pursuant to the Notes converted in excess of $1,500,000 of principal amount of such Notes on account of the Company having delivered a "Company Conversion Notice" pursuant to such Note, then upon each such conversion in excess of $1,500,000 (a "Subsequent Conversion") the Exercise Price shall be reduced (but not increased) to 110% of the Conversion Price in effect for each such Subsequent Conversion. 7 (f) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased, as the case may be, proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. (g) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company; provided, however, the provisions of this Section 9 shall apply to any sale, issuance, distribution or disposition of any such shares by the Company. (h) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's Transfer Agent. (i) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company; then in each case, the Company shall on the earlier of the day on which the Company (A) publicly announces such proposed action, or (B) notifies its shareholders of such proposed action deliver to the Holder a notice describing the material terms and conditions of such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 10. Payment of Exercise Price. The Holder shall pay the Exercise Price by delivering to the Company immediately available funds. 11. Limitation on Exercise. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any 8 other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph. The Company's obligation to issue shares of Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. By written notice to the Company, the Holder may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the Holder and not to any other holder of Warrants. (b) Notwithstanding anything to the contrary contained herein, this Warrant may not be exercised to the extent such exercise would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon exercise of this Warrant after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of an exercise hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section 11(b) will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section 11(b) applies, the determination of the extent to which this Warrant is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered an Exercise Notice for a number of Warrant Shares that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the Exercise Notice to the extent of the maximum number of Warrant Shares permitted to be purchased at such Exercise Date pursuant to the provisions of this Section 11(b). 12. Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the shares of Common Stock issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the Company to the effect that such exercise, transfer or exchange may be made 9 without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. 13. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the Company shall pay an amount in cash equal to the average of the Closing Prices of the Common Stock for the five Trading Days immediately prior to (but not including) the Exercise Date multiplied by such fraction; provided that, unless the Holder requests otherwise, no payment shall be required pursuant to this sentence until the aggregate amount payable exceeds $1,000, at which time all previously deferred payments shall be made. 14. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day or (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service. The addresses for such communications shall be: (i) if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618; facsimile: (609) 671-0995; attention Sidney Rosenblatt, Chief Financial Officer, or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section. 15. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 16. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, 10 remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder. (b) The corporate laws of the Commonwealth of Pennsylvania shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. The Company and the Holder hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. Each of the Company and the Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under this instrument and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. (c) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. (e) This Warrant shall not entitle the Holder to any voting or other rights as a stockholder of the Company, except to the extent the Holder has purchased any Warrant Shares. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] 11 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. UNIVERSAL DISPLAY CORPORATION By: /s/ Sidney D. Rosenblatt ---------------------------- Name: Sidney D. Rosenblatt Title: Chief Financial Officer 12 FORM OF EXERCISE NOTICE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To: Universal Display Corporation The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of Universal Display Corporation, a Pennsylvania corporation (the "Company"), evidenced by Warrant No. A-2 issued by the Company to the undersigned (the "Warrant"). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant. 1. Payment of Exercise Price. The holder shall pay the sum of $___________________ to the Company in accordance with the terms of the Warrant. 2. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant. If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the remaining shares of Common Stock be issued in the name of and delivered to (please print name and address): __________________________________________________________ __________________________________________________________ __________________________________________________________ Dated: _______________, ____ Name of Holder: (Print)__________________________ By:______________________________ Name:____________________________ Title:___________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of Universal Display Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Universal Display Corporation with full power of substitution in the premises. Dated: _______________, ____ ___________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) ___________________________________ Address of Transferee ___________________________________ ___________________________________ In the presence of: _______________________________ EX-4.7 7 ex4-7.txt EX-4.7 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. UNIVERSAL DISPLAY CORPORATION AMENDED AND RESTATED WARRANT Warrant No. B-1 Dated: August 22, 2001 Effective November 1, 2001, this Amended and Restated Warrant ("Warrant") amends and restates Warrant No. B-1 that was originally issued by Universal Display Corporation to Strong River Investments, Inc. as of August 22, 2001 (the "Original Warrant") in connection with the execution of the Purchase Agreement (as such term is defined below). Universal Display Corporation, a Pennsylvania corporation (the "Company"), hereby certifies that, for value received, Strong River Investments, Inc. or its registered assigns (the "Holder"), is entitled to purchase from the Company up to a total of 78,740 shares of common stock, $.01 par value per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $9.9225 per share (as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time and from time to time from and after the earlier of (a) August 22, 2004 and (b) the Second Closing Date (the earlier of such dates being the "Commencement Date") and through and including August 22, 2011 (the "Expiration Date"), and subject to the following terms and conditions. 1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement, dated as of August 22, 2001, among the Company and the Purchasers identified therein (the "Purchase Agreement"). 2. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 3. Registration of Transfers. Subject to Section 12 hereof, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. 4. Exercise and Duration of Warrants. (a) This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Commencement Date to and including the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value; provided that, if the Closing Price on the Expiration Date is greater than 102% of the Exercise Price on the Expiration Date, then this Warrant shall be deemed to have been exercised in full (to the extent not previously exercised) on a "cashless exercise" basis at 6:30 P.M. New York City time on the Expiration Date. (b) Subject to Section 12 hereof, a Holder may exercise this Warrant by delivering to the Company (i) an Exercise Notice, in the form attached hereto, appropriately completed and duly signed; (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised; and (iii) this Warrant (or a New Warrant, as described in Section 5(b)), unless the Holder is awaiting receipt of a New Warrant from the Company pursuant to another provision hereof. The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an "Exercise Date". (c) In the event the Commencement Date shall not have occurred on or before August 22, 2002, the Company may redeem this Warrant by paying $100.00 to the Holder. 5. Delivery of Warrant Shares. (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than four Trading Days after the Exercise Date (the "Delivery Date")) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares as of the Exercise Date. The Company shall, upon request of the Holder, use its best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust 2 Corporation or another established clearing corporation performing similar functions. (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. (c) The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. (d) If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each Trading Day after the Delivery Date until such certificates are delivered. Nothing herein shall limit the Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon exercise within the period specified herein and the Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other provision hereof or under applicable law. (e) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, and if after such Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the lesser of (A) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue or (B) the number of shares of Common Stock so purchased, multiplied by (2) the Exercise Price of the Common Stock on the applicable Exercise Date, in which event the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements shall not be so issued. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In in connection with an attempted exercise of this Warrant with respect to which the Exercise Price of the Underlying Shares on the applicable Exercise 3 Date multiplied by the number of Underlying Shares was equal to $2,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $9,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. (f) The provisions of Sections 5(d) and 5(e) shall not apply to an exercise under Section 4(a). 6. Charges, Taxes and Expenses. Except as otherwise provided in this Section 6, issuance of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9. - (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price 4 shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. (b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted (effective on such record date) to equal the product of such Exercise Price times a fraction of which the denominator shall be such Exercise Price and of which the numerator shall be such Exercise Price less the then fair market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the Company's independent certified public accountants that regularly examine the financial statements of the Company (an "Appraiser"). In such event, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case such fair market value shall be deemed to equal the average of the values determined by each of the Appraiser and such appraiser. (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate Consideration"). The aggregate Exercise Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder's request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be similarly 5 adjusted upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a Change of Control and if upon the happening of such Change of Control (A) the Company or its successors is not traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market, or (B) the Company or its successor, as the case may be, for the 90 day period prior thereto (1) had an average daily trading volume of its common stock of less than 100,000 shares or (2) had an average daily Closing Price of its common stock of less than $10 per share, then at the request of the Holder delivered before the 90th day after such Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such request. (d) Subsequent Equity Sales. (i) If, at any time while this Warrant is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common Stock Equivalents" and together with Common Stock hereinafter called the "CS Securities") at an effective price per share of Common Stock (the "Effective Price") less than the Exercise Price, then the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect immediately prior to such issuance of Common Stock or Common Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares of Common Stock which the aggregate Effective Price of the Common Stock issued (or deemed to be issued) would purchase at the Exercise Price, and the denominator of which is the aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately after such issuance. For purposes of the foregoing adjustment, in connection with any issuance of any Common Stock Equivalents, (x) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (y) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock, divided by the Deemed Number, and (z) no further adjustment shall be made to the Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. However, upon termination or expiration of any Common Stock Equivalents the issuance of which resulted in an adjustment to the Exercise Price pursuant to this paragraph, the Exercise Price shall be recomputed to equal the price it 6 would have been had the adjustments in this paragraph been made, at the time of issuance of such Common Stock Equivalents, only with respect to that number of shares of the Common Stock actually issued upon conversion, exercise or exchange of such Common Stock Equivalents and at the Effective Prices actually paid in connection therewith. (ii) If, at any time while this Warrant is outstanding, the Company or any Subsidiary has outstanding any Common Stock Equivalents with an Effective Price that floats or resets or otherwise varies or is subject to adjustment based on market prices of the Common Stock (a "Floating Price Security"), then for purposes of applying the preceding paragraph in connection with any subsequent exercise, the Effective Price will be determined separately on each Exercise Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire shares of Common Stock on such Exercise Date (regardless of whether any such holder actually acquires any shares on such date). (iii) Notwithstanding the foregoing, no adjustment will be made under this Section 9(d) in respect of (a) any grant of options to employees, officers, directors or consultants of the Company pursuant to any stock option plan duly adopted by the Company's board of directors (provided, that the number of shares of Common Stock which are the subject of any such plan may not exceed 2,800,000, subject to annual increases of up to 40% of the number of shares authorized under such plans during the immediately preceding year), (b) in respect of the issuance of CS Securities upon exercise of any such options, (c) the issuance of CS Securities under the PPG Agreement or the Motorola Agreement, (d) up to 1,000,000 CS Securities issued in connection with any contractual strategic alliances approved by the Company's Board of Directors, (e) the issuance of any CS Securities representing or convertible into up to 50,000 shares of Common Stock in any single transaction; provided that this subsection (e) shall only apply to the first 50,000 shares in the aggregate issued in any consecutive 12 month period and 150,000 in the aggregate, (f) CS Securities issued or issuable pursuant to the Notes, Preferred Stock, Warrants or any other Transaction Document or pursuant to the anti-dilution provisions thereof, (g) any CS Securities issuable upon the exercise of, or pursuant to the anti-dilution provisions contained within, any options, restricted stock awards, preferred stock or warrants outstanding on the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 1 hereto, or (h) any Common Stock issued upon the conversion of exercise of any Common Stock Equivalents outstanding as of the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 2 hereto. (e) Special Adjustment. Notwithstanding anything to the contrary that may be contained herein, if at any time on or after the date hereof, the Holder has pursuant to the Notes converted in excess of $1,500,000 of principal amount of such Notes on account of the Company having delivered a "Company Conversion Notice" pursuant to such Note, then upon each such conversion in excess of $1,500,000 (a "Subsequent Conversion") the Exercise Price shall be reduced (but not increased) to 110% of the Conversion Price in effect for each such Subsequent Conversion. 