-----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, TXD2QzUPRcQ7hCAfbCdkqy9UTF4lq4ji9pNABGjmo9/0FU/YcgZr0zB2tfqNWGcq h8lcDjF1JkKRjtLfYVN5Hw== 0000950127-02-000738.txt : 20020703 0000950127-02-000738.hdr.sgml : 20020703 20020703173000 ACCESSION NUMBER: 0000950127-02-000738 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020620 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMAGIN CORP CENTRAL INDEX KEY: 0001046995 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 880378451 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15751 FILM NUMBER: 02696846 BUSINESS ADDRESS: STREET 1: 1580 ROUTE 52 STREET 2: SUITE 2000 V6E 2K3 CITY: HOPEWELL JUNCTION STATE: NY ZIP: 12533 BUSINESS PHONE: 9148921900 MAIL ADDRESS: STREET 1: 1580 ROUTE 52 STREET 2: SUITE 2000 V6E 2K3 CITY: HOPEWELL JUNCITON STATE: NY ZIP: 12533 FORMER COMPANY: FORMER CONFORMED NAME: FASHION DYNAMICS CORP DATE OF NAME CHANGE: 19980805 8-K 1 form8k.txt CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 28, 2002 eMagin Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 000-24757 56-1764501 - ------------------------------- -------------------- ---------------------- (State or Other (Commission (I.R.S. Employer Jurisdiction of Incorporation) File Number) Identification Number) 2070 Route 52, Hopewell Junction, New York 12533 - -------------------------------------------------------------------------------- (Address of principal executive offices) (zip code) (845) 892-1900 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) ITEM 5. OTHER EVENTS. On June 20, 2002 (the "Closing Date"), eMagin Corporation ("eMagin") and an Investor ("Investor") entered into a Secured Note Purchase Agreement (the "Secured Note Agreement") whereby Investors agreed to lend eMagin $200,000 in exchange for (i) $200,000 11.00% per annum Secured Promissory Note due on August 30, 2002 (the "Secured Note") and (ii) Warrants (the "Warrants") exercisable for a period of three (3) years to purchase 300,000 shares of common stock of eMagin. The Secured Note Agreement provides for eMagin to issue $200,000 aggregate amount of Secured Notes. The proceeds from the Secured Note were received by eMagin on June 28, 2002. Interest is payable on the Secured Note at a rate of 11% per annum and is payable at maturity or on the effective date of an early termination. The full amount of the Secured Note is secured by (i) a first priority general security interest in the assets of Virtual Vision, Inc. ("Virtual Vision"), a wholly owned subsidiary of eMagin, pursuant to a Security Agreement (the "Security Agreement") dated June 20, 2002 by and between Virtual Vision, Inc., Alligator Holdings, Inc. ("Alligator") and the Investor; and (ii) a second priority general security interest in the assets of eMagin pursuant to a Subordinated Security Agreement (the "Subordinated Security Agreement") dated June 20, 2002, by and between eMagin Corporation, Alligator and the Investor. Upon a change in control of eMagin, eMagin may call the Secured Note and purchase all of the aggregate principal amount of the Secured Note at a price equal to 250% of the principal amount plus accrued and unpaid interest. If eMagin does not call the Secured Note within thirty (30) days of the event of a change in control, the Investors may put the Secured Note to eMagin at a price equal to 250% of the aggregate principal amount for a period of thirty days following the call period. In connection with the issuance of the Warrants, eMagin entered into a registration rights agreement ("Registration Rights Agreement") dated June 20, 2002, with the Investor, providing the Investor with certain registration rights under the Securities Act of 1933, as amended, to register for resale the shares to be issued pursuant to an exercise of the Warrants. The foregoing is not intended to be a full and complete description of the transaction. Terms of the transaction are more fully described in the copies of the Secured Note Purchase Agreement, the Secured Promissory Note, the Stock Purchase Warrant, the Registration Rights Agreement, the Security Agreement and the Subordinated Security Agreement attached as exhibits to this Form 8-K. ITEM 7. EXHIBITS. Exhibit Number Description 4.1 Secured Note Purchase Agreement entered into as of June 20, 2002, by and among eMagin Corporation and Investor. 4.2 Secured Promissory Note dated as of June 20, 2002, due August 30, 2002. 4.3 Stock Purchase Warrant dated June 20, 2002, to purchase common stock of eMagin Corporation. 4.4 Registration Rights Agreement dated June 20, 2002 by and between eMagin Corporation and Initial Investors. 4.5 Security Agreement dated as of June 20, 2002, by and between Virtual Vision, Inc., Alligator Holdings, Inc. and the Investor. 