-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JIeyxhxwLa5uagH9BJ73cebwqCAJqO7Y3Prz26TafNgzWc8xBxiT0u65osAmLvQB P0qK9e3YK+Uao1wxi581aQ== 0000950116-03-002581.txt : 20030513 0000950116-03-002581.hdr.sgml : 20030513 20030513095023 ACCESSION NUMBER: 0000950116-03-002581 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030513 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12031 FILM NUMBER: 03694096 BUSINESS ADDRESS: STREET 1: 375 PHILLIPS BOULEVARD CITY: EWING STATE: NJ ZIP: 08618 BUSINESS PHONE: 6096710980 MAIL ADDRESS: STREET 1: 375 PHILLIPS BOULEVARD STREET 2: 375 PHILLIPS BOULEVARD CITY: EWING STATE: NJ ZIP: 08618 10-Q 1 tenq.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 -------------- or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to _________ Commission File Number 1-12031 UNIVERSAL DISPLAY CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Pennsylvania 23-2372688 - ------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 375 Phillips Boulevard Ewing, New Jersey 08618 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (609) 671-0980 --------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ____ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act): Yes __X__ No ____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of May 7, 2003, the registrant had outstanding 21,864,710 shares of Common Stock. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS............................................................................... 3 Consolidated Balance Sheets - March 31, 2003 (unaudited) and December 31, 2002................. 3 Consolidated Statements of Operations - Three months ended March 31, 2003 and 2002 and inception to March 31, 2003 (unaudited)..................................... 4 Consolidated Statements of Cash Flows - Three months ended March 31, 2003 and 2002 and inception to March 31, 2003 (unaudited)..................................... 5 Notes to Consolidated Financial Statements (unaudited)......................................... 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................................................................... 12 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK......................................... 14 ITEM 4. CONTROLS AND PROCEDURES............................................................................ 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS.................................................................................. 14 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.......................................................... 14 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................................................... 14 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................ 14 ITEM 5. OTHER INFORMATION.................................................................................. 15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................... 15
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY (a development-stage company) CONSOLIDATED BALANCE SHEETS ASSETS March 31, 2003 (unaudited) December 31, 2002 --------------- ----------------- CURRENT ASSETS: Cash and cash equivalents $ 11,049,558 $ 15,905,416 Short-term investments 6,114,304 4,662,898 Accounts receivable 880,965 662,822 Prepaids and other current assets 113,931 177,219 -------------- -------------- Total current assets 18,158,758 21,408,355 PROPERTY AND EQUIPMENT, net 4,441,336 4,617,570 AQUIRED TECHNOLOGY, net 12,676,007 13,099,775 INVESTMENTS 1,146,021 379,753 OTHER ASSETS 134,773 133,763 -------------- -------------- $ 36,556,895 $ 39,639,216 ============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Capital lease obligations $ 4,853 $ 4,713 Accounts payable 329,810 388,286 Accrued expenses 927,028 1,084,889 Deferred license fees 1,166,667 1,066,667 Deferred revenue 67,204 322,204 -------------- -------------- Total current liabilities 2,495,562 2,866,759 -------------- -------------- CAPITAL LEASE OBLIGATIONS 2,615 3,886 DEFERRED LICENSE FEES 3,100,000 3,100,000 -------------- -------------- Total liabilities 5,598,177 5,970,645 SHAREHOLDERS' EQUITY Preferred Stock, par value $0.01 per share, 5,000,000 shares authorized, 200,000 shares Series A Nonconvertible Preferred Stock issued and Outstanding (liquidation value of $7.50 per share or $1,500,000), 300,000 shares Series B Convertible Preferred Stock issued and outstanding (liquidation value of $21.48 per share or $6,444,000), 5,000 shares of Series C-1 Convertible Preferred Stock authorized and none outstanding, 5,000 shares of Series D Convertible Preferred Stock authorized and none outstanding 5,000 5,000 Common Stock, par value $.01 per share, 50,000,000 shares authorized, 21,611,994 and 21,525,412 shares issued and outstanding, respectively 216,120 215,254 Additional paid-in capital 114,702,569 113,541,408 Accumulated other comprehensive loss (21,720) (18,586) Deficit accumulated during development-stage (83,943,251) (80,074,505) -------------- -------------- Total shareholders' equity 30,958,718 33,668,571 -------------- -------------- $ 36,556,895 $ 39,639,216 ============== ============== The accompanying notes are an integral part of these statements
-3-
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY (a development-stage company) CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, Period from Inception ------------------------------------ (June 17, 1994) to 2003 2002 March 31, 2003 ------------ ------------ ------------------- REVENUE: Contract research revenue $ 369,147 $ 447,083 $ 4,371,367 Development chemicals 561,800 87,843 1,549,648 Technology development revenue 250,000 -- 432,796 ------------ ------------ -------------- Total revenue 1,180,947 534,926 6,353,811 ------------ ------------ -------------- OPERATING EXPENSES: Research and development 3,927,551 3,849,548 51,157,069 General and administrative 1,098,981 957,856 21,443,128 Royalty expense 87,500 -- 412,500 ------------ ------------ -------------- Total operating expenses 5,114,032 4,807,404 73,012,697 ------------ ------------ ------------ Operating loss (3,933,085) (4,272,478) (66,658,886) INTEREST INCOME 59,563 128,362 2,114,528 INTEREST EXPENSE (224) (1,154,693) (5,146,955) DEBT CONVERSION AND EXTINGUISHMENT EXPENSE -- -- (10,011,780) OTHER INCOME 5,000 -- 230,657 ------------ ------------ -------------- NET LOSS (3,868,746) (5,298,809) (79,472,436) DEEMED DIVIDEND TO PREFERRED SHAREHOLDERS -- -- (4,470,815) ------------ ------------ -------------- NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS $ (3,868,746) $ (5,298,809) $ (83,943,251) ============ ============ ============== BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.18) $ (0.29) ============ ============ WEIGHTED AVERAGE SHARES USED IN COMPUTING BASIC AND DILUTED NET LOSS PER COMMON SHARE 21,543,505 18,435,253 ============ ============ The accompanying notes are an integral part of these statements.
-4- UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY (a development-stage company) CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended Period from Inception March 31, (June 17, 1994) to 2003 2002 March 31, 2003 ----------- ----------- -------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(3,868,746) $(5,298,809) $(79,472,436) Non-cash charges to statement of operations: Depreciation 514,510 358,952 4,201,590 Amortization of intangibles 423,768 423,768 4,274,711 Amortization of discounts on Convertible Promissory Note -- 1,091,782 14,734,168 Issuance of Common Stock options and warrants for services 12,506 1,709 1,623,066 Issuance of Common Stock and warrants in connection with amended research and license agreements -- -- 3,120,329 Issuance of Common Stock in connection with executive compensation -- -- 439,370 Issuance of redeemable Common Stock, Common Stock options and warrants in connection with development agreement 990,051 1,542,951 9,423,859 Issuance of Common Stock options and warrants for Scientific Advisory Board -- -- 1,947,369 Issuance of Common Stock in connection with License Agreement -- -- 71,816 Acquired in-process technology -- -- 350,000 (Increase) decrease in assets: Accounts receivable (218,143) 48,398 (880,965) Other current assets 63,288 (10,793) 234,385 Other assets (1,010) (13,000) (134,773) Increase (decrease) in liabilities: Accounts payable and accrued expenses (85,007) (315,119) 957,588 Payable to related parties -- -- 250,000 Deferred license fees 100,000 666,667 4,266,667 Deferred revenue (255,000) -- 67,204 ----------- ----------- ------------ Net cash used in operating activities (2,323,783) (1,503,494) (34,526,052) ----------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of equipment (338,276) (780,460) (7,760,905) Purchase of intangibles -- -- (25,750) Purchases of investments (3,085,000) (1,446,492) (35,951,605) Proceeds from sale of investments 864,192 1,352,000 28,669,560 Restricted cash -- 20,090 -- ----------- ----------- ------------ Net cash used in investing activities (2,559,084) (854,862) (15,068,700) ----------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of Common Stock -- -- 31,031,937 Proceeds from issuance of Preferred Stock -- -- 9,137,079 Proceeds from issuance of Convertible Promissory Notes and equity instruments -- -- 15,000,000 Repayment of Convertible Promissory Notes -- -- (8,819,997) Proceeds from the exercise of Common Stock options and warrants 28,140 -- 14,307,844 Principal payments on capital lease (1,131) (1,015) (12,553) ----------- ----------- ------------ Net cash provided by (used in) financing activities 27,009 (1,015) 60,644,310 ----------- ----------- ------------ (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,855,858) (2,359,371) 11,049,558 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 15,905,416 7,883,132 -- ----------- ----------- ------------ CASH AND CASH EQUIVALENTS, END OF PERIOD $11,049,558 $ 5,523,761 $ 11,049,558 =========== =========== ============ The accompanying notes are an integral part of these statements.
-5- UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY (a development-stage company) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BACKGROUND: Universal Display Corporation (the "Company"), a development-stage company, is engaged in the research and development and commercialization of organic light emitting device ("OLED") technologies and materials for potential flat panel display and other applications. The Company, formerly known as Enzymatics, Inc. ("Enzymatics"), was incorporated under the laws of the Commonwealth of Pennsylvania on April 24, 1985, and commenced its current business activities on August 1, 1994. The New Jersey corporation formerly known as Universal Display Corporation and now known as UDC, Inc. ("UDC") was incorporated under the laws of the State of New Jersey on June 17, 1994. The Company also sponsors substantial OLED technology research being conducted at the Advanced Technology Center for Photonics and Optoelectronic Materials at Princeton University and at the University of Southern California ("USC") (on a subcontract basis with Princeton University), pursuant to a Research Agreement between the Company and the Trustees of Princeton University dated October 9, 1997 (as amended, the "1997 Research Agreement") (Note 3). The Company previously sponsored OLED technology research conducted at Princeton University under a Sponsored Research Agreement between the Trustees of Princeton University and American Biomimetics Corporation ("ABC") dated August 1, 1994 (as amended, the "1994 Sponsored Research Agreement"). ABC, a privately held Pennsylvania corporation that is affiliated with the Company, assigned its rights and obligations under the 1994 Sponsored Research Agreement to the Company in October 1995. Pursuant to a License Agreement between the Trustees of Princeton University and ABC dated August 1, 1994 (as amended, the "1994 License Agreement"), Princeton University granted the Company a worldwide exclusive license, with rights to sublicense, to make, have made, use, lease and/or sell products and to practice processes based on a pending patent application of Princeton University relating to OLED technology. Under the 1994 License Agreement, Princeton University further granted ABC similar license rights with respect to patent applications and issued patents arising out of work performed by Princeton University under the 1994 Sponsored Research Agreement. ABC assigned its rights and obligations under the 1994 License Agreement to the Company in June 1995. On October 9, 1997, the Company and Princeton University entered into an Amended License Agreement that amended and restated the 1994 License Agreement (as amended, the "1997 Amended License Agreement") (Note 3). Under the 1997 Amended License Agreement, Princeton University granted the Company corresponding license rights with respect to patent applications and issued patents arising out of work performed by Princeton University and USC under the 1997 Research Agreement. The Company conducts a substantial portion of its OLED technology development activities at its technology development and transfer facility in Ewing, New Jersey. The Company moved its operations to this facility in the fourth quarter of 1999 and expanded the facility from 11,000 square feet to 21,000 square feet in 2001. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Interim Financial Information In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of March 31, 2003, and the results of operations and cash flows for the three months ended March 31, 2003 and 2002. While management believes that the disclosures presented are adequate to make the information not misleading, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company's latest year-end financial statements, which were included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002. Principles of Consolidation The consolidated financial statements include the accounts of Universal Display Corporation and its wholly owned subsidiary, UDC, Inc. All significant intercompany transactions and accounts have been eliminated. -6- Management's Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash, Cash Equivalents and Short-term Investments Cash and cash equivalents are defined as cash and highly liquid investments with original maturities of less than three months. At March 31, 2003, cash and cash equivalents included cash on hand, cash in banks, money market accounts and certificate of deposits. The Company classifies its investments as available-for-sale in accordance with the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." These investments are carried at fair market value, with unrealized gains and losses reported in shareholders' equity as a component of other comprehensive income (loss). Gains or losses on securities sold are based on the specific identification method. Investments classified as current have maturity dates of greater then three months but less than one year. Investments classified as long-term have maturity dates greater than one year. The Company reported unrealized holding losses of $21,720 and $18,586 at March 31, 2003 and December 31, 2002, respectively. Comprehensive loss, which includes the net loss and change in unrealized holding losses, was $3,871,880 and $5,300,050 for the three months ended March 31, 2003 and 2002, respectively. Fair Value of Financial Instruments Cash and cash equivalents, short-term investments, accounts receivable, prepaid and other current assets, accounts payable and accrued expenses are reflected in the accompanying financial statements at fair value due to the short-term nature of those instruments. The carrying amount of capital lease obligations approximate fair value at the balance sheet dates. Property and Equipment Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful life of 3 to 7 years for office and lab equipment, furniture and fixtures, and the lesser of the lease term or useful life for leasehold improvements and capital leases. Equipment under capital leases are stated at the present value of the minimum lease payments. Repair and maintenance costs are charged to expense as incurred. Additions and betterments are capitalized. Acquired Technology Acquired technology consists of acquired license rights for patents and know-how obtained from PD-LD, Inc. and Motorola, Inc. (Note 4). These intangible assets consist of the following: March 31, 2003 December 31, 2002 -------------- ----------------- PD-LD, Inc. $ 1,481,250 $ 1,481,250 Motorola 15,469,468 15,469,468 ----------- ----------- 16,950,718 16,950,718 Less: Accumulated amortization (4,274,711) (3,850,943) ----------- ----------- Acquired Technology, net $12,676,007 $13,099,775 =========== =========== Acquired technology is amortized on a straight-line basis over its estimated useful life of ten years. Impairment of Long-Lived Assets In accordance with SFAS 144, "Accounting for Impairment or Disposal of Long-Lived Assets," management continually evaluates whether events or changes in circumstances might indicate that the remaining estimated useful life of long-lived assets may warrant revision, or that the remaining balance may not be recoverable. When factors indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related undiscounted cash flows in measuring whether the long-lived asset should be written down to fair value. Measurement of the amount of impairment would be based on generally accepted valuation methodologies, as deemed appropriate. As of March 31, 2003 and December 31, 2002, management of the Company believed that no revision to the remaining useful lives or write-down of the Company's long-lived assets was required. -7- Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss attributable to Common Stock shareholders by the weighted-average number of shares of Common Stock outstanding for the period. Diluted net loss per common share reflects the potential dilution from the exercise, or conversion of securities into Common Stock. For the three months ended March 31, 2003 and 2002, the effects of the exercise of 8,196,174 and 7,278,203 outstanding stock options and warrants, respectively, were excluded from the calculation of diluted EPS as the impact would be antidilutive. Revenue Recognition and Deferred License Fees Contract revenues represent reimbursements by government entities for all or a portion of the research and development costs the Company incurs in relation to its government contracts. Revenues are recognized proportionally as research and development costs are incurred, or as defined milestones are achieved. Development chemical revenues represent revenues from sales of OLED materials to OLED manufacturers for evaluation and product development purposes. Revenues are recognized at the time of shipment and passage of title. The customer does not have the right to return the materials. The Company receives non-refundable advanced payments in connection with certain joint development, technology evaluation and license agreements it enters into. Certain of these payments are creditable against future license fees payable under commercial license agreements that the parties may subsequently enter into and are deferred until such license agreements are executed or negotiations have ceased and there is no likelihood of executing a license agreement. Revenues are recorded over the expected life of the licensed technology, if there is an effective license agreement, or at the time the negotiations show no likelihood of an executable license agreement. Advanced payments under these agreements that are received under a technology evaluation agreement and are not creditable against license fees are deferred and revenue is recognized over the term of the agreement as technology development revenue. Research and Development Expenditures for research and development are charged to operations as incurred. Recent Accounting Pronouncements In July 2002, the FASB Issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses the financial accounting and reporting of expenses related to restructurings initiated after 2002, and applies to costs associated with an exit activity (including a restructuring) or with a disposal of long-lived assets. Those activities can include eliminating or reducing product lines, terminating employees and contracts, and relocating plant facilities or personnel. Under SFAS No. 146, a company will record a liability for a cost associated with an exit or disposal activity when the liability is incurred and can be measured at fair value. The provisions of SFAS No. 146 are effective prospectively for exit or disposal activities initiated after December 31, 2002. The adoption of this statement had no effect on the Company's financial statements. In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," which elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees issued. The Interpretation also clarifies that a guarantor is required to recognize, at inception of a guarantee, a liability for the fair value of the obligation undertaken. The initial recognition and measurement provisions of the Interpretation were applicable to guarantees issued or modified after December 31, 2002 and had no impact on the Company's financial statements. In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation- Transition and Disclosure," which amends SFAS No. 123, to provide alternative methods of transition for a voluntary change to the fair value method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements. In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," which addresses the consolidation by business enterprises of variable interest entities as defined in the Interpretation. The Interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The application of this Interpretation had no effect on the Company's financial statements. The EITF recently reached a consensus on EITF Issue No. 00-21, which provides accounting guidance for customer solutions where delivery or performance of products, services and/or performances may occur at different points in time or over different periods of time. Companies are required to adopt this consensus for fiscal periods beginning after June 15, 2003. The adoption of EITF Issue No. 00-21 is not expected to have a significant impact on the Company's financial position, results of operations, or liquidity. -8- In April 2003, the FASB Issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities", which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities". This Statement is effective for contracts entered into or modified after June 30, 2003, except for certain instruments involving the purchase or sale of certain securities. The Company is still evaluating what effect this Amendment will have on the Company's consolidated financial statements. Statement of Cash Flow Information The following non-cash investing and financing activities occurred: Three months ended March 31, ----------------------------- 2003 2002 ------ ------ Unrealized loss on investments $3,134 $1,241 Stock Options The Company accounts for its stock option plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB No. 25) under which no compensation cost has been recognized for options issued to employees at fair market value on the date of grant. In 1995, the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 established a fair value based method of accounting for stock-based compensation plans. SFAS No. 123 requires that a company's financial statements include certain disclosures about stock-based employee compensation arrangement regardless of the method used to account for the plan. The Company accounts for its stock option and warrant grants to non-employees in exchange for goods or services in accordance with SFAS No. 123 and Emerging Issues Task Force No. 96-18 ("EITF 96-18"). SFAS 123 and EITF 96-18 require that the Company account for its option and warrant grants to non-employees based on the fair value of the options and warrants granted. SFAS No. 123, as amended by SFAS No. 148, permits companies to (i) recognize as expense the fair value of stock-based awards, or (ii) continue to apply the provisions of APB No. 25, and provide pro forma net income and earnings per share disclosures for employee stock option grants as if the fair-value-based method defined in SFAS No. 123 had been applied. The Company continues to apply the provisions of APB No. 25 and provide the pro forma disclosures in accordance with the provisions of SFAS Nos. 123 and 148 to its stock option plans. Under APB No. 25, the Company has not recorded any stock-based employee compensation cost associated with the Company's stock option plan, as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net loss and net loss per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to its stock option plans:
Three months ended March 31, ---------------------------- 2003 2002 ----------- ----------- Net loss applicable to Common shareholders: As reported $(3,868,746) $(5,298,809) Add stock-based employee compensation expense included in reported net income -- -- Deduct total stock-based employee compensation expense determined under fair-value-based method for all rewards (252,636) (271,403) ----------- ----------- Pro forma (4,121,382) (5,570,212) =========== =========== Basic and diluted net loss per share: As reported $ (0.18) $ (0.29) Pro forma (0.19) (0.30)
-9- 3. RESEARCH AND LICENSE AGREEMENTS WITH PRINCETON UNIVERSITY: In April 2002, the Company amended the 1997 Research Agreement with Princeton University providing, among other things, for an additional five-year term. The Company is obligated to pay Princeton University up to $7,477,993 under the 1997 Research Agreement from July 31, 2002 through July 31, 2007. Payments to Princeton University under this agreement are charged to research and development expenses when they become due. As of March 31, 2003, the Company has funded $1,212,052 of this agreement and is obligated to fund an additional $6,265,941 through July 2007. Under the 1997 Amended License Agreement, the Company is required to pay Princeton University royalties for licensed products sold by the Company or its sublicensees. For licensed products sold by the Company, the Company is required to pay Princeton University 3% of the net sales price of these products. For licensed products sold by the Company's sublicensees, the Company is required to pay Princeton University 3% of the revenues received by the Company from these sublicensees. These royalty rates are subject to upward adjustments under certain conditions. The Company is obligated under the 1997 Amended License Agreement to pay to Princeton University minimum annual royalties. The minimum royalty payment was $25,000 in 1999, $50,000 in 2000, $75,000 in 2001, and $100,000 in 2002 and thereafter. Accordingly, the Company accrued $25,000 of royalty expense for the three months ended March 31, 2003. These royalties are charged to research and development expense in the year they become due. The Company also is required under the 1997 Amended License Agreement to use commercially reasonable efforts to bring the licensed OLED technology to market. However, this requirement is deemed satisfied provided the Company performs its obligations under the 1997 Research Agreement and, when that agreement ends, the Company invests a minimum of $800,000 per year in research, development, commercialization or patenting efforts respecting the patent rights licensed to the Company. In connection with executing the Research Agreement and the Amended License Agreement, in 1997 the Company issued to Princeton University 140,000 shares of the Company's Common Stock and 10 year warrants to purchase an additional 175,000 shares of the Common Stock at an exercise price of $7.25 per share vesting immediately. The Company also issued to USC 60,000 shares of the Common Stock and 10 year warrants to purchase an additional 75,000 shares of the Common Stock at an exercise price of $7.25 per share vesting immediately. 4. ACQUIRED TECHNOLOGY: On July 19, 2000, the Company, PD-LD, Inc. ("PD-LD"), its president Dr. Vladimir Ban and the Trustees of Princeton University entered into a Termination, Amendment and License Agreement whereby the Company acquired all PD-LD's rights to certain issued and pending OLED technology patents in exchange for 50,000 shares of the Company's Common Stock. Pursuant to this transaction, these patents were included in the patent rights exclusively licensed to the Company under the 1997 Amended License Agreement. The acquisition of these patents had a fair value of $1,481,250 (Note 2). On September 29, 2000, the Company entered into a License Agreement with Motorola, Inc. ("Motorola"). Pursuant to this agreement, the Company licensed from Motorola 72 U.S. patents, 6 U.S. patent applications and additional foreign patents relating to OLED technologies. These patents expire between 2012 and 2018. The Company has the sole right to sublicense these patents to OLED manufacturers. As consideration for this license, the Company issued to Motorola 200,000 shares of the Company's Common Stock (valued at $4,412,500), 300,000 shares of the Company's Series B Convertible Preferred Stock (valued at $6,618,750), and a warrant to purchase 150,000 shares of the Company's Common Stock at $21.60 per share. This warrant became exercisable on September 29, 2001, and will remain exercisable until September 29, 2008. The warrant was recorded at a fair market value of $2,206,234 based on the Black-Scholes option-pricing model, and was recorded as a component of the cost of the acquired technology. The Company also issued a warrant to an unaffiliated third party to acquire 150,000 shares of Common Stock as a finder's fee in connection with this transaction. This warrant was granted with an exercise price of $21.60 per share and was exercisable immediately and will remain exercisable until September 29, 2007. This warrant was accounted for at its fair value based on the Black-Scholes option pricing model and $2,206,234 was recorded as a component of the cost of the acquired technology. The Company used the following assumptions in the Black-Scholes option pricing model for the 300,000 warrants issued in connection with this transaction: (1) 6.3% risk-free interest rate, (2) expected life of 7 years, (3) 60% volatility, and (4) zero expected dividend yield. In addition, the Company incurred $25,750 of direct cash transaction costs that have been included in the cost of the acquired technology. In total, the Company recorded an intangible asset of $15,469,468 for the technology acquired from Motorola (Note 2). The Company is required under the License Agreement to pay Motorola on gross revenues earned by the Company for its sales of OLED products or components, or from its sublicensees for their sales of OLED products or components, whether or not these products or components are based on inventions claimed in the patent rights licensed from Motorola. Moreover, the Company is required to pay Motorola minimum royalties of $150,000 for the two-year period ending on December 31, 2002, $500,000 for the two-year period ending on December 31, 2004, and $1,000,000 for the two-year period ending on December 31, 2006. All royalty payments may be made, at the Company's discretion, in either all cash or 50% cash and 50% in shares of the Company's Common Stock. The number of shares of Common Stock used to pay the stock portion of the royalty is equal to 50% of the royalty due divided by the average daily closing price per share of the Company's Common Stock over the 10 trading days ending two business days prior to the date the Common Stock is issued. Accordingly, the Company accrued $62,500 of royalty expense for the three months ended March 31, 2003. -10- 5. COMMON STOCK AND WARRANTS ISSUED UNDER THE PPG DEVELOPMENT AND LICENSE AGREEMENT: On October 1, 2000, the Company entered into a five-year Development and License Agreement with PPG Industries, Inc. ("PPG") to leverage the Company's OLED technologies with PPG's expertise in the development and manufacturing of organic materials. A team of PPG scientists and engineers are assisting the Company in developing and commercializing its proprietary OLED materials. In consideration for PPG's services under the agreement, the Company is required to issue shares of its Common Stock and warrants to acquire its Common Stock to PPG on an annual basis over the period from January 1, 2001 through December 31, 2005. The amount of securities the Company is required to issue is subject to adjustment under certain circumstances, as defined in the agreement. In January 2003, the Company amended the Development and License Agreement, providing for additional consideration to PPG for services provided under the agreement, which are to be paid for in cash. The Company records these expenses to research and development as they are incurred. During the first quarter of each of 2003 and 2002, the Company issued to PPG 305,715 and 344,379 shares of the Company's Common Stock as consideration for services required to be provided by PPG under the Development and License Agreement in 2003 and 2002, respectively. During the three months ended March 31, 2003 and 2002, respectively, the Company recorded a charge of $523,005 and $820,368 to research and development expense for the portion of the shares issued that were earned during the period the services were provided. The charge was determined based on the fair value of the Common Stock earned by PPG as of March 31, 2003 and 2002. As required under the Development and License Agreement, the Company issued 16,645 shares of Common Stock to PPG in February 2003. The additional shares were issued to PPG based on a final accounting for actual costs incurred by PPG under the agreement through December 31, 2002. Accordingly, the Company accrued $131,329 of additional research and development expense as of December 31, 2002, for these additional shares. In further consideration of the services performed by PPG under the Development and License Agreement, the Company is required to issue warrants to PPG to acquire shares of the Company's Common Stock. The number of warrants earned and issued is based on the number of shares of Common Stock earned by, and issued to, PPG by the Company during each calendar year of the term of the agreement. Accordingly, the Company issued warrants to PPG to acquire 361,024 shares of the Company's Common Stock as part of the consideration for services performed by PPG during 2002. The warrants were earned and charged to research and development expenses during 2002, but were not issued until February 2003. The Company will similarly issue warrants to PPG for services performed during 2003 in the first quarter of 2004 and charge the related fair value of the warrants to research and development in 2003 as they are earned. During the three months ended March 31, 2003 and 2002, the Company recorded charges to research and development expense of $410,987 and $672,220, respectively, for the portion of the warrants that were earned by PPG during these periods. These charges were recorded based on the estimated fair value of the warrants earned. The Company determined the fair value of the warrants earned during each such period using the Black-Scholes option-pricing model with the following assumptions: (1) risk free interest rate of 3.350% and 5.443%, (2) no expected dividend yield, (3) expected life of 7 years, and (4) expected volatility of 94%, respectively. The Company is required to grant options to purchase the Company's Common Stock to PPG employees performing services for the Company under the Development and License Agreement. Subject to certain contingencies, all of these options vest one-year from the date of grant and expire 10 years from the date of grant. On December 17, 2001, the Company granted to PPG employees performing services under the agreement options to purchase 26,333 shares of the Company's Common Stock at an exercise price of $8.56 per share. During the three months ended March 31, 2002, the Company recorded $50,363 in research and development costs related to these options. On September 23, 2002, the Company granted to PPG employees performing services under the agreement options to purchase 30,000 shares of the Company's Common Stock at an exercise price of $5.45. During the three months ended March 31, 2003, the Company recorded $56,059 in research and development costs related to these options. The Company determined the fair value of the options earned during the three months ended March 31, 2003 and 2002, respectively, using the Black-Scholes option-pricing model with the following assumptions: (1) risk free interest rate of 3.70% and 5.443%, (2) no expected dividend yield, (3) expected life of 10 years, and (4) expected volatility of 94%, respectively. 