7 (f) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased, as the case may be, proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. (g) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company; provided, however, the provisions of this Section 9 shall apply to any sale, issuance, distribution or disposition of any such shares by the Company. (h) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's Transfer Agent. (i) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company; then in each case, the Company shall on the earlier of the day on which the Company (A) publicly announces such proposed action, or (B) notifies its shareholders of such proposed action deliver to the Holder a notice describing the material terms and conditions of such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 10. Payment of Exercise Price. The Holder shall pay the Exercise Price by delivering to the Company immediately available funds. 11. Limitation on Exercise. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any 8 other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph. The Company's obligation to issue shares of Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. By written notice to the Company, the Holder may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the Holder and not to any other holder of Warrants. (b) Notwithstanding anything to the contrary contained herein, this Warrant may not be exercised to the extent such exercise would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon exercise of this Warrant after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of an exercise hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section 11(b) will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section 11(b) applies, the determination of the extent to which this Warrant is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered an Exercise Notice for a number of Warrant Shares that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the Exercise Notice to the extent of the maximum number of Warrant Shares permitted to be purchased at such Exercise Date pursuant to the provisions of this Section 11(b). 12. Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the shares of Common Stock issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the Company to the effect that such exercise, transfer or exchange may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the Holder or transferee execute and 9 deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. 13. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the Company shall pay an amount in cash equal to the average of the Closing Prices of the Common Stock for the five Trading Days immediately prior to (but not including) the Exercise Date multiplied by such fraction; provided that, unless the Holder requests otherwise, no payment shall be required pursuant to this sentence until the aggregate amount payable exceeds $1,000, at which time all previously deferred payments shall be made. 14. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day or (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service. The addresses for such communications shall be: (i) if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618; facsimile: (609) 671-0995; attention Sidney Rosenblatt, Chief Financial Officer, or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section. 15. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 16. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to 10 any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder. (b) The corporate laws of the Commonwealth of Pennsylvania shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. The Company and the Holder hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. Each of the Company and the Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under this instrument and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. (c) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. (e) This Warrant shall not entitle the Holder to any voting or other rights as a stockholder of the Company, except to the extent the Holder has purchased any Warrant Shares. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] 11 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. UNIVERSAL DISPLAY CORPORATION By: /s/ Sidney D. Rosenblatt ------------------------ Name: Sidney D. Rosenblatt Title: Chief Financial Officer 12 FORM OF EXERCISE NOTICE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To: Universal Display Corporation The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of Universal Display Corporation, a Pennsylvania corporation (the "Company"), evidenced by Warrant No. B-1 issued by the Company to the undersigned (the "Warrant"). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant. 1. Payment of Exercise Price. The holder shall pay the sum of $___________________ to the Company in accordance with the terms of the Warrant. 2. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant. If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the remaining shares of Common Stock be issued in the name of and delivered to (please print name and address): ----------------------------------------------------------------- ----------------------------------------------------------------- ----------------------------------------------------------------- Dated: _________, ____ Name of Holder: (Print) ------------------------------------- By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Warrant) FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of Universal Display Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Universal Display Corporation with full power of substitution in the premises. Dated: _______________, ____ ------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Warrant) ------------------------------------- Address of Transferee ------------------------------------- ------------------------------------- In the presence of: -------------------------- EX-4.8 8 ex4-8.txt EX-4.8 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. UNIVERSAL DISPLAY CORPORATION AMENDED AND RESTATED WARRANT Warrant No. B-2 Dated: August 22, 2001 Effective November 1, 2001, this Amended and Restated Warrant ("Warrant") amends and restates Warrant No. B-2 that was originally issued by Universal Display Corporation to Pine Ridge Financial Inc. as of August 22, 2001 (the "Original Warrant") in connection with the execution of the Purchase Agreement (as such term is defined below). Universal Display Corporation, a Pennsylvania corporation (the "Company"), hereby certifies that, for value received, Pine Ridge Financial, Inc. or its registered assigns (the "Holder"), is entitled to purchase from the Company up to a total of 78,740 shares of common stock, $.01 par value per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $9.9225 per share (as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time and from time to time from and after the earlier of (a) August 22, 2004 and (b) the Second Closing Date (the earlier of such dates being the "Commencement Date") and through and including August 22, 2011 (the "Expiration Date"), and subject to the following terms and conditions. 1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement, dated as of August 22, 2001, among the Company and the Purchasers identified therein (the "Purchase Agreement"). 2. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 3. Registration of Transfers. Subject to Section 12 hereof, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. 4. Exercise and Duration of Warrants. (a) This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Commencement Date to and including the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value; provided that, if the Closing Price on the Expiration Date is greater than 102% of the Exercise Price on the Expiration Date, then this Warrant shall be deemed to have been exercised in full (to the extent not previously exercised) on a "cashless exercise" basis at 6:30 P.M. New York City time on the Expiration Date. (b) Subject to Section 12 hereof, a Holder may exercise this Warrant by delivering to the Company (i) an Exercise Notice, in the form attached hereto, appropriately completed and duly signed; (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised; and (iii) this Warrant (or a New Warrant, as described in Section 5(b)), unless the Holder is awaiting receipt of a New Warrant from the Company pursuant to another provision hereof. The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an "Exercise Date". (c) In the event the Commencement Date shall not have occurred on or before August 22, 2002, the Company may redeem this Warrant by paying $100.00 to the Holder. 5. Delivery of Warrant Shares. (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than four Trading Days after the Exercise Date (the "Delivery Date")) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares as of the Exercise Date. The Company shall, upon request of the Holder, use its best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust 2 Corporation or another established clearing corporation performing similar functions. (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. (c) The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. (d) If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each Trading Day after the Delivery Date until such certificates are delivered. Nothing herein shall limit the Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon exercise within the period specified herein and the Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other provision hereof or under applicable law. (e) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, and if after such Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the lesser of (A) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue or (B) the number of shares of Common Stock so purchased, multiplied by (2) the Exercise Price of the Common Stock on the applicable Exercise Date, in which event the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements shall not be so issued. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In in connection with an attempted exercise of this Warrant with respect to 3 which the Exercise Price of the Underlying Shares on the applicable Exercise Date multiplied by the number of Underlying Shares was equal to $2,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $9,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. (f) The provisions of Sections 5(d) and 5(e) shall not apply to an exercise under Section 4(a). 6. Charges, Taxes and Expenses. Except as otherwise provided in this Section 6, issuance of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9. - (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which 4 the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. (b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted (effective on such record date) to equal the product of such Exercise Price times a fraction of which the denominator shall be such Exercise Price and of which the numerator shall be such Exercise Price less the then fair market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the Company's independent certified public accountants that regularly examine the financial statements of the Company (an "Appraiser"). In such event, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case such fair market value shall be deemed to equal the average of the values determined by each of the Appraiser and such appraiser. (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate Consideration"). The aggregate Exercise Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder's request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to 5 purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a Change of Control and if upon the happening of such Change of Control (A) the Company or its successors is not traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market, or (B) the Company or its successor, as the case may be, for the 90 day period prior thereto (1) had an average daily trading volume of its common stock of less than 100,000 shares or (2) had an average daily Closing Price of its common stock of less than $10 per share, then at the request of the Holder delivered before the 90th day after such Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such request. (d) Subsequent Equity Sales. (i) If, at any time while this Warrant is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common Stock Equivalents" and together with Common Stock hereinafter called the "CS Securities") at an effective price per share of Common Stock (the "Effective Price") less than the Exercise Price, then the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect immediately prior to such issuance of Common Stock or Common Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares of Common Stock which the aggregate Effective Price of the Common Stock issued (or deemed to be issued) would purchase at the Exercise Price, and the denominator of which is the aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately after such issuance. For purposes of the foregoing adjustment, in connection with any issuance of any Common Stock Equivalents, (x) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (y) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock, divided by the Deemed Number, and (z) no further adjustment shall be made to the Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. However, upon termination or expiration of any Common Stock Equivalents the issuance of which resulted in an adjustment to the Exercise Price pursuant to this paragraph, the Exercise Price shall be recomputed to equal the price it 6 would have been had the adjustments in this paragraph been made, at the time of issuance of such Common Stock Equivalents, only with respect to that number of shares of the Common Stock actually issued upon conversion, exercise or exchange of such Common Stock Equivalents and at the Effective Prices actually paid in connection therewith. (ii) If, at any time while this Warrant is outstanding, the Company or any Subsidiary has outstanding any Common Stock Equivalents with an Effective Price that floats or resets or otherwise varies or is subject to adjustment based on market prices of the Common Stock (a "Floating Price Security"), then for purposes of applying the preceding paragraph in connection with any subsequent exercise, the Effective Price will be determined separately on each Exercise Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire shares of Common Stock on such Exercise Date (regardless of whether any such holder actually acquires any shares on such date). (iii) Notwithstanding the foregoing, no adjustment will be made under this Section 9(d) in respect of (a) any grant of options to employees, officers, directors or consultants of the Company pursuant to any stock option plan duly adopted by the Company's board of directors (provided, that the number of shares of Common Stock which are the subject of any such plan may not exceed 2,800,000, subject to annual increases of up to 40% of the number of shares authorized under such plans during the immediately preceding year), (b) in respect of the issuance of CS Securities upon exercise of any such options, (c) the issuance of CS Securities under the PPG Agreement or the Motorola Agreement, (d) up to 1,000,000 CS Securities issued in connection with any contractual strategic alliances approved by the Company's Board of Directors, (e) the issuance of any CS Securities representing or convertible into up to 50,000 shares of Common Stock in any single transaction; provided that this subsection (e) shall only apply to the first 50,000 shares in the aggregate issued in any consecutive 12 month period and 150,000 in the aggregate, (f) CS Securities issued or issuable pursuant to the Notes, Preferred Stock, Warrants or any other Transaction Document or pursuant to the anti-dilution provisions thereof, (g) any CS Securities issuable upon the exercise of, or pursuant to the anti-dilution provisions contained within, any options, restricted stock awards, preferred stock or warrants outstanding on the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 1 hereto, or (h) any Common Stock issued upon the conversion of exercise of any Common Stock Equivalents outstanding as of the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 2 hereto. (e) Special Adjustment. Notwithstanding anything to the contrary that may be contained herein, if at any time on or after the date hereof, the Holder has pursuant to the Notes converted in excess of $1,500,000 of principal amount of such Notes on account of the Company having delivered a "Company Conversion Notice" pursuant to such Note, then upon each such conversion in excess of $1,500,000 (a "Subsequent Conversion") the Exercise Price shall be reduced (but not increased) to 110% of the Conversion Price in effect for each such Subsequent Conversion. 