4.6 Subordinated Security Agreement dated as of June 20, 2002, by and between eMagin Corporation, Alligator Holdings, Inc. and the Investor. SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. EMAGIN CORPORATION By: /s/ Susan Jones -------------------------------------- Name: Susan Jones Title: Executive Vice President Dated June 28, 2002. EX-4.1 3 securednotepa.txt SECURED NOTE PURCHASE AGREEMENT EMAGIN CORPORATION SECURED NOTE PURCHASE AGREEMENT THIS SECURED NOTE PURCHASE AGREEMENT (this "Agreement") is entered into as of June 20, 2002, by and among eMagin Corporation, a Delaware corporation (the "Company"), Virtual Vision, Inc., a Delaware corporation, and wholly-owned subsidiary of the Company (the "Subsidiary") and the investor listed on Schedule A attached hereto (the "Investor"). W I T N E S S E T H : - - - - - - - - - - WHEREAS, the Company and the Subsidiary have requested funding for the satisfaction of their salary obligations through at least the end of June 2002; WHEREAS, in order to induce the Investor to enter into this Agreement, the Subsidiary has agreed to grant a continuing first priority security interest in and to the Subsidiary Collateral (as such term is defined in the Security Agreement attached to this Agreement as Exhibit C) WHEREAS, in order to further induce the Investor to enter into this Agreement, the Company has agreed to grant a subordinated security interest in and to the Company Collateral (as such term is defined in the Subordinated Security Agreement attached to this Agreement as Exhibit D) WHEREAS, the Investor has agreed to lend bridge financing to the Company (subject to the terms and conditions set forth in this Agreement) in order for the Company and the Subsidiary to satisfy their salary obligations until at least the end of June 2002; NOW, THEREFORE, in consideration of the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Purchase and Sale of Secured Note; Issuance of Warrant. (a) (i) The Company has duly authorized for sale, issue and delivery the secured note (the "Note") for a total aggregate principal amount of $200,000 (the "Maximum Note Amount"), due and payable on August 30, 2002 (the "Maturity Date") (unless prepaid prior to such date pursuant to the terms of the Note) and shall otherwise be substantially in the form attached to this Agreement as Exhibit A. The Note shall be issued to the Investor pursuant to this Agreement in the principal amount of $200,000. (ii) The Company has duly authorized for sale, issue and delivery of the three year warrant (the "Warrant" and together with the Note and the Common Stock (defined below), the "Securities") to purchase up to 300,000 shares, subject to adjustment (the "Maximum Warrant Amount") of the Company's common stock, par value $.001 per share (the "Common Stock"), such Warrant to be substantially in the form attached to this Agreement as Exhibit B. (b) Subject to the terms of this Agreement, the Investor agrees to purchase, and the Company agrees to issue the Investor, the Note and the Warrant for a purchase price and amount as set out on Schedule A attached hereto. (c) The purchase and sale of the Note and the Warrant shall take place concurrently with the execution of this Agreement (the "Closing"). At the Closing, the Company shall deliver to the Investor (i) an executed counterpart to this Agreement and (ii) the Note in the principal amount of $200,000, against delivery to the Company by the Investor of (x) an executed counterpart to this Agreement and (y) the purchase price of the Note and the Warrant in the amount described in the preceding clause (ii) by bank wire transfer of immediately available funds to an account designated in writing by the Company. (d) At the Closing, the Company will promptly issue to the Investor a Warrant to purchase the Maximum Warrant Amount, such Warrant to have an exercise price per share equal to 105% of the volume weighted average closing price of the Common Stock on the American Stock Exchange (or the over-the-counter market) for the five (5) trading days immediately preceding June 20, 2002 as reported by the Wall Street Journal, New York City edition (the "Warrant Exercise Price"). The Warrant shall be substantially in the form attached to this Agreement as Exhibit B. (e) Notwithstanding anything to the contrary contained in this Agreement or the Note issued hereunder, if the Investor shall not have delivered to the Company wire directions or other evidence satisfactory to the Company, acting reasonably, of irrevocable instruction to its respective banking or financial institutions to transfer and deliver to the Company's account, by wire transfer or otherwise, the amounts due from the Investor at the Closing pursuant to Section 1(a) above (and amounting to, in the aggregate, $200,000, in immediately available funds), by the close of business on June 21, 2002, then this Agreement and any Note issued hereby (including any schedules or exhibits attached hereto) shall be null and void, and of no further force and effect, and any amounts, if any, received by the Company from the Investor pursuant to this Agreement or such Note shall be promptly (and in any case no later than the close of business on the immediately following business day) returned by the Company to the Investor in such amount as may have transferred to the Company by the Investor; provided, that, any Note or Warrant issuable hereunder to the Investor shall not be required to be released or issued by the Company to the Investor unless and until the respective amounts due in respect of such Note and Warrant shall have been actually received by the Company. 