6. RESTRICTED CASH AND CONVERTIBLE PROMISSORY NOTES: In an August 2001 private placement transaction, the Company issued two $7,500,000 notes, each with a maturity date of August 22, 2004 (the "Notes"). The Notes were convertible into shares of the Company's Common Stock at an initial conversion price of $13.97 per share, with such conversion price subject to change based on anti-dilution provisions and other adjustments. -11- In August 2002, the Company completed a registered direct offering of Common Stock to institutional investors that was deemed dilutive under the terms of the Notes. As a result, the conversion price of the Notes was reduced to $5.09. In September 2002, $7,000,002 in principal amount of the Notes was converted into 1,375,246 shares of Common Stock and $7,999,998 in principal amount of the Notes was repaid, together with a prepayment premium, established under the Notes, of $400,000 in cash. The Company's obligations under the Notes were secured by irrevocable letters of credit issued with face amounts equal to the outstanding principal of the related Notes. The $15,000,000 in proceeds from the sale of the Notes was pledged as collateral to the bank issuing the letters of credit. Prior to the conversion and repayment of the Notes, the $15,000,000 in cash proceeds plus accrued but unpaid interest had been classified as restricted cash. In accordance with APB No. 14, "Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants" ("APB No. 14"), the Company determined in August 2001 the relative fair value of the Notes to be $9,857,006. The resulting original issuance discount ("OID") of $5,142,994 was being amortized as interest expense, using the effective interest method, over the original maturity period of three years. During the three months ended March 31, 2002, the Company recognized a non-cash charge to interest expense of $660,121 for amortization of the OID. In accordance with Emerging Issues Task Force ("EITF") No. 00-27, "Application of Issue No. 98-5 to Certain Convertible Instruments" ("EITF No. 00-27"), and EITF No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" ("EITF No. 98-5"), and after considering the allocation of the proceeds to the Notes, the Company determined in August 2001 that the Notes contained an initial beneficial conversion feature ("BCF"). The BCF existed at the commitment date due to the fact that the carrying value of the Notes, after the initial allocation of the proceeds, was less than the fair market value of the Common Stock that was issuable upon conversion. Accordingly, the Company recorded $3,258,468 of BCF in August 2001 as a debt discount. The BCF debt discount was being amortized as interest expense, using the effective interest method, over the original maturity period of three years. During the three months ended March 31, 2002, the Company recognized a non-cash charge to interest expense of $431,661 for amortization of the BCF. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS All statements in this document that are not historical, such as financial or product forecasts and market growth predictions, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Often, though not always, these statements are accompanied by the words "estimate," "project," "believe," "anticipate," "intend," "expect" and similar expressions. You are cautioned not to place undue reliance on any forward-looking statements in this document, as they reflect Universal Display Corporation's current views with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. These include, but are not limited to, the following: the feasibility and market acceptance of OLEDs for use in commercial product applications; the success of Universal Display Corporation and its research and development partners in accomplishing advances in OLED technologies, including Universal Display Corporation's TOLED, FOLED, PHOLED, P2OLED and Organic Vapor Phase Deposition (OVPD) technologies; the ability of Universal Display Corporation to enter into licensing and other strategic alliances with manufacturers of OLEDs and OLED-containing products; Universal Display Corporation's ability to obtain patent protection for its OLED technologies and to assert these patents against others; and future developments and advances by Universal Display Corporation's competitors in OLED and other display technologies. These and other risks and uncertainties are discussed in greater detail in Universal Display Corporation's periodic reports on Form 10-K and Form 10-Q filed with the Securities and Exchange Commission, including, in particular, the section entitled "Factors that May Affect Future Results and Financial Condition" in Universal Display Corporation's annual report on Form 10-K for the year ended December 31, 2002. Universal Display Corporation expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this document to reflect events or circumstances after the date hereof, or to reflect the occurrence of unanticipated events. General Since inception, the Company has been exclusively engaged, and for the foreseeable future expects to continue to be exclusively engaged, in funding and performing research and development activities related to OLED technologies and associated materials, and in attempting to commercialize these technologies and materials. The Company has incurred significant losses since its inception, resulting in an accumulated deficit of $83,943,251 as of March 31, 2003. The rate of loss is expected to increase as the Company's activities increase, and losses are expected to continue for the foreseeable future and until such time, if ever, as the Company is able to achieve, from the commercial licensing of its OLED technologies and sale of its OLED materials, revenues that are sufficient to support its operations. -12- Results of Operations Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002 The Company had a net loss of $ 3,868,746 (or $0.18 per share) for the quarter ended March 31, 2003, compared to a net loss of $5,298,809 (or $0.29 per share) for the same period in 2002. The decrease in net loss is primarily attributed to the following: o an increase in revenues; and o a decrease in interest expense as a result of the conversion and repayment of convertible promissory notes in September 2002, which is described in greater detail in Note 6 of the Notes to Consolidated Financial Statements. The Company earned $369,147 in contract research revenue from the U.S. Government in the quarter ended March 31, 2003, compared to $447,083 for the same period in 2002. In the quarter ended March 31,2003, the Company had five existing government contracts and one new government contract, four of which were in the early stages of performance. In the first quarter of 2002, 50% of the contract revenue was generated from one contract, which was completed in December 2002. In the quarter ended March 31, 2003, contract research revenue was mainly derived from the following government contracts: o $105,412 recognized under a 24-month, $729,158 SBIR Phase II contract received from the Department of Defense ("DoD"), which commenced in February 2001 and was completed in February 2003, o $158,007 recognized under a 24-month, $2,013,725 cooperative agreement received from the U.S. Army Research Laboratories ("ARL"), which commenced in August 2002, and o $49,889 recognized under a $49,889 Option to Extend an SBIR Phase I contract received from the U.S. Department of the Army. The Company earned $561,800 from its sales of OLED materials for evaluation purposes in the quarter ended March 31, 2003, compared to $87,843 for the same period in 2002. The increase in this amount is mainly due to an increased volume of OLED materials purchased for evaluation by potential OLED manufacturers, including the Company's current joint development partners. The Company recognized $250,000 in technology development revenue from deferred revenue in connection with a technology and development evaluation agreement, which commenced in October 2002. There were no such agreements in effect for the same period in 2002. The Company incurred research and development expenses of $3,927,551 for the quarter ended March 31, 2003, compared to $3,849,548 for the same period 2002. The increase in these expenses was primarily a result of further development and operation of the Company's facility in Ewing, New Jersey. General and administrative expenses for the Company were $1,098,981 for the quarter ended March 31, 2003, compared to $957,856 for same period in 2002. The increase in these expenses is mainly due to increased salaries, the hiring of an additional employee and increased costs of operations, including increases in shareholder services, corporate and employee insurance premiums and depreciation. The Company's interest expense was $224 for the quarter ended March 31, 2003, compared to $1,154,693 for the same period in 2002. The decrease is a result of the conversion and repayment of convertible promissory notes in September 2002. For further discussion, see Note 6 of the Notes to Consolidated Financial Statements. Liquidity and Capital Resources As of March 31, 2003, the Company had cash and cash equivalents of $11,049,558, short-term investments of $6,114,304 and long-term investments of $1,146,021. This compares to cash and cash equivalents of $15,905,416, short-term investments of $4,662,898 and long-term investments of $379,753 as of December 31, 2002. In the quarter ended March 31, 2003, the cash used in operating activities was $2,323,783 as compared to $1,503,494 for the same period in 2002. The increased use of cash in operating activities is mainly due to an increase in accounts receivable and a decrease in deferred revenue. In the quarter ended March 31, 2003, the Company received no non-refundable cash payments in connection with its joint development and technology evaluation agreements. For the same period in 2002, the Company received non-refundable cash payments of $666,667. All amounts received under these agreements have been recorded as unearned revenue. Working capital decreased to $15,663,196 at March 31, 2003 from working capital of $18,541,596 at December 31, 2002. The net decrease is due primarily to the use of cash in operating activities and the investment of cash in long term investments. -13- The Company anticipates, based on management's internal forecasts and assumptions relating to its operations (including assumptions regarding working capital requirements of the Company, the progress of research and development, the availability and amount of other sources of funding available to Princeton University for research relating to the OLED technology and the timing and costs associated with the preparation, filing and prosecution of patent applications and the enforcement of intellectual property rights), that it has sufficient cash, cash equivalents and short term investments to meet its obligations into 2004. Management believes that potential additional financing sources for the Company include long-term and short-term borrowings, public and private sales of the Company's equity and debt securities and receipt of cash upon the exercise of warrants. It should be noted, however, that substantial additional funds will be required in the future for research, development and commercialization of the Company's OLED technologies and OLED materials, to obtain and maintain patents and other intellectual property rights in these technologies and materials, and for working capital and other purposes, the timing and amount of which are difficult to ascertain. For example, under the Company's Research Agreement with Princeton University, the Company is required to pay Princeton University up to $1,495,599 per year through July 2007. There can be no assurance that additional funds will be available to the Company when needed, on commercially reasonable terms or at all. Critical Accounting Policies Refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2002 for a discussion of critical accounting policies. During the three months ended March 31, 2003, there were no material changes to these policies. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company does not utilize financial instruments for trading purposes and holds no derivative financial instruments that could expose the Company to significant market risk. The Company's primary market risk exposure with regard to financial instruments is to changes in interest rates, which would impact interest income earned on investments. ITEM 4. CONTROLS AND PROCEDURES The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on an evaluation conducted within 90 days prior to the filing date of this report, that the Company's disclosure controls and procedures have functioned effectively so as to provide those officers the information necessary to evaluate whether: (i) this report contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report, and (ii) the financial statements and other financial information included in this report fairly present, in all material respects, the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report. There have been no significant changes in the Company's internal controls or other procedures since the date of the Chief Executive Officer's and the Chief Financial Officer's evaluation that could significantly affect these internal controls, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not currently a party to any legal proceedings of a material nature. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted by the Company to a vote of its security holders in the first quarter of 2003. -14- ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: The following is a list of the exhibits filed as part of this report. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated by footnote. Exhibit Number Description ------ ----------- 3.1 Articles of Incorporation of the Company 10.42 Equity Compensation Plan (1) 10.43# Change in Control Agreement between the Company and Sherwin I. Seligsohn dated as of April 28, 2003 10.44# Change in Control Agreement between the Company and Steven V. Abramson dated as of April 28, 2003 10.45# Change in Control Agreement between the Company and Sidney D. Rosenblatt dated as of April 28, 2003 10.46# Change in Control Agreement between the Company and Julia J. Brown dated as of April 28, 2003 99.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ______________ Explanation of Footnotes to Listing of Exhibits: # Management contract or compensatory plan or arrangement (1) Incorporated by reference to Appendix B to the Company's Proxy Statement for the Annual Meeting of Shareholders, filed with the SEC on April 28, 2003. (b) Reports on Form 8-K: Current Report on Form 8-K, filed with the SEC on March 31, 2003, reporting Items 7 and 12, and containing, as an exhibit, a press release announcing the Company's 2002 year-end results. -15- SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNIVERSAL DISPLAY CORPORATION Date: May 13, 2003 By: Sidney D. Rosenblatt -------------------------------- Sidney D. Rosenblatt Executive Vice President and Chief Financial Officer -16- CERTIFICATION I, Sherwin I. Seligsohn, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Universal Display Corporation (the "registrant"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons fulfilling the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 13, 2003 By: Sherwin I. Seligsohn -------------------------------- Sherwin I. Seligsohn Chairman of the Board and Chief Executive Officer -17- CERTIFICATION I, Sidney D. Rosenblatt, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Universal Display Corporation (the "registrant"); 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons fulfilling the equivalent functions): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 13, 2003 By: Sidney D. Rosenblatt -------------------------------- Sidney D. Rosenblatt Executive Vice President and Chief Financial Officer -18- EX-3 3 ex3-1.txt EXHIBIT 3.1 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF ENZYMATICS, INC. (TO BECOME UNIVERSAL DISPLAY CORPORATION) The Amended and Restated Articles of Incorporation of Enzymatics, Inc., to be known as Universal Display Corporation (the "Corporation"), are as follows: 1. The name of the Corporation is Universal Display Corporation. 2. The location and post office address of the registered office of the Corporation in this Commonwealth is 1221 Centennial Road, Penn Valley, Pennsylvania 19072. 3. The Corporation is incorporated under the Business Corporation Law of the Commonwealth of Pennsylvania for the following purpose or purposes: to have unlimited power to engage in and to do all lawful acts concerning any or all lawful business for which corporations may be incorporated under the Business Corporation Law. 4. The term for which the Corporation is to exist is perpetual. 5. The aggregate number of shares which the Corporation shall have authority to issue shall be 30,000,000 shares: (a) 25,000,000 shares of Common Stock, $.01 par value per share ("Common Stock"); (b) 4,800,000 shares of Preferred Stock, $.01 par value per share ("Preferred Stock") (exclusive of the share of Series A Preferred Stock); and (c) 200,000 shares of Series A Nonconvertible Preferred Stock, $.01 par value per share. The designations, preferences, qualifications, privileges, limitations, restrictions and the special or relative rights of each share of Common Stock, and the express grant of authority to the Board of Directors to fix by resolution the designations, preferences, qualifications, privileges, limitations, restrictions and the special or relative rights in respect of each share of Preferred Stock which are not fixed by these Articles of Incorporation, are as follows: A. Common Stock. Subject to the rights of the holders of Preferred Stock, and subject to any other provisions of these Amended and Restated Articles of Incorporation, as amended from time to time, holders of Common Stock shall be entitles to receive such dividends and other distributions in cash, stock or property of the Corporation as may be declared thereon by the Board of Directors from time to time out of assets or funds of the Corporation legally available therefore. At every meeting or action by consent in writing of the shareholders every holder of Common Stock shall be entitles to one (1) vote in person or by proxy for each share of Common Stock standing in his or her name on the transfer books of the Corporation. Shareholders shall not have the right to cumulate votes in the election of directors. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of each series of Preferred Stock shall be entitled to receive, out of the net assets of the Corporation, an amount for each share equal to the amount fixed and determined by the Board of Directors in any resolution or resolutions providing for the insurance of any particular series of Preferred Stock before any of the assets of the Corporation shall be distributed or paid over to the holders of Common Stock. After payment in full of any such amounts to the holders of any Preferred Stock entitled thereto, the remaining assets and funds of the Corporation shall be divided among and paid ratably to the holders of Common Stock. B. Preferred Stock. The Board of Directors is hereby authorized from time to time to provide by resolution for the issuance of shares of Preferred Stock in one or more series not exceeding the aggregate number of shares of Preferred Stock authorized by these Amended and Restated Articles of Incorporation, as amended from time to time; and to determine with respect to each such series the voting powers, if any (which voting powers if granted may be full or limited), designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions appertaining thereto, including without limiting the generality of the foregoing, the voting rights appertaining to shares of Preferred Stock of any series (which may be one vote per share or a fraction or multiple of a vote per share, and which may be applicable generally or only upon the happening and continuance of stated events or conditions), the rate of dividend to which holders of Preferred Stock of any series may be entitled (which may be cumulative or noncumulative), the rights of holders of Preferred Stock of any series in the event of liquidation, dissolution or winding up of the affairs of the Corporation, and the rights (if any) of holders of Preferred Stock of any series to convert or exchange such shares of Preferred Stock of such series for shares of any other class of capital stock (including the determination of the price or prices or the rate or rates applicable to such rights to convert or exchange and the adjustment thereof, the time or times during which the right to convert or exchange shall be applicable and the time or times during which a particular price or rate shall be applicable). -2- Before the Corporation shall issue any shares of Preferred Stock of any series, a certificate, setting forth a copy of the resolution or resolutions of the Board of Directors, fixing the voting powers, designations, preferences, the relative, participating, option or other rights, if any, and the qualifications, limitations and restrictions, if any, appertaining to the shares of Preferred Stock of such series, and the number of shares of Preferred Stock of such series authorized by the Board of Directors to be issued, shall be filed in the manner prescribed by the laws of the Commonwealth of Pennsylvania. C. Series A Nonconvertible Preferred Stock. The following is a statement of designations and preferences relating to Two Hundred Thousand (200,000) shares of the Corporation's authorized Preferred Stock which shall be designated as "Series A Nonconvertible Preferred Stock" (the "Series A Preferred Stock"); such Series A Preferred Stock to have such voting rights, designations, preferences, qualifications, privileges, limitations, restrictions, options, conversion rights and other special or relative rights as may be hereinafter set forth: (1) No Dividend Provisions. Holders of Series A Preferred Stock shall not be entitled to receive dividends. (2) Rights on Liquidation; Dissolution; Winding-Up. (a) In the event of any liquidation, dissolution or winding-up of the affairs of the Corporation (collectively, a "Liquidation"), whether voluntary or involuntary, and after payment of the Corporation's debts and liabilities, before any payment of cash or distribution of other property shall be made to the holders of the Common Stock or any other class or series of shares ranking on Liquidation junior to the Series A Preferred Stock, the holders of Series A Preferred Stock shall be entitled to receive out of the assets of the Corporation legally available for distribution to its shareholders, an amount per share (rounded to the nearest $0.01) equal to $7.50 per share (the "Liquidation Preference"). (b) If upon the occurrence of any Liquidation, the assets and funds thus distributed among holders of the Series A Preferred Stock shall be insufficient to permit the payment to such holders of the preferential amounts described in subsection 2(a) above, then the entire assets and funds of the Corporation legally available for distribution shall be distributed ratably among holders of the Series A Preferred Stock in proportion to the amount of such Series A Preferred Stock owned by each such holder. (c) If upon the occurrence of any Liquidation, the assets and funds thus distributed among holders of Series A Preferred Stock shall be sufficient to permit the full payment of the Liquidation Preference to the holders of Series A Preferred Stock, such holders shall be entitled to no further participation in the distribution of the assets of the Corporation. -3- (3) Merger; Consolidation; etc. The Corporation shall give notice to each holder of Series A Preferred Stock at least twenty (20) days prior to the effective date of (i) any consolidation or merger of the Corporation with or into any other corporation or corporations (other than a merger or consolidation in which the holders of Series A Preferred Stock receive securities of the surviving corporation having substantially similar rights to the Series A Preferred Stock and in which the shareholders of the Corporation immediately prior to the transaction will be the holders of at least a majority of the voting securities of the surviving corporation immediately after the transaction); (ii) a sale, conveyance or disposition of all or substantially all of the assets of the Corporation; or (iii) the effectuation by the Corporation of a transaction or series of related transactions in which more than 50% of the voting power of the Corporation is disposed of. The holders of a majority of the Series A Preferred Stock shall be entitled, by electing prior to the effective date of any of the foregoing types of transactions, to require the Corporation to treat any such transaction as if it were a Liquidation and to cause the proceeds of such transaction, or any property deliverable from such transaction to be distributed among the holders of Series A Preferred Stock as if such transaction were a Liquidation. (4) Voting Provisions. Except as expressly provided herein or as otherwise required by law, the holders of Series A Preferred Stock will vote together with the holders of Common Stock, and not as a separate class, on all matters, with each holder of Series A Preferred Stock entitles to one vote per share. (5) Protective Provisions. So long as any shares of Series A Preferred Stock shall remain outstanding, the Corporation shall not, without the affirmative vote of the holders of at least a majority of the shares of Series A Preferred Stock at the time outstanding, voting as a single class (i) alter or change the rights, preferences or privileges of the shares of the Series A Preferred Stock so as to affect adversely the shares of the Series A Preferred Stock, (ii) increase the authorized number of shares of the Series A Preferred Stock, or (iii) do any act or thing which would result in taxation of the holders of shares of Series A Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as amended (or any other comparable provision) or (iv) increase the liquidation value of the Series A Preferred Stock. (6) No Conversion. The Series A Preferred Stock shall not be convertible into other shares of the capital stock of the Corporation. -4- (7) Board Seats. The holders of the Series A Preferred Stock shall have the right to nominate, in the manner prescribed in the Corporation's bylaws, two (2) of the candidates for election as director of the Corporation. The holders of the Series A Preferred Stock, voting as a separate series, shall be entitled to elect any candidates so nominated. The holders of the Common Stock, voting as a separate class, shall be entitled to elect that number of directors as shall equal the total number of director positions as the Board of Directors of the Corporation shall consist of from time to time, less the number of directors, if any, nominated and elected by the holders of the Series A Preferred Stock. At any meeting (or in a written consent in lieu thereof) held for the purpose of electing directors, the presence in person or by proxy (or the written consent) of the holders of a majority of the shares of the Series A Preferred Stock then outstanding shall constitute a quorum of the Series A Preferred Stock for the election of directors to be elected solely by the holders of the Series A Preferred Stock. A vacancy in any directorship elected by the holders of the Series A Preferred Stock shall be filled only by vote or written consent of the holders of the Series A Preferred Stock. A vacancy in any directorship elected by the holders of the Common Stock shall be filled only by vote or written consent of the holders of the Common Stock. 6. Section 1715 of the Pennsylvania Business Corporation Law of 1988, as amended (the "BCL") and subchapters E, F, G and H of Chapter 25 of the BCL shall not be applicable to this Corporation. 7. Henceforth, these Amended and Restated Articles of Incorporation shall become the Corporation's Articles of Incorporation and shall supersede the original Articles of Incorporation of this Corporation and all amendments thereto. -5- EX-10 4 ex10-42.txt EXHIBIT 10.42 UNIVERSAL DISPLAY CORPORATION EQUITY COMPENSATION PLAN The purpose of the Universal Display Corporation Equity Compensation Plan (the "Plan") is to provide designated key employees (including employees who are also officers and directors) and directors who are not employees ("Non-Employee Directors") of Universal Display Corporation and its "subsidiary corporations," as that term is defined in section 424(f) of the Internal Revenue Code of 1986, as amended (the "Code") (hereinafter collectively referred to as the "Company") and selected consultants ("Consultants") to the Company with the opportunity to receive grants of incentive stock options, nonqualified stock options and other forms of equity compensation; provided, however, that Non-Employee Directors and Consultants shall not be eligible to receive incentive stock options under the Plan. The Company believes that the Plan will cause the participants to contribute materially to the growth of the Company, thereby benefiting the Company's stockholders and will align the economic interests of the participants with those of the stockholders. 