7 (f) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased, as the case may be, proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. (g) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company; provided, however, the provisions of this Section 9 shall apply to any sale, issuance, distribution or disposition of any such shares by the Company. (h) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's Transfer Agent. (i) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company; then in each case, the Company shall on the earlier of the day on which the Company (A) publicly announces such proposed action, or (B) notifies its shareholders of such proposed action deliver to the Holder a notice describing the material terms and conditions of such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 10. Payment of Exercise Price. The Holder shall pay the Exercise Price by delivering to the Company immediately available funds. 11. Limitation on Exercise. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated 8 with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph. The Company's obligation to issue shares of Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. By written notice to the Company, the Holder may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the Holder and not to any other holder of Warrants. (b) Notwithstanding anything to the contrary contained herein, this Warrant may not be exercised to the extent such exercise would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon exercise of this Warrant after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of an exercise hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section 11(b) will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section 11(b) applies, the determination of the extent to which this Warrant is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered an Exercise Notice for a number of Warrant Shares that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the Exercise Notice to the extent of the maximum number of Warrant Shares permitted to be purchased at such Exercise Date pursuant to the provisions of this Section 11(b). 12. Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the shares of Common Stock issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the Company to the effect that such exercise, transfer or exchange may be made 9 without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. 13. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the Company shall pay an amount in cash equal to the average of the Closing Prices of the Common Stock for the five Trading Days immediately prior to (but not including) the Exercise Date multiplied by such fraction; provided that, unless the Holder requests otherwise, no payment shall be required pursuant to this sentence until the aggregate amount payable exceeds $1,000, at which time all previously deferred payments shall be made. 14. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day or (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service. The addresses for such communications shall be: (i) if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618; facsimile: (609) 671-0995; attention Sidney Rosenblatt, Chief Financial Officer, or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section. 15. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 16. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to 10 any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder. (b) The corporate laws of the Commonwealth of Pennsylvania shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. The Company and the Holder hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. Each of the Company and the Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under this instrument and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. (c) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. (e) This Warrant shall not entitle the Holder to any voting or other rights as a stockholder of the Company, except to the extent the Holder has purchased any Warrant Shares. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] 11 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. UNIVERSAL DISPLAY CORPORATION By: /s/ Sidney D. Rosenblatt ------------------------ Name: Sidney D. Rosenblatt Title: Chief Financial Officer 12 FORM OF EXERCISE NOTICE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To: Universal Display Corporation The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of Universal Display Corporation, a Pennsylvania corporation (the "Company"), evidenced by Warrant No. B-2 issued by the Company to the undersigned (the "Warrant"). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant. 1. Payment of Exercise Price. The holder shall pay the sum of $___________________ to the Company in accordance with the terms of the Warrant. 2. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant. If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the remaining shares of Common Stock be issued in the name of and delivered to (please print name and address): --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Dated: ___________, ___ Name of Holder: (Print) ------------------------------ By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Warrant) FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of Universal Display Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Universal Display Corporation with full power of substitution in the premises. Dated: _______________, ____ ------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Warrant) ------------------------------------- Address of Transferee ------------------------------------- ------------------------------------- In the presence of: -------------------------- EX-4.9 9 ex4-9.txt EX-4.9 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. UNIVERSAL DISPLAY CORPORATION AMENDED AND RESTATED WARRANT Warrant No. C-1 Dated: August 22, 2001 Effective November 1, 2001, this Amended and Restated Warrant ("Warrant") amends and restates Warrant No. C-1 that was originally issued by Universal Display Corporation to Strong River Investments, Inc. as of August 22, 2001 (the "Original Warrant") in connection with the execution of the Purchase Agreement (as such term is defined below). Universal Display Corporation, a Pennsylvania corporation (the "Company"), hereby certifies that, for value received, Strong River Investments, Inc. or its registered assigns (the "Holder"), is entitled to purchase from the Company up to a total of 214,746 shares of common stock, $.01 par value per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $15.24 per share (as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time and from time to time from and after the date hereof and through and including August 22, 2011 (the "Expiration Date"), and subject to the following terms and conditions. 1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement, dated as of August 22, 2001, among the Company and the Purchasers identified therein (the "Purchase Agreement"). 2. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 3. Registration of Transfers. Subject to Section 12 hereof, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. 4. Exercise and Duration of Warrants. (a) This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the date hereof to and including the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value; provided that, if the Closing Price on the Expiration Date is greater than 102% of the Exercise Price on the Expiration Date, then this Warrant shall be deemed to have been exercised in full (to the extent not previously exercised) on a "cashless exercise" basis at 6:30 P.M. New York City time on the Expiration Date. (b) Subject to Section 12 hereof, a Holder may exercise this Warrant by delivering to the Company (i) an Exercise Notice, in the form attached hereto, appropriately completed and duly signed; (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised; and (iii) this Warrant (or a New Warrant, as described in Section 5(b)), unless the Holder is awaiting receipt of a New Warrant from the Company pursuant to another provision hereof. The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an "Exercise Date". 5. Delivery of Warrant Shares. (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than four Trading Days after the Exercise Date (the "Delivery Date")) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares as of the Exercise Date. The Company shall, upon request of the Holder, use its best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. 2 (c) The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. (d) If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each Trading Day after the Delivery Date until such certificates are delivered. Nothing herein shall limit the Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon exercise within the period specified herein and the Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other provision hereof or under applicable law. (e) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, and if after such Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the lesser of (A) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue or (B) the number of shares of Common Stock so purchased, multiplied by (2) the Exercise Price of the Common Stock on the applicable Exercise Date, in which event the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements shall not be so issued. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In in connection with an attempted exercise of this Warrant with respect to which the Exercise Price of the Underlying Shares on the applicable Exercise Date multiplied by the number of Underlying Shares was equal to $2,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $9,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. (f) The provisions of Sections 5(d) and 5(e) shall not apply to an exercise under Section 4(a). 3 6. Charges, Taxes and Expenses. Except as otherwise provided in this Section 6, issuance of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9. - (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. 4 (b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted (effective on such record date) to equal the product of such Exercise Price times a fraction of which the denominator shall be such Exercise Price and of which the numerator shall be such Exercise Price less the then fair market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the Company's independent certified public accountants that regularly examine the financial statements of the Company (an "Appraiser"). In such event, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case such fair market value shall be deemed to equal the average of the values determined by each of the Appraiser and such appraiser. (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate Consideration"). The aggregate Exercise Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder's request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental 5 Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a Change of Control and if upon the happening of such Change of Control (A) the Company or its successors is not traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market, or (B) the Company or its successor, as the case may be, for the 90 day period prior thereto (1) had an average daily trading volume of its common stock of less than 100,000 shares or (2) had an average daily Closing Price of its common stock of less than $10 per share, then at the request of the Holder delivered before the 90th day after such Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such request. (d) Subsequent Equity Sales. (i) If, at any time while this Warrant is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common Stock Equivalents" and together with Common Stock hereinafter called the "CS Securities") at an effective price per share of Common Stock (the "Effective Price") less than the Exercise Price, then the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect immediately prior to such issuance of Common Stock or Common Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares of Common Stock which the aggregate Effective Price of the Common Stock issued (or deemed to be issued) would purchase at the Exercise Price, and the denominator of which is the aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately after such issuance. For purposes of the foregoing adjustment, in connection with any issuance of any Common Stock Equivalents, (x) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (y) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock, divided by the Deemed Number, and (z) no further adjustment shall be made to the Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. However, upon termination or expiration of any Common Stock Equivalents the issuance of which resulted in an adjustment to the Exercise Price pursuant to this paragraph, the Exercise Price shall be recomputed to equal the price it would have been had the adjustments in this paragraph been made, at the time of issuance of such Common Stock Equivalents, only with respect to that number of shares of the Common Stock actually issued upon conversion, exercise or exchange of such Common Stock Equivalents and at the Effective Prices actually paid in connection therewith. 6 (ii) If, at any time while this Warrant is outstanding, the Company or any Subsidiary has outstanding any Common Stock Equivalents with an Effective Price that floats or resets or otherwise varies or is subject to adjustment based on market prices of the Common Stock (a "Floating Price Security"), then for purposes of applying the preceding paragraph in connection with any subsequent exercise, the Effective Price will be determined separately on each Exercise Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire shares of Common Stock on such Exercise Date (regardless of whether any such holder actually acquires any shares on such date). (iii) Notwithstanding the foregoing, no adjustment will be made under this Section 9(d) in respect of (a) any grant of options to employees, officers, directors or consultants of the Company pursuant to any stock option plan duly adopted by the Company's board of directors (provided, that the number of shares of Common Stock which are the subject of any such plan may not exceed 2,800,000, subject to annual increases of up to 40% of the number of shares authorized under such plans during the immediately preceding year), (b) in respect of the issuance of CS Securities upon exercise of any such options, (c) the issuance of CS Securities under the PPG Agreement or the Motorola Agreement, (d) up to 1,000,000 CS Securities issued in connection with any contractual strategic alliances approved by the Company's Board of Directors, (e) the issuance of any CS Securities representing or convertible into up to 50,000 shares of Common Stock in any single transaction; provided that this subsection (e) shall only apply to the first 50,000 shares in the aggregate issued in any consecutive 12 month period and 150,000 in the aggregate, (f) CS Securities issued or issuable pursuant to the Notes, Preferred Stock, Warrants or any other Transaction Document or pursuant to the anti-dilution provisions thereof, (g) any CS Securities issuable upon the exercise of, or pursuant to the anti-dilution provisions contained within, any options, restricted stock awards, preferred stock or warrants outstanding on the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 1 hereto, or (h) any Common Stock issued upon the conversion of exercise of any Common Stock Equivalents outstanding as of the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 2 hereto. (e) Special Adjustment. Notwithstanding anything to the contrary that may be contained herein, if at any time on or after the date hereof, the Holder has pursuant to the Notes converted in excess of $1,500,000 of principal amount of such Notes on account of the Company having delivered a "Company Conversion Notice" pursuant to such Note, then upon each such conversion in excess of $1,500,000 (a "Subsequent Conversion") the Exercise Price shall be reduced (but not increased) to 110% of the Conversion Price in effect for each such Subsequent Conversion. (f) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased, as the case may be, 7 proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. (g) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company; provided, however, the provisions of this Section 9 shall apply to any sale, issuance, distribution or disposition of any such shares by the Company. (h) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's Transfer Agent. (i) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company; then in each case, the Company shall on the earlier of the day on which the Company (A) publicly announces such proposed action, or (B) notifies its shareholders of such proposed action deliver to the Holder a notice describing the material terms and conditions of such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. (j) Exception. Notwithstanding anything contained to the contrary in Section 9(d), in the event, and only in the event, an Event of Default under Section 4(a)(viii) of the Notes has occurred, and no other Event of Default (as defined in the Notes) has occurred, then Section 9(d) hereof shall only apply to the extent sales of CS Securities by the Company exceed $15 million in the aggregate. 10. Payment of Exercise Price. The Holder shall pay the Exercise Price by delivering to the Company immediately available funds. 11. Limitation on Exercise. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated 8 with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph. The Company's obligation to issue shares of Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. By written notice to the Company, the Holder may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the Holder and not to any other holder of Warrants. (b) Notwithstanding anything to the contrary contained herein, this Warrant may not be exercised to the extent such exercise would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon exercise of this Warrant after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of an exercise hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section 11(b) will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section 11(b) applies, the determination of the extent to which this Warrant is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered an Exercise Notice for a number of Warrant Shares that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the Exercise Notice to the extent of the maximum number of Warrant Shares permitted to be purchased at such Exercise Date pursuant to the provisions of this Section 11(b). 12. Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the shares of Common Stock issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel that is reasonably acceptable to the 9 Company to the effect that such exercise, transfer or exchange may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. 13. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the Company shall pay an amount in cash equal to the average of the Closing Prices of the Common Stock for the five Trading Days immediately prior to (but not including) the Exercise Date multiplied by such fraction; provided that, unless the Holder requests otherwise, no payment shall be required pursuant to this sentence until the aggregate amount payable exceeds $1,000, at which time all previously deferred payments shall be made. 14. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day or (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service. The addresses for such communications shall be: (i) if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618; facsimile: (609) 671-0995; attention Sidney Rosenblatt, Chief Financial Officer, or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section. 15. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 16. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to 10 the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder. (b) The corporate laws of the Commonwealth of Pennsylvania shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. The Company and the Holder hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. Each of the Company and the Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under this instrument and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. (c) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. (e) This Warrant shall not entitle the Holder to any voting or other rights as a stockholder of the Company, except to the extent the Holder has purchased any Warrant Shares. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] 11 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. UNIVERSAL DISPLAY CORPORATION By: /s/ Sidney D. Rosenblatt ------------------------ Name: Sidney D. Rosenblatt Title: Chief Financial Officer 12 FORM OF EXERCISE NOTICE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To: Universal Display Corporation The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of Universal Display Corporation, a Pennsylvania corporation (the "Company"), evidenced by Warrant No. C-1 issued by the Company to the undersigned (the "Warrant"). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant. 1. Payment of Exercise Price. The holder shall pay the sum of $___________________ to the Company in accordance with the terms of the Warrant. 2. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant. If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the remaining shares of Common Stock be issued in the name of and delivered to (please print name and address): --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Dated: ___________, ___ Name of Holder: (Print) ------------------------------ By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Warrant) FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of Universal Display Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Universal Display Corporation with full power of substitution in the premises. Dated: ____________, ___ ------------------------------------- (Signature must conform in all respects to name of holder as specified on the face of the Warrant) ------------------------------------- Address of Transferee ------------------------------------- ------------------------------------- In the presence of: ------------------------- EX-4.10 10 ex4-10.txt EX-4.10 EXHIBIT 4.10 NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THEY ARE EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. UNIVERSAL DISPLAY CORPORATION AMENDED AND RESTATED WARRANT Warrant No. C-2 Dated: August 22, 2001 Effective November 1, 2001, this Amended and Restated Warrant ("Warrant") amends and restates Warrant No. C-2 that was originally issued by Universal Display Corporation to Pine Ridge Financial Inc. as of August 22, 2001 (the "Original Warrant") in connection with the execution of the Purchase Agreement (as such term is defined below). Universal Display Corporation, a Pennsylvania corporation (the "Company"), hereby certifies that, for value received, Pine Ridge Financial, Inc. or its registered assigns (the "Holder"), is entitled to purchase from the Company up to a total of 214,746 shares of common stock, $.01 par value per share (the "Common Stock"), of the Company (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") at an exercise price equal to $15.24 per share (as adjusted from time to time as provided in Section 9, the "Exercise Price"), at any time and from time to time from and after the date hereof and through and including August 22, 2011 (the "Expiration Date"), and subject to the following terms and conditions. 1. Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise defined herein have the meanings given to such terms in the Securities Purchase Agreement, dated as of August 22, 2001, among the Company and the Purchasers identified therein (the "Purchase Agreement"). 2. Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. 3. Registration of Transfers. Subject to Section 12 hereof, the Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Transfer Agent or to the Company at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially the form of this Warrant (any such new warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant. 4. Exercise and Duration of Warrants. (a) This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the date hereof to and including the Expiration Date. At 6:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value; provided that, if the Closing Price on the Expiration Date is greater than 102% of the Exercise Price on the Expiration Date, then this Warrant shall be deemed to have been exercised in full (to the extent not previously exercised) on a "cashless exercise" basis at 6:30 P.M. New York City time on the Expiration Date. (b) Subject to Section 12 hereof, a Holder may exercise this Warrant by delivering to the Company (i) an Exercise Notice, in the form attached hereto, appropriately completed and duly signed; (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised; and (iii) this Warrant (or a New Warrant, as described in Section 5(b)), unless the Holder is awaiting receipt of a New Warrant from the Company pursuant to another provision hereof. The date such items are delivered to the Company (as determined in accordance with the notice provisions hereof) is an "Exercise Date". 5. Delivery of Warrant Shares. (a) Upon exercise of this Warrant, the Company shall promptly (but in no event later than four Trading Days after the Exercise Date (the "Delivery Date")) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise, free of restrictive legends unless a registration statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder is not then effective and the Warrant Shares are not freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares as of the Exercise Date. The Company shall, upon request of the Holder, use its best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. (b) This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares. If less than all of the Warrant Shares which may be purchased under this Warrant are exercised at any time, the Company shall issue or cause to be issued, at its expense, a New Warrant evidencing the right to purchase the remaining number of Warrant Shares. 2 (c) The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. (d) If the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, $5,000 for each Trading Day after the Delivery Date until such certificates are delivered. Nothing herein shall limit the Holder's right to pursue actual damages for the Company's failure to deliver certificates representing shares of Common Stock upon exercise within the period specified herein and the Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other provision hereof or under applicable law. (e) In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder such certificate or certificates pursuant to this Section 5 by the Delivery Date, and if after such Delivery Date the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Underlying Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the lesser of (A) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue or (B) the number of shares of Common Stock so purchased, multiplied by (2) the Exercise Price of the Common Stock on the applicable Exercise Date, in which event the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements shall not be so issued. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In in connection with an attempted exercise of this Warrant with respect to which the Exercise Price of the Underlying Shares on the applicable Exercise Date multiplied by the number of Underlying Shares was equal to $2,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $9,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In. (f) The provisions of Sections 5(d) and 5(e) shall not apply to an exercise under Section 4(a). 3 6. Charges, Taxes and Expenses. Except as otherwise provided in this Section 6, issuance of certificates for shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof. 7. Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 8. Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 9. Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9. - (a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination. 4 (b) Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution shall be adjusted (effective on such record date) to equal the product of such Exercise Price times a fraction of which the denominator shall be such Exercise Price and of which the numerator shall be such Exercise Price less the then fair market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the Company's independent certified public accountants that regularly examine the financial statements of the Company (an "Appraiser"). In such event, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser (which shall be a nationally recognized accounting firm), in which case such fair market value shall be deemed to equal the average of the values determined by each of the Appraiser and such appraiser. (c) Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate Consideration"). The aggregate Exercise Price for this Warrant will not be affected by any such Fundamental Transaction, but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. At the Holder's request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder's right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. If any Fundamental Transaction constitutes or results in a Change of Control and if upon the happening of such 5 Change of Control (A) the Company or its successors is not traded on the New York Stock Exchange, the American Stock Exchange or the NASDAQ National Market, or (B) the Company or its successor, as the case may be, for the 90 day period prior thereto (1) had an average daily trading volume of its common stock of less than 100,000 shares or (2) had an average daily Closing Price of its common stock of less than $10 per share, then at the request of the Holder delivered before the 90th day after such Fundamental Transaction, the Company (or any such successor or surviving entity) will purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such request. (d) Subsequent Equity Sales. (i) If, at any time while this Warrant is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common Stock Equivalents" and together with Common Stock hereinafter called the "CS Securities") at an effective price per share of Common Stock (the "Effective Price") less than the Exercise Price, then the Exercise Price shall be reduced to equal the product of (A) the Exercise Price in effect immediately prior to such issuance of Common Stock or Common Stock Equivalents times (B) a fraction, the numerator of which is the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance, plus (2) the number of shares of Common Stock which the aggregate Effective Price of the Common Stock issued (or deemed to be issued) would purchase at the Exercise Price, and the denominator of which is the aggregate number of shares of Common Stock outstanding or deemed to be outstanding immediately after such issuance. For purposes of the foregoing adjustment, in connection with any issuance of any Common Stock Equivalents, (x) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (y) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock, divided by the Deemed Number, and (z) no further adjustment shall be made to the Exercise Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. However, upon termination or expiration of any Common Stock Equivalents the issuance of which resulted in an adjustment to the Exercise Price pursuant to this paragraph, the Exercise Price shall be recomputed to equal the price it would have been had the adjustments in this paragraph been made, at the time of issuance of such Common Stock Equivalents, only with respect to that number of shares of the Common Stock actually issued upon conversion, exercise or exchange of such Common Stock Equivalents and at the Effective Prices actually paid in connection therewith. 6 (ii) If, at any time while this Warrant is outstanding, the Company or any Subsidiary has outstanding any Common Stock Equivalents with an Effective Price that floats or resets or otherwise varies or is subject to adjustment based on market prices of the Common Stock (a "Floating Price Security"), then for purposes of applying the preceding paragraph in connection with any subsequent exercise, the Effective Price will be determined separately on each Exercise Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire shares of Common Stock on such Exercise Date (regardless of whether any such holder actually acquires any shares on such date). (iii) Notwithstanding the foregoing, no adjustment will be made under this Section 9(d) in respect of (a) any grant of options to employees, officers, directors or consultants of the Company pursuant to any stock option plan duly adopted by the Company's board of directors (provided, that the number of shares of Common Stock which are the subject of any such plan may not exceed 2,800,000, subject to annual increases of up to 40% of the number of shares authorized under such plans during the immediately preceding year), (b) in respect of the issuance of CS Securities upon exercise of any such options, (c) the issuance of CS Securities under the PPG Agreement or the Motorola Agreement, (d) up to 1,000,000 CS Securities issued in connection with any contractual strategic alliances approved by the Company's Board of Directors, (e) the issuance of any CS Securities representing or convertible into up to 50,000 shares of Common Stock in any single transaction; provided that this subsection (e) shall only apply to the first 50,000 shares in the aggregate issued in any consecutive 12 month period and 150,000 in the aggregate, (f) CS Securities issued or issuable pursuant to the Notes, Preferred Stock, Warrants or any other Transaction Document or pursuant to the anti-dilution provisions thereof, (g) any CS Securities issuable upon the exercise of, or pursuant to the anti-dilution provisions contained within, any options, restricted stock awards, preferred stock or warrants outstanding on the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 1 hereto, or (h) any Common Stock issued upon the conversion of exercise of any Common Stock Equivalents outstanding as of the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 2 hereto. (e) Special Adjustment. Notwithstanding anything to the contrary that may be contained herein, if at any time on or after the date hereof, the Holder has pursuant to the Notes converted in excess of $1,500,000 of principal amount of such Notes on account of the Company having delivered a "Company Conversion Notice" pursuant to such Note, then upon each such conversion in excess of $1,500,000 (a "Subsequent Conversion") the Exercise Price shall be reduced (but not increased) to 110% of the Conversion Price in effect for each such Subsequent Conversion. (f) Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased, as the case may be, proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased 7 number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment. (g) Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company; provided, however, the provisions of this Section 9 shall apply to any sale, issuance, distribution or disposition of any such shares by the Company. (h) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's Transfer Agent. (i) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company; then in each case, the Company shall on the earlier of the day on which the Company (A) publicly announces such proposed action, or (B) notifies its shareholders of such proposed action deliver to the Holder a notice describing the material terms and conditions of such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. (j) Exception. Notwithstanding anything contained to the contrary in Section 9(d), in the event, and only in the event, an Event of Default under Section 4(a)(viii) of the Notes has occurred, and no other Event of Default (as defined in the Notes) has occurred, then Section 9(d) hereof shall only apply to the extent sales of CS Securities by the Company exceed $15 million in the aggregate. 