2. Representations and Warranties of the Investor. As of the date of Closing, the Investor hereby represents and warrants to the Company as follows: (a) The Investor is acquiring its Note and will acquire its Warrant for the Investor's own account, not as nominee or agent, for investment and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). By executing this Agreement, the 2 Investor further represents that the Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant participation to any such person or to any third person, with respect to the Securities. (b) The Investor understands that (i) the Securities have not been registered under either the Securities Act or the securities laws of any state of the United States by reason of specific exemptions therefrom, (ii) the Securities must be held by the Investor indefinitely, and, therefore, the Investor must bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the Securities Act and the securities laws of any applicable state or is exempt from such registrations; (iii) each certificate that represents the Securities will be endorsed with legends as required by applicable securities laws; and (iv) the Company will instruct any transfer agent not to register the transfer of any of the Securities unless the conditions specified in the foregoing legend are satisfied. For greater certainty, the restrictive legend referred to in clause (iii) shall be substantially in the following form: THIS SECURITY (A) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND IS BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS, AND (B) MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED. (c) The Investor has been furnished with such materials and has been given access to such information relating to the Company as the Investor has requested. The Investor has been afforded the opportunity to ask questions regarding the Company and the Securities as the Investor has found necessary to make an informed investment decision. The Investor has been solely responsible for his own due diligence investigation of the Company and its business, for his own analysis of the merits and risks of its investment made pursuant to this Agreement and for his own analysis of the terms of its investment. (d) The Investor is an "accredited investor" within the meaning of Rule 501 under the Securities Act. The Investor is in a financial position to hold the Securities and is able to bear the economic risk and withstand a complete loss of the Investor's investment in the Securities. The Investor recognizes that the Securities involve a high degree of risk. The Investor is a sophisticated investor, is able to fend for himself in the transaction contemplated by this Agreement, and has such knowledge and experience in financial and business matters that the Investor is capable of evaluating the merits and risks of the prospective investment in the Securities. (e) This Agreement when duly executed and delivered by the Investor, will constitute a valid and binding obligation of the Investor, enforceable against the Investor in accordance with its terms, except, in each case, as such enforceability may be limited by 3 applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (f) During the period the Investor holds the Note, neither the Investor nor any person acting on his behalf (i) has the intention of entering, or will enter into, any put option, short position or other similar instrument or position with respect to the Common Stock that may be acquired upon exercise of the Warrant or (ii) will use shares of Common Stock that may be acquired upon exercise of the Warrant to settle any put option, short position or other similar instrument or position that may have been entered into prior to the execution of this Agreement. 3. Representations and Warranties of the Company and the Subsidiary. The Company and the Subsidiary represent and warrant to the Investor as follows: (a) Organization, Good Standing and Power. The Company and the Subsidiary are corporations duly incorporated, validly existing and in good standing under the laws of the State of Delaware and have all requisite corporate authority to own, lease and operate their respective properties and assets and to carry on their respective businesses as now being conducted. Each of the Company and the Subsidiary is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, other than those in which the failure so to qualify would not have a Material Adverse Effect. As used in this Agreement, a "Material Adverse Effect" shall mean any adverse effect on the business, operations, properties, or financial condition of the Company that is material and adverse