1. ADMINISTRATION -------------- The Plan shall be administered and interpreted by the Board of Directors of the Company (the "Board"), or by a committee consisting of members of the Board, which shall be appointed by the Board. During any period in which the Company's stock is publicly traded, however, the Plan may be administered by a committee (the "Committee") consisting of two or more persons, all of whom are "outside directors" as defined under section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and related Treasury regulations, and "non-employee directors" as defined under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Membership on the Committee shall also be structured so as to comply with applicable exchange rules. Notwithstanding the foregoing, the Board may retain the ability to ratify or approve any grants as it deems appropriate, and the Board shall approve and administer all grants made to non-employee directors. The Board may delegate this authority to one or more subcommittees, as it deems appropriate. To the extent that the Board or a subcommittee administers the Plan, references in the Plan to the "Committee" shall be deemed to refer to such Board or such subcommittee. Except as otherwise specifically provided in this Plan, the Committee shall have the sole authority to (i) determine the individuals to whom grants shall be made under the Plan, (ii) determine the type, size and terms of grants to each such individual, (iii) determine the time when the grants will be made and the duration of the exercise or restriction period, including the criteria for vesting, the acceleration of vesting, or the lapse of restriction, (iv) amend the terms of any previously issued grants; (v) select the "Valuation Expert," as defined below, and (vi) deal with any other matters arising under the Plan. The Committee shall have full power and authority to administer and interpret the Plan, to make factual determinations and to adopt or amend such rules, regulations, agreements and instruments for implementing the Plan and for conduct of its business as it deems necessary or advisable, in its sole discretion. The Committee's interpretations of the Plan and all determinations made by the Committee pursuant to the powers vested in it hereunder shall be conclusive and binding on all persons having any interests in the Plan or in any awards granted hereunder. All powers of the Committee shall be executed in the best interest of the Company, not as a fiduciary and in keeping with the objectives of the Plan and need not be uniform as to similarly situated individuals. 2. GRANTS ------ Awards under the Plan may consist of grants of incentive stock options as described in Section 5 ("Incentive Stock Options"), nonqualified stock options as described in Section 5 ("Nonqualified Stock Options") (Incentive Stock Options and Nonqualified Stock Options are collectively referred to as "Options" or "Stock Options"), stock awards as described in Section 8 ("Stock Awards"), stock appreciation rights as described in Section 9 ("SARs"), and performance units as described in Section 10 ("Performance Units") (hereinafter collectively referred to as "Grants"). All Grants shall be subject to the terms and conditions set forth herein and to such other terms and conditions consistent with the Plan as the Committee deems appropriate and as are specified in writing to the individual in a grant letter or other instrument or amendment thereto (the "Grant Letter"). 3. SHARES SUBJECT TO THE PLAN -------------------------- Subject to the adjustment specified below, the aggregate number of shares of the common stock of the Company, par value $.01 (the "Company Stock") that have been or may be issued or transferred under the Plan is 4,600,000 shares, in the aggregate. The shares may be authorized but unissued shares of Company Stock or reacquired shares of Company Stock, including shares purchased by the Company for purposes of the Plan. If and to the extent Options or SARs granted under the Plan terminate, expire, or are canceled, forfeited, exchanged or surrendered without having been exercised or if any Stock Awards or Performance Units (including restricted Stock Awards received upon the exercise of Options) are forfeited, the shares subject to such Grants shall again be available for purposes of the Plan. If there is any change in the number or kind of shares of Company Stock issuable under the Plan through the declaration of stock dividends or if the value of outstanding shares of Company Stock is substantially reduced due to the Company's payment of an extraordinary dividend or distribution, or through a recapitalization, stock splits, or combinations or exchanges of such shares, or merger, reorganization or consolidation of the Company, reclassification or change in par value or by reason of any other extraordinary or unusual events affecting the outstanding Company Stock as a class without the Company's receipt of consideration, the maximum number of shares of Company Stock available for Grants, the maximum number of shares of Company Stock for which any one individual participating in the Plan may be granted over the term of the Plan, the number of shares covered by outstanding Grants, and the price per share or the applicable market value of such Grants, and the other terms and conditions of the Grants, as the Committee may deem necessary or desirable, may be proportionately adjusted by the Committee to reflect any increase or decrease in the number or kind of issued shares of Company Stock to preclude the enlargement or dilution of rights and benefits under such Grants; provided, however, that any fractional shares resulting from such adjustment shall be eliminated. The adjustments determined by the Committee shall be final, binding and conclusive. Notwithstanding the foregoing, no adjustment shall be authorized or made pursuant to this Section to the extent that such authority or adjustment would cause any Incentive Stock Option to fail to comply with Section 422 of the Code. - 2 - 4. ELIGIBILITY FOR PARTICIPATION ----------------------------- All individuals employed by the Company ("Employees") (including Employees who are officers or members of the Board), all Non-Employee Directors and all Consultants whose services, in the judgment of the Committee, can have a significant effect on the long-term success of the Company shall be eligible to participate in the Plan. Except as specifically otherwise provided in this Plan, the Committee shall select the Employees, Non-Employee Directors and Consultants to receive Grants (each, a "Grantee") and determine the number of shares of Company Stock subject to a particular Grants in such manner as the Committee determines. Nothing contained in this Plan shall be construed to limit the right of the Company to grant options or warrants or issue stock otherwise in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business or assets of any corporation, firm or association, including options or warrants granted to employees thereof who become Employees of the Company, or for other proper corporate purpose. 5. GRANTING OF OPTIONS ------------------- (a) Number of Shares. The Committee, in its sole discretion, shall determine the number of shares of Company Stock that will be subject to each Stock Option grant. The maximum aggregate number of shares of Company Stock that shall be subject to Grants of Stock Options or SARs made under the Plan to any individual during any calendar year shall be 400,000 shares, subject to adjustment as described above. (b) Type of Option and Price. The Committee may grant Incentive Stock Options, Nonqualified Stock Options or any combination of Incentive Stock Options and Nonqualified Stock Options, all in accordance with the terms and conditions set forth herein; provided, however, that neither Non-Employee Directors nor Consultants shall be eligible to receive grants of Incentive Stock Options. The purchase price of Company Stock subject to a Stock Option shall be determined by the Committee and may be equal to, greater than, or less than the fair market value of a share of such stock on the date such Stock Option is granted; provided, however, that the purchase price of Company Stock subject to an Incentive Stock Option shall be equal to, or greater than, the fair market value of a share of such stock on the date such Stock Option is granted. During such time that the Company Stock is not listed on an established stock exchange or traded in the over-the-counter-market, the fair market value of Company Stock shall be determined by an independent firm, i.e., a firm not otherwise engaged in consulting work for the Company, unless determined otherwise by the Committee, with expertise in the valuation of business entities and the securities thereof, selected by the Committee (the "Valuation Expert") or as otherwise determined by - 3 - the Committee in good faith based on the best available facts and circumstances. Such determination of fair market value shall be made on a periodic basis, but no less frequently than once a calendar year. If the Company Stock is listed upon an established stock exchange or other market source, as determined by the Committee, fair market value on any date of reference shall be the closing price of a share of Company Stock (on a consolidated basis) on the principal exchange or other recognized market source, as determined by the Committee on such date, or if there is no sale on such date, then the closing price of a share of Company Stock on the last previous day on which a sale is reported. (c) Exercise Period. The Committee shall determine the option exercise period of each Stock Option. The exercise period shall not exceed ten years from the date of grant. (d) Exercisability of Options. Stock Options shall become exercisable in accordance with the terms and conditions determined by the Committee, in its sole discretion, and specified in the Grant Letter. All outstanding Stock Options shall become immediately exercisable upon a Change in Control (as defined herein), unless the Committee, in its sole discretion, determines not to accelerate such Stock Options upon a Change in Control. (e) Manner of Exercise. The Grantee of Stock Options (the "Optionee") may exercise a Stock Option which has become exercisable by delivering a notice of exercise to the Committee with accompanying payment of the option price in accordance with (h) below. Such notice may instruct the Company to deliver shares of Company Stock due upon the exercise of the Stock Option to any registered broker or dealer designated by the Company ("Designated Broker") in lieu of delivery to the Optionee. Such instructions must designate the account into which the shares are to be deposited. The Optionee may tender this notice of exercise, which has been properly executed by the Optionee, and the aforementioned delivery instructions to any Designated Broker. (f) Termination of Employment, Disability or Death. (1) Employees. (a) In the event the Optionee during the Optionee's lifetime ceases to be an employee of the Company for any reason other than death, disability (as defined herein), retirement approved by the Company, or termination for cause, as defined below, by the Company, any Stock Option which is otherwise exercisable by the Optionee shall terminate unless exercised within three months of the date on which the Optionee ceases to be an employee (or within such other period of time as may be specified in the Grant Letter), but in any event no later than the date of expiration of the option exercise period (except as the Committee may otherwise provide in the Grant Letter). For purposes of this Section 5, a leave of absence at the request, or with the approval, of the Company shall not be deemed a termination of employment so long as the period of such leave does not exceed 90 days, or, if longer, so long as the Optionee's right to re-employment with the Company is guaranteed by contract. Any of the Optionee's Stock Options which are not otherwise exercisable as of the date on which the Optionee ceases to be an employee shall terminate as of such date (except as the Board may otherwise provide). - 4 - (b) In the event the Optionee ceases to be an employee of the Company on account of a termination for cause by the Company, as determined in accordance with the personnel policies of the Company in effect before any Change in Control of the Company, any Stock Option held by the Optionee shall terminate as of the date the Optionee ceases to be an employee (except as the Committee may otherwise provide). (c) In the event the Optionee ceases to be an employee of the Company on account of becoming disabled within the meaning of section 22(e) of the Code, any Stock Option which is otherwise exercisable by the Optionee on the date on which the Optionee ceases to be an employee shall terminate unless exercised within one year from the date on which the Optionee ceases to be an employee (or within such other period of time as may be specified in the Grant Letter), but in any event no later than the date of the expiration of the option exercise period (except as the Committee may otherwise provide in the Grant Letter). (d) In the event of the death of the Optionee while he is an employee of the Company or within 30 days of the date on which he ceases to be an employee for any reason other than a termination for cause by the Company (or within such other period of time as may be specified in the Grant Letter), any Stock Option which is otherwise exercisable by the Optionee on the date on which the Optionee ceases to be an employee shall terminate unless exercised by the Optionee's personal representative within six months of the date on which the Optionee ceases to be an employee (or within such other period of time as may be specified in the Grant Letter), but in any event no later than the date of the expiration of the option exercise period (except as the Committee may otherwise provide in the Grant Letter). (e) Notwithstanding the foregoing provisions, failure to exercise an Incentive Stock Option within the periods of time prescribed under sections 421 and 422(a) of the Code shall cause the Incentive Stock Option to cease to be treated as an "incentive stock option" for purposes of sections 421 and 422 of the Code. (2) Non-Employee Directors and Consultants. (a) In the event the Optionee during the Optionee's lifetime ceases to be a Non-Employee Director or Consultant to the Company for any reason other than becoming an employee of the Company, or termination for cause, as defined below, by the Company, any Stock Option which is otherwise exercisable by the Optionee shall not terminate until the date of expiration of the option exercise period (except as the Committee may otherwise provide in the Grant Letter). Any of the Optionee's Stock Options which are not otherwise exercisable as of the date on which the Optionee ceases his relationship with the Company shall terminate as of such date (except as the Committee may otherwise provide). (b) In the event the Optionee ceases to be a Non-Employee Director or Consultant to the Company on account of a termination for cause by the Company, as determined in accordance with the policies of the Company in effect before any Change in Control of the Company, any Stock Option held by the Optionee shall terminate as of the date the Optionee ceases to serve in such capacity (except as the Committee may otherwise provide). - 5 - (g) Satisfaction of Option Price. The Optionee shall pay the option price specified in the Grant Letter in (i) cash; (ii) with the approval of the Committee, by delivering shares of Company Stock owned by the Optionee including Company Stock (including, but not limited to, shares acquired in connection with the exercise of a particular Stock Option and having a fair market value on the date of exercise equal to the option price, subject to such restrictions as the Committee may impose) (a "Stock-for-Stock Exercise"); (iii) if, as directed by the Committee, shares of Company Stock may not be sold immediately following the exercise of a Stock Option, with the proceeds of a promissory note payable by the Optionee to the Company, but only in accordance with the provisions of a loan program established by the Company, or any successor program as in effect from time to time, and only to the extent not precluded by the Sarbanes-Oxley Act of 2002 and other applicable law, (A) in a principal amount of up to 100% of the payment due upon the exercise of the Stock Option, or such applicable lower percentage as may be specified by the Board pursuant to the loan program, and (B) bearing interest at a rate not less than the applicable Federal rate prescribed by Section 1274 of the Code, or such higher rate as may be specified by the Committee pursuant to the loan program; (iv) payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board; (v) by such other method as the Committee may approve; or (vi) through any combination of (i), (ii), (iii), (iv) or (v). Any loan by the Company under (iii) above shall be with full recourse against the Optionee to whom the loan is granted, and shall be secured in whole or in part by the shares of Company Stock so purchased. In addition, any such loan by the Company shall, at the option of the Company, become immediately due and payable in full upon termination of the Optionee's employment or position as an officer or director with the Company for any reason, or upon a sale of any shares of Company Stock acquired with such loan to the extent of the cash and fair market value of any property received by the Optionee in such sale. The Committee may make arrangements for the application of payroll deductions from compensation payable to the Optionee to amounts owing to the Company under any such loan. Until any loan by the Company hereunder is fully paid in cash, the shares of Company Stock purchased with the loan shall be pledged to the Company as security for the loan, and the Company shall retain physical possession of the stock certificates evidencing such shares together with a duly executed stock power for such shares. No loan shall be made hereunder unless counsel for the Company shall be satisfied that the loan and the issuance of the shares of Company Stock funded thereby will be in compliance with all applicable federal, state and local laws. The Optionee shall pay the option price and the amount of withholding tax due, if any, as specified by the Committee. Shares of Company Stock shall not be issued or transferred upon exercise of a Stock Option until the option price is fully paid and any amount of withholding tax is paid. Shares of Company Stock used in a Stock-for-Stock Exercise shall have been held by the Optionee for the requisite period of time to avoid "anti-pyramiding" rules or other adverse accounting consequences to the Company with respect to the Option. (h) Limits on Incentive Stock Options. Each Incentive Stock Option shall provide that to the extent that the aggregate fair market value of the Company Stock on the date of the grant with respect to which Incentive Stock Options are exercisable for the first time by an Optionee during any calendar year under the Plan or any other stock option plan of the Company exceeds $100,000, then such option as to the excess shall be treated as a Nonqualified Stock Option. An Incentive Stock Option shall not be granted to any Employee who, at the time of grant, owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or parent of the Company, unless the option price per share is not less than 110% of the fair market value of Company Stock on the date of grant and the option exercise period is not more than five years from the date of grant. - 6 - (i) Optional Purchase by the Company. In the sole discretion of the Committee, in lieu of the exercise of a Stock Option, the Optionee may be permitted to transfer the Stock Option to the Company in exchange for a cash payment equal to the excess over the purchase price of the then fair market value of the shares of Company Stock subject to the Optionee's outstanding Stock Options. 6. TRANSFERABILITY OF OPTIONS -------------------------- Only the Optionee or his or her authorized legal representative may exercise rights under a Stock Option. Such persons may not transfer those rights except by will or by the laws of descent and distribution or, if permitted under Rule 16b-3 of the Exchange Act and if permitted in any specific case by the Committee in its sole discretion, pursuant to a qualified domestic relations order as defined under the Code or Title I of ERISA or the regulations thereunder. When an Optionee dies, the personal representative or other person entitled to succeed to the rights of the Optionee ("Successor Optionee") may exercise such rights. A Successor Optionee must furnish proof satisfactory to the Company of his or her right to receive the Stock Option under the Optionee's will or under the applicable laws of descent and distribution. Notwithstanding the foregoing, the Committee may permit an Employee to transfer rights under a Nonqualified Stock Option to the Employee's spouse or a lineal descendant or to one or more trusts for the benefit of such family members or to partnerships in which such family members are the only partners (a "Family Transfer") provided that the Employee receives no consideration for a Family Transfer and the Grant Letter relating to the Stock Options transferred in a Family Transfer continues to be subject to the same terms and conditions that were applicable to such Stock Options immediately prior to the Family Transfer. 7. STOCK AWARDS ------------ The Committee may issue or transfer shares of Company Stock to an Employee, Non-Employee Director or Consultant under a Stock Award, upon such terms as the Committee deems appropriate. The following provisions are applicable to Stock Awards: (a) General Requirements. Shares of Company Stock issued or transferred pursuant to Stock Awards may be issued or transferred for consideration or for no consideration, and subject to restrictions or no restrictions, as determined by the Committee. The Committee may, but shall not be required to, establish conditions under which restrictions on Stock Awards shall lapse over a period of time or according to such other criteria as the Committee deems appropriate, including, without limitation, restrictions based upon the achievement of specific performance goals. The period of time during which the Stock Awards will remain subject to restrictions will be designated in the Grant Letter as the "Restriction Period." - 7 - (b) Number of Shares. The Committee shall determine the number of shares of Company Stock to be issued or transferred pursuant to a Stock Award and the restrictions applicable to such shares. (c) Requirement of Employment or Service. If the Grantee ceases to be employed by, or provide service to, the Employer during a period designated in the Grant Letter as the Restriction Period, or if other specified conditions are not met, the Stock Award shall terminate as to all shares covered by the Grant as to which the restrictions have not lapsed, and those shares of Company Stock must be immediately returned to the Company. The Committee may, however, provide for complete or partial exceptions to this requirement as it deems appropriate. (d) Restrictions on Transfer and Legend on Stock Certificate. During the Restriction Period, a Grantee may not sell, assign, transfer, pledge or otherwise dispose of the shares of a Stock Award except to a successor under Section 10. Each certificate for a share of a Stock Award shall contain a legend giving appropriate notice of the restrictions in the Grant. The Grantee shall be entitled to have the legend removed from the stock certificate covering the shares subject to restrictions when all restrictions on such shares have lapsed. The Committee may determine that the Company will not issue certificates for Stock Awards until all restrictions on such shares have lapsed, or that the Company will retain possession of certificates for shares of Stock Awards until all restrictions on such shares have lapsed. (e) Right to Vote and to Receive Dividends. Unless the Committee determines otherwise, during the Restriction Period, the Grantee shall have the right to vote shares of Stock Awards and to receive any dividends or other distributions paid on such shares, subject to any restrictions deemed appropriate by the Committee, including, without limitation, the achievement of specific performance goals. (f) Lapse of Restrictions. All restrictions imposed on Stock Awards shall lapse upon the expiration of the applicable Restriction Period and the satisfaction of all conditions imposed by the Committee. The Committee may determine, as to any or all Stock Awards, that the restrictions shall lapse without regard to any Restriction Period. 8. STOCK APPRECIATION RIGHTS ------------------------- (a) General Requirements. The Committee may grant stock appreciation rights ("SARs") to an Employee, Non-Employee Director or Consultant separately or in tandem with any Option (for all or a portion of the applicable Option). Tandem SARs may be granted either at the time the Option is granted or at any time thereafter while the Option remains outstanding; provided, however, that, in the case of an Incentive Stock Option, SARs may be granted only at the time of the Grant of the Incentive Stock Option. The Committee shall establish the base amount of the SAR at the time the SAR is granted. Unless the Committee determines otherwise, the base amount of each SAR shall be equal to the per share exercise price of the related Option or, if there is no related Option, the fair market value of a share of Company Stock as of the date of Grant of the SAR. - 8 - (b) Tandem SARs. In the case of tandem SARs, the number of SARs granted to a Grantee that shall be exercisable during a specified period shall not exceed the number of shares of Company Stock that the Grantee may purchase upon the exercise of the related Option during such period. Upon the exercise of an Option, the SARs relating to the Company Stock covered by such Option shall terminate. Upon the exercise of SARs, the related Option shall terminate to the extent of an equal number of shares of Company Stock. (c) Exercisability. SARs shall be exercisable during the period specified by the Committee in the Grant Letter and shall be subject to such vesting and other restrictions as may be specified in the Grant Letter. The Committee may accelerate the exercisability of any or all outstanding SARs at any time for any reason. SARs may only be exercised while the Grantee is employed by, or providing service to, the Employer or during the applicable period after termination of employment or service comparable to the provisions of Section 5(f) as related to Stock Options. A tandem SAR shall be exercisable only during the period when the Option to which it is related is also exercisable. (d) Value of SARs. When a Grantee exercises SARs, the Grantee shall receive in settlement of such SARs an amount equal to the value of the stock appreciation for the number of SARs exercised, payable in cash, Company Stock or a combination thereof. The stock appreciation for an SAR is the amount by which the fair market value of the underlying Company Stock on the date of exercise of the SAR exceeds the base amount of the SAR as described in subsection (a). (e) Transferability of SARs. SARs may only be transferred in situations comparable to those under Section 6 relating to the transfer of Stock Options. 9. PERFORMANCE UNITS ----------------- (a) General Requirements. The Committee may grant performance units ("Performance Units") to an Employee, Non-Employee Director or Consultant. Each Performance Unit shall represent the right of the Grantee to receive an amount based on the value of the Performance Unit, if performance goals established by the Committee are met. A Performance Unit shall be based on the fair market value of a share of Company Stock or on such other measurement base as the Committee deems appropriate. The Committee shall determine the number of Performance Units to be granted and the requirements applicable to such units. (b) Performance Period and Performance Goals. When Performance Units are granted, the Committee shall establish the performance period during which performance shall be measured (the "Performance Period"), performance goals applicable to such units ("Performance Goals") and such other conditions of the Grant as the Committee deems appropriate. Performance Goals may relate to the financial performance of the Company or its operating units, the performance of Company Stock, individual performance, or such other criteria as the Committee deems appropriate. - 9 - (c) Payment with respect to Performance Units. At the end of each Performance Period, the Committee shall determine to what extent the Performance Goals and other conditions of the Performance Units are met, the value of the Performance Units (if applicable), and the amount, if any, to be paid with respect to the Performance Units. Payments with respect to Performance Units shall be made in cash, in Company Stock, or in a combination of the two, as determined by the Committee. (d) Requirement of Employment or Service. If the Grantee ceases to be employed by, or provide service to, the Employer during a Performance Period, or if other conditions established by the Committee are not met, the Grantee's Performance Units shall be forfeited. The Committee may, however, provide for complete or partial exceptions to this requirement as it deems appropriate. 10. QUALIFIED PERFORMANCE-BASED COMPENSATION ---------------------------------------- (a) Designation as Qualified Performance-Based Compensation. The Committee may determine that Performance Units or Stock Awards granted to an Employee shall be considered "qualified performance-based compensation" under section 162(m) of the Code. The provisions of this Section 10 shall apply to Grants of Performance Units and Stock Awards that are to be considered "qualified performance-based compensation" under section 162(m) of the Code. (b) Performance Goals. When Performance Units or Stock Awards that are to be considered "qualified performance-based compensation" are granted, the Committee shall establish in writing (i) the objective performance goals that must be met, (ii) the period during which these performance goals must be met, (iii) the threshold, target and maximum amounts that may be paid if these goals are met, and (iv) any other conditions that the Committee deems appropriate and consistent with the Plan and Section 162(m) of the Code. The performance goals may relate to the Employee's business unit or the performance of the Company and its parents and subsidiaries as a whole, or any combination of the foregoing. The Committee shall use objectively determinable performance goals based on one or more of the following criteria: stock price, earnings per share, net earnings, operating earnings, return on assets, shareholder return, return on equity, growth in assets, unit volume, sales, market share, or strategic business criteria consisting of one or more objectives based on meeting specified revenue goals, market penetration goals, geographic business expansion goals, cost targets or goals relating to acquisitions or divestitures. (c) Establishment of Goals. The Committee shall establish the performance goals in writing either before the beginning of the relevant performance period or during a period ending no later than the earlier of (i) 90 days after the beginning of such performance period or (ii) the date on which 25% of the performance period has been completed, or such other date as may be required or permitted under applicable regulations under section 162(m) of the Code. The performance goals shall satisfy the requirements for "qualified performance-based compensation," including the requirement that the achievement of the goals be substantially uncertain at the time they are established and that the goals be established in such a way that a third party with knowledge of the relevant facts could determine whether and to what extent the goals have been met. The Committee shall not have discretion to increase the amount of compensation that is payable upon achievement of the designated performance goals. - 10 - (d) Maximum Payment. If Stock Awards or Performance Units measured with respect to Company Stock are granted, not more than 400,000 shares of Company Stock may be granted to an Employee as Performance Units or Stock Awards for any performance period. If Performance Units measured with respect to cash are granted, the maximum amount that may be paid to an Employee pursuant to Performance Units with respect to any performance period is $1,000,000. (e) Announcement of Grants. The Committee shall certify and announce the results for each performance period to all affected Grantees immediately following the announcement of the Company's financial results for such period. If and to the extent that the Committee does not certify that the relevant performance goals have been met, the grants of Stock Awards or Performance Units for the performance period shall be forfeited or shall not be made, as applicable. (f) Death, Disability or Other Circumstances. The Committee may provide that Performance Units or Stock Awards shall be payable or restrictions on Stock Awards shall lapse, in whole or in part, in the event of the Grantee's death or Disability during the relevant performance period, or under other circumstances, consistent with the Treasury regulations and rulings under section 162(m) of the Code. 11. CHANGE IN CONTROL OF THE COMPANY -------------------------------- As used herein, a "Change in Control" shall be deemed to have occurred if: (i) As a result of any transaction, any one stockholder other than an existing stockholder as of the effective date of the Plan, becomes a beneficial owner, as defined below, directly or indirectly, of securities of the Company representing more than 50% of the Common Stock of the Company or the combined voting power of the Company's then outstanding securities; (ii) A liquidation or dissolution of or the sale of all or substantially all of the Company's assets occurs; or (iii) After the effective date of the Plan: (a) As a result of a tender offer, stock purchase, other stock acquisition, merger, consolidation, recapitalization, reverse split, or sale or transfer of assets (but excluding any sale of the Company's securities to the public pursuant to a public offering), any person or group (as such terms are used in and under Section 13(d) of the Exchange Act) other than an existing stockholder, becomes the beneficial owner (as defined in Rule 13-d under the Exchange Act), directly or indirectly, of securities of the Company representing more than 30% of the combined voting power of the Company's then outstanding securities; or - 11 - (b) During any period of two consecutive years, individuals who at the beginning of such period constitute the board of directors cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's shareholders, of each new director was approved by a vote of at least 2/3 of the directors then still in office who were directors at the beginning of the period. 