10. Payment of Exercise Price. The Holder shall pay the Exercise Price by delivering to the Company immediately available funds. 11. Limitation on Exercise. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of 8 Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of an Exercise Notice hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Warrant Shares requested in such Exercise Notice is permitted under this paragraph. The Company's obligation to issue shares of Common Stock in excess of the limitation referred to in this Section shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. By written notice to the Company, the Holder may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to the Holder and not to any other holder of Warrants. (b) Notwithstanding anything to the contrary contained herein, this Warrant may not be exercised to the extent such exercise would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon exercise of this Warrant after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of an exercise hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section 11(b) will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section 11(b) applies, the determination of the extent to which this Warrant is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered an Exercise Notice for a number of Warrant Shares that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the Exercise Notice to the extent of the maximum number of Warrant Shares permitted to be purchased at such Exercise Date pursuant to the provisions of this Section 11(b). 12. Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the shares of Common Stock issuable hereunder), shall not be registered under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the Holder or transferee of this Warrant, as the case may be, furnish to 9 the Company a written opinion of counsel that is reasonably acceptable to the Company to the effect that such exercise, transfer or exchange may be made without registration under the Securities Act and under applicable state securities or blue sky laws, (ii) that the Holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee is an "accredited investor" as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status as an "accredited investor" shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. 13. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable upon exercise of this Warrant, the Company shall pay an amount in cash equal to the average of the Closing Prices of the Common Stock for the five Trading Days immediately prior to (but not including) the Exercise Date multiplied by such fraction; provided that, unless the Holder requests otherwise, no payment shall be required pursuant to this sentence until the aggregate amount payable exceeds $1,000, at which time all previously deferred payments shall be made. 14. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day or (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service. The addresses for such communications shall be: (i) if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618; facsimile: (609) 671-0995; attention Sidney Rosenblatt, Chief Financial Officer, or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section. 15. Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon 30 days' notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register. 16. Miscellaneous. (a) This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Subject to the 10 preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder. (b) The corporate laws of the Commonwealth of Pennsylvania shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. The Company and the Holder hereby irrevocably submit to the exclusive jurisdiction of the state and federal courts sitting in the City of New York, borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or that such suit, action or proceeding is improper. Each of the Company and the Holder hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by receiving a copy thereof sent to the Company at the address in effect for notices to it under this instrument and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. (c) The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof. (d) In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant. (e) This Warrant shall not entitle the Holder to any voting or other rights as a stockholder of the Company, except to the extent the Holder has purchased any Warrant Shares. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK, SIGNATURE PAGE FOLLOWS] 11 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above. UNIVERSAL DISPLAY CORPORATION By: /s/ Sidney D. Rosenblatt --------------------------- Name: Sidney D. Rosenblatt Title: Chief Financial Officer 12 FORM OF EXERCISE NOTICE (To be executed by the Holder to exercise the right to purchase shares of Common Stock under the foregoing Warrant) To: Universal Display Corporation The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of Universal Display Corporation, a Pennsylvania corporation (the "Company"), evidenced by Warrant No. C-2 issued by the Company to the undersigned (the "Warrant"). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant. 1. Payment of Exercise Price. The holder shall pay the sum of $___________________ to the Company in accordance with the terms of the Warrant. 2. Delivery of Warrant Shares. The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant. If the number of shares of Common Stock issuable upon this exercise shall not be all of the shares of Common Stock which the undersigned is entitled to purchase in accordance with the enclosed Warrant, the undersigned requests that a New Warrant (as defined in the Warrant) evidencing the right to purchase the remaining shares of Common Stock be issued in the name of and delivered to (please print name and address): ______________________________________________________________ ______________________________________________________________ ______________________________________________________________ Dated: _______________, ____ Name of Holder: (Print)_____________________________ By:_________________________________ Name:_______________________________ Title:______________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) FORM OF ASSIGNMENT [To be completed and signed only upon transfer of Warrant] FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the within Warrant to purchase ____________ shares of Common Stock of Universal Display Corporation to which the within Warrant relates and appoints ________________ attorney to transfer said right on the books of Universal Display Corporation with full power of substitution in the premises. Dated: _______________, ____ _____________________________________ (Signature must conform in all respects to name of holder as specified on the face of the Warrant) _____________________________________ Address of Transferee _____________________________________ _____________________________________ In the presence of: ______________________________ EX-10.9 11 ex10-9.txt EX-10.9 EXHIBIT 10.9 FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT THIS FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT (this "First Amendment") is dated as of September 20, 2001, by and among Universal Display Corporation, a Pennsylvania corporation (the "Company"), and the Purchasers identified on the signature pages hereto (each, a "Purchaser" and collectively, the "Purchasers"). WHEREAS, the Company and the Purchasers have entered into a Securities Purchase Agreement dated as of August 22, 2001 (the "Purchase Agreement"); and WHEREAS, the Company and the Purchasers desire to amend the Purchase Agreement as set forth in full herein. NOW, THEREFORE, in consideration of the agreements and mutual covenants set forth herein, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged by the parties, the parties hereto agree as follows: 1. Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement. 2. Second Closing. Section 2.3(a) of the Purchase Agreement is hereby amended and restated in its entirety to read as follows: "(a) Subject to the terms and conditions set forth in this Agreement, on the 30th Trading Day following the Conversion Shares Effective Date, the Purchasers shall purchase from the Company, and the Company shall sell to the Purchasers, the Second Shares. The closing of the purchase and sale of the Second Shares is referred to as the "Second Closing." 3. Purchase of Second Shares. Subsection (d) set forth below shall be added to Section 2.3 of the Purchase Agreement to read as follows: "(d) Notwithstanding anything to the contrary contained herein: (i) in the event that the average Closing Price of the Common Stock for the eighteen Trading Days immediately prior to the 10th Trading Day following the Conversion Shares Effective Date (such eighteen Trading Day period is referred to herein as the "Second Shares Measuring Period") is less than $12.00, then the Company shall have the right to elect, in its sole discretion, to not sell the Second Shares to the Purchasers by delivering notice of such election to the Purchasers within one Trading Day after the expiration of the Second Shares Measuring Period; and (ii) If the Conversion Shares Registration Statement has not been declared effective by the Commission by December 12, 2001, then the Purchasers shall have the right to elect, in their sole discretion, to not purchase the Second Shares by delivering notice of such election to the Company within ten Trading Days after December 12, 2001." 4. Form of Second Certificate of Designation. The definition of "Conversion Price" as used in the Second Certificate of Designation attached to the Purchase Agreement as Exhibit B is amended to read as follows: ""Conversion Price" means $___[the average Closing Price for the 36 Trading Days beginning on the 8th Trading Day prior to the Conversion Shares Effective Date as contemplated by Section 2.3 of the Purchase Agreement]*, as adjusted pursuant to Section 15 hereof." 5. Ratification of Purchase Agreement.Except as expressly amended hereby, all of the terms of the Purchase Agreement shall remain in full force and effect, and are hereby ratified and confirmed. 6. Controlling Law. This First Amendment and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of the State of New York, notwithstanding any conflict of laws doctrines of such State or any other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. 7. Execution in Counterparts and via Facsimile. This First Amendment may be executed via facsimile and in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This First Amendment shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of the Company and each of the Purchasers. [remainder of page intentionally left blank] 2 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Securities Purchase Agreement as of the day and year first above written. UNIVERSAL DISPLAY CORPORATION By: /s/ Sidney Rosenblatt ------------------------------ Sidney Rosenblatt, Chief Financial Officer PINE RIDGE FINANCIAL INC. By: /s/ Kenneth L. Henderson -------------------------- Name: Kenneth L. Henderson Title: Attorney-in-Fact STRONG RIVER INVESTMENTS, INC. By: /s/ Kenneth L. Henderson -------------------------- Name: Kenneth L. Henderson Title: Attorney-in-Fact 3 EX-10.10 12 ex10-10.txt EX-10.10 EXHIBIT 10.10 SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT THIS SECOND AMENDMENT TO SECURITIES PURCHASE AGREEMENT (this "Second Amendment") is dated as of November 1, 2001, by and among Universal Display Corporation, a Pennsylvania corporation (the "Company"), and the Purchasers identified on the signature pages hereto (each, a "Purchaser" and collectively, the "Purchasers"). WHEREAS, the Company and the Purchasers have entered into a Securities Purchase Agreement dated as of August 22, 2001, as amended by the First Amendment thereto dated as of September 20, 2001 (together, the "Purchase Agreement"); and WHEREAS, the Company and the Purchasers desire to further amend the Purchase Agreement as set forth in full herein. NOW, THEREFORE, in consideration of the agreements and mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, the parties hereto agree as follows: 1. Defined Terms. Except as expressly stated herein to the contrary, capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement. 2. Second Closing. Section 2.3(a) of the Purchase Agreement is hereby amended and restated in its entirety to read as follows: "(a) Subject to the terms and conditions set forth in this Agreement including, without limitation, Section 2.3(d)(ii), on the 3rd Trading Day following the Conversion Shares Effective Date, the Purchasers shall purchase from the Company, and the Company shall sell to the Purchasers, the Second Shares. The closing of the purchase and sale of the Second Shares is referred to as the "Second Closing." 3. Second Shares Measuring Period. Subsection (d)(i) of Section 2.3 of the Purchase Agreement is hereby deleted. 4. Form of Second Certificate of Designation. The definition of "Conversion Price" as used in the Second Certificate of Designation attached to the Purchase Agreement as Exhibit B is amended to read as follows: ""Conversion Price" means $9.45, as adjusted pursuant to Section 15 hereof." In addition, Section 4 of the Second Certificate of Designation attached to the Purchase Agreement as Exhibit B is amended to read as follows: "4. Stated Value. The "Stated Value" shall be increased by $4.16 on the last day of each month beginning on November 30, 2001." Section 9(c) of the Second Certificate of Designation attached to the Purchase Agreement as Exhibit B is also amended to read as follows: "(c) Automatic Conversion. Notwithstanding Section 16(a) hereof or any other provision to the contrary contained herein, but subject to the satisfaction of the Equity Conditions and the provisions of Section 16(b) hereof, on the second Trading Day after the Original Issuance Date, all the shares of Preferred Stock shall be converted as if the Holder had delivered a Conversion Notice with respect to such shares on such day. In the event the Equity Conditions (other than the requirements set forth in Section 16(a)) are not satisfied on the second Trading Day after the Original Issuance Date, then all the shares of Preferred Stock shall be converted on the first date thereafter on which the Equity Conditions (other than the requirements set forth in Section 16(a)) are satisfied as if the Holder had delivered a Conversion Notice with respect to such shares on such day, provided that such date occurs on or prior to the third anniversary of the Original Issue Date. In the event the Equity Conditions (other than the requirements set forth in Sections 16(a) and 16(b), which need not be satisfied for this purpose) are not satisfied on the third anniversary of the Original Issue Date, the Holder, at its option, may require the Company to repurchase the Preferred Stock for an amount equal to the Stated Value of the Preferred Stock on such date. The Holder shall exercise this option by delivering to the Company written notice to that effect and the Company shall repurchase the Preferred Stock on the fifth Business Day following the receipt of such notice against delivery of the Preferred Stock." 5. Conversion of First Shares and Second Shares. Each of the Purchasers represents and warrants to the Company that, as of the date hereof, the total number of shares of Common Stock beneficially owned by the Purchasers and their Affiliates, when added to the number of shares of Common Stock issuable upon the conversion of the First Shares and the Second Shares, does not exceed 9.999% of the issued and outstanding shares of the Company's Common Stock reported in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, including shares issuable upon conversion of the First Shares and the Second Shares. Each of the Purchasers further agrees with and covenants to the Company that, from the date hereof until the earlier of (x) the date on which all of the First Shares and Second Shares are converted and (y) December 12, 2001, it will not acquire a number of securities of the Company such that the conversion limitations set forth in Section 16(b) in each of the First Certificate of Designation and the Second Certificate of Designation would prevent the conversion of all of the First Shares and Second Shares on the 2nd Trading Day following the Second Closing. 