to the Company and the Subsidiary, taken as a whole, and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company or the Subsidiary to perform any of their material obligations under this Agreement or the Securities. (b) Authorization, Enforcement. (i) The Company and the Subsidiary each has the requisite corporate power and corporate authority to enter into and perform its obligations under this Agreement and the Securities, pursuant to their respective terms, (ii) the execution and delivery of this Agreement and the Securities by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company, the Subsidiary or their respective Board of Directors or the Company's stockholders is required, and (iii) each of this Agreement, the Note, and the Warrant when executed and delivered by the Company will constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except, in each case, as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditors' rights and remedies or by other equitable principles of general application. (c) Company Capitalization. The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, of which 30,354,980 shares are issued and outstanding and 10,000,000 shares of preferred stock, par value $.001 per share, of which no shares are issued and outstanding. All of the outstanding shares of the Company's Common 4 Stock have been duly authorized and validly issued and are fully paid and non-assessable and were issued in accordance with the registration or qualification provisions of the Securities Act and any relevant state securities laws or pursuant to valid exemptions therefrom. Except as set forth in this Agreement and as set forth in the SEC Documents and the attached Schedule 3(c), no shares of Common Stock are entitled to preemptive rights or registration rights and there are no outstanding options, warrant, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company. Furthermore, except as set forth in this Agreement and as set forth in the SEC Documents and the attached Schedule 3(c), there are no contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company. The Company is not a party to, and it has no knowledge of, any agreement restricting the voting or transfer of any shares of the capital stock of the Company. Except as set forth in the SEC Documents, the offer and sale of all capital stock, convertible securities, rights, warrants, or options of the Company issued prior to the Closing complied with all applicable federal and state securities laws, and no stockholder has a right of rescission or damages with respect thereto which would have a Material Adverse Effect. The Company has filed as exhibits to the SEC Documents true and correct copies of the Company's articles or certificate of incorporation as in effect on the date hereof (the "Charter"), and the Company's bylaws as in effect on the date hereof (the "Bylaws"). The Company has not received any notice from the AMEX questioning or threatening the continued inclusion of the Common Stock on such market. (d) Issuance of Securities. The Note and the Warrant (and the shares of Common Stock underlying such Warrant) to be issued under this Agreement have been duly authorized by all necessary corporate action and, when paid for and issued in accordance with the terms of the Warrant, the Common Stock issued on exercise of the Warrant shall be validly issued and outstanding, fully paid and non-assessable. (e) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the Subsidiary and the consummation by the Company of the transactions contemplated herein do not and will not (i) violate any provision of the Company's or the Subsidiary's Charter or Bylaws, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company or the Subsidiary is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Company or the Subsidiary under any agreement or any commitment to which the Company or the Subsidiary is a party or by which the Company or the Subsidiary is bound or by which any of its respective properties or assets are bound, or (iv) result in a violation of any federal, state, or local statute, rule, regulation, order, judgment or decree (including any federal or state securities laws and regulations) applicable to the Company, the Subsidiary or any of their respective subsidiaries or by which any property or asset of the Company, the Subsidiary or any of their respective subsidiaries are bound or affected. To the knowledge of the Company and the Subsidiary, the business of the Company, the Subsidiary and their respective subsidiaries are not being conducted in violation of any laws, ordinances or regulations of any governmental entity, 5 except for possible violations which singularly or in the aggregate do not and will not have a Material Adverse Effect. The Company and the Subsidiary are not required under any federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for them to execute, deliver or perform any of their obligations under this Agreement, or for the Company to issue and sell the