12. CERTAIN CORPORATE CHANGES ------------------------- (a) Sale or Exchange of Assets, Dissolution or Liquidation, or Merger or Consolidation Where the Company Does Not Survive. If all or substantially all of the assets of the Company are to be sold or exchanged, the Company is to be dissolved or liquidated, or the Company is a party to a merger or consolidation with another corporation in which the Company will not be the surviving corporation, then, at least 10 days prior to the effective date of such event, the Company shall give each Optionee with any outstanding Stock Options written notice of such event. Each such Optionee shall thereupon have the right to exercise in full any installments of such Stock Options not previously exercised (whether or not the right to exercise such installments has accrued pursuant to such Stock Options), within 10 days after such written notice is sent by the Company or, if a cashout of such Stock Options would not result in materially adverse accounting consequences, to require that the Company purchase such Stock Options for a cash payment equal to the excess over the purchase price of the then fair market value of the shares of Company Stock subject to the Optionee's outstanding Stock Options. In addition, under the above circumstances all restrictions on Stock Awards shall lapse, all SARs shall become fully vested and exercisable, and all Performance Units shall be deemed fully earned. (b) Merger or Consolidation Where the Company Survives. If the Company is a party to a merger or consolidation in which the Company will be the surviving corporation, or in the event of the occurrence of any other Change in Control not described in subsection (a), then the Board may, in its sole discretion, elect to give each Optionee with any outstanding Stock Options written notice of such event. If such notice is given, each such Optionee shall thereupon have the right to exercise some or all of any installments of such Stock Options not previously exercised (whether or not the right to exercise such installments has accrued pursuant to such Stock Options), within 10 days after such written notice is sent by the Company or, if a cashout of such Stock Options would result in materially adverse accounting consequences, to require that the Company purchase such Stock Options for a cash payment equal to the excess over the purchase price of the then fair market value of the shares of Company Stock subject to the Optionee's outstanding Stock Options. In addition, under the above circumstances the Board may determine that all restrictions on Stock Awards shall lapse, all SARs shall become fully vested and exercisable and all Performance Units shall be deemed fully earned. 13. AMENDMENT AND TERMINATION OF THE PLAN ------------------------------------- (a) Amendment. The Board, by written resolution, may amend or terminate the Plan at any time; provided, however, that any amendment that increases the aggregate number (or individual limit for any single Grantee) of shares of Company Stock that may be issued or transferred under the Plan (other than by operation of Section 3(b)), or modifies the requirements as to eligibility for participation in the Plan, shall be subject to approval by the shareholders of the Company. - 12 - (b) Termination of Plan. The Plan shall terminate on the tenth anniversary of its effective date unless terminated earlier by the Board of Directors of the Company or unless extended by the Board with the approval of the stockholders. (c) Termination and Amendment of Outstanding Grant. A termination or amendment of the Plan that occurs after a Grant is made shall not materially impair the rights of a Grantee unless the Grantee consents or unless the Committee acts under Section 22(b) hereof. The termination of the Plan shall not impair the power and authority of the Committee with respect to an outstanding Grant. Whether or not the Plan has terminated, an outstanding Grant may be terminated or amended under Section 22(b) hereof or may be amended by agreement of the Company and the Grantee consistent with the Plan. (d) Governing Document. The Plan shall be the controlling document. No other statements, representations, explanatory materials, or examples, oral or written, may amend the Plan in any manner. The Plan shall be binding upon and enforceable against the Company, its successors and assigns and the Grantees and their assigns. 14. FUNDING OF THE PLAN ------------------- This Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Grant under this Plan. In no event shall interest be paid or accrued on any Grant, including unpaid installments of Grant. 15. RIGHTS OF INDIVIDUALS --------------------- Nothing in this Plan shall entitle any Employee, Non-Employee Director, Consultant or other person to any claim or right to be issued a Grant under this Plan. Neither this Plan nor any action taken hereunder shall be construed as giving any Employee, Non-Employee Director, Consultant or other person any rights to be retained by or in the employ of the Company or any other employment rights. 16. NO FRACTIONAL SHARES -------------------- No fractional shares of Company Stock shall be issued or delivered pursuant to the Plan or any Grant. The Committee shall determine whether cash, other awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated. 17. WITHHOLDING OF TAXES -------------------- The Grantee or other person receiving shares of Company Stock or other consideration under this Plan shall be required to pay to the Company the amount of any federal, state or local taxes which the Company is required to withhold with respect to the taxable income associated with such Grant or the Company shall have the right to deduct from other wages paid to the Employee by the Company (including through the withholding of Company Stock purchased upon the exercise of a Stock Option or otherwise deliverable under this Plan, if then authorized by the Committee and applicable law) the minimum amount of any withholding due with respect to such Stock Grant. - 13 - 18. AGREEMENTS WITH GRANTEES ------------------------ Each Grant made under this Plan shall be evidenced by a Grant Letter containing such terms and conditions as the Committee shall approve. 19. REQUIREMENTS FOR ISSUANCE OF SHARES ----------------------------------- No Company Stock shall be issued or transferred upon the exercise of any Stock Option or lapse of restrictions or payment of other Grants under this Plan hereunder unless and until all legal requirements applicable to the issuance or transfer of such Company Stock have been complied with to the satisfaction of the Committee. The Committee shall have the right to condition any Grant made to any Optionee hereunder on such Optionee's undertaking in writing to comply with such restrictions on his subsequent disposition of such shares of Company Stock as the Committee shall deem necessary or advisable as a result of any applicable law, regulation or official interpretation thereof, and certificates representing such shares may be legended to reflect any such restrictions. Certificates representing shares of Company Stock issued under the Plan will be subject to such stop-transfer orders and other restrictions as may be applicable under such laws, regulations and other obligations of the Company, including any requirement that a legend or legends be placed thereon. 20. HEADINGS -------- Section headings are for reference only. In the event of a conflict between a title and the content of a Section, the content of the Section shall control. 21. EFFECTIVE DATE -------------- (a) Effective Date of the Plan. Subject to the approval of the Company's stockholders, this Plan shall be effective as of September 1, 1995. (b) Effectiveness of Section 16 Provisions. The provisions of the Plan that refer to, or are applicable to persons subject to, Section 16 of the Exchange Act shall be effective, if at all, upon registration of the Company Stock under Section 12(g) of the Exchange Act, and shall remain effective thereafter for so long as such stock is so registered. 22. MISCELLANEOUS ------------- (a) Substitute Grants. The Committee may make a Grant to an employee of another corporation who becomes an Employee by reason of a corporate merger, consolidation, acquisition of stock or property, reorganization or liquidation involving the Company or any of its subsidiaries in substitution for a stock option or restricted stock grant granted by such corporation ("Substituted Stock Incentives"). The terms and conditions of the substitute grant may vary from the terms and conditions required by the Plan and from those of the Substituted Stock Incentives. The Committee shall prescribe the provisions of the substitute grants. - 14 - (b) Compliance with Law. The Plan, the exercise of Stock Options, granting of other forms of equity compensation under the Plan and the obligations of the Company to issue or transfer shares of Company Stock with respect to Grants shall be subject to all applicable laws and to approvals by any governmental or regulatory agency as may be required. With respect to persons subject to Section 16 of the Exchange Act, it is the intent of the Company that the Plan and all transactions under the Plan comply with all applicable provisions of Rule 16b-3 or its successors under the Exchange Act. The Committee may revoke any Grant if it is contrary to law or modify a Grant to bring it into compliance with any valid and mandatory government regulation. The Committee may also adopt rules regarding the withholding of taxes on payments to Grantees. The Committee may, in its sole discretion, agree to limit its authority under this Section. (c) Ownership of Stock. A Grantee or successor shall have no rights as a shareholder with respect to any shares of Company Stock covered by a Grant until the shares are issued or transferred to the Grantee or successor on the stock transfer records of the Company. (d) Governing Law. The validity, construction, interpretation and effect of the Plan and Grant Letters issued under the Plan shall exclusively be governed by and determined in accordance with the law of the Commonwealth of Pennsylvania. - 15 - EX-10 5 ex10-43.txt EXHIBIT 10.43 CHANGE IN CONTROL AGREEMENT This Change in Control Agreement (the "Agreement') is made as of April 28, 2003, by and between Universal Display Corporation (the "Company"), and Sherwin I. Seligsohn ("Employee"). WHEREAS, Employee is employed by UDC, Inc., an affiliate of the Company, currently serving in a capacity as Chief Executive Officer of the Company; and WHEREAS, the Company believes that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of Employee to the Company without distraction notwithstanding the fact that the Company could be subject to a "Change in Control" (as hereinafter defined), and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; and WHEREAS, in consideration for Employee agreeing to continue in employment with the Company and its affiliate and agreeing to keep Company information confidential and not to compete with the Company (as hereinafter defined), the Company agrees that Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on Employee in the event Employee's employment with the Company is terminated without cause in connection with a Change in Control. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the Company and Employee (individually a "Party" and together, the "Parties") agree as follows: 1. Definitions. (a) "Annual Base Salary" shall mean twelve (12) times the greater of: (a) the highest monthly base salary paid or payable (including any base salary which has been earned but deferred and any car allowance) to Employee by the Company and its affiliates (as defined in Section 1504 of the Code without regard to subsection (b) thereof), together with any and all salary reduction authorized amounts under any of the Company's and its affiliates' benefit plans or programs, during the twenty-four (24) month period immediately preceding the date of the Change in Control, or (b) the monthly base salary paid or payable to Employee by the Company and its affiliates (including authorized deferrals, salary reduction amounts and any car allowance), together with any and all salary reduction authorized amounts under any of the Company's and its affiliates' benefit plans or programs, for the last full month immediately prior to Employee's Termination of Employment. (b) "Annual Bonus" shall mean an amount equal to Employee's highest annual bonus for the last three (3) full fiscal years prior to the Change in Control (annualized in the event that Employee was not employed for the whole of such fiscal year). If any such amount was paid in whole or in part in the form of stock options, stock appreciation rights, warrants, stock awards or performance units, whether or not restricted or subject to the satisfaction of any performance goals or other criteria, the annual bonus for such fiscal year shall include the fair market dollar value equivalent of all such stock options, stock appreciation rights, warrants, stock awards and performance units, determined as of the date of issuance. (c) "Board" shall mean the board of directors of the Company. (d) "Cause" shall mean (i) conviction of a crime involving moral turpitude, or (ii) gross negligence in the performance of duties, which gross negligence is willful, has or has the potential to have a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its affiliates taken as a whole, and is not cured within sixty (60) days after reasonable written notice from the Company. (e) "Change in Control" shall mean the occurrence of any of the following: (i) if any Person or affiliated group of Persons (other than in their capacities as trustees of a trust existing on the Effective Date or any successor trust having the same beneficiaries) first become the "beneficial owners" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Persons any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of either the then-outstanding shares of stock of the Company or the combined voting power of the Company's then-outstanding securities; (ii) if, during any period of twenty-four (24) consecutive months during the existence of this Agreement commencing on or after the date hereof, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided that a director who was not a director at the beginning of such twenty-four (24) month period shall be deemed to have satisfied such twenty-four (24) month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such twenty-four (24) month period) or by prior operation of this clause (ii); (iii) the consummation of a merger or consolidation of the Company with any other corporation other than (A) a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving of the Company or such surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or a similar transaction) in - 2 - which no Person or group of affiliated Persons (other than in their capacities as trustees of a trust existing on the Effective Date or any successor trust having the same beneficiaries) first become the "beneficial owners" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Persons any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of either the then-outstanding shares of stock of the Company or the combined voting power of the Company's then-outstanding securities; (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportion as their ownership of the Company immediately prior to such sale; or (v) any Person has consummated a tender offer or exchange for a majority of the voting power of the then outstanding shares of stock of the Company. Upon the occurrence of a Change in Control as provided above, no subsequent event or condition shall constitute a Change in Control for purposes of this Agreement, with the result that there can be no more than one Change in Control hereunder. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended. (g) "Person" shall mean any corporation, partnership, limited liability company, joint venture, other entity or natural person. (h) "Separation Period" shall mean the twenty-four (24) month period beginning on the Termination Date. (i) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof, or any later date specified therein, as the case may be. (j) "Termination of Employment" shall mean the termination of Employee's active employment relationship with the Company or its affiliates. (k) "Termination in Connection with a Change in Control" shall mean: (i) a Termination of Employment within two (2) years after a Change in Control either: (A) initiated by the Company or its affiliates for any reason other than (I) Employee's death, continuous illness, injury or incapacity for a period of twelve (12) consecutive months, or (II) for "Cause;" or - 3 - (B) initiated by Employee upon one or more of the following occurrences: (I) any material failure of the Company to comply with and satisfy any of the terms of this Agreement; (II) any significant reduction by the Company or its affiliates of the authority, duties, reporting responsibilities or job responsibilities of Employee; (III) any removal by the Company or its affiliates of Employee from the employment grade, compensation level or officer positions which Employee holds as of the effective date hereof except in connection with a promotion to higher office; (IV) the requirement that Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position Employee holds; (V) the relocation of the offices of the Company at which Employee is principally employed to a location more than twenty-five (25) miles from the location of such offices immediately prior to the date that is six (6) months before the Change in Control, or the Company's requiring Employee to be based anywhere other than such offices, except for required travel on the Company's business to any extent substantially consistent with Employee's business travel obligations as of the date of this Agreement; or (VI) the failure of the Company to obtain an agreement from any successor to assume and agree to perform this Agreement, as required by Section 14 hereof; or (ii) a Termination of Employment during the one (1) year period immediately preceding a Change in Control, unless the Company establishes by clear and convincing evidence that such Termination of Employment was for good faith business reasons not related to the Change in Control. 2. Notice of Termination of Employment. The Company shall communicate any Termination of Employment to Employee by a Notice of Termination given in accordance with Section 15 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice that (a) briefly summarizes the facts and circumstances deemed to provide a basis for the Termination of Employment, (b) indicates whether the Company considers the Termination of Employment to be a Termination in Connection with a Change in Control and, if not, the specific reasons why, and (c) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than fifteen (15) days after the giving of such notice). - 4 - 3. Compensation upon Termination in Connection with a Change in Control. In the event of Employee's Termination in Connection with a Change in Control, the Company shall pay to Employee, or provide to Employee at no additional cost for the length of the Separation Period, the following: (a) An amount equal to Employee's earned or accrued but unpaid compensation (including any unused paid time off) as of the date of Termination of Employment, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (b) An amount equal to all reasonable out-of-pocket business expenses properly incurred but not yet reimbursed by the Company or its affiliates, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (c) An amount equal to two (2) times the sum of the Annual Base Salary and the Annual Bonus, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (d) An amount equal to the estimated after-tax cost to Employee of continuing any Company-sponsored life or other insurance, travel or accident insurance and disability insurance coverage in effect for Employee, and where applicable, his or her spouse and dependents, for the length of the Separation Period, as if Employee had continued to be employed by the Company during the Separation Period at his or her Annual Base Salary, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (e) The benefits to which Employee would be entitled under the Company's or its affiliates' long term incentive, savings and retirement plans (including stock option and other equity compensation plans, whether qualified or non-qualified) (the "Benefit Plans"), if Employee had continued working for the Company during the Separation Period at his or her Annual Base Salary, and were making the maximum amount of employee contributions, if any, as are required under such Benefit Plans. In the event that applicable law does not permit continued coverage under any tax qualified benefit plan or incentive or option plan during the Separation Period, the Company shall provide economically-equivalent benefits to Employee on a nonqualified, supplemental or other basis. Employee shall be fully vested in his or her benefits under all such Benefit Plans, and all stock options, stock appreciation rights, warrants, stock awards and performance units held by Employee, whether or not restricted or subject to the satisfaction of any performance goals or other criteria, shall become fully vested and exercisable as of the Termination Date, or immediately preceding the Change in Control, whichever occurs sooner. (f) Continued group hospitalization, health and dental care coverage, with coverage equivalent to the coverage to which Employee would have been entitled had Employee continued working for the Company during the Separation Period at his or her Annual Base Salary. Where the continuation of such coverage would adversely affect the tax status of the plan pursuant to which the coverage is provided, the Company may elect to pay Employee, in lieu of providing such coverage, an amount equal to the estimated after-tax cost of continuing such coverage for the length of the Separation Period, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. The COBRA healthcare continuation coverage period under Section 4980B of the Internal Revenue Code of 1986, as amended, shall run concurrently with the Separation Period. Following the end of the Separation Period and until the end of the COBRA continuation coverage period, Employee (or, if Employee is deceased, Employee's surviving spouse) may continue to purchase health care coverage for himself (or herself) and eligible dependents under the Company's health benefits plan at the prevailing rate then in effect for COBRA continuation coverage. - 5 - (g) Outplacement assistance services during the Separation Period (at a total cost not to exceed $10,000) provided by an outplacement agency selected by Employee. Notwithstanding the foregoing, no such payments, benefits or services shall be made or provided (except as may be required by law) unless Employee executes, and does not revoke, a written release, substantially in the form attached hereto as ANNEX I (the "Release"), of any and all claims against the Company and all related parties with respect to all matters arising out of Employee's employment by the Company or its affiliates (other than any entitlements under the terms of this Agreement or under any other plans or programs of the Company in which Employee participated and under which Employee has accrued or become entitled to a benefit), or the termination thereof. 4. Other Payments; Non-Exclusivity of Rights. The payments and benefits due under Section 3 hereof shall be in addition to and not in lieu of any payments or benefits due to Employee under any other plan, policy or program of the Company or its affiliates, including, without limitation, any employee benefit programs, compensation plans and programs and employee perquisite programs maintained for the benefit of the Company's officers or employees, except that no cash payments shall be paid to Employee under the Company's then-current severance pay policies. Moreover, nothing in this Agreement shall prevent or limit Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or its affiliates and for which Employee may qualify. 5. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee under Sections 3 and 4 hereof within the respective time periods provided therein, the Company shall pay to Employee, in addition to the payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the date payment is required under Section 3 and 4, as appropriate, until paid to Employee, at the rate from time to time reported by The Wall Street Journal as its "prime rate" plus 2%, each change in such rate to take effect on the effective date of the change in such prime rate. (b) It is the intent of the Parties that Employee not be required to incur any expenses associated with the enforcement of his or her rights under Sections 3 or 4 hereof by arbitration, litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Employee hereunder. Accordingly, the Company shall pay Employee, on demand, the amounts necessary to advance to, or reimburse Employee in full for, all expenses (including all attorneys' fees and legal expenses) reasonably incurred by Employee in enforcing any of Employee's rights under this Agreement. - 6 - 6. No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 7. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or its affiliates may have against Employee or others. 8. Tax Withholding. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements. 9. Tax Reimbursement Payments. In the event that any amount or benefit paid or distributed to Employee pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Employee by the Company or its affiliates (collectively, the "Covered Payments"), including, without limitation, any profits realized in respect of the receipt, vesting or exercise of stock options or warrants and similar events, are or become subject to the tax (the "Excise Tax") imposed under Section 4999 of the Code", the Company shall pay to Employee at the time specified below an additional amount (the "Tax Reimbursement Payment"), such that the net amount retained by Employee with respect to such Covered Payments, after deducting any Excise Tax on the Covered Payments, as well as any Federal, state and local income taxes and Excise Tax on the Tax Reimbursement Payment provided for by this Section 9, but before deduction for any Federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. The Company shall reimburse Employee only as a result of excise taxes imposed under Section 4999 of the Code (or a successor Code provision of comparable intent). (a) For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated as "parachute payments" within the meaning of Section 280G of the Code, and all "parachute payments" in excess of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of the Company's independent certified public accountants or tax counsel selected by such Accountants (the "Accountants"), such Covered Payments, in whole or in part, either do not constitute "parachute payments" or represent reasonable compensation for personal services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base amount," or such "parachute payments" are otherwise not subject to the Excise Tax, and - 7 - (ii) the value of any non-cash benefits or any deferred payments or benefits shall be determined by the Accountants in accordance with the principles of Section 280G of the Code. (b) For purposes of determining the amount of the Tax Reimbursement Payment, Employee shall be deemed to pay: (i) Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Tax Reimbursement Payment is to be made, and taking into account the effect of loss of the value of itemized deductions and personal exemptions as a result of Employee's receipt of the Tax Reimbursement Payment; and (ii) any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal incomes taxes that could be obtained from the deduction of such state or local taxes if paid in such year. (c) In the event that the Excise Tax is subsequently determined by the Accountants, or pursuant to any proceeding or negotiations with the Internal Revenue Service, to be less than the amount taken into account hereunder in calculating the Tax Reimbursement Payment made, Employee shall repay to the Company, at the time that the amount of such reduction in the Excise Tax is finally determined, the portion of such prior Tax Reimbursement Payment that would not have been paid if such Excise Tax had been applied in initially calculating such Tax Reimbursement Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any portion of the Tax Reimbursement Payment to be refunded to the Company has been paid to any Federal, state or local tax authority, repayment thereof shall not be required until actual refund or credit of such portion has been made to Employee, and interest payable to the Company shall not exceed interest received or credited to Employee by such tax authority for the period it held such portion. Employee and the Company shall mutually agree upon a course of action to be pursued (and the method of allocating the expenses thereof) if Employee's good faith claim for refund or credit is denied. (d) In the event that the Excise Tax is later determined by the Accountants, or pursuant to any proceeding or negotiations with the Internal Revenue Service, to exceed the amount taken into account hereunder at the time the Tax Reimbursement Payment is made (including, but not limited to, by reason of any payment the existence or amount of which cannot be determined at the time of the Tax Reimbursement Payment), the Company shall make an additional Tax Reimbursement Payment in respect of such excess (plus any interest or penalty payable with respect to such excess) at the time that the amount of such excess is finally determined. (e) The Tax Reimbursement Payment (or any portion thereof) provided for in this Section 9 shall be paid to Employee not later than fifteen (15) days following payment of the Covered Payments; provided, however, that if the amount of such Tax Reimbursement Payment (or any portion thereof) cannot be finally determined on or before the date on which payment is due, the Company - 8 - shall pay to Employee by such date an amount estimated in good faith by the Accountants to be the minimum amount of such Tax Reimbursement Payment, and shall pay to Employee the remainder of such Tax Reimbursement Payment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than forty-five (45) days after payment of the related Covered Payment. In the event that the amount of the estimated Tax Reimbursement Payment exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Employee, payable within fifteen (15) days after written demand by the Company for repayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). 10. Confidential Information. Employee recognizes and acknowledges that, by reason of his or her employment by and service to the Company, he or she has had and will continue to have access to confidential information of the Company, including, without limitation, information and know-how pertaining to the Company's products and services, innovations, designs, ideas, plans, trade secrets, proprietary inventions, distribution and sales methods and systems, sales and profit figures, customer and supplier lists, and relationships with customers, suppliers and others ("Confidential Information"). Employee acknowledges that such Confidential Information is a valuable and unique asset of the Company and covenants that he or she will not, either during or after his or her employment by the Company, disclose or use any Confidential Information for any purpose known to be adverse to the interests of the Company, unless the information is already in the public domain through no fault of Employee or such disclosure or use is required by law or in a judicial or administrative proceeding. 11. Non-Competition and Non-Solicitation. (a) During Employee's employment by the Company and for a period of six (6) months after Employee's Termination in Connection with a Change in Control, Employee will not, except with the prior written consent of the Board (which consent shall not be unreasonably withheld or delayed), own, manage, operate, join, control or finance, or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Employee's name to be used in connection with, any business or enterprise directly engaged in, or with affiliates directly engaged in, the business of researching, developing, licensing, selling, distributing, marketing or otherwise commercializing organic light emitting device ("OLED") technology, chemicals or manufacturing equipment. The foregoing restrictions shall not be construed to prohibit the ownership by Employee of less than five percent (5%) of any class of securities of a corporation engaged in any of the foregoing business activities that has a class of securities registered pursuant to the Securities Exchange Act, provided that such ownership represents a passive investment and that neither Employee nor any group of Persons including Employee, either directly or indirectly, manages or exercises control over any such corporation, guarantees any of its financial obligations, otherwise takes any part in the conduct of its business (other than in exercising their rights as shareholders), or seeks to do any of the foregoing. (b) During his or her employment by the Company, and thereafter during the Separation Period, Employee will not knowingly (i) solicit, divert, take away, redirect or unreasonably interfere with the Company's business relationships with any of its suppliers, customers, partners or joint venturers with whom Employee had any direct or indirect involvement during the term of this Agreement; or (ii) solicit, induce, recruit or attempt to influence any person who is now or is hereafter an employee of the Company to become an employee or be engaged as an independent contractor of any entity engaged in activities competitive with those of the Company. - 9 - (c) An amount equal to one-half of the severance benefits payable under this Agreement is specifically designated as additional consideration for the covenants described in this Section 11. The covenants described in this Section 11 shall continue to apply during the period specified herein after Employee's Termination of Employment for any reason, without regard to whether Employee executes a Release or receives any severance benefits as a result of such termination. If Employee breaches any of the covenants described in this Section 11, the applicable period during which the covenant applies shall be tolled during the period of such breach. 12. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 10 and 11 hereof are reasonable and necessary to protect the legitimate interests of the Company and its affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those Sections will result in irreparable injury to the Company. Employee agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 10 or 11 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Sections 10 or 11 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law. (b) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 10 or 11 hereof, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief or other equitable relief, may be brought in the state or federal courts of the State of New Jersey, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court. Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof. 13. Term of Agreement. This Agreement shall continue in full force and effect until all of the obligations of the Parties hereunder are satisfied or have expired. 14. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by written agreement in form and substance reasonably satisfactory to Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. - 10 - 15. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: If to the Company, to: Universal Display Corporation 375 Phillips Boulevard Ewing, New Jersey 08618 Attention: President and Chief Operating Officer If to Employee, to Employee's address of record with the Company or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to the other in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change in Control, notice at the last address of the Company or to any successor pursuant to this Section shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five (5) days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 16. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of New Jersey, without giving effect to any conflict of laws provisions. 17. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the Parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by Employee and executed on the Company's behalf by a senior executive officer or a senior management representative having supervisory responsibility with respect to Employee and/or Board approval. The provisions of this Agreement may provide for payments to Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the Parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. - 11 - (b) Nothing in this Agreement shall be construed as giving Employee any right to be retained in the employ of the Company, or as changing or modifying the "at will" nature of Employee's employment status. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the Parties hereto, except that the duties and responsibilities of Employee and the Company hereunder shall not be assignable, in whole or in part, except as expressly authorized herein. If Employee should die after a Termination in Connection with a Change in Control and while any amount payable hereunder would still be payable to Employee if Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's devises, legates or other designees or, if there is no such designee, to Employee's estate. 18. Severability; Effect of Legal Restrictions. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. Moreover, the terms of this Agreement shall be deemed modified to the extent necessary for the Company, in the written opinion of its outside counsel, to avoid violating the requirements of the Sarbanes-Oxley Act of 2002, or any other law applicable to the employment arrangements between Employee and the Company. Any delay in providing benefits or payments, any failure to provide a benefit or payment, or any repayment of compensation that is required due to operation of the preceding sentence shall not, in and of itself, constitute a breach of this Agreement; provided, however, that the Company shall provide economically equivalent payments or benefits to Employee to the extent permitted by law. 19. Remedies Cumulative; No Waiver. Except as otherwise expressly set forth herein, no right conferred upon either Party by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder, or now or hereafter existing at law or in equity. No delay or omission by either Party in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof. 20. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. EMPLOYEE REPRESENTS AND ACKNOWLEDGES THAT (I) HE OR SHE HAS BEEN ADVISED BY THE COMPANY TO CONSULT HIS OR HER OWN LEGAL COUNSEL IN RESPECT OF THIS AGREEMENT, AND (II) THAT HE OR SHE HAS HAD FULL OPPORTUNITY, PRIOR TO EXECUTION OF THIS AGREEMENT, TO REVIEW THOROUGHLY THIS AGREEMENT WITH HIS OR HER COUNSEL. - 12 - IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. UNIVERSAL DISPLAY CORPORATION By: Sidney D. Rosenblatt ------------------------- Name: Sidney D. Rosenblatt ------------------------- Title: CFO ------------------------- Sherwin I. Seigsohn - -------------------------------- -------------------------------- Witness EMPLOYEE - 13 - ANNEX I SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE WHEREAS, Sherwin I. Seligsohn ("Employee") has been employed by Universal Display Corporation (the "Company") and its affiliate, UDC, Inc., and because the Employee's employment with the Company will terminate effective as of ____________________ (the "Termination Date"), Employee and the Company agree as follows: In consideration of the promises of the Company set forth in paragraph 3 below, Employee, and his or her heirs, executors and administrators, intending to be legally bound, hereby permanently and irrevocably agrees to the termination of Employee's employment with the Company effective as of the Termination Date, and hereby REMISE, RELEASE and FOREVER DISCHARGE the Company and any individual or organization related to the Company against whom or which Employee could assert a claim, including any and all affiliates, and their officers, directors, shareholders, partners, employees and agents, together with their respective successors and assigns, heirs, executors and administrators (hereinafter referred to collectively as the "Releasees"), of and from any and all causes of action, suits, debts, claims and demands whatsoever, which Employee had, has, or may have against Releasees up until the date of execution of this Separation of Employment Agreement and General Release, other than the Release Exclusions (as defined below). Particularly, but without limitation, Employee so releases all claims relating in any way to his employment or the termination of his employment relationship with the Company, including without limitation claims under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et al., Title VII of the Civil Rights Act of 1964, as amended, ss. 42 U.S.C. 2000e et seq., the Americans with Disabilities Act, 42 U.S.C. ss. 12101 et seq., Employee Retirement Income Security Act 29 U.S.C. ss. 1001 et seq., the Age Discrimination in Employment Act, as amended 29 U.S.C. ss. 621 et seq. (the "ADEA"), any common law claims and all claims for attorneys' fees and costs. Employee agrees and covenants that, should any other person, organization or other entity file, charge, claim, sue, or cause or permit to be filed any civil action, suit or legal proceeding involving any matter occurring at any time in the past, up to and including the date of execution of this Separation of Employment Agreement and General Release, Employee will not seek or accept any personal relief in such civil action, suit or legal proceeding. Moreover, Employee shall promptly take all steps necessary to dismiss, with prejudice, any and all pending complaints, charges and grievances against the Company or the Releasees, regardless of whether they are or have been filed internally or externally. Notwithstanding anything to the contrary in this Separation of Employment Agreement and General Release, nothing herein relinquishes any rights Employee may have to the following claims, or to any civil actions, suits or legal proceedings involving such claims (the "Release Exclusions"): (i) claims to seek indemnification pursuant to applicable state law, the Company's By-Laws, applicable Company resolutions, applicable Company employee benefit plans or other such documents maintained or required to be maintained by the Company, (ii) claims to seek coverage under directors' and officers' liability insurance policies maintained or required to be maintained by the Company, and (iii) claims to seek enforcement of Employee's rights under the Change in Control Agreement between Employee and the Company (the "Change in Control Agreement"). - 14 - In full consideration of Employee's execution of this Separation of Employment Agreement and General Release, and his or her agreement to be legally bound by its terms, the Company has agreed to provide Employee with the payments, benefits and other consideration specified in the Change in Control Agreement. Except as set forth in this Separation of Employment Agreement and General Release, or as may be required by applicable law, it is expressly agreed and understood that Releasees do not have, and will not have, any obligation to provide Employee, at any time in the future, with any payments, benefits or other consideration not specified in the Change in Control Agreement. Employee hereby agrees and recognizes that, as of the Termination Date, Employee's employment relationship with the Company will be permanently and irrevocably severed. Accordingly, Employee will not apply for a position with the Company or any of its affiliates and Employee waives his or her right to be hired or rehired in the future by the Company or any of its affiliates. It is further agreed and understood that Employee will continue to be available and cooperate in a reasonable manner in providing assistance to the Company in concluding any matters which are reasonably related to the duties and responsibilities which Employee had while employed by the Company, provided that such cooperation and assistance does not interfere with any subsequent employment obtained by Employee. Employee agrees and acknowledges that this Separation of Employment Agreement and General Release is not and shall not be construed to be an admission of any violation by the Releasees of any federal, state or local statute or regulation, or of any duty owed by the Releasees to Employee or any other person. Employee agrees, covenants and promises that Employee will not communicate or disclose the terms of this Separation of Employment Agreement and General Release to any persons with the exception of members of Employee's immediate family and Employee's attorneys and financial advisors, except as may be required by applicable law. Employee hereby certifies that Employee has read the terms of this Separation of Employment Agreement and General Release, that Employee has been advised by the Company to consult with an attorney of his or her own choice prior to executing this Separation of Employment Agreement and General Release, that Employee has had an opportunity to do so, and that Employee understands the terms and effects of this Separation of Employment Agreement and General Release. Employee further certifies that neither the Releasees, nor any representative of Releasees, have made any representations to Employee concerning this Separation of Employment Agreement and General Release other than those contained herein. Employee acknowledges that Employee has been informed that this Separation of Employment Agreement and General Release includes a waiver of claims under the ADEA, and that Employee has the right to reconsider this Separation of Employment Agreement and General Release as it pertains to claims under the ADEA for a period of twenty-one (21) days (or forty-five (45) days in the event of a group termination). Employee also understands that he or she has the right to revoke this Separation of Employment Agreement and General Release in its entirety for a period of seven (7) days following Employee's execution thereof. Should Employee desire to exercise any of the foregoing rights, Employee shall do so by providing written notice to the Company within the applicable period at the following address: Universal Display Corporation at 375 Phillips Boulevard, Ewing, New Jersey 08618, Attention: President. - 15 - This Separation of Employment Agreement and General Release, together with the Change in Control Agreement, constitute the complete and entire understanding between the parties relating to the subject matter of such documents, and supersede any and all prior agreements and understandings between the parties relating thereto. If any provision of this Separation of Employment Agreement and General Release is deemed invalid, the remaining provisions shall not be affected. The provisions of this Separation of Employment Agreement and General Release shall be governed by the laws of New Jersey, without giving effect to any conflict of laws provisions. IN WITNESS WHEREOF, and intending to be legally bound hereby, Employee has executed this Separation of Employment Agreement and General Release as of the date indicated below. - ----------------------------------- ----------------------------------- EMPLOYEE Date Acknowledgment of Receipt by: UNIVERSAL DISPLAY CORPORATION By: -------------------------------- Name: ------------------------------ Title: ----------------------------- - 16 - EX-10 6 ex10-44.txt EXHIBIT 10.45 CHANGE IN CONTROL AGREEMENT This Change in Control Agreement (the "Agreement') is made as of April 28, 2003, by and between Universal Display Corporation (the "Company"), and Steven V. Abramson ("Employee"). WHEREAS, Employee is employed by UDC, Inc., an affiliate of the Company, currently serving in a capacity as Chief Operating Officer and President of the Company; and WHEREAS, the Company believes that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of Employee to the Company without distraction notwithstanding the fact that the Company could be subject to a "Change in Control" (as hereinafter defined), and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; and WHEREAS, in consideration for Employee agreeing to continue in employment with the Company and its affiliate and agreeing to keep Company information confidential and not to compete with the Company (as hereinafter defined), the Company agrees that Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on Employee in the event Employee's employment with the Company is terminated without cause in connection with a Change in Control. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the Company and Employee (individually a "Party" and together, the "Parties") agree as follows: 1. Definitions. (a) "Annual Base Salary" shall mean twelve (12) times the greater of: (a) the highest monthly base salary paid or payable (including any base salary which has been earned but deferred and any car allowance) to Employee by the Company and its affiliates (as defined in Section 1504 of the Code without regard to subsection (b) thereof), together with any and all salary reduction authorized amounts under any of the Company's and its affiliates' benefit plans or programs, during the twenty-four (24) month period immediately preceding the date of the Change in Control, or (b) the monthly base salary paid or payable to Employee by the Company and its affiliates (including authorized deferrals, salary reduction amounts and any car allowance), together with any and all salary reduction authorized amounts under any of the Company's and its affiliates' benefit plans or programs, for the last full month immediately prior to Employee's Termination of Employment. (b) "Annual Bonus" shall mean an amount equal to Employee's highest annual bonus for the last three (3) full fiscal years prior to the Change in Control (annualized in the event that Employee was not employed for the whole of such fiscal year). If any such amount was paid in whole or in part in the form of stock options, stock appreciation rights, warrants, stock awards or performance units, whether or not restricted or subject to the satisfaction of any performance goals or other criteria, the annual bonus for such fiscal year shall include the fair market dollar value equivalent of all such stock options, stock appreciation rights, warrants, stock awards and performance units, determined as of the date of issuance. (c) "Board" shall mean the board of directors of the Company. (d) "Cause" shall mean (i) conviction of a crime involving moral turpitude, or (ii) gross negligence in the performance of duties, which gross negligence is willful, has or has the potential to have a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its affiliates taken as a whole, and is not cured within sixty (60) days after reasonable written notice from the Company. (e) "Change in Control" shall mean the occurrence of any of the following: (i) if any Person or affiliated group of Persons (other than in their capacities as trustees of a trust existing on the Effective Date or any successor trust having the same beneficiaries) first become the "beneficial owners" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Persons any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of either the then-outstanding shares of stock of the Company or the combined voting power of the Company's then-outstanding securities; (ii) if, during any period of twenty-four (24) consecutive months during the existence of this Agreement commencing on or after the date hereof, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided that a director who was not a director at the beginning of such twenty-four (24) month period shall be deemed to have satisfied such twenty-four (24) month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such twenty-four (24) month period) or by prior operation of this clause (ii); (iii) the consummation of a merger or consolidation of the Company with any other corporation other than (A) a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving of the Company or such surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or a similar transaction) in - 2 - which no Person or group of affiliated Persons (other than in their capacities as trustees of a trust existing on the Effective Date or any successor trust having the same beneficiaries) first become the "beneficial owners" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Persons any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of either the then-outstanding shares of stock of the Company or the combined voting power of the Company's then-outstanding securities; (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportion as their ownership of the Company immediately prior to such sale; or (v) any Person has consummated a tender offer or exchange for a majority of the voting power of the then outstanding shares of stock of the Company. Upon the occurrence of a Change in Control as provided above, no subsequent event or condition shall constitute a Change in Control for purposes of this Agreement, with the result that there can be no more than one Change in Control hereunder. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended. (g) "Person" shall mean any corporation, partnership, limited liability company, joint venture, other entity or natural person. (h) "Separation Period" shall mean the twenty-four (24) month period beginning on the Termination Date. (i) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof, or any later date specified therein, as the case may be. (j) "Termination of Employment" shall mean the termination of Employee's active employment relationship with the Company or its affiliates. (k) "Termination in Connection with a Change in Control" shall mean: (i) a Termination of Employment within two (2) years after a Change in Control either: (A) initiated by the Company or its affiliates for any reason other than (I) Employee's death, continuous illness, injury or incapacity for a period of twelve (12) consecutive months, or (II) for "Cause;" or - 3 - (B) initiated by Employee upon one or more of the following occurrences: (I) any material failure of the Company to comply with and satisfy any of the terms of this Agreement; (II) any significant reduction by the Company or its affiliates of the authority, duties, reporting responsibilities or job responsibilities of Employee; (III) any removal by the Company or its affiliates of Employee from the employment grade, compensation level or officer positions which Employee holds as of the effective date hereof except in connection with a promotion to higher office; (IV) the requirement that Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position Employee holds; (V) the relocation of the offices of the Company at which Employee is principally employed to a location more than twenty-five (25) miles from the location of such offices immediately prior to the date that is six (6) months before the Change in Control, or the Company's requiring Employee to be based anywhere other than such offices, except for required travel on the Company's business to any extent substantially consistent with Employee's business travel obligations as of the date of this Agreement; or (VI) the failure of the Company to obtain an agreement from any successor to assume and agree to perform this Agreement, as required by Section 14 hereof; or (ii) a Termination of Employment during the one (1) year period immediately preceding a Change in Control, unless the Company establishes by clear and convincing evidence that such Termination of Employment was for good faith business reasons not related to the Change in Control. 2. Notice of Termination of Employment. The Company shall communicate any Termination of Employment to Employee by a Notice of Termination given in accordance with Section 15 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice that (a) briefly summarizes the facts and circumstances deemed to provide a basis for the Termination of Employment, (b) indicates whether the Company considers the Termination of Employment to be a Termination in Connection with a Change in Control and, if not, the specific reasons why, and (c) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than fifteen (15) days after the giving of such notice). - 4 - 3. Compensation upon Termination in Connection with a Change in Control. In the event of Employee's Termination in Connection with a Change in Control, the Company shall pay to Employee, or provide to Employee at no additional cost for the length of the Separation Period, the following: (a) An amount equal to Employee's earned or accrued but unpaid compensation (including any unused paid time off) as of the date of Termination of Employment, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (b) An amount equal to all reasonable out-of-pocket business expenses properly incurred but not yet reimbursed by the Company or its affiliates, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (c) An amount equal to two (2) times the sum of the Annual Base Salary and the Annual Bonus, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (d) An amount equal to the estimated after-tax cost to Employee of continuing any Company-sponsored life or other insurance, travel or accident insurance and disability insurance coverage in effect for Employee, and where applicable, his or her spouse and dependents, for the length of the Separation Period, as if Employee had continued to be employed by the Company during the Separation Period at his or her Annual Base Salary, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (e) The benefits to which Employee would be entitled under the Company's or its affiliates' long term incentive, savings and retirement plans (including stock option and other equity compensation plans, whether qualified or non-qualified) (the "Benefit Plans"), if Employee had continued working for the Company during the Separation Period at his or her Annual Base Salary, and were making the maximum amount of employee contributions, if any, as are required under such Benefit Plans. In the event that applicable law does not permit continued coverage under any tax qualified benefit plan or incentive or option plan during the Separation Period, the Company shall provide economically-equivalent benefits to Employee on a nonqualified, supplemental or other basis. Employee shall be fully vested in his or her benefits under all such Benefit Plans, and all stock options, stock appreciation rights, warrants, stock awards and performance units held by Employee, whether or not restricted or subject to the satisfaction of any performance goals or other criteria, shall become fully vested and exercisable as of the Termination Date, or immediately preceding the Change in Control, whichever occurs sooner. (f) Continued group hospitalization, health and dental care coverage, with coverage equivalent to the coverage to which Employee would have been entitled had Employee continued working for the Company during the Separation Period at his or her Annual Base Salary. Where the continuation of such coverage would adversely affect the tax status of the plan pursuant to which the coverage is provided, the Company may elect to pay Employee, in lieu of providing such coverage, an amount equal to the estimated after-tax cost of continuing such coverage for the length of the Separation Period, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. The COBRA healthcare continuation coverage period under Section 4980B of the Internal Revenue Code of 1986, as amended, shall run concurrently with the Separation Period. Following the end of the Separation Period and until the end of the COBRA continuation coverage period, Employee (or, if Employee is deceased, Employee's surviving spouse) may continue to purchase health care coverage for himself (or herself) and eligible dependents under the Company's health benefits plan at the prevailing rate then in effect for COBRA continuation coverage. - 5 - (g) Outplacement assistance services during the Separation Period (at a total cost not to exceed $10,000) provided by an outplacement agency selected by Employee. Notwithstanding the foregoing, no such payments, benefits or services shall be made or provided (except as may be required by law) unless Employee executes, and does not revoke, a written release, substantially in the form attached hereto as ANNEX I (the "Release"), of any and all claims against the Company and all related parties with respect to all matters arising out of Employee's employment by the Company or its affiliates (other than any entitlements under the terms of this Agreement or under any other plans or programs of the Company in which Employee participated and under which Employee has accrued or become entitled to a benefit), or the termination thereof. 4. Other Payments; Non-Exclusivity of Rights. The payments and benefits due under Section 3 hereof shall be in addition to and not in lieu of any payments or benefits due to Employee under any other plan, policy or program of the Company or its affiliates, including, without limitation, any employee benefit programs, compensation plans and programs and employee perquisite programs maintained for the benefit of the Company's officers or employees, except that no cash payments shall be paid to Employee under the Company's then-current severance pay policies. Moreover, nothing in this Agreement shall prevent or limit Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or its affiliates and for which Employee may qualify. 5. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee under Sections 3 and 4 hereof within the respective time periods provided therein, the Company shall pay to Employee, in addition to the payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the date payment is required under Section 3 and 4, as appropriate, until paid to Employee, at the rate from time to time reported by The Wall Street Journal as its "prime rate" plus 2%, each change in such rate to take effect on the effective date of the change in such prime rate. (b) It is the intent of the Parties that Employee not be required to incur any expenses associated with the enforcement of his or her rights under Sections 3 or 4 hereof by arbitration, litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Employee hereunder. Accordingly, the Company shall pay Employee, on demand, the amounts necessary to advance to, or reimburse Employee in full for, all expenses (including all attorneys' fees and legal expenses) reasonably incurred by Employee in enforcing any of Employee's rights under this Agreement. - 6 - 6. No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 7. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or its affiliates may have against Employee or others. 8. Tax Withholding. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements. 9. Tax Reimbursement Payments. In the event that any amount or benefit paid or distributed to Employee pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Employee by the Company or its affiliates (collectively, the "Covered Payments"), including, without limitation, any profits realized in respect of the receipt, vesting or exercise of stock options or warrants and similar events, are or become subject to the tax (the "Excise Tax") imposed under Section 4999 of the Code", the Company shall pay to Employee at the time specified below an additional amount (the "Tax Reimbursement Payment"), such that the net amount retained by Employee with respect to such Covered Payments, after deducting any Excise Tax on the Covered Payments, as well as any Federal, state and local income taxes and Excise Tax on the Tax Reimbursement Payment provided for by this Section 9, but before deduction for any Federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. The Company shall reimburse Employee only as a result of excise taxes imposed under Section 4999 of the Code (or a successor Code provision of comparable intent). (a) For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated as "parachute payments" within the meaning of Section 280G of the Code, and all "parachute payments" in excess of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of the Company's independent certified public accountants or tax counsel selected by such Accountants (the "Accountants"), such Covered Payments, in whole or in part, either do not constitute "parachute payments" or represent reasonable compensation for personal services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base amount," or such "parachute payments" are otherwise not subject to the Excise Tax, and - 7 - (ii) the value of any non-cash benefits or any deferred payments or benefits shall be determined by the Accountants in accordance with the principles of Section 280G of the Code. (b) For purposes of determining the amount of the Tax Reimbursement Payment, Employee shall be deemed to pay: (i) Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Tax Reimbursement Payment is to be made, and taking into account the effect of loss of the value of itemized deductions and personal exemptions as a result of Employee's receipt of the Tax Reimbursement Payment; and (ii) any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal incomes taxes that could be obtained from the deduction of such state or local taxes if paid in such year. (c) In the event that the Excise Tax is subsequently determined by the Accountants, or pursuant to any proceeding or negotiations with the Internal Revenue Service, to be less than the amount taken into account hereunder in calculating the Tax Reimbursement Payment made, Employee shall repay to the Company, at the time that the amount of such reduction in the Excise Tax is finally determined, the portion of such prior Tax Reimbursement Payment that would not have been paid if such Excise Tax had been applied in initially calculating such Tax Reimbursement Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any portion of the Tax Reimbursement Payment to be refunded to the Company has been paid to any Federal, state or local tax authority, repayment thereof shall not be required until actual refund or credit of such portion has been made to Employee, and interest payable to the Company shall not exceed interest received or credited to Employee by such tax authority for the period it held such portion. Employee and the Company shall mutually agree upon a course of action to be pursued (and the method of allocating the expenses thereof) if Employee's good faith claim for refund or credit is denied. (d) In the event that the Excise Tax is later determined by the Accountants, or pursuant to any proceeding or negotiations with the Internal Revenue Service, to exceed the amount taken into account hereunder at the time the Tax Reimbursement Payment is made (including, but not limited to, by reason of any payment the existence or amount of which cannot be determined at the time of the Tax Reimbursement Payment), the Company shall make an additional Tax Reimbursement Payment in respect of such excess (plus any interest or penalty payable with respect to such excess) at the time that the amount of such excess is finally determined. (e) The Tax Reimbursement Payment (or any portion thereof) provided for in this Section 9 shall be paid to Employee not later than fifteen (15) days following payment of the Covered Payments; provided, however, that if the amount of such Tax Reimbursement Payment (or any portion thereof) cannot be finally determined on or before the date on which payment is due, the Company - 8 - shall pay to Employee by such date an amount estimated in good faith by the Accountants to be the minimum amount of such Tax Reimbursement Payment, and shall pay to Employee the remainder of such Tax Reimbursement Payment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than forty-five (45) days after payment of the related Covered Payment. In the event that the amount of the estimated Tax Reimbursement Payment exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Employee, payable within fifteen (15) days after written demand by the Company for repayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). 