6. Maximum Number of Shares Issuable. The first sentence of Section 4.5(f) of the Purchase Agreement is hereby amended and restated in its entirety to read as follows: 2 "The maximum number of shares of Common Stock that the Company may issue pursuant to the Transaction Documents at any time at an effective purchase price less than the "Market Value" (as defined in Nasdaq Marketplace Rule 4200(a)(20)) of a share of Common Stock on the Trading Day immediately preceding the Closing Date (the "Market Value") equals 3,409,245 shares (the "Issuable Maximum"), unless the Company obtains shareholder approval in accordance with the rules and regulations of the applicable Trading Market including, without limitation, Nasdaq Marketplace Rule 4350(i)(1)(D)." 7. Ratification of Purchase Agreement. Except as expressly amended hereby, all of the terms of the Purchase Agreement shall remain in full force and effect, and are hereby ratified and confirmed. 8. Controlling Law. This Second Amendment and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of the State of New York, notwithstanding any conflict of laws doctrines of such State or any other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. 9. Execution in Counterparts and via Facsimile. This Second Amendment may be executed via facsimile and in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This Second Amendment shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of the Company and each of the Purchasers. 3 IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment to Securities Purchase Agreement as of the day and year first above written. UNIVERSAL DISPLAY CORPORATION By: /s/ Sidney Rosenblatt --------------------------------- Sidney Rosenblatt, Chief Financial Officer PINE RIDGE FINANCIAL INC. By: /s/ Miriam O. Hyman ------------------------- Name: Miriam O. Hyman Title: Attorney-in-Fact STRONG RIVER INVESTMENTS, INC. By: /s/ Miriam O. Hyman ------------------------ Name: Miriam O. Hyman Title: Attorney-in-Fact 4 EX-10.11 13 ex10-11.txt EX-10.11 EXHIBIT 10.11 FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT THIS FIRST AMENDMENT TO REGISTRATION RIGHTS AGREEMENT (this "First Amendment") is dated as of November 1, 2001, by and among Universal Display Corporation, a Pennsylvania corporation (the "Company"), and the Purchasers identified on the signature pages hereto (each, a "Purchaser" and collectively, the "Purchasers"). WHEREAS, the Company and the Purchasers have entered into a Registration Rights Agreement dated as of August 22, 2001 (the "Registration Rights Agreement"); and WHEREAS, the Company and the Purchasers desire to amend the Registration Rights Agreement as set forth in full herein. NOW, THEREFORE, in consideration of the agreements and mutual covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, the parties hereto agree as follows: 1. Defined Terms. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Registration Rights Agreement. 2. Definition of "CS Required Minimum." The definition of the term "CS Required Minimum" in Section 1 of the Registration Rights Agreement is hereby amended and restated in its entirety to read as follows: ""CS Required Minimum" means, as of any date, the sum of (1) the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future upon the conversion in full of all First Shares and all Second Shares and (2) two times the maximum aggregate number of shares of Common Stock then issued or potentially issuable in the future upon the exercise in full of all Warrants, assuming that any previously unexercised Warrants are held until the tenth anniversary of Closing or, if earlier, until expired." 3. Effectiveness Period. The last sentence of Section 2(a) of the Registration Rights Agreement is hereby amended and restated in its entirety to read as follows: "The Company shall use its reasonable best efforts to cause the Conversion Shares Registration Statement and the Note Shares Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event, with respect to the Conversion Shares Registration Statement only, prior to the Required Effectiveness Date, and shall use its reasonable best efforts to keep such Registration Statement continuously effective under the Securities Act (subject to Section 3(m)) until, with respect to the Note Shares Registration Statement, the date which is two years after the date that the Note Shares Registration Statement is declared effective by the Commission and, with respect to the Conversion Shares Registration Statement, the date which is ten years after the date that the Conversion Shares Registration Statement is declared effective by the Commission, or, in each case, such earlier date when all Registrable Securities covered by such Registration Statement have been sold or may be sold in any calendar quarter pursuant to Rule 144(k) (as the context requires, the "Effectiveness Period")." 4. Ratification of Registration Rights Agreement. Except as expressly amended hereby, all of the terms of the Registration Rights Agreement shall remain in full force and effect, and are hereby ratified and confirmed. 5. Controlling Law. This First Amendment and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed in accordance with the laws of the State of New York, notwithstanding any conflict of laws doctrines of such State or any other jurisdiction to the contrary, and without the aid of any canon, custom or rule of law requiring construction against the draftsman. 6. Execution in Counterparts and via Facsimile. This First Amendment may be executed via facsimile and in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which together shall constitute one and the same instrument. This First Amendment shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of the Company and each of the Purchasers. [remainder of page intentionally left blank] 2 IN WITNESS WHEREOF, the parties hereto have executed this First Amendment to Registration Rights Agreement as of the day and year first above written. UNIVERSAL DISPLAY CORPORATION By: /s/ Sidney Rosenblatt ------------------------------ Sidney Rosenblatt, Chief Financial Officer PINE RIDGE FINANCIAL INC. By: /s/ Miriam O. Hyman ------------------------------ Name: Miriam O. Hyman Title: Attorney-in-Fact STRONG RIVER INVESTMENTS, INC. By: /s/ Miriam O. Hyman ------------------------------ Name: Miriam O. Hyman Title: Attorney-in-Fact 3 EX-10.12 14 ex10-12.txt EX-10.12 EXCHANGE AGREEMENT This EXCHANGE AGREEMENT (this "Agreement") is entered into as of November 2, 2001 by and among Universal Display Corporation, a Pennsylvania corporation (the "Corporation"), and each of the other persons and entities who are signatories hereto (the "Investors"). B A C K G R O U N D WHEREAS, the Corporation and each of the Investors have entered into a Securities Purchase Agreement dated as of August 22, 2001 (as amended to date, the "Purchase Agreement"), pursuant to which the Investors purchased shares of the Corporation's Series C Convertible Preferred Stock; and WHEREAS, the undersigned parties are entering into this Agreement pursuant to which the Corporation will issue to each Investor listed on Schedule "A" attached hereto the number of shares of Series C-1 Convertible Preferred Stock, par value $.01 per share, of the Corporation (the "Series C-1 Stock") set forth on Schedule "A" in exchange for (i) all previously issued shares of Series C Convertible Preferred Stock owned by each Investor in the Corporation (the "Previous Shares"), and (ii) the release of certain claims as provided in this Agreement; NOW, THEREFORE, in order to implement the foregoing and in consideration of the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Corporation and each of the Investors, intending to be legally bound hereby, agree as follows: 1. Designation of Series C-1 Stock. The Corporation shall, within one Trading Day after the execution of this Agreement by all of the parties hereto, file with the Department of State of the Commonwealth of Pennsylvania (the "Department of State") a Statement of Designations, Preferences and Rights of Series C-1 Convertible Preferred Stock (the "Series C-1 Designation"), in the form attached hereto as Exhibit "A". 2. Exchange of Previous Shares for Shares of Series C-1 Stock of the Corporation. Each of the parties hereto agrees that, on the day on which the Series C-1 Designation is filed with the Department of State, the stock certificates representing the number of Previous Shares set forth next to each Investor's name on Schedule "A" shall be deemed to represent the number of shares of Series C-1 Stock set forth next to each Investor's name on Schedule "A", and the Corporation shall have been deemed to have issued to each Investor, and each Investor shall be deemed to have accepted from the Corporation, the number of shares of Series C-1 Stock in exchange for all Previous Shares owned by each Investor in the Corporation (including any stock certificate representing such Previous Shares). 3. Release of Claims. Effective as of the filing of the Series C-1 Designation with the Department of State, each of the Investors hereby waives any claim to the Previous Shares issued by the Corporation including, without limitation, any increase to the Stated Value of the Previous Shares from August 22, 2001 to the date on which the Series C-1 Designation is filed with the Department of State. 4. Amendment to Transaction Documents. The parties agree that all references to "First Shares" and "First Certificate of Designation" as used in the Transaction Documents (including, without limitation, the Voting Agreement) shall mean the shares of Series C-1 Stock and Series C-1 Designation, respectively, and that this Section 4 shall operate as an amendment to each of the Transaction Documents (including, without limitation, the Voting Agreement). 5. Representations and Warranties of Investors. Each of the Investors, for itself and no other Investor, hereby makes all of the representations and warranties set forth in Section 3 of the Purchase Agreement to the Corporation as of the date hereof with respect to the shares of Series C-1 Stock, including without limitation, that it is an "accredited investor" within the meaning of Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended. 6. Defined Terms. Capitalized terms that are used but not otherwise defined herein shall have the meanings ascribed to such terms in the Purchase Agreement. 7. Governing Law. This Agreement shall be governed by and construed under the laws of the Commonwealth of Pennsylvania without giving effect to its conflict of laws provisions. 8. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Corporation and each Investor. 9. Entire Agreement. This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically set forth herein or therein. 10. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 2 IN WITNESS WHEREOF, the parties have executed this Exchange Agreement as of the date first written above. UNIVERSAL DISPLAY CORPORATION By: /s/ Steven Abramson ------------------------- Steven Abramson, President INVESTORS: PINE RIDGE FINANCIAL INC. By: /s/ Kenneth L. Henderson ------------------------ Kenneth L. Henderson, Attorney-in-Fact STRONG RIVER INVESTMENTS, INC. By: /s/ Kenneth L. Henderson ------------------------- Kenneth L. Henderson, Attorney-in-Fact 3 SCHEDULE "A"
Name Series C Convertible Series C-1 Convertible ---- Preferred Stock (#) Preferred Stock (#) ------------------- ------------------- Pine Ridge Financial Inc. c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd 2,500 2,500 Vanterpool Plaza, 2nd Floor, Wickhams Cay I Road Town, Tortola, British Virgin Islands Strong River Investments, Inc. 2,500 2,500 c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd Vanterpool Plaza, 2nd Floor, Wickhams Cay I Road Town, Tortola, British Virgin Islands
EXHIBIT "A" STATEMENT OF DESIGNATIONS, PREFERENCES AND RIGHTS OF SERIES C-1 CONVERTIBLE PREFERRED STOCK OF UNIVERSAL DISPLAY CORPORATION UNIVERSAL DISPLAY CORPORATION, a corporation organized and existing under the laws of the Commonwealth of Pennsylvania (the "Company"), hereby certifies that the following resolutions were adopted by the Board of Directors of the Company pursuant to the provisions of Section 1522 of the Pennsylvania Business Corporation Law, as amended (the "BCL"): RESOLVED, that pursuant to the authority vested in the Board of Directors pursuant to the provisions of the BCL and the Company's Articles of Incorporation, as amended, the Corporation is authorized to issue, out of the 5,000,000 shares of preferred stock, $.01 par value per share, of the Corporation authorized in the Company's Articles of Incorporation, as amended, a series of preferred stock to be designated as "Series C-1 Convertible Preferred Stock," $.01 par value per share, with the following preferences, limitations, and special rights: 1. Designation, Amount and Par Value. The series of preferred stock shall be designated as the Company's Series C-1 Convertible Preferred Stock (the "Preferred Stock"), and the number of shares so designated shall be 5,000. Each share of Preferred Stock shall have a par value of $.01 per share and a stated value initially equal to $1,008.32 as increased from time to time pursuant to Section 4 below (the "Stated Value"). 2. Definitions. In addition to the terms defined elsewhere in this Certificate of Designations, (a) the terms set forth in Exhibit A hereto shall have the meanings indicated therein, and (b) the following terms have the meanings indicated: "Company" means Universal Display Corporation, a Pennsylvania corporation. "Conversion Price" means $9.45, as adjusted pursuant to Section 15 hereof. "Equity Conditions" means, with respect to a specified issuance of Common Stock, that each of the following conditions is satisfied: (i) the number of authorized but unissued and otherwise unreserved shares of Common Stock is sufficient for such issuance; (ii) such shares of Common Stock are registered for resale by the Holders pursuant to an effective Conversion Shares Registration Statement or all such shares may be sold without volume restrictions pursuant to Rule 144(k) under the Securities Act; (iii) the Common Stock is listed or quoted (and is not suspended from trading) on an Eligible Market; (iv) such issuance would be permitted in full without violating Section 16 hereof or the rules or regulations of any Trading Market; and (v) 1 the Company is not in default with respect to any material obligation hereunder or under (A) any other agreement between the Company and any Holder, dated as of August 22, 2001, as may hereafter be amended; including, without limitation, the Purchase Agreement and the Notes or (B) any instrument or security issued pursuant to any of the agreements referred to in the preceding clause (A). "Holder" means any holder of Preferred Stock. "Junior Securities" means the Common Stock and all other equity or equity equivalent securities of the Company other than those securities that are outstanding on the Original Issue Date and are explicitly senior in dividend rights or liquidation preference to the Preferred Stock; except that any shares of Series C Convertible Preferred Stock and any shares of Series D Convertible Preferred Stock issued pursuant to the provisions of the Purchase Agreement shall not be Junior Securities but shall rank pari passu with the Preferred Stock. "Original Issue Date" means the date of the first issuance of any shares of the Preferred Stock regardless of the number of transfers of any particular shares of Preferred Stock and regardless of the number of certificates that may be issued to evidence such Preferred Stock. "Purchase Agreement" means the Securities Purchase Agreement, dated August 22, 2001, among the Company and the original purchasers of the Preferred Stock. 3. Dividends. (a) Holders shall not be entitled to receive dividends on the Preferred Stock. 4. Stated Value. The "Stated Value" shall be increased by $4.16 on the last day of each month beginning on November 30, 2001. 5. Liquidation. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall be entitled to receive an amount equal to $1,000 for each share of Preferred Stock, payable out of the assets of the Company, whether such assets are capital or surplus, and before any distribution or payment may be made to the holders of any Junior Securities. If the assets of the Company are insufficient to pay such amounts in full, then the entire amount of assets to be distributed shall be distributed among the Holders ratably in accordance with the amount each Holder would have received if such assets were sufficient to pay all such amounts in full. The Company shall provide notice of any Liquidation or Change of Control to each record Holder on the earlier of the day on which the Company (a) publicly announces such event or proposed action, or (b) notifies its shareholders of such event or proposed action. At the request of any Holder, which must be delivered prior to the effective date of a Change of Control (or, if later, within five Trading Days after such Holder receives notice of such Change of Control from the Company), such Change of Control will be treated as a Liquidation with respect to such Holder. 