Securities in accordance with the terms hereof (other than any filings which may be required to be made by the Company with the SEC or state securities administrators subsequent to the Closing and any registration statement which may be filed pursuant hereto); provided that, for purpose of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of each Investor herein. (f) SEC Documents, Financial Statements. The Common Stock is registered pursuant to Section 12 of the Exchange Act, and, except as disclosed in the SEC Documents or in Schedule 3(f), the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with the U.S. Securities and Exchange Commission (the "SEC") pursuant to the reporting requirements of the Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the Exchange Act (all of the foregoing including filings incorporated by reference therein being referred to herein as the "SEC Documents"). The Company has directed the Investor to accurate and readily accessible sources of true and correct copies of the SEC Documents. As of their respective filing dates, the SEC Documents complied in all material respects with the requirements of the Exchange Act or the Securities Act, as applicable, and the rules and regulations of the SEC promulgated thereunder applicable to such documents, and, as of their respective filing dates, none of the SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form in all material respects with applicable accounting requirements under the United States Generally Accepted Accounting Principles, as those conventions, rules and procedures are determined by the Financial Accounting Standards Board ("GAAP"), and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with GAAP applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and the Subsidiary as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). (g) Disclosure. The Company and the Subsidiary have each provided the Investor with all the information that the Investor has requested for deciding whether to purchase the Note and the Warrant. To the best of the Company's or the Subsidiary's knowledge, none of this Agreement, other agreements, written statements or certificates made or delivered in connection herewith and the SEC Documents, when taken in the aggregate, as of the date of the Closing contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein not misleading. 6 (h) No Liens in Subsidiary. Other than in respect of leased tangible equipment used by the Subsidiary in the ordinary course of business, the Subsidiary is, as of the Closing, the owner of all Subsidiary Collateral (as such term is defined in the Security Agreement referred to in Section 4(a) of this Agreement) free from any security interest, deed of trust, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on the Subsidiary's property (other than Permitted Liens, as such term is defined in the Security Agreement) and the Subsidiary has not issued or committed to issue any indebtedness ranking equal to or higher in priority to the security interests to be granted in the Collateral under the Security Agreement to secure the obligations under the Note. (i) No Liens in Company. Other than in respect of leased tangible equipment used by the Company in the ordinary course of business and the first priority security interest granted pursuant to the Security Agreement, dated November 20, 2001 (the "Company Senior Security Agreement"), among the Company, the Secured Creditors and the Collateral Agent (as such terms are defined in the Company Senior Security Agreement), the Company is, as of the Closing, the owner of all Company Collateral (as such term is defined in the Subordinated Security Agreement referred to in Section 4(a) of this Agreement) free from any security interest, deed of trust, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on the Company's property (other than Permitted Liens, as such term is defined in the Company Security Agreement) and the Company has not issued or committed to issue any indebtedness ranking equal to or higher in priority to the security interests to be granted in the Company Collateral under the Subordinated Security Agreement to secure the obligations under the Note. (j) Creditor Actions. The Company or the Subsidiary have not received any written notice of foreclosure, involuntary bankruptcy or other material adverse creditor actions against the Company or the Subsidiary and have no actual knowledge of potential foreclosure, involuntary bankruptcy or other material adverse creditor actions affecting the Company or the Subsidiary. (k) Company Patents. To the best of the Company's knowledge, (i) the Company has not received any written notice of any claim from any third party (including, without limitation, any governmental or regulatory entity) and no such third party claims are pending challenging the right of the Company to use the patents (collectively, the "Subordinated Security Agreement Patents") listed on Annex G to the Subordinated Security Agreement (as defined in