10. Confidential Information. Employee recognizes and acknowledges that, by reason of his or her employment by and service to the Company, he or she has had and will continue to have access to confidential information of the Company, including, without limitation, information and know-how pertaining to the Company's products and services, innovations, designs, ideas, plans, trade secrets, proprietary inventions, distribution and sales methods and systems, sales and profit figures, customer and supplier lists, and relationships with customers, suppliers and others ("Confidential Information"). Employee acknowledges that such Confidential Information is a valuable and unique asset of the Company and covenants that he or she will not, either during or after his or her employment by the Company, disclose or use any Confidential Information for any purpose known to be adverse to the interests of the Company, unless the information is already in the public domain through no fault of Employee or such disclosure or use is required by law or in a judicial or administrative proceeding. 11. Non-Competition and Non-Solicitation. (a) During Employee's employment by the Company and for a period of six (6) months after Employee's Termination in Connection with a Change in Control, Employee will not, except with the prior written consent of the Board (which consent shall not be unreasonably withheld or delayed), own, manage, operate, join, control or finance, or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Employee's name to be used in connection with, any business or enterprise directly engaged in, or with affiliates directly engaged in, the business of researching, developing, licensing, selling, distributing, marketing or otherwise commercializing organic light emitting device ("OLED") technology, chemicals or manufacturing equipment. The foregoing restrictions shall not be construed to prohibit the ownership by Employee of less than five percent (5%) of any class of securities of a corporation engaged in any of the foregoing business activities that has a class of securities registered pursuant to the Securities Exchange Act, provided that such ownership represents a passive investment and that neither Employee nor any group of Persons including Employee, either directly or indirectly, manages or exercises control over any such corporation, guarantees any of its financial obligations, otherwise takes any part in the conduct of its business (other than in exercising their rights as shareholders), or seeks to do any of the foregoing. (b) During his or her employment by the Company, and thereafter during the Separation Period, Employee will not knowingly (i) solicit, divert, take away, redirect or unreasonably interfere with the Company's business relationships with any of its suppliers, customers, partners or joint venturers with whom Employee had any direct or indirect involvement during the term of this Agreement; or (ii) solicit, induce, recruit or attempt to influence any person who is now or is hereafter an employee of the Company to become an employee or be engaged as an independent contractor of any entity engaged in activities competitive with those of the Company. - 9 - (c) An amount equal to one-half of the severance benefits payable under this Agreement is specifically designated as additional consideration for the covenants described in this Section 11. The covenants described in this Section 11 shall continue to apply during the period specified herein after Employee's Termination of Employment for any reason, without regard to whether Employee executes a Release or receives any severance benefits as a result of such termination. If Employee breaches any of the covenants described in this Section 11, the applicable period during which the covenant applies shall be tolled during the period of such breach. 12. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 10 and 11 hereof are reasonable and necessary to protect the legitimate interests of the Company and its affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those Sections will result in irreparable injury to the Company. Employee agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 10 or 11 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Sections 10 or 11 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law. (b) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 10 or 11 hereof, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief or other equitable relief, may be brought in the state or federal courts of the State of New Jersey, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court. Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof. 13. Term of Agreement. This Agreement shall continue in full force and effect until all of the obligations of the Parties hereunder are satisfied or have expired. 14. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by written agreement in form and substance reasonably satisfactory to Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. - 10 - 15. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: If to the Company, to: Universal Display Corporation 375 Phillips Boulevard Ewing, New Jersey 08618 Attention: President and Chief Operating Officer If to Employee, to Employee's address of record with the Company or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to the other in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change in Control, notice at the last address of the Company or to any successor pursuant to this Section shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five (5) days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 16. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of New Jersey, without giving effect to any conflict of laws provisions. 17. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the Parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by Employee and executed on the Company's behalf by a senior executive officer or a senior management representative having supervisory responsibility with respect to Employee and/or Board approval. The provisions of this Agreement may provide for payments to Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the Parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. - 11 - (b) Nothing in this Agreement shall be construed as giving Employee any right to be retained in the employ of the Company, or as changing or modifying the "at will" nature of Employee's employment status. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the Parties hereto, except that the duties and responsibilities of Employee and the Company hereunder shall not be assignable, in whole or in part, except as expressly authorized herein. If Employee should die after a Termination in Connection with a Change in Control and while any amount payable hereunder would still be payable to Employee if Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's devises, legates or other designees or, if there is no such designee, to Employee's estate. 18. Severability; Effect of Legal Restrictions. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. Moreover, the terms of this Agreement shall be deemed modified to the extent necessary for the Company, in the written opinion of its outside counsel, to avoid violating the requirements of the Sarbanes-Oxley Act of 2002, or any other law applicable to the employment arrangements between Employee and the Company. Any delay in providing benefits or payments, any failure to provide a benefit or payment, or any repayment of compensation that is required due to operation of the preceding sentence shall not, in and of itself, constitute a breach of this Agreement; provided, however, that the Company shall provide economically equivalent payments or benefits to Employee to the extent permitted by law. 19. Remedies Cumulative; No Waiver. Except as otherwise expressly set forth herein, no right conferred upon either Party by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder, or now or hereafter existing at law or in equity. No delay or omission by either Party in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof. 20. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. EMPLOYEE REPRESENTS AND ACKNOWLEDGES THAT (I) HE OR SHE HAS BEEN ADVISED BY THE COMPANY TO CONSULT HIS OR HER OWN LEGAL COUNSEL IN RESPECT OF THIS AGREEMENT, AND (II) THAT HE OR SHE HAS HAD FULL OPPORTUNITY, PRIOR TO EXECUTION OF THIS AGREEMENT, TO REVIEW THOROUGHLY THIS AGREEMENT WITH HIS OR HER COUNSEL. - 12 - IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. UNIVERSAL DISPLAY CORPORATION By: Sidney D. Rosenblatt ----------------------------------- Name: Sidney D. Rosenblatt --------------------------------- Title: CFO -------------------------------- Scott C. Bovino Steven V. Abramson - ------------------------------------ -------------------------------------- Witness EMPLOYEE - 13 - ANNEX I SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE WHEREAS, Steven V. Abramson ("Employee") has been employed by Universal Display Corporation (the "Company") and its affiliate, UDC, Inc., and because the Employee's employment with the Company will terminate effective as of ____________________ (the "Termination Date"), Employee and the Company agree as follows: In consideration of the promises of the Company set forth in paragraph 3 below, Employee, and his or her heirs, executors and administrators, intending to be legally bound, hereby permanently and irrevocably agrees to the termination of Employee's employment with the Company effective as of the Termination Date, and hereby REMISE, RELEASE and FOREVER DISCHARGE the Company and any individual or organization related to the Company against whom or which Employee could assert a claim, including any and all affiliates, and their officers, directors, shareholders, partners, employees and agents, together with their respective successors and assigns, heirs, executors and administrators (hereinafter referred to collectively as the "Releasees"), of and from any and all causes of action, suits, debts, claims and demands whatsoever, which Employee had, has, or may have against Releasees up until the date of execution of this Separation of Employment Agreement and General Release, other than the Release Exclusions (as defined below). Particularly, but without limitation, Employee so releases all claims relating in any way to his employment or the termination of his employment relationship with the Company, including without limitation claims under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et al., Title VII of the Civil Rights Act of 1964, as amended, ss. 42 U.S.C. 2000e et seq., the Americans with Disabilities Act, 42 U.S.C. ss. 12101 et seq., Employee Retirement Income Security Act 29 U.S.C. ss. 1001 et seq., the Age Discrimination in Employment Act, as amended 29 U.S.C. ss. 621 et seq. (the "ADEA"), any common law claims and all claims for attorneys' fees and costs. Employee agrees and covenants that, should any other person, organization or other entity file, charge, claim, sue, or cause or permit to be filed any civil action, suit or legal proceeding involving any matter occurring at any time in the past, up to and including the date of execution of this Separation of Employment Agreement and General Release, Employee will not seek or accept any personal relief in such civil action, suit or legal proceeding. Moreover, Employee shall promptly take all steps necessary to dismiss, with prejudice, any and all pending complaints, charges and grievances against the Company or the Releasees, regardless of whether they are or have been filed internally or externally. Notwithstanding anything to the contrary in this Separation of Employment Agreement and General Release, nothing herein relinquishes any rights Employee may have to the following claims, or to any civil actions, suits or legal proceedings involving such claims (the "Release Exclusions"): (i) claims to seek indemnification pursuant to applicable state law, the Company's By-Laws, applicable Company resolutions, applicable Company employee benefit plans or other such documents maintained or required to be maintained by the Company, (ii) claims to seek coverage under directors' and officers' liability insurance policies maintained or required to be maintained by the Company, and (iii) claims to seek enforcement of Employee's rights under the Change in Control Agreement between Employee and the Company (the "Change in Control Agreement"). - 14 - In full consideration of Employee's execution of this Separation of Employment Agreement and General Release, and his or her agreement to be legally bound by its terms, the Company has agreed to provide Employee with the payments, benefits and other consideration specified in the Change in Control Agreement. Except as set forth in this Separation of Employment Agreement and General Release, or as may be required by applicable law, it is expressly agreed and understood that Releasees do not have, and will not have, any obligation to provide Employee, at any time in the future, with any payments, benefits or other consideration not specified in the Change in Control Agreement. Employee hereby agrees and recognizes that, as of the Termination Date, Employee's employment relationship with the Company will be permanently and irrevocably severed. Accordingly, Employee will not apply for a position with the Company or any of its affiliates and Employee waives his or her right to be hired or rehired in the future by the Company or any of its affiliates. It is further agreed and understood that Employee will continue to be available and cooperate in a reasonable manner in providing assistance to the Company in concluding any matters which are reasonably related to the duties and responsibilities which Employee had while employed by the Company, provided that such cooperation and assistance does not interfere with any subsequent employment obtained by Employee. Employee agrees and acknowledges that this Separation of Employment Agreement and General Release is not and shall not be construed to be an admission of any violation by the Releasees of any federal, state or local statute or regulation, or of any duty owed by the Releasees to Employee or any other person. Employee agrees, covenants and promises that Employee will not communicate or disclose the terms of this Separation of Employment Agreement and General Release to any persons with the exception of members of Employee's immediate family and Employee's attorneys and financial advisors, except as may be required by applicable law. Employee hereby certifies that Employee has read the terms of this Separation of Employment Agreement and General Release, that Employee has been advised by the Company to consult with an attorney of his or her own choice prior to executing this Separation of Employment Agreement and General Release, that Employee has had an opportunity to do so, and that Employee understands the terms and effects of this Separation of Employment Agreement and General Release. Employee further certifies that neither the Releasees, nor any representative of Releasees, have made any representations to Employee concerning this Separation of Employment Agreement and General Release other than those contained herein. Employee acknowledges that Employee has been informed that this Separation of Employment Agreement and General Release includes a waiver of claims under the ADEA, and that Employee has the right to reconsider this Separation of Employment Agreement and General Release as it pertains to claims under the ADEA for a period of twenty-one (21) days (or forty-five (45) days in the event of a group termination). Employee also understands that he or she has the right to revoke this Separation of Employment Agreement and General Release in its entirety for a period of seven (7) days following Employee's execution thereof. Should Employee desire to exercise any of the foregoing rights, Employee shall do so by providing written notice to the Company within the applicable period at the following address: Universal Display Corporation at 375 Phillips Boulevard, Ewing, New Jersey 08618, Attention: President. - 15 - This Separation of Employment Agreement and General Release, together with the Change in Control Agreement, constitute the complete and entire understanding between the parties relating to the subject matter of such documents, and supersede any and all prior agreements and understandings between the parties relating thereto. If any provision of this Separation of Employment Agreement and General Release is deemed invalid, the remaining provisions shall not be affected. The provisions of this Separation of Employment Agreement and General Release shall be governed by the laws of New Jersey, without giving effect to any conflict of laws provisions. IN WITNESS WHEREOF, and intending to be legally bound hereby, Employee has executed this Separation of Employment Agreement and General Release as of the date indicated below. - --------------------------------------- ----------------------------------- EMPLOYEE Date Acknowledgment of Receipt by: UNIVERSAL DISPLAY CORPORATION By: -------------------------------- Name: ------------------------------ Title: ----------------------------- - 16 - EX-10 7 ex10-45.txt EXHIBIT 10.45 CHANGE IN CONTROL AGREEMENT This Change in Control Agreement (the "Agreement') is made as of April 28, 2003, by and between Universal Display Corporation (the "Company"), and Sidney D. Rosenblatt ("Employee"). WHEREAS, Employee is employed by UDC, Inc., an affiliate of the Company, currently serving in a capacity as Executive Vice President, Chief Financial Officer, Treasurer and Secretary of the Company; and WHEREAS, the Company believes that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of Employee to the Company without distraction notwithstanding the fact that the Company could be subject to a "Change in Control" (as hereinafter defined), and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; and WHEREAS, in consideration for Employee agreeing to continue in employment with the Company and its affiliate and agreeing to keep Company information confidential and not to compete with the Company (as hereinafter defined), the Company agrees that Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on Employee in the event Employee's employment with the Company is terminated without cause in connection with a Change in Control. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the Company and Employee (individually a "Party" and together, the "Parties") agree as follows: 1. Definitions. (a) "Annual Base Salary" shall mean twelve (12) times the greater of: (a) the highest monthly base salary paid or payable (including any base salary which has been earned but deferred and any car allowance) to Employee by the Company and its affiliates (as defined in Section 1504 of the Code without regard to subsection (b) thereof), together with any and all salary reduction authorized amounts under any of the Company's and its affiliates' benefit plans or programs, during the twenty-four (24) month period immediately preceding the date of the Change in Control, or (b) the monthly base salary paid or payable to Employee by the Company and its affiliates (including authorized deferrals, salary reduction amounts and any car allowance), together with any and all salary reduction authorized amounts under any of the Company's and its affiliates' benefit plans or programs, for the last full month immediately prior to Employee's Termination of Employment. (b) "Annual Bonus" shall mean an amount equal to Employee's highest annual bonus for the last three (3) full fiscal years prior to the Change in Control (annualized in the event that Employee was not employed for the whole of such fiscal year). If any such amount was paid in whole or in part in the form of stock options, stock appreciation rights, warrants, stock awards or performance units, whether or not restricted or subject to the satisfaction of any performance goals or other criteria, the annual bonus for such fiscal year shall include the fair market dollar value equivalent of all such stock options, stock appreciation rights, warrants, stock awards and performance units, determined as of the date of issuance. (c) "Board" shall mean the board of directors of the Company. (d) "Cause" shall mean (i) conviction of a crime involving moral turpitude, or (ii) gross negligence in the performance of duties, which gross negligence is willful, has or has the potential to have a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its affiliates taken as a whole, and is not cured within sixty (60) days after reasonable written notice from the Company. (e) "Change in Control" shall mean the occurrence of any of the following: (i) if any Person or affiliated group of Persons (other than in their capacities as trustees of a trust existing on the Effective Date or any successor trust having the same beneficiaries) first become the "beneficial owners" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Persons any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of either the then-outstanding shares of stock of the Company or the combined voting power of the Company's then-outstanding securities; (ii) if, during any period of twenty-four (24) consecutive months during the existence of this Agreement commencing on or after the date hereof, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided that a director who was not a director at the beginning of such twenty-four (24) month period shall be deemed to have satisfied such twenty-four (24) month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such twenty-four (24) month period) or by prior operation of this clause (ii); (iii) the consummation of a merger or consolidation of the Company with any other corporation other than (A) a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving of the Company or such surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or a similar transaction) in - 2 - which no Person or group of affiliated Persons (other than in their capacities as trustees of a trust existing on the Effective Date or any successor trust having the same beneficiaries) first become the "beneficial owners" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Persons any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of either the then-outstanding shares of stock of the Company or the combined voting power of the Company's then-outstanding securities; (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportion as their ownership of the Company immediately prior to such sale; or (v) any Person has consummated a tender offer or exchange for a majority of the voting power of the then outstanding shares of stock of the Company. Upon the occurrence of a Change in Control as provided above, no subsequent event or condition shall constitute a Change in Control for purposes of this Agreement, with the result that there can be no more than one Change in Control hereunder. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended. (g) "Person" shall mean any corporation, partnership, limited liability company, joint venture, other entity or natural person. (h) "Separation Period" shall mean the twenty-four (24) month period beginning on the Termination Date. (i) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof, or any later date specified therein, as the case may be. (j) "Termination of Employment" shall mean the termination of Employee's active employment relationship with the Company or its affiliates. (k) "Termination in Connection with a Change in Control" shall mean: (i) a Termination of Employment within two (2) years after a Change in Control either: - 3 - (A) initiated by the Company or its affiliates for any reason other than (I) Employee's death, continuous illness, injury or incapacity for a period of twelve (12) consecutive months, or (II) for "Cause;" or (B) initiated by Employee upon one or more of the following occurrences: (I) any material failure of the Company to comply with and satisfy any of the terms of this Agreement; (II) any significant reduction by the Company or its affiliates of the authority, duties, reporting responsibilities or job responsibilities of Employee; (III) any removal by the Company or its affiliates of Employee from the employment grade, compensation level or officer positions which Employee holds as of the effective date hereof except in connection with a promotion to higher office; (IV) the requirement that Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position Employee holds; (V) the relocation of the offices of the Company at which Employee is principally employed to a location more than twenty-five (25) miles from the location of such offices immediately prior to the date that is six (6) months before the Change in Control, or the Company's requiring Employee to be based anywhere other than such offices, except for required travel on the Company's business to any extent substantially consistent with Employee's business travel obligations as of the date of this Agreement; or (VI) the failure of the Company to obtain an agreement from any successor to assume and agree to perform this Agreement, as required by Section 14 hereof; or (ii) a Termination of Employment during the one (1) year period immediately preceding a Change in Control, unless the Company establishes by clear and convincing evidence that such Termination of Employment was for good faith business reasons not related to the Change in Control. 2. Notice of Termination of Employment. The Company shall communicate any Termination of Employment to Employee by a Notice of Termination given in accordance with Section 15 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice that (a) briefly summarizes the facts and circumstances deemed to provide a basis for the Termination of Employment, (b) indicates whether the Company considers the Termination of Employment to be a Termination in Connection with a Change in Control and, if not, the specific reasons why, and (c) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than fifteen (15) days after the giving of such notice). - 4 - 3. Compensation upon Termination in Connection with a Change in Control. In the event of Employee's Termination in Connection with a Change in Control, the Company shall pay to Employee, or provide to Employee at no additional cost for the length of the Separation Period, the following: (a) An amount equal to Employee's earned or accrued but unpaid compensation (including any unused paid time off) as of the date of Termination of Employment, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (b) An amount equal to all reasonable out-of-pocket business expenses properly incurred but not yet reimbursed by the Company or its affiliates, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (c) An amount equal to two (2) times the sum of the Annual Base Salary and the Annual Bonus, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (d) An amount equal to the estimated after-tax cost to Employee of continuing any Company-sponsored life or other insurance, travel or accident insurance and disability insurance coverage in effect for Employee, and where applicable, his or her spouse and dependents, for the length of the Separation Period, as if Employee had continued to be employed by the Company during the Separation Period at his or her Annual Base Salary, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (e) The benefits to which Employee would be entitled under the Company's or its affiliates' long term incentive, savings and retirement plans (including stock option and other equity compensation plans, whether qualified or non-qualified) (the "Benefit Plans"), if Employee had continued working for the Company during the Separation Period at his or her Annual Base Salary, and were making the maximum amount of employee contributions, if any, as are required under such Benefit Plans. In the event that applicable law does not permit continued coverage under any tax qualified benefit plan or incentive or option plan during the Separation Period, the Company shall provide economically-equivalent benefits to Employee on a nonqualified, supplemental or other basis. Employee shall be fully vested in his or her benefits under all such Benefit Plans, and all stock options, stock appreciation rights, warrants, stock awards and performance units held by Employee, whether or not restricted or subject to the satisfaction of any performance goals or other criteria, shall become fully vested and exercisable as of the Termination Date, or immediately preceding the Change in Control, whichever occurs sooner. (f) Continued group hospitalization, health and dental care coverage, with coverage equivalent to the coverage to which Employee would have been entitled had Employee continued working for the Company during the Separation Period at his or her Annual Base Salary. Where the continuation of - 5 - such coverage would adversely affect the tax status of the plan pursuant to which the coverage is provided, the Company may elect to pay Employee, in lieu of providing such coverage, an amount equal to the estimated after-tax cost of continuing such coverage for the length of the Separation Period, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. The COBRA healthcare continuation coverage period under Section 4980B of the Internal Revenue Code of 1986, as amended, shall run concurrently with the Separation Period. Following the end of the Separation Period and until the end of the COBRA continuation coverage period, Employee (or, if Employee is deceased, Employee's surviving spouse) may continue to purchase health care coverage for himself (or herself) and eligible dependents under the Company's health benefits plan at the prevailing rate then in effect for COBRA continuation coverage. (g) Outplacement assistance services during the Separation Period (at a total cost not to exceed $10,000) provided by an outplacement agency selected by Employee. Notwithstanding the foregoing, no such payments, benefits or services shall be made or provided (except as may be required by law) unless Employee executes, and does not revoke, a written release, substantially in the form attached hereto as ANNEX I (the "Release"), of any and all claims against the Company and all related parties with respect to all matters arising out of Employee's employment by the Company or its affiliates (other than any entitlements under the terms of this Agreement or under any other plans or programs of the Company in which Employee participated and under which Employee has accrued or become entitled to a benefit), or the termination thereof. 4. Other Payments; Non-Exclusivity of Rights. The payments and benefits due under Section 3 hereof shall be in addition to and not in lieu of any payments or benefits due to Employee under any other plan, policy or program of the Company or its affiliates, including, without limitation, any employee benefit programs, compensation plans and programs and employee perquisite programs maintained for the benefit of the Company's officers or employees, except that no cash payments shall be paid to Employee under the Company's then-current severance pay policies. Moreover, nothing in this Agreement shall prevent or limit Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or its affiliates and for which Employee may qualify. 5. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee under Sections 3 and 4 hereof within the respective time periods provided therein, the Company shall pay to Employee, in addition to the payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the date payment is required under Section 3 and 4, as appropriate, until paid to Employee, at the rate from time to time reported by The Wall Street Journal as its "prime rate" plus 2%, each change in such rate to take effect on the effective date of the change in such prime rate. (b) It is the intent of the Parties that Employee not be required to incur any expenses associated with the enforcement of his or her rights under Sections 3 or 4 hereof by arbitration, litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Employee hereunder. Accordingly, the Company shall pay Employee, on demand, the amounts necessary to advance to, or reimburse Employee in full for, all expenses (including all attorneys' fees and legal expenses) reasonably incurred by Employee in enforcing any of Employee's rights under this Agreement. - 6 - 6. No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 7. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or its affiliates may have against Employee or others. 8. Tax Withholding. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements. 9. Tax Reimbursement Payments. In the event that any amount or benefit paid or distributed to Employee pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Employee by the Company or its affiliates (collectively, the "Covered Payments"), including, without limitation, any profits realized in respect of the receipt, vesting or exercise of stock options or warrants and similar events, are or become subject to the tax (the "Excise Tax") imposed under Section 4999 of the Code", the Company shall pay to Employee at the time specified below an additional amount (the "Tax Reimbursement Payment"), such that the net amount retained by Employee with respect to such Covered Payments, after deducting any Excise Tax on the Covered Payments, as well as any Federal, state and local income taxes and Excise Tax on the Tax Reimbursement Payment provided for by this Section 9, but before deduction for any Federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. The Company shall reimburse Employee only as a result of excise taxes imposed under Section 4999 of the Code (or a successor Code provision of comparable intent). (a) For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated as "parachute payments" within the meaning of Section 280G of the Code, and all "parachute payments" in excess of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of the Company's independent certified public accountants or tax counsel selected by such Accountants (the "Accountants"), such Covered Payments, in whole or in part, either do not constitute "parachute payments" or represent reasonable compensation for personal services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base amount," or such "parachute payments" are otherwise not subject to the Excise Tax, and - 7 - (ii) the value of any non-cash benefits or any deferred payments or benefits shall be determined by the Accountants in accordance with the principles of Section 280G of the Code. (b) For purposes of determining the amount of the Tax Reimbursement Payment, Employee shall be deemed to pay: (i) Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Tax Reimbursement Payment is to be made, and taking into account the effect of loss of the value of itemized deductions and personal exemptions as a result of Employee's receipt of the Tax Reimbursement Payment; and (ii) any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal incomes taxes that could be obtained from the deduction of such state or local taxes if paid in such year. (c) In the event that the Excise Tax is subsequently determined by the Accountants, or pursuant to any proceeding or negotiations with the Internal Revenue Service, to be less than the amount taken into account hereunder in calculating the Tax Reimbursement Payment made, Employee shall repay to the Company, at the time that the amount of such reduction in the Excise Tax is finally determined, the portion of such prior Tax Reimbursement Payment that would not have been paid if such Excise Tax had been applied in initially calculating such Tax Reimbursement Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any portion of the Tax Reimbursement Payment to be refunded to the Company has been paid to any Federal, state or local tax authority, repayment thereof shall not be required until actual refund or credit of such portion has been made to Employee, and interest payable to the Company shall not exceed interest received or credited to Employee by such tax authority for the period it held such portion. Employee and the Company shall mutually agree upon a course of action to be pursued (and the method of allocating the expenses thereof) if Employee's good faith claim for refund or credit is denied. (d) In the event that the Excise Tax is later determined by the Accountants, or pursuant to any proceeding or negotiations with the Internal Revenue Service, to exceed the amount taken into account hereunder at the time the Tax Reimbursement Payment is made (including, but not limited to, by reason of any payment the existence or amount of which cannot be determined at the time of the Tax Reimbursement Payment), the Company shall make an additional Tax Reimbursement Payment in respect of such excess (plus any interest or penalty payable with respect to such excess) at the time that the amount of such excess is finally determined. - 8 - (e) The Tax Reimbursement Payment (or any portion thereof) provided for in this Section 9 shall be paid to Employee not later than fifteen (15) days following payment of the Covered Payments; provided, however, that if the amount of such Tax Reimbursement Payment (or any portion thereof) cannot be finally determined on or before the date on which payment is due, the Company shall pay to Employee by such date an amount estimated in good faith by the Accountants to be the minimum amount of such Tax Reimbursement Payment, and shall pay to Employee the remainder of such Tax Reimbursement Payment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than forty-five (45) days after payment of the related Covered Payment. In the event that the amount of the estimated Tax Reimbursement Payment exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Employee, payable within fifteen (15) days after written demand by the Company for repayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). 10. Confidential Information. Employee recognizes and acknowledges that, by reason of his or her employment by and service to the Company, he or she has had and will continue to have access to confidential information of the Company, including, without limitation, information and know-how pertaining to the Company's products and services, innovations, designs, ideas, plans, trade secrets, proprietary inventions, distribution and sales methods and systems, sales and profit figures, customer and supplier lists, and relationships with customers, suppliers and others ("Confidential Information"). Employee acknowledges that such Confidential Information is a valuable and unique asset of the Company and covenants that he or she will not, either during or after his or her employment by the Company, disclose or use any Confidential Information for any purpose known to be adverse to the interests of the Company, unless the information is already in the public domain through no fault of Employee or such disclosure or use is required by law or in a judicial or administrative proceeding. 11. Non-Competition and Non-Solicitation. (a) During Employee's employment by the Company and for a period of six (6) months after Employee's Termination in Connection with a Change in Control, Employee will not, except with the prior written consent of the Board (which consent shall not be unreasonably withheld or delayed), own, manage, operate, join, control or finance, or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Employee's name to be used in connection with, any business or enterprise directly engaged in, or with affiliates directly engaged in, the business of researching, developing, licensing, selling, distributing, marketing or otherwise commercializing organic light emitting device ("OLED") technology, chemicals or manufacturing equipment. The foregoing restrictions shall not be construed to prohibit the ownership by Employee of less than five percent (5%) of any class of securities of a corporation engaged in any of the foregoing business activities that has a class of securities registered pursuant to the Securities Exchange Act, provided that such ownership represents a passive investment and that neither Employee nor any group of Persons including Employee, either directly or indirectly, manages or exercises control over any such corporation, guarantees any of its financial obligations, otherwise takes any part in the conduct of its business (other than in exercising their rights as shareholders), or seeks to do any of the foregoing. - 9 - (b) During his or her employment by the Company, and thereafter during the Separation Period, Employee will not knowingly (i) solicit, divert, take away, redirect or unreasonably interfere with the Company's business relationships with any of its suppliers, customers, partners or joint venturers with whom Employee had any direct or indirect involvement during the term of this Agreement; or (ii) solicit, induce, recruit or attempt to influence any person who is now or is hereafter an employee of the Company to become an employee or be engaged as an independent contractor of any entity engaged in activities competitive with those of the Company. (c) An amount equal to one-half of the severance benefits payable under this Agreement is specifically designated as additional consideration for the covenants described in this Section 11. The covenants described in this Section 11 shall continue to apply during the period specified herein after Employee's Termination of Employment for any reason, without regard to whether Employee executes a Release or receives any severance benefits as a result of such termination. If Employee breaches any of the covenants described in this Section 11, the applicable period during which the covenant applies shall be tolled during the period of such breach. 12. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 10 and 11 hereof are reasonable and necessary to protect the legitimate interests of the Company and its affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those Sections will result in irreparable injury to the Company. Employee agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 10 or 11 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Sections 10 or 11 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law. (b) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 10 or 11 hereof, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief or other equitable relief, may be brought in the state or federal courts of the State of New Jersey, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court. Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof. 13. Term of Agreement. This Agreement shall continue in full force and effect until all of the obligations of the Parties hereunder are satisfied or have expired. - 10 - 14. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by written agreement in form and substance reasonably satisfactory to Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. 15. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: If to the Company, to: Universal Display Corporation 375 Phillips Boulevard Ewing, New Jersey 08618 Attention: President and Chief Operating Officer If to Employee, to Employee's address of record with the Company or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to the other in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change in Control, notice at the last address of the Company or to any successor pursuant to this Section shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five (5) days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 16. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of New Jersey, without giving effect to any conflict of laws provisions. 17. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the Parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by Employee and executed on the Company's behalf by a senior executive officer or a senior management representative having supervisory responsibility with respect to Employee and/or Board approval. The provisions of this Agreement may provide for payments to Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the Parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. - 11 - (b) Nothing in this Agreement shall be construed as giving Employee any right to be retained in the employ of the Company, or as changing or modifying the "at will" nature of Employee's employment status. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the Parties hereto, except that the duties and responsibilities of Employee and the Company hereunder shall not be assignable, in whole or in part, except as expressly authorized herein. If Employee should die after a Termination in Connection with a Change in Control and while any amount payable hereunder would still be payable to Employee if Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's devises, legates or other designees or, if there is no such designee, to Employee's estate. 18. Severability; Effect of Legal Restrictions. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. Moreover, the terms of this Agreement shall be deemed modified to the extent necessary for the Company, in the written opinion of its outside counsel, to avoid violating the requirements of the Sarbanes-Oxley Act of 2002, or any other law applicable to the employment arrangements between Employee and the Company. Any delay in providing benefits or payments, any failure to provide a benefit or payment, or any repayment of compensation that is required due to operation of the preceding sentence shall not, in and of itself, constitute a breach of this Agreement; provided, however, that the Company shall provide economically equivalent payments or benefits to Employee to the extent permitted by law. 19. Remedies Cumulative; No Waiver. Except as otherwise expressly set forth herein, no right conferred upon either Party by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder, or now or hereafter existing at law or in equity. No delay or omission by either Party in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof. 20. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. EMPLOYEE REPRESENTS AND ACKNOWLEDGES THAT (I) HE OR SHE HAS BEEN ADVISED BY THE COMPANY TO CONSULT HIS OR HER OWN LEGAL COUNSEL IN RESPECT OF THIS AGREEMENT, AND (II) THAT HE OR SHE HAS HAD FULL OPPORTUNITY, PRIOR TO EXECUTION OF THIS AGREEMENT, TO REVIEW THOROUGHLY THIS AGREEMENT WITH HIS OR HER COUNSEL. - 12 - IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. UNIVERSAL DISPLAY CORPORATION By: Steven V. Abramson ---------------------------------- Name: Steven V. Abramson -------------------------------- Title: President ------------------------------- Scott C. Bovino Sidney D. Rosenblatt - ------------------------------------- ------------------------------------- Witness EMPLOYEE - 13 - ANNEX I SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE WHEREAS, Sidney D. Rosenblatt ("Employee") has been employed by Universal Display Corporation (the "Company") and its affiliate, UDC, Inc., and because the Employee's employment with the Company will terminate effective as of ____________________ (the "Termination Date"), Employee and the Company agree as follows: In consideration of the promises of the Company set forth in paragraph 3 below, Employee, and his or her heirs, executors and administrators, intending to be legally bound, hereby permanently and irrevocably agrees to the termination of Employee's employment with the Company effective as of the Termination Date, and hereby REMISE, RELEASE and FOREVER DISCHARGE the Company and any individual or organization related to the Company against whom or which Employee could assert a claim, including any and all affiliates, and their officers, directors, shareholders, partners, employees and agents, together with their respective successors and assigns, heirs, executors and administrators (hereinafter referred to collectively as the "Releasees"), of and from any and all causes of action, suits, debts, claims and demands whatsoever, which Employee had, has, or may have against Releasees up until the date of execution of this Separation of Employment Agreement and General Release, other than the Release Exclusions (as defined below). Particularly, but without limitation, Employee so releases all claims relating in any way to his employment or the termination of his employment relationship with the Company, including without limitation claims under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et al., Title VII of the Civil Rights Act of 1964, as amended, ss. 42 U.S.C. 2000e et seq., the Americans with Disabilities Act, 42 U.S.C. ss. 12101 et seq., Employee Retirement Income Security Act 29 U.S.C. ss. 1001 et seq., the Age Discrimination in Employment Act, as amended 29 U.S.C. ss. 621 et seq. (the "ADEA"), any common law claims and all claims for attorneys' fees and costs. Employee agrees and covenants that, should any other person, organization or other entity file, charge, claim, sue, or cause or permit to be filed any civil action, suit or legal proceeding involving any matter occurring at any time in the past, up to and including the date of execution of this Separation of Employment Agreement and General Release, Employee will not seek or accept any personal relief in such civil action, suit or legal proceeding. Moreover, Employee shall promptly take all steps necessary to dismiss, with prejudice, any and all pending complaints, charges and grievances against the Company or the Releasees, regardless of whether they are or have been filed internally or externally. Notwithstanding anything to the contrary in this Separation of Employment Agreement and General Release, nothing herein relinquishes any rights Employee may have to the following claims, or to any civil actions, suits or legal proceedings involving such claims (the "Release Exclusions"): (i) claims to seek indemnification pursuant to applicable state law, the Company's By-Laws, applicable Company resolutions, applicable Company employee benefit plans or other such documents maintained or required to be maintained by the Company, (ii) claims to seek coverage under directors' and officers' liability insurance policies maintained or required to be maintained by the Company, and (iii) claims to seek enforcement of Employee's rights under the Change in Control Agreement between Employee and the Company (the "Change in Control Agreement"). - 14 - In full consideration of Employee's execution of this Separation of Employment Agreement and General Release, and his or her agreement to be legally bound by its terms, the Company has agreed to provide Employee with the payments, benefits and other consideration specified in the Change in Control Agreement. Except as set forth in this Separation of Employment Agreement and General Release, or as may be required by applicable law, it is expressly agreed and understood that Releasees do not have, and will not have, any obligation to provide Employee, at any time in the future, with any payments, benefits or other consideration not specified in the Change in Control Agreement. Employee hereby agrees and recognizes that, as of the Termination Date, Employee's employment relationship with the Company will be permanently and irrevocably severed. Accordingly, Employee will not apply for a position with the Company or any of its affiliates and Employee waives his or her right to be hired or rehired in the future by the Company or any of its affiliates. It is further agreed and understood that Employee will continue to be available and cooperate in a reasonable manner in providing assistance to the Company in concluding any matters which are reasonably related to the duties and responsibilities which Employee had while employed by the Company, provided that such cooperation and assistance does not interfere with any subsequent employment obtained by Employee. Employee agrees and acknowledges that this Separation of Employment Agreement and General Release is not and shall not be construed to be an admission of any violation by the Releasees of any federal, state or local statute or regulation, or of any duty owed by the Releasees to Employee or any other person. Employee agrees, covenants and promises that Employee will not communicate or disclose the terms of this Separation of Employment Agreement and General Release to any persons with the exception of members of Employee's immediate family and Employee's attorneys and financial advisors, except as may be required by applicable law. Employee hereby certifies that Employee has read the terms of this Separation of Employment Agreement and General Release, that Employee has been advised by the Company to consult with an attorney of his or her own choice prior to executing this Separation of Employment Agreement and General Release, that Employee has had an opportunity to do so, and that Employee understands the terms and effects of this Separation of Employment Agreement and General Release. Employee further certifies that neither the Releasees, nor any representative of Releasees, have made any representations to Employee concerning this Separation of Employment Agreement and General Release other than those contained herein. Employee acknowledges that Employee has been informed that this Separation of Employment Agreement and General Release includes a waiver of claims under the ADEA, and that Employee has the right to reconsider this Separation of Employment Agreement and General Release as it pertains to claims under the ADEA for a period of twenty-one (21) days (or forty-five (45) days in the event of a group termination). Employee also understands that he or she has the right to revoke this Separation of Employment Agreement and General Release in its entirety for a period of seven (7) days following Employee's execution thereof. Should Employee desire to exercise any of the foregoing rights, Employee shall do so by providing written notice to the Company within the applicable period at the following address: Universal Display Corporation at 375 Phillips Boulevard, Ewing, New Jersey 08618, Attention: President. - 15 - This Separation of Employment Agreement and General Release, together with the Change in Control Agreement, constitute the complete and entire understanding between the parties relating to the subject matter of such documents, and supersede any and all prior agreements and understandings between the parties relating thereto. If any provision of this Separation of Employment Agreement and General Release is deemed invalid, the remaining provisions shall not be affected. The provisions of this Separation of Employment Agreement and General Release shall be governed by the laws of New Jersey, without giving effect to any conflict of laws provisions. IN WITNESS WHEREOF, and intending to be legally bound hereby, Employee has executed this Separation of Employment Agreement and General Release as of the date indicated below. - ------------------------------------- --------------------------------------- EMPLOYEE Date Acknowledgment of Receipt by: UNIVERSAL DISPLAY CORPORATION By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- - 16 - EX-10 8 ex10-46.txt EXHIBIT 10.46 CHANGE IN CONTROL AGREEMENT This Change in Control Agreement (the "Agreement') is made as of April 28, 2003, by and between Universal Display Corporation (the "Company"), and Julia J. Brown ("Employee"). WHEREAS, Employee is employed by UDC, Inc., an affiliate of the Company, currently serving in a capacity as Vice President and Chief Technical Officer of the Company; and WHEREAS, the Company believes that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of Employee to the Company without distraction notwithstanding the fact that the Company could be subject to a "Change in Control" (as hereinafter defined), and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company; and WHEREAS, in consideration for Employee agreeing to continue in employment with the Company and its affiliate and agreeing to keep Company information confidential and not to compete with the Company (as hereinafter defined), the Company agrees that Employee shall receive the compensation set forth in this Agreement as a cushion against the financial and career impact on Employee in the event Employee's employment with the Company is terminated without cause in connection with a Change in Control. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth and intending to be legally bound hereby, the Company and Employee (individually a "Party" and together, the "Parties") agree as follows: 1. Definitions. (a) "Annual Base Salary" shall mean twelve (12) times the greater of: (a) the highest monthly base salary paid or payable (including any base salary which has been earned but deferred and any car allowance) to Employee by the Company and its affiliates (as defined in Section 1504 of the Code without regard to subsection (b) thereof), together with any and all salary reduction authorized amounts under any of the Company's and its affiliates' benefit plans or programs, during the twenty-four (24) month period immediately preceding the date of the Change in Control, or (b) the monthly base salary paid or payable to Employee by the Company and its affiliates (including authorized deferrals, salary reduction amounts and any car allowance), together with any and all salary reduction authorized amounts under any of the Company's and its affiliates' benefit plans or programs, for the last full month immediately prior to Employee's Termination of Employment. (b) "Annual Bonus" shall mean an amount equal to Employee's highest annual bonus for the last three (3) full fiscal years prior to the Change in Control (annualized in the event that Employee was not employed for the whole of such fiscal year). If any such amount was paid in whole or in part in the form of stock options, stock appreciation rights, warrants, stock awards or performance units, whether or not restricted or subject to the satisfaction of any performance goals or other criteria, the annual bonus for such fiscal year shall include the fair market dollar value equivalent of all such stock options, stock appreciation rights, warrants, stock awards and performance units, determined as of the date of issuance. (c) "Board" shall mean the board of directors of the Company. (d) "Cause" shall mean (i) conviction of a crime involving moral turpitude, or (ii) gross negligence in the performance of duties, which gross negligence is willful, has or has the potential to have a material adverse effect on the business, operations, assets, properties or financial condition of the Company and its affiliates taken as a whole, and is not cured within sixty (60) days after reasonable written notice from the Company. (e) "Change in Control" shall mean the occurrence of any of the following: (i) if any Person or affiliated group of Persons (other than in their capacities as trustees of a trust existing on the Effective Date or any successor trust having the same beneficiaries) first become the "beneficial owners" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Persons any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of either the then-outstanding shares of stock of the Company or the combined voting power of the Company's then-outstanding securities; (ii) if, during any period of twenty-four (24) consecutive months during the existence of this Agreement commencing on or after the date hereof, the individuals who, at the beginning of such period, constitute the Board (the "Incumbent Directors") cease for any reason other than death to constitute at least a majority thereof; provided that a director who was not a director at the beginning of such twenty-four (24) month period shall be deemed to have satisfied such twenty-four (24) month requirement (and be an Incumbent Director) if such director was elected by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors either actually (because they were directors at the beginning of such twenty-four (24) month period) or by prior operation of this clause (ii); (iii) the consummation of a merger or consolidation of the Company with any other corporation other than (A) a merger or consolidation that would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving of the Company or such surviving entity or any parent thereof) at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or a similar transaction) in - 2 - which no Person or group of affiliated Persons (other than in their capacities as trustees of a trust existing on the Effective Date or any successor trust having the same beneficiaries) first become the "beneficial owners" (as defined in Rule 13d-3 under the Securities Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Persons any securities acquired directly from the Company or its affiliates) representing thirty percent (30%) or more of either the then-outstanding shares of stock of the Company or the combined voting power of the Company's then-outstanding securities; (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company, or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition by the Company of all or substantially all of the Company's assets to an entity, at least fifty percent (50%) of the combined voting power of the voting securities of which are owned by Persons in substantially the same proportion as their ownership of the Company immediately prior to such sale; or (v) any Person has consummated a tender offer or exchange for a majority of the voting power of the then outstanding shares of stock of the Company. Upon the occurrence of a Change in Control as provided above, no subsequent event or condition shall constitute a Change in Control for purposes of this Agreement, with the result that there can be no more than one Change in Control hereunder. (f) "Code" shall mean the Internal Revenue Code of 1986, as amended. (g) "Person" shall mean any corporation, partnership, limited liability company, joint venture, other entity or natural person. (h) "Separation Period" shall mean the twenty-four (24) month period beginning on the Termination Date. (i) "Termination Date" shall mean the date of receipt of the Notice of Termination described in Section 2 hereof, or any later date specified therein, as the case may be. (j) "Termination of Employment" shall mean the termination of Employee's active employment relationship with the Company or its affiliates. (k) "Termination in Connection with a Change in Control" shall mean: (i) a Termination of Employment within two (2) years after a Change in Control either: (A) initiated by the Company or its affiliates for any reason other than (I) Employee's death, continuous illness, injury or incapacity for a period of twelve (12) consecutive months, or (II) for "Cause;" or - 3 - (B) initiated by Employee upon one or more of the following occurrences: (I) any material failure of the Company to comply with and satisfy any of the terms of this Agreement; (II) any significant reduction by the Company or its affiliates of the authority, duties, reporting responsibilities or job responsibilities of Employee; (III) any removal by the Company or its affiliates of Employee from the employment grade, compensation level or officer positions which Employee holds as of the effective date hereof except in connection with a promotion to higher office; (IV) the requirement that Employee undertake business travel to an extent substantially greater than is reasonable and customary for the position Employee holds; (V) the relocation of the offices of the Company at which Employee is principally employed to a location more than twenty-five (25) miles from the location of such offices immediately prior to the date that is six (6) months before the Change in Control, or the Company's requiring Employee to be based anywhere other than such offices, except for required travel on the Company's business to any extent substantially consistent with Employee's business travel obligations as of the date of this Agreement; or (VI) the failure of the Company to obtain an agreement from any successor to assume and agree to perform this Agreement, as required by Section 14 hereof; or (ii) a Termination of Employment during the one (1) year period immediately preceding a Change in Control, unless the Company establishes by clear and convincing evidence that such Termination of Employment was for good faith business reasons not related to the Change in Control. 