6. No Payments on Junior Securities. So long as any Preferred Stock is outstanding, (i) neither the Company nor any Subsidiary shall, directly or 2 indirectly, redeem, purchase or otherwise acquire any Junior Securities or set aside any monies for such a redemption, purchase or other acquisition, and (ii) the Company shall not pay or declare any dividend or make any distribution on any Junior Securities, except stock dividends on the Common Stock payable in additional shares of Common Stock and dividends due and paid in the ordinary course on preferred stock of the Company at such times as the Company is in compliance with its payment and other obligations hereunder. 7. Registration of Preferred Stock. The Company shall register shares of the Preferred Stock, upon records to be maintained by the Company for that purpose (the "Preferred Stock Register"), in the name of the record Holders thereof from time to time. The Company may deem and treat the registered Holder of shares of Preferred Stock as the absolute owner thereof for the purpose of any conversion hereof or any distribution to such Holder, and for all other purposes, absent actual notice to the contrary. 8. Registration of Transfers. The Company shall register the transfer of any shares of Preferred Stock in the Preferred Stock Register, upon surrender of certificates evidencing such shares to the Company at its address specified herein. Upon any such registration or transfer, a new certificate evidencing the shares of Preferred Stock so transferred shall be issued to the transferee and a new certificate evidencing the remaining portion of the shares not so transferred, if any, shall be issued to the transferring Holder. 9. Conversion. (a) Conversion at Option of Holder. At the option of any Holder, any Preferred Stock held by such Holder may be converted into Common Stock based on the then-applicable Conversion Price. A Holder may convert Preferred Stock into Common Stock pursuant to this paragraph at any time and from time to time after the Original Issue Date and prior to August 22, 2004, by delivering to the Company a conversion notice, in the form attached hereto as Exhibit B (a "Conversion Notice"), appropriately completed and duly signed, and the date any such Conversion Notice is delivered to the Company (as determined in accordance with the notice provisions hereof) is a "Conversion Date." A Holder shall simultaneously deliver a copy of the Conversion Notice to the Transfer Agent; provided, however, a Holder's failure to deliver such a copy shall not render such Conversion Notice invalid or ineffective. (b) Conversion at Option of Company. If, at any time after the Effective Date, the Closing Price for twenty (20) consecutive Trading Days exceeds 135% of the Conversion Price (the "Threshold Price"), the Company may require the Holders to convert all of the Preferred Stock into Common Stock based on the then-applicable Conversion Price. The Company may require a conversion pursuant to this paragraph by delivering irrevocable written notice of such election to the Holders, and the thirtieth Trading Day after the date any such notice is delivered to the Holders (as determined in accordance with the notice provisions hereof) will be the "Conversion Date" for such required conversion. Notwithstanding the foregoing, the Company may not require any conversion under this paragraph (and any notice thereof will be void), unless 3 from the beginning of the period of twenty consecutive Trading Days through the Conversion Date, the Equity Conditions (except for the condition set forth in Section 16(a), which need not be satisfied for this purpose) are satisfied with respect to all of the Underlying Shares then issuable upon conversion in full of all outstanding Preferred Stock. (c) Automatic Conversion. Notwithstanding Section 16(a) hereof or any other provision to the contrary contained herein, but subject to the satisfaction of the Equity Conditions and the provisions of Section 16(b) hereof, on the second Trading Day after the Original Issuance Date of the Series D Convertible Preferred Stock, all the shares of Preferred Stock shall be converted as if the Holder had delivered a Conversion Notice with respect to such shares on such day. In the event the Equity Conditions (other than the requirements set forth in Section 16(a)) are not satisfied on the second Trading Day after the Original Issuance Date of the Series D Convertible Preferred Stock, then all the shares of Preferred Stock shall be converted on the first date thereafter on which the Equity Conditions (other than the requirements set forth in Section 16(a)) are satisfied as if the Holder had delivered a Conversion Notice with respect to such shares on such day, provided that such date occurs on or prior to the third anniversary of the Original Issue Date. In the event the Equity Conditions (other than the requirements set forth in Sections 16(a) and 16(b), which need not be satisfied for this purpose) are not satisfied on the third anniversary of the Original Issue Date, the Holder, at its option, may require the Company to repurchase the Preferred Stock for an amount equal to the Stated Value of the Preferred Stock on such date. The Holder shall exercise this option by delivering to the Company written notice to that effect and the Company shall repurchase the Preferred Stock on the fifth Business Day following the receipt of such notice against delivery of the Preferred Stock. 10. Mechanics of Conversion. (a) The number of Underlying Shares issuable upon any conversion of a share of Preferred Stock hereunder shall equal the Stated Value on the Conversion Date of such share of Preferred Stock to be converted, divided by the Conversion Price in effect on the Conversion Date. (b) Upon conversion of any Preferred Stock, the Company shall promptly (but in no event later than four Trading Days after the Conversion Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names as the Holder may designate (i) a certificate for the Underlying Shares issuable upon such conversion, free of restrictive legends unless a registration statement covering the resale of the Underlying Shares and naming the Holder as a selling stockholder thereunder is not then effective and such Underlying Shares are not then freely transferable without volume restrictions pursuant to Rule 144 under the Securities Act, and (ii) a bank check in the amount of all accrued and unpaid dividends on the Preferred Stock so converted (if the Company has elected or is required to pay such accrued dividends in cash). Within three Trading Days after receipt thereof, the Holder will deliver the original certificate(s) evidencing the Preferred Stock so converted to the Company, unless the Holder is awaiting receipt of a new certificate evidencing such shares from the Company pursuant to another provision hereof. The Holder, or any Person so designated by the Holder to receive Underlying Shares, shall be deemed to have become holder of record of such Underlying Shares as of the Conversion Date. The Company shall, upon request of the Holder, use its best efforts to deliver Underlying 4 Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. (c) If a Holder is converting less than all shares of Preferred Stock represented by the certificate or certificates delivered by such Holder to the Company in connection with such conversion, or if such conversion cannot be effected in full for any reason, the Company shall promptly deliver to such Holder a new certificate representing the number of shares of Preferred Stock not converted. (d) The Company's obligations to issue and deliver Underlying Shares upon conversion of Preferred Stock in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by any Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by any Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by any Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to any Holder in connection with the issuance of such Underlying Shares. 11. Voting Rights. Except as otherwise provided herein or as required by applicable law, the Holders shall not be entitled to vote on any matters. So long as any shares of Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the Holders of two-thirds (2/3) of the shares of Preferred Stock then outstanding, (a) alter or change adversely the powers, preferences or rights given to the Preferred Stock or alter or amend this Certificate of Designation, (b) except for Series D Convertible Preferred Stock, authorize or create any class of stock ranking as to dividends or distribution of assets upon a Liquidation senior to or otherwise pari passu with the Preferred Stock, (c) amend its certificate or articles of incorporation or other charter documents so as to affect adversely any rights of the Holders, or (d) increase the authorized number of shares of Preferred Stock. 12. Charges, Taxes and Expenses. Except as otherwise provided in this Section 12, issuance of certificates for shares of Preferred Stock and for Underlying Shares issued on conversion of (or otherwise in respect of) the Preferred Stock shall be made without charge to the Holders for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall be entitled to withhold any applicable taxes with respect to the actual or deemed payment of any dividends on the Preferred Stock (whether in cash or shares of stock) and with respect to the payment of any cash in lieu of the issuance of fractional shares pursuant to Section 17 hereof; and further provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any certificates for Common Stock or Preferred Stock in a name other than that of the Holder. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring the Preferred Stock or receiving Underlying Shares in respect of the Preferred Stock. 13. Replacement Certificates. If any certificate evidencing Preferred Stock or Underlying Shares is mutilated, lost, stolen or destroyed, the Company 5 shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for such certificate, a new certificate, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. Applicants for a new certificate under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. 14. Reservation of Underlying Shares. The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Underlying Shares as required hereunder, the number of Underlying Shares which are then issuable and deliverable upon the conversion of (and otherwise in respect of) all outstanding Preferred Stock (taking into account the adjustments of Section 15), free from preemptive rights or any other contingent purchase rights of persons other than the Holder. The Company covenants that all Underlying Shares so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. 15. Certain Adjustments. The Conversion Price is subject to adjustment from time to time as set forth in this Section 15. (a) Stock Dividends and Splits. If the Company, at any time while Preferred Stock is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock (other than regular dividends on the Preferred Stock), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any other shares of capital stock, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clauses (ii), (iii) or (iv) of this paragraph shall become effective immediately after the effective date of such subdivision, combination or reclassification. If any event requiring an adjustment under this paragraph occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event. (b) Pro Rata Distributions. If the Company, at any time while Preferred Stock is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then, at the request of any Holder delivered before the 90th day after the record date fixed for determination of stockholders entitled to receive such distribution, the Company will deliver to such Holder, within five Trading Days after such request (or, if later, on the effective date of such distribution), the Distributed Property that such Holder would have been entitled to receive in respect of the Underlying Shares for which such Holder's Preferred Stock could have been converted immediately prior to such record date. 6 If such Distributed Property is not delivered to a Holder pursuant to the preceding sentence, then upon any conversion of Preferred Stock that occurs after such record date, such Holder shall be entitled to receive, in addition to the Underlying Shares otherwise issuable upon such conversion, the Distributed Property that such Holder would have been entitled to receive in respect of such number of Underlying Shares had the Holder been the record holder of such Underlying Shares immediately prior to such record date. (c) Fundamental Transactions. If, at any time while Preferred Stock is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then upon any subsequent conversion of Preferred Stock, each Holder shall have the right to receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the "Alternate Consideration"). For purposes of any such conversion, the determination of the Variable Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then each Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of Preferred Stock following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new series of preferred stock consistent with the foregoing provisions and evidencing the Holders' right to convert such preferred stock into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that the Preferred Stock (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. (d) Subsequent Equity Sales. (i) If, at any time while Preferred Stock is outstanding, the Company issues additional shares of Common Stock or rights, warrants, options or other securities or debt convertible, exercisable or exchangeable for shares of Common Stock or otherwise entitling any Person to acquire shares of Common Stock (collectively, "Common Stock Equivalents" and together with Common 7 Stock sometimes hereinafter called "CS Securities") at an effective price per share of Common Stock (the "Effective Price") less than the Conversion Price (as adjusted hereunder to such date), then the Conversion Price shall be reduced to equal the Effective Price. For purposes of the foregoing adjustment, in connection with any issuance of any Common Stock Equivalents, (x) the maximum number of shares of Common Stock potentially issuable at any time upon conversion, exercise or exchange of such Common Stock Equivalents (the "Deemed Number") shall be deemed to be outstanding upon issuance of such Common Stock Equivalents, (y) the Effective Price applicable to such Common Stock shall equal the minimum dollar value of consideration payable to the Company to purchase such Common Stock Equivalents and to convert, exercise or exchange them into Common Stock, divided by the Deemed Number, and (z) no further adjustment shall be made to the Conversion Price upon the actual issuance of Common Stock upon conversion, exercise or exchange of such Common Stock Equivalents. (ii) If, at any time while Preferred Stock is outstanding, the Company or any Subsidiary has outstanding any Common Stock Equivalents with an Effective Price that floats or resets or otherwise varies or is subject to adjustment based on market prices of the Common Stock (a "Floating Price Security"), then for purposes of applying the preceding paragraph in connection with any subsequent conversion, the Effective Price will be determined separately on each Conversion Date and will be deemed to equal the lowest Effective Price at which any holder of such Floating Price Security is entitled to acquire shares of Common Stock on such Conversion Date (regardless of whether any such holder actually acquires any shares on such date). (iii) Notwithstanding the foregoing, no adjustment will be made under this Section 13(d) in respect of (a) any grant of options to employees, officers, directors or consultants of the Company pursuant to any stock option plan duly adopted by the Company's board of directors (provided, that the number of shares of Common Stock which are the subject of any such plan may not exceed 2,800,000, subject to annual increases of up to 40% of the shares authorized under such plans during the immediately preceding year), (b) the issuance of CS Securities upon exercise of any such options, (c) the issuance of CS Securities under the PPG Agreement or the Motorola Agreement (d) up to 1,000,000 of CS Securities issued in connection with any contractual strategic alliances approved by the Company's Board of Directors; (e) the issuance of any CS Securities representing or convertible into up to 50,000 shares of Common Stock in any single transaction; provided that this subsection (e) shall only apply to the first 50,000 shares in the aggregate issued in any consecutive 12 month period and 150,000 in the aggregate; (f) CS Securities issued or issuable pursuant to the Notes, Preferred Stock, Warrants or any other Transaction Document or pursuant to the anti-dilution provisions thereof; (g) any CS Securities issuable upon the exercise of, or pursuant to the anti-dilution provisions contained within, any options, restricted stock awards, preferred stock or warrants outstanding on the date hereof (but not to the extent amended hereafter) all of which are set forth on Schedule 8 3.1(g) to the Purchase Agreement, a copy of which is on file at the offices of the Company and which will be made available to any Holder upon request; or (h) any Common Stock issued upon the conversion of exercise of any Common Stock Equivalents outstanding as of the date hereof (but not to the extent amended hereafter) all of which are set forth on; Schedule 3.1(g) to the Purchase Agreement, a copy of which is on file at the offices of the Company and which will be made available to any Holder upon request; (e) Calculations. All calculations under this Section 15 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock. (f) Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 15, the Company at its expense will promptly compute such adjustment in accordance with the terms hereof and prepare a certificate describing in reasonable detail such adjustment and the transactions giving rise thereto, including all facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to each Holder and to the Transfer Agent. (g) Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to each Holder a notice describing the material terms and conditions of such transaction, on the earlier of the day on which the Company (a) publicly announces such proposed action or (b) notifies its Shareholders of such proposed action, and the Company will take all steps reasonably necessary in order to insure that each Holder is given the practical opportunity to convert its Preferred Stock prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice. 16. Limitation on Conversion. (a) Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by any Holder upon any conversion of Preferred Stock (or otherwise in respect of the Preferred Stock) shall be limited to the extent necessary to insure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 4.999% (the "Maximum Percentage") of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of 9 Common Stock issuable upon such conversion). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Each delivery of a Conversion Notice by a Holder will constitute a representation by such Holder that it has evaluated the limitation set forth in this paragraph and determined that issuance of the full number of Underlying Shares requested in such Conversion Notice is permitted under this paragraph. By written notice to the Company, any Holder may waive the provisions of this Section or increase or decrease the Maximum Percentage to any other percentage specified in such notice, but (i) any such waiver or increase will not be effective until the 61st day after such notice is delivered to the Company, and (ii) any such waiver or increase or decrease will apply only to such Holder and not to any other Holder. (b) Notwithstanding anything contained to the contrary herein, the number of shares of Common Stock that may be acquired by any Holder upon any conversion of Preferred Stock (or otherwise in respect of the Preferred Stock) shall be limited to the extent such conversion would result in the Holder, together with any affiliate thereof, beneficially owning (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 9.999% of the then issued and outstanding shares of Common Stock, including shares issuable upon conversion of this Note after application of this Section. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 9.999% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section 14(b) will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section 14(b) applies, the determination of the extent to which the Preferred Stock is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice or the Company is requiring conversion pursuant to Section 9(b) in either case, that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum amount permitted to be converted on such Conversion Date. 17. Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Underlying Shares on conversion of Preferred Stock. If any fraction of an Underlying Share would, except for the provisions of this Section, be issuable upon conversion of Preferred Stock, the Company shall pay an amount in cash equal to the average of the Closing Prices of the Common Stock for the five Trading Days immediately prior to (but not including) the Conversion Date multiplied by such fraction; provided that, unless a Holder requests otherwise, no payment shall be required to be made to a Holder pursuant to this sentence until the aggregate amount payable to such Holder in connection with such conversion (together with unpaid amounts from prior conversions) exceeds $1,000, at which time all previously deferred payments shall be made. 18. Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date 10 of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, or (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service.. The addresses for such communications shall be: (i) if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618, facsimile: (609) 671-0995, Attention Sidney Rosenblatt, or (ii) if to a Holder, to the address or facsimile number appearing on the Company's stockholder records or such other address or facsimile number as such Holder may provide to the Company in accordance with this Section. 19. Miscellaneous. (a) The headings herein are for convenience only, do not constitute a part of this Certificate of Designations and shall not be deemed to limit or affect any of the provisions hereof. (b) No waiver of any default with respect to any provision, condition or requirement of this Certificate of Designations shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. 11 EXHIBIT A ADDITIONAL DEFINITIONS "Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act. With respect to a Holder, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Holder will be deemed to be an Affiliate of such Holder. "Business Day" means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. "Change of Control" means the occurrence of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of more than one-half of the voting rights or equity interests in the Company, (ii) a replacement of more than one-half of the members of the Company's board of directors that is not approved by those individuals who are members of the board of directors on the date hereof in one or a series of related transactions, (iii) a merger or consolidation of the Company or any Subsidiary or a sale of all or substantially all of the assets of the Company in one or a series of related transactions, unless following such transaction or series of transactions, the holders of the Company's securities prior to the first such transaction continue to hold at least a majority of the voting rights and equity interests in of the surviving entity or acquirer of such assets, or (iv) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i), (ii) or (iii). "Closing Price" means, for any date the VWAP for such date (or the nearest preceding date) all as reported by Bloomberg L.P. or any successor to its function for reporting VWAP. "Common Stock" means the common stock of the Company, par value $.01 per share. "Conversion Shares Registration Statement" means a registration statement covering the resale of the Underlying Shares by the Holders and any additional registration statements with respect thereto, including (in each case) the Prospectus included in such registration statement and in any amendments and supplements to such registration statement or prospectus including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. "Effective Date" means the date that a Conversion Shares Registration Statement is declared effective by the Commission. "Eligible Market" means the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market. 12 "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Motorola Agreement" means collectively the License Agreement dated as of September 29, 2000 between the Company and Motorola, Inc., the Stock Purchase Warrant granted to Motorola, Inc. on September 29, 2000 and the Securities Purchase Agreement, dated as of September 29, 2000 between the Company and Motorola, Inc. "Notes" means $15,000,000 in aggregate principal amount of Convertible Promissory Notes due August 22, 2004 issued by the Company to the Holders. "Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind. "PPG Agreement" means collectively, the Development and License Agreement dated as of October 1, 2000 between the Company and PPG Industries, Inc., as amended, and the Stock Purchase Warrant granted to PPG Industries, Inc. on October 1, 2000. "Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiary" means any subsidiary of the Company. "Trading Day" means (a) any day on which the Common Stock is traded on its primary Trading Market, or (b) if the Common Stock is not then listed or quoted on any national securities exchange, market or trading or quotation facility, then a day on which trading occurs on the New York Stock Exchange (or any successor thereto). "Trading Market" means the NASDAQ National Market System or any other national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted. "Transfer Agent" means American Stock Transfer & Trust Company or such other entity that the Company shall designate as its transfer agent from time to time, provided that the Company has given notice to the Holder that it has designated a new Transfer Agent. "Underlying Shares" means the shares of Common Stock issuable upon conversion of the Preferred Stock. "VWAP" means Volume Weighted Average Price of a share of Common Stock. 13 EXHIBIT B FORM OF CONVERSION NOTICE (To be executed by the registered Holder in order to convert shares of Preferred Stock) The undersigned hereby elects to convert the number of shares of Series C-1 Convertible Preferred Stock indicated below into shares of common stock, par value $.01 per share (the "Common Stock"), of Universal Display Corporation, a Pennsylvania corporation (the "Company"), according to the conditions hereof, as of the date written below. -------------------------------------------------------------- Date to Effect Conversion -------------------------------------------------------------- Number of shares of Preferred Stock owned prior to Conversion -------------------------------------------------------------- Number of shares of Preferred Stock to be Converted -------------------------------------------------------------- Stated Value of shares of Preferred Stock to be Converted -------------------------------------------------------------- Number of shares of Common Stock to be Issued -------------------------------------------------------------- Applicable Conversion Price -------------------------------------------------------------- Number of shares of Preferred Stock subsequent to Conversion The undersigned hereby covenants and agrees that the undersigned (i) will not sell or otherwise dispose of the shares of Common Stock to be delivered pursuant to this Conversion Notice (the "Shares") except pursuant to an effective registration statement (the "Registration Statement") under the Securities Act of 1933, as amended (the "Act"), (ii) will sell the Shares only in accordance with the Plan of Distribution set forth in the prospectus forming a part of the Registration Statement (the "Prospectus"), (iii) will comply with the requirements of the Act when selling or otherwise disposing of the Shares, including, but not limited to, the prospectus delivery requirements of the Act, (iv) will not sell or otherwise dispose of, and will return immediately to the Company for the purpose of placing a restrictive legend thereon, the Shares (and any certificates representing the Shares, if applicable) upon notice from the Company that the Prospectus may not be used for the sale of the Shares, and (v) will indemnify and hold harmless the Company, its directors, officers, agents and employees, each person who controls the Company (within the meaning of Section 15 of the Act and Section 20 of the Securities Exchange Act of 1934, as amended), and the directors, officers, agents or employees of such controlling persons, to the fullest extent permitted by applicable law, from and against all Losses (as defined in the Registration Rights Agreement dated August 22, 2001 by and between the Company and the investors signatory thereto) arising out of or based upon any breach by the undersigned of any of the covenants contained herein. --------------------------------------- Name of Holder By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- EX-23.1 15 ex23-1.txt EX-23.1 EXHIBIT 23.1 Morgan, Lewis & Bockius LLP 1701 Market Street Philadelphia, PA 19103 November 5, 2001 Universal Display Corporation 375 Phillips Boulevard Ewing, NJ 08618 Re: Universal Display Corporation Registration Statement on Form S-3 Relating to the Registration of 2,737,620 shares of Common Stock, $.01 par value ------------------------------------------------ Ladies and Gentlemen: We have acted as counsel to Universal Display Corporation, a Pennsylvania corporation (the "Company"), in connection with the preparation of the above-referenced Registration Statement on Form S-3 (the "Registration Statement") to be filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Act"), and the rules and regulations promulgated thereunder, relating to 2,737,620 shares (the "Shares") of the Company's common stock, par value $.01 per share (the "Common Stock"), to be sold by the selling shareholders named in the Registration Statement (the "Selling Shareholders"). The Shares consist of shares of Common Stock that (i) are issuable upon the conversion of (A) 5,000 shares of Series C-1 Convertible Preferred Stock (the "Series C Shares") and (B) up to 5,000 shares of Series D Convertible Preferred Stock (the "Series D Shares") that the Selling Shareholders may acquire in the future in accordance with the terms of the Securities Purchase Agreement dated as of August 22, 2001 among the Company and the purchasers identified therein, as amended (the "Purchase Agreement"); and (ii) may be issuable upon the exercise of warrants (as amended, the "Warrants") issued as of August 22, 2001 in accordance with the terms of the Purchase Agreement and a letter agreement between the Company and Gerard Klauer Mattison & Co., Inc. (the "GKM Agreement"). In rendering the opinion set forth below, we have examined the Registration Statement and the exhibits thereto (including, without limitation, the Statement of Designations, Preferences and Rights of Series C-1 Convertible Preferred Stock (the "Series C Statement") filed with the Department of State of the Commonwealth of Pennsylvania, the Statement of Designations, Preferences and Rights of Series D Convertible Preferred Stock (the "Series D Statement") filed with the Department of State of the Commonwealth of Pennsylvania, the Purchase Agreement and the Warrants), the GKM Agreement, certain records of the Company's corporate proceedings as reflected in its minute books and such statutes, records and other documents as we have deemed relevant. In our II-1 examination, we have assumed: (i) that the Series D Shares will be issued and sold in accordance with the terms of the Purchase Agreement; and (ii) the genuineness of documents submitted to us as originals and the genuineness of, and conformity with, the original of all documents submitted to us as copies thereof. Based upon the foregoing, we are of the opinion that (i) the portion of the Shares issuable upon the conversion of the Series C Shares are duly authorized and, when issued in accordance with the terms of the Series C Statement, will be validly issued, fully paid and non-assessable; (ii) the portion of the Shares issuable upon the conversion of the Series D Shares are duly authorized and, following the issuance of the Series D Shares in accordance with the terms of the Purchase Agreement, will be, when issued in accordance with the terms of the Series D Statement, validly issued, fully paid and non-assessable; and (iii) that the portion of the Shares issuable upon the exercise of the Warrants are duly authorized and, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and non-assessable. The opinion set forth above is limited to the laws of the Commonwealth of Pennsylvania. We hereby consent to the use of this opinion as an exhibit to the Registration Statement and further consent to the reference to our firm under the caption "Legal Opinion" in the prospectus included in the Registration Statement. In giving such consent, we do not thereby admit that we are acting within the category of persons whose consent is required under section 7 of the Act or the rules or regulations of the Securities and Exchange Commission thereunder. Very truly yours, /s/ Morgan, Lewis & Bockius LLP ------------------------------- II-2 EX-23.2 16 ex23-2.txt EX-23.2 EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated March 1, 2001 included in Universal Display Corporation's Form 10-K for the year ended December 31, 2000 and to all references to our Firm included in this registration statement. /s/ Arthur Andersen LLP Philadelphia, PA November 5, 2001 II-3