Section 4(a)) or alleging any violation or infringement by the Company thereof, and (ii) each Subordinated Security Agreement Patent shown as registered, filed, issued or applied for, has been duly and validly registered in, filed in or issued by, the official governmental registrars and/or issuers of patents and trademarks and remain in full force and effect as of the date of the Closing without any material defect. (l) Subsidiary Patents. To the best of the Subsidiary's knowledge, (i) the Subsidiary has not received any written notice of any claim from any third party (including, without limitation, any governmental or regulatory entity) and no such third party claims are pending challenging the right of the Subsidiary to use the patents (collectively, the "Security 7 Agreement Patents") listed on Annex G to the Security Agreement (as defined in Section 4(a)) or alleging any violation or infringement by the Subsidiary thereof, and (ii) each Security Agreement Patent shown as registered, filed, issued or applied for, has been duly and validly registered in, filed in or issued by, the official governmental registrars and/or issuers of patents and trademarks and remain in full force and effect as of the date of the Closing without any material defect. (m) Litigation. Except as set forth in the disclosure letter provided by the Company to the Investor on June 20, 2002, the Company and the Subsidiary are not party to or aware of any actual or asserted litigation claims filed in any court that could result in damages suffered by the Company or the Subsidiary in excess of $25,000 in the aggregate. 4. Miscellaneous. (a) Security. (i) The Note shall be secured by both (A) a general security interest under a security agreement (the "Security Agreement"), dated as of June 17, 2002, between the Subsidiary, as assignor of the security interest and Alligator Holdings, Inc., as collateral agent for the Investor, and (B) a general security interest under a subordinated security agreement (the "Subordinated Security Agreement"), dated as of June 17, 2002, between the Company, as assignor of the security interest and Alligator Holdings, Inc., as collateral agent for the Investor, with such security granted for the benefit of the Investor as holder of the Note. Reference is hereby made to both the Security Agreement and the Subordinated Security Agreement for a statement of the rights and obligations of the Investor, and the nature and extent of the security for, the Note. (ii) Any lien, security interest, encumbrance, charge or claim of the Investor on any Company Collateral or any proceeds or revenues therefrom which the Investor may have at any time as security for any of the Note shall be, and hereby are, subordinated to all liens, security interests, or encumbrances now or hereafter granted to the Secured Creditors under the Company Senior Security Agreement by the Company or any other person or by law, notwithstanding the date or order of attachment or perfection of any such lien, security interest, encumbrance or claim or charge or the provision of any applicable law. Notwithstanding the foregoing, if the Secured Creditors under the Company Senior Security Agreement shall at any time determine to release their lien on any Company Collateral for the purpose of enabling the Company or any other person to dispose of such assets, the Investor under the Subordinated Security Agreement hereby agrees, subject to the terms and conditions set forth below, to simultaneously release any lien granted therein as security for the Note. Upon the request of and at the expense of the Secured Creditors under the Company Senior Security Agreement (or any agent or other person acting on their behalf), the Investor under the Subordinated Security Agreement shall execute and deliver any releases and other documents and agreements that the Secured Creditors under the Company Senior Security Agreement (or such agent or other person) in their reasonable discretion deem necessary to dispose of the Company Collateral for the benefit of the Secured Creditors under the Company Senior Security Agreement in accordance with the terms and provisions thereof free of the interest in same of the Investor under the Subordinated Security Agreement. The Investor under the 8 Subordinated Security Agreement retains all of his rights as a junior secured creditor with respect to the surplus proceeds of the Company Collateral or undisposed-of Company Collateral, if any, arising from sale or other disposition of the Company Collateral for the benefit of the Secured Creditors under the Company Senior Security Agreement. (iii) Notwithstanding anything herein to the contrary, in no event shall the Collateral Agent nor the Investor initiate any judicial proceeding or other action which results or is intended to result in the foreclosure, realization upon, levy upon, or a liquidation of any of the Company Collateral, including without limitation, the exercise of any rights or remedies of a "secured party" under