2. Notice of Termination of Employment. The Company shall communicate any Termination of Employment to Employee by a Notice of Termination given in accordance with Section 15 hereof. For purposes of this Agreement, a "Notice of Termination" means a written notice that (a) briefly summarizes the facts and circumstances deemed to provide a basis for the Termination of Employment, (b) indicates whether the Company considers the Termination of Employment to be a Termination in Connection with a Change in Control and, if not, the specific reasons why, and (c) if the Termination Date is other than the date of receipt of such notice, specifies the Termination Date (which date shall not be more than fifteen (15) days after the giving of such notice). - 4 - 3. Compensation upon Termination in Connection with a Change in Control. In the event of Employee's Termination in Connection with a Change in Control, the Company shall pay to Employee, or provide to Employee at no additional cost for the length of the Separation Period, the following: (a) An amount equal to Employee's earned or accrued but unpaid compensation (including any unused paid time off) as of the date of Termination of Employment, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (b) An amount equal to all reasonable out-of-pocket business expenses properly incurred but not yet reimbursed by the Company or its affiliates, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (c) An amount equal to two (2) times the sum of the Annual Base Salary and the Annual Bonus, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (d) An amount equal to the estimated after-tax cost to Employee of continuing any Company-sponsored life or other insurance, travel or accident insurance and disability insurance coverage in effect for Employee, and where applicable, his or her spouse and dependents, for the length of the Separation Period, as if Employee had continued to be employed by the Company during the Separation Period at his or her Annual Base Salary, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. (e) The benefits to which Employee would be entitled under the Company's or its affiliates' long term incentive, savings and retirement plans (including stock option and other equity compensation plans, whether qualified or non-qualified) (the "Benefit Plans"), if Employee had continued working for the Company during the Separation Period at his or her Annual Base Salary, and were making the maximum amount of employee contributions, if any, as are required under such Benefit Plans. In the event that applicable law does not permit continued coverage under any tax qualified benefit plan or incentive or option plan during the Separation Period, the Company shall provide economically-equivalent benefits to Employee on a nonqualified, supplemental or other basis. Employee shall be fully vested in his or her benefits under all such Benefit Plans, and all stock options, stock appreciation rights, warrants, stock awards and performance units held by Employee, whether or not restricted or subject to the satisfaction of any performance goals or other criteria, shall become fully vested and exercisable as of the Termination Date, or immediately preceding the Change in Control, whichever occurs sooner. (f) Continued group hospitalization, health and dental care coverage, with coverage equivalent to the coverage to which Employee would have been entitled had Employee continued working for the Company during the Separation Period at his or her Annual Base Salary. Where the continuation of - 5 - such coverage would adversely affect the tax status of the plan pursuant to which the coverage is provided, the Company may elect to pay Employee, in lieu of providing such coverage, an amount equal to the estimated after-tax cost of continuing such coverage for the length of the Separation Period, said amount to be paid in a lump sum within fifteen (15) days after the Termination Date. The COBRA healthcare continuation coverage period under Section 4980B of the Internal Revenue Code of 1986, as amended, shall run concurrently with the Separation Period. Following the end of the Separation Period and until the end of the COBRA continuation coverage period, Employee (or, if Employee is deceased, Employee's surviving spouse) may continue to purchase health care coverage for himself (or herself) and eligible dependents under the Company's health benefits plan at the prevailing rate then in effect for COBRA continuation coverage. (g) Outplacement assistance services during the Separation Period (at a total cost not to exceed $10,000) provided by an outplacement agency selected by Employee. Notwithstanding the foregoing, no such payments, benefits or services shall be made or provided (except as may be required by law) unless Employee executes, and does not revoke, a written release, substantially in the form attached hereto as ANNEX I (the "Release"), of any and all claims against the Company and all related parties with respect to all matters arising out of Employee's employment by the Company or its affiliates (other than any entitlements under the terms of this Agreement or under any other plans or programs of the Company in which Employee participated and under which Employee has accrued or become entitled to a benefit), or the termination thereof. 4. Other Payments; Non-Exclusivity of Rights. The payments and benefits due under Section 3 hereof shall be in addition to and not in lieu of any payments or benefits due to Employee under any other plan, policy or program of the Company or its affiliates, including, without limitation, any employee benefit programs, compensation plans and programs and employee perquisite programs maintained for the benefit of the Company's officers or employees, except that no cash payments shall be paid to Employee under the Company's then-current severance pay policies. Moreover, nothing in this Agreement shall prevent or limit Employee's continuing or future participation in or rights under any benefit, bonus, incentive or other plan or program provided by the Company or its affiliates and for which Employee may qualify. 5. Enforcement. (a) In the event that the Company shall fail or refuse to make payment of any amounts due Employee under Sections 3 and 4 hereof within the respective time periods provided therein, the Company shall pay to Employee, in addition to the payment of any other sums provided in this Agreement, interest, compounded daily, on any amount remaining unpaid from the date payment is required under Section 3 and 4, as appropriate, until paid to Employee, at the rate from time to time reported by The Wall Street Journal as its "prime rate" plus 2%, each change in such rate to take effect on the effective date of the change in such prime rate. (b) It is the intent of the Parties that Employee not be required to incur any expenses associated with the enforcement of his or her rights under Sections 3 or 4 hereof by arbitration, litigation or other legal action because the cost and expense thereof would substantially detract from the benefits intended to be extended to Employee hereunder. Accordingly, the Company shall pay Employee, on demand, the amounts necessary to advance to, or reimburse Employee in full for, all expenses (including all attorneys' fees and legal expenses) reasonably incurred by Employee in enforcing any of Employee's rights under this Agreement. - 6 - 6. No Mitigation. Employee shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for herein be reduced by any compensation earned by other employment or otherwise. 7. No Set-Off. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company or its affiliates may have against Employee or others. 8. Tax Withholding. Any payment required under this Agreement shall be subject to all requirements of the law with regard to the withholding of taxes, filing, making of reports and the like, and the Company shall use its best efforts to satisfy promptly all such requirements. 9. Tax Reimbursement Payments. In the event that any amount or benefit paid or distributed to Employee pursuant to this Agreement, taken together with any amounts or benefits otherwise paid or distributed to Employee by the Company or its affiliates (collectively, the "Covered Payments"), including, without limitation, any profits realized in respect of the receipt, vesting or exercise of stock options or warrants and similar events, are or become subject to the tax (the "Excise Tax") imposed under Section 4999 of the Code", the Company shall pay to Employee at the time specified below an additional amount (the "Tax Reimbursement Payment"), such that the net amount retained by Employee with respect to such Covered Payments, after deducting any Excise Tax on the Covered Payments, as well as any Federal, state and local income taxes and Excise Tax on the Tax Reimbursement Payment provided for by this Section 9, but before deduction for any Federal, state or local income or employment tax withholding on such Covered Payments, shall be equal to the amount of the Covered Payments. The Company shall reimburse Employee only as a result of excise taxes imposed under Section 4999 of the Code (or a successor Code provision of comparable intent). (a) For purposes of determining whether any of the Covered Payments will be subject to the Excise Tax and the amount of such Excise Tax, (i) such Covered Payments will be treated as "parachute payments" within the meaning of Section 280G of the Code, and all "parachute payments" in excess of the "base amount" (as defined under Section 280G(b)(3) of the Code) shall be treated as subject to the Excise Tax, unless, and except to the extent that, in the good faith judgment of the Company's independent certified public accountants or tax counsel selected by such Accountants (the "Accountants"), such Covered Payments, in whole or in part, either do not constitute "parachute payments" or represent reasonable compensation for personal services actually rendered (within the meaning of Section 280G(b)(4)(B) of the Code) in excess of the "base amount," or such "parachute payments" are otherwise not subject to the Excise Tax, and - 7 - (ii) the value of any non-cash benefits or any deferred payments or benefits shall be determined by the Accountants in accordance with the principles of Section 280G of the Code. (b) For purposes of determining the amount of the Tax Reimbursement Payment, Employee shall be deemed to pay: (i) Federal income taxes at the highest applicable marginal rate of Federal income taxation for the calendar year in which the Tax Reimbursement Payment is to be made, and taking into account the effect of loss of the value of itemized deductions and personal exemptions as a result of Employee's receipt of the Tax Reimbursement Payment; and (ii) any applicable state and local income taxes at the highest applicable marginal rate of taxation for the calendar year in which the Tax Reimbursement Payment is to be made, net of the maximum reduction in Federal incomes taxes that could be obtained from the deduction of such state or local taxes if paid in such year. (c) In the event that the Excise Tax is subsequently determined by the Accountants, or pursuant to any proceeding or negotiations with the Internal Revenue Service, to be less than the amount taken into account hereunder in calculating the Tax Reimbursement Payment made, Employee shall repay to the Company, at the time that the amount of such reduction in the Excise Tax is finally determined, the portion of such prior Tax Reimbursement Payment that would not have been paid if such Excise Tax had been applied in initially calculating such Tax Reimbursement Payment, plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. Notwithstanding the foregoing, in the event any portion of the Tax Reimbursement Payment to be refunded to the Company has been paid to any Federal, state or local tax authority, repayment thereof shall not be required until actual refund or credit of such portion has been made to Employee, and interest payable to the Company shall not exceed interest received or credited to Employee by such tax authority for the period it held such portion. Employee and the Company shall mutually agree upon a course of action to be pursued (and the method of allocating the expenses thereof) if Employee's good faith claim for refund or credit is denied. (d) In the event that the Excise Tax is later determined by the Accountants, or pursuant to any proceeding or negotiations with the Internal Revenue Service, to exceed the amount taken into account hereunder at the time the Tax Reimbursement Payment is made (including, but not limited to, by reason of any payment the existence or amount of which cannot be determined at the time of the Tax Reimbursement Payment), the Company shall make an additional Tax Reimbursement Payment in respect of such excess (plus any interest or penalty payable with respect to such excess) at the time that the amount of such excess is finally determined. (e) The Tax Reimbursement Payment (or any portion thereof) provided for in this Section 9 shall be paid to Employee not later than fifteen (15) days following payment of the Covered Payments; provided, however, that if the amount of such Tax Reimbursement Payment (or any portion thereof) cannot be finally determined on or before the date on which payment is due, the Company - 8 - shall pay to Employee by such date an amount estimated in good faith by the Accountants to be the minimum amount of such Tax Reimbursement Payment, and shall pay to Employee the remainder of such Tax Reimbursement Payment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than forty-five (45) days after payment of the related Covered Payment. In the event that the amount of the estimated Tax Reimbursement Payment exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Employee, payable within fifteen (15) days after written demand by the Company for repayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code). 10. Confidential Information. Employee recognizes and acknowledges that, by reason of his or her employment by and service to the Company, he or she has had and will continue to have access to confidential information of the Company, including, without limitation, information and know-how pertaining to the Company's products and services, innovations, designs, ideas, plans, trade secrets, proprietary inventions, distribution and sales methods and systems, sales and profit figures, customer and supplier lists, and relationships with customers, suppliers and others ("Confidential Information"). Employee acknowledges that such Confidential Information is a valuable and unique asset of the Company and covenants that he or she will not, either during or after his or her employment by the Company, disclose or use any Confidential Information for any purpose known to be adverse to the interests of the Company, unless the information is already in the public domain through no fault of Employee or such disclosure or use is required by law or in a judicial or administrative proceeding. 11. Non-Competition and Non-Solicitation. (a) During Employee's employment by the Company and for a period of six (6) months after Employee's Termination in Connection with a Change in Control, Employee will not, except with the prior written consent of the Board (which consent shall not be unreasonably withheld or delayed), own, manage, operate, join, control or finance, or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Employee's name to be used in connection with, any business or enterprise directly engaged in, or with affiliates directly engaged in, the business of researching, developing, licensing, selling, distributing, marketing or otherwise commercializing organic light emitting device ("OLED") technology, chemicals or manufacturing equipment. The foregoing restrictions shall not be construed to prohibit the ownership by Employee of less than five percent (5%) of any class of securities of a corporation engaged in any of the foregoing business activities that has a class of securities registered pursuant to the Securities Exchange Act, provided that such ownership represents a passive investment and that neither Employee nor any group of Persons including Employee, either directly or indirectly, manages or exercises control over any such corporation, guarantees any of its financial obligations, otherwise takes any part in the conduct of its business (other than in exercising their rights as shareholders), or seeks to do any of the foregoing. (b) During his or her employment by the Company, and thereafter during the Separation Period, Employee will not knowingly (i) solicit, divert, take away, redirect or unreasonably interfere with the Company's business relationships with any of its suppliers, customers, partners or joint venturers with whom Employee had any direct or indirect involvement during the term of this Agreement; or (ii) solicit, induce, recruit or attempt to influence any person who is now or is hereafter an employee of the Company to become an employee or be engaged as an independent contractor of any entity engaged in activities competitive with those of the Company. - 9 - (c) An amount equal to one-half of the severance benefits payable under this Agreement is specifically designated as additional consideration for the covenants described in this Section 11. The covenants described in this Section 11 shall continue to apply during the period specified herein after Employee's Termination of Employment for any reason, without regard to whether Employee executes a Release or receives any severance benefits as a result of such termination. If Employee breaches any of the covenants described in this Section 11, the applicable period during which the covenant applies shall be tolled during the period of such breach. 12. Equitable Relief. (a) Employee acknowledges that the restrictions contained in Sections 10 and 11 hereof are reasonable and necessary to protect the legitimate interests of the Company and its affiliates, that the Company would not have entered into this Agreement in the absence of such restrictions, and that any violation of any provision of those Sections will result in irreparable injury to the Company. Employee agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 10 or 11 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled. In the event that any of the provisions of Sections 10 or 11 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, then such provisions shall be deemed reformed in such jurisdiction to the maximum time, geographic, service, or other limitations permitted by applicable law. (b) Employee irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Section 10 or 11 hereof, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief or other equitable relief, may be brought in the state or federal courts of the State of New Jersey, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Employee may have to the laying of venue of any such suit, action or proceeding in any such court. Employee also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 15 hereof. 13. Term of Agreement. This Agreement shall continue in full force and effect until all of the obligations of the Parties hereunder are satisfied or have expired. 14. Successor Company. The Company shall require any successor or successors (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company, by written agreement in form and substance reasonably satisfactory to Employee, to acknowledge expressly that this Agreement is binding upon and enforceable against the Company in accordance with the terms hereof, and to become jointly and severally obligated with the Company to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession or successions had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement. As used in this Agreement, the Company shall mean the Company as hereinbefore defined and any such successor or successors to its business and/or assets, jointly and severally. - 10 - 15. Notices. All notices and other communications required or permitted hereunder or necessary or convenient in connection herewith shall be in writing and shall be delivered personally or mailed by registered or certified mail, return receipt requested, or by overnight express courier service, as follows: If to the Company, to: Universal Display Corporation 375 Phillips Boulevard Ewing, New Jersey 08618 Attention: President and Chief Operating Officer If to Employee, to Employee's address of record with the Company or to such other names or addresses as the Company or Employee, as the case may be, shall designate by notice to the other in the manner specified in this Section; provided, however, that if no such notice is given by the Company following a Change in Control, notice at the last address of the Company or to any successor pursuant to this Section shall be deemed sufficient for the purposes hereof. Any such notice shall be deemed delivered and effective when received in the case of personal delivery, five (5) days after deposit, postage prepaid, with the U.S. Postal Service in the case of registered or certified mail, or on the next business day in the case of overnight express courier service. 16. Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of New Jersey, without giving effect to any conflict of laws provisions. 17. Contents of Agreement, Amendment and Assignment. (a) This Agreement supersedes all prior agreements, sets forth the entire understanding between the Parties hereto with respect to the subject matter hereof and cannot be changed, modified, extended or terminated except upon written amendment executed by Employee and executed on the Company's behalf by a senior executive officer or a senior management representative having supervisory responsibility with respect to Employee and/or Board approval. The provisions of this Agreement may provide for payments to Employee under certain compensation or bonus plans under circumstances where such plans would not provide for payment thereof. It is the specific intention of the Parties that the provisions of this Agreement shall supersede any provisions to the contrary in such plans, and such plans shall be deemed to have been amended to correspond with this Agreement without further action by the Company or the Board. - 11 - (b) Nothing in this Agreement shall be construed as giving Employee any right to be retained in the employ of the Company, or as changing or modifying the "at will" nature of Employee's employment status. (c) All of the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective heirs, representatives, successors and assigns of the Parties hereto, except that the duties and responsibilities of Employee and the Company hereunder shall not be assignable, in whole or in part, except as expressly authorized herein. If Employee should die after a Termination in Connection with a Change in Control and while any amount payable hereunder would still be payable to Employee if Employee had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Employee's devises, legates or other designees or, if there is no such designee, to Employee's estate. 18. Severability; Effect of Legal Restrictions. If any provision of this Agreement or application thereof to anyone or under any circumstances shall be determined to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions or applications of this Agreement which can be given effect without the invalid or unenforceable provision or application. Moreover, the terms of this Agreement shall be deemed modified to the extent necessary for the Company, in the written opinion of its outside counsel, to avoid violating the requirements of the Sarbanes-Oxley Act of 2002, or any other law applicable to the employment arrangements between Employee and the Company. Any delay in providing benefits or payments, any failure to provide a benefit or payment, or any repayment of compensation that is required due to operation of the preceding sentence shall not, in and of itself, constitute a breach of this Agreement; provided, however, that the Company shall provide economically equivalent payments or benefits to Employee to the extent permitted by law. 19. Remedies Cumulative; No Waiver. Except as otherwise expressly set forth herein, no right conferred upon either Party by this Agreement is intended to be exclusive of any other right or remedy, and each and every such right or remedy shall be cumulative and shall be in addition to any other right or remedy given hereunder, or now or hereafter existing at law or in equity. No delay or omission by either Party in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof. 20. Miscellaneous. All section headings are for convenience only. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. EMPLOYEE REPRESENTS AND ACKNOWLEDGES THAT (I) HE OR SHE HAS BEEN ADVISED BY THE COMPANY TO CONSULT HIS OR HER OWN LEGAL COUNSEL IN RESPECT OF THIS AGREEMENT, AND (II) THAT HE OR SHE HAS HAD FULL OPPORTUNITY, PRIOR TO EXECUTION OF THIS AGREEMENT, TO REVIEW THOROUGHLY THIS AGREEMENT WITH HIS OR HER COUNSEL. - 12 - IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have executed this Agreement as of the date first above written. UNIVERSAL DISPLAY CORPORATION By: Sidney D. Rosenblatt ----------------------------------- Name: Sidney D. Rosenblatt ---------------------------------- Title: CFO --------------------------------- Scott C. Bovino Julia J. Brown - ----------------------------------- --------------------------------------- Witness EMPLOYEE - 13 - ANNEX I SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE WHEREAS, Julia J. Brown ("Employee") has been employed by Universal Display Corporation (the "Company") and its affiliate, UDC, Inc., and because the Employee's employment with the Company will terminate effective as of ____________________ (the "Termination Date"), Employee and the Company agree as follows: In consideration of the promises of the Company set forth in paragraph 3 below, Employee, and his or her heirs, executors and administrators, intending to be legally bound, hereby permanently and irrevocably agrees to the termination of Employee's employment with the Company effective as of the Termination Date, and hereby REMISE, RELEASE and FOREVER DISCHARGE the Company and any individual or organization related to the Company against whom or which Employee could assert a claim, including any and all affiliates, and their officers, directors, shareholders, partners, employees and agents, together with their respective successors and assigns, heirs, executors and administrators (hereinafter referred to collectively as the "Releasees"), of and from any and all causes of action, suits, debts, claims and demands whatsoever, which Employee had, has, or may have against Releasees up until the date of execution of this Separation of Employment Agreement and General Release, other than the Release Exclusions (as defined below). Particularly, but without limitation, Employee so releases all claims relating in any way to his employment or the termination of his employment relationship with the Company, including without limitation claims under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et al., Title VII of the Civil Rights Act of 1964, as amended, ss. 42 U.S.C. 2000e et seq., the Americans with Disabilities Act, 42 U.S.C. ss. 12101 et seq., Employee Retirement Income Security Act 29 U.S.C. ss. 1001 et seq., the Age Discrimination in Employment Act, as amended 29 U.S.C. ss. 621 et seq. (the "ADEA"), any common law claims and all claims for attorneys' fees and costs. Employee agrees and covenants that, should any other person, organization or other entity file, charge, claim, sue, or cause or permit to be filed any civil action, suit or legal proceeding involving any matter occurring at any time in the past, up to and including the date of execution of this Separation of Employment Agreement and General Release, Employee will not seek or accept any personal relief in such civil action, suit or legal proceeding. Moreover, Employee shall promptly take all steps necessary to dismiss, with prejudice, any and all pending complaints, charges and grievances against the Company or the Releasees, regardless of whether they are or have been filed internally or externally. Notwithstanding anything to the contrary in this Separation of Employment Agreement and General Release, nothing herein relinquishes any rights Employee may have to the following claims, or to any civil actions, suits or legal proceedings involving such claims (the "Release Exclusions"): (i) claims to seek indemnification pursuant to applicable state law, the Company's By-Laws, applicable Company resolutions, applicable Company employee benefit plans or other such documents maintained or required to be maintained by the Company, (ii) claims to seek coverage under directors' and officers' liability insurance policies maintained or required to be maintained by the Company, and (iii) claims to seek enforcement of Employee's rights under the Change in Control Agreement between Employee and the Company (the "Change in Control Agreement"). - 14 - In full consideration of Employee's execution of this Separation of Employment Agreement and General Release, and his or her agreement to be legally bound by its terms, the Company has agreed to provide Employee with the payments, benefits and other consideration specified in the Change in Control Agreement. Except as set forth in this Separation of Employment Agreement and General Release, or as may be required by applicable law, it is expressly agreed and understood that Releasees do not have, and will not have, any obligation to provide Employee, at any time in the future, with any payments, benefits or other consideration not specified in the Change in Control Agreement. Employee hereby agrees and recognizes that, as of the Termination Date, Employee's employment relationship with the Company will be permanently and irrevocably severed. Accordingly, Employee will not apply for a position with the Company or any of its affiliates and Employee waives his or her right to be hired or rehired in the future by the Company or any of its affiliates. It is further agreed and understood that Employee will continue to be available and cooperate in a reasonable manner in providing assistance to the Company in concluding any matters which are reasonably related to the duties and responsibilities which Employee had while employed by the Company, provided that such cooperation and assistance does not interfere with any subsequent employment obtained by Employee. Employee agrees and acknowledges that this Separation of Employment Agreement and General Release is not and shall not be construed to be an admission of any violation by the Releasees of any federal, state or local statute or regulation, or of any duty owed by the Releasees to Employee or any other person. Employee agrees, covenants and promises that Employee will not communicate or disclose the terms of this Separation of Employment Agreement and General Release to any persons with the exception of members of Employee's immediate family and Employee's attorneys and financial advisors, except as may be required by applicable law. Employee hereby certifies that Employee has read the terms of this Separation of Employment Agreement and General Release, that Employee has been advised by the Company to consult with an attorney of his or her own choice prior to executing this Separation of Employment Agreement and General Release, that Employee has had an opportunity to do so, and that Employee understands the terms and effects of this Separation of Employment Agreement and General Release. Employee further certifies that neither the Releasees, nor any representative of Releasees, have made any representations to Employee concerning this Separation of Employment Agreement and General Release other than those contained herein. Employee acknowledges that Employee has been informed that this Separation of Employment Agreement and General Release includes a waiver of claims under the ADEA, and that Employee has the right to reconsider this Separation of Employment Agreement and General Release as it pertains to claims under the ADEA for a period of twenty-one (21) days (or forty-five (45) days in the event of a group termination). Employee also understands that he or she has the right to revoke this Separation of Employment Agreement and General Release in its entirety for a period of seven (7) days following Employee's execution thereof. Should Employee desire to exercise any of the foregoing rights, Employee shall do so by providing written notice to the Company within the applicable period at the following address: Universal Display Corporation at 375 Phillips Boulevard, Ewing, New Jersey 08618, Attention: President. - 15 - This Separation of Employment Agreement and General Release, together with the Change in Control Agreement, constitute the complete and entire understanding between the parties relating to the subject matter of such documents, and supersede any and all prior agreements and understandings between the parties relating thereto. If any provision of this Separation of Employment Agreement and General Release is deemed invalid, the remaining provisions shall not be affected. The provisions of this Separation of Employment Agreement and General Release shall be governed by the laws of New Jersey, without giving effect to any conflict of laws provisions. IN WITNESS WHEREOF, and intending to be legally bound hereby, Employee has executed this Separation of Employment Agreement and General Release as of the date indicated below. - ------------------------------------- --------------------------------------- EMPLOYEE Date Acknowledgment of Receipt by: UNIVERSAL DISPLAY CORPORATION By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- - 16 - EX-99 9 ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with this report of the Company on Form 10-Q for the quarter ended March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Sherwin I. Seligsohn, Chairman of the Board and Chief Executive Officer of the Company, hereby certify, based on my knowledge, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Date: May 13, 2003 By: Sherwin I. Seligsohn ------------------------------------------------- Sherwin I. Seligsohn Chairman of the Board and Chief Executive Officer
EX-99 10 ex99-2.txt EXHIBIT 99.2 Exhibit 99.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with this report of the Company on Form 10-Q for the quarter ended March 31, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Sherwin I. Seligsohn, Chairman of the Board and Chief Executive Officer of the Company, hereby certify, based on my knowledge, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Date: May 13, 2003 By: Sidney D. Rosenblatt ---------------------------------------------------- Sidney D. Rosenblatt Executive Vice President and Chief Financial Officer
-----END PRIVACY-ENHANCED MESSAGE-----