the Subordinated Security Agreement or under Article 9 of the UCC, unless and until such time as all of the Secured Creditors under the Company Senior Security Agreement shall have been paid in full in cash, and in the event that the Collateral Agent or the Investor shall have received any Company Collateral or the proceeds thereof in respect of the obligations under the Subordinated Agreement as a result of any violation of this Section 4(a)(iii), then in such event, such Company Collateral or proceeds thereof shall be held in trust for the Secured Creditors under the Company Senior Security Agreement and paid over and delivered forthwith to the agent for the Secured Creditors under the Company Senior Security Agreement in the form held (together with any necessary endorsements) for application to the Company's obligations under the Company Senior Security Agreement. (b) Fees and Expenses. Each party shall pay all of its own fees and expenses related to the transactions contemplated by this Agreement. (c) Survival. The representations, warranties, covenants and agreements made herein shall survive the date of the Closing. (d) Entire Agreement; Amendment. This Agreement, including but not limited to the form of Note (attached hereto as Exhibit A), the form of Warrant (attached hereto as Exhibit B), the form of Security Agreement (attached hereto as Exhibit C), the form of Subordinated Security Agreement (attached hereto as Exhibit D) and the Registration Rights Agreement (attached hereto as Exhibit E) and the other schedules and exhibits attached hereto, all of which form a part of this Agreement, contain the entire understanding of the parties with respect to the matters covered hereby and, except as specifically set forth herein, neither the Company nor the Investor make any representations, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by a written instrument signed by all of the parties to this Agreement. (e) Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (i) upon hand delivery, overnight mail or courier service at the address or number designated on the signature pages hereof (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. 9 The addresses for such communications shall be as set forth on the signature pages hereof. Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other parties hereto in accordance herewith. (f) Waivers. No waiver by any party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provisions, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter. (g) Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof. (h) No Third Party Beneficiaries; Assignment. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. The Investor may assign any of his rights under this Agreement to any permitted assignee of the Securities. The Company may not assign any of its rights or obligations under this Agreement without the written consent of the Investor. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to the choice of law provisions. The Company and the Investor waives any right to a jury trial with respect to any dispute arising out of this Agreement. (j) Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart. Execution of counterparts may be by facsimile. (k) Publicity. Upon the execution of this Agreement (i) the Company may file SEC Documents describing this Agreement and the transactions contemplated hereby, and (ii) any party may make a public statement or announcement with respect to this Agreement, the transactions contemplated hereby or the existence of this Agreement; provided, however, that prior to issuing any public statement or announcement described in clause (ii) above, such party must obtain the prior consent of each other party, which consent shall not be unreasonably withheld or delayed. (l) Severability. The provisions of this Agreement are severable and, in the event that any court shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, 10 had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible, so long as such construction does not materially adversely effect the economic rights of either party hereto. (m) Further Assurances. From and after the date of this Agreement, upon the request of the Investor or the Company, each of the Company and the Investor shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement. 5. Conditions to Closing. It shall be a condition to the consummation of the transactions contemplated by this Agreement at the Closing that the Company shall have, concurrently with the execution of this Agreement by the Investor, executed and delivered: (a) a copy of an agreement of The Travelers Insurance Company ("Travelers") with the Company extending the maturity date of the Convertible Promissory Note, entered into as of August 21, 2001 by the Company and Travelers, to August 30, 2002; (b) to the Collateral Agent (as such term is defined therein) the Security Agreement and Subordinated Security (as defined in Section 4(a)) in the forms attached to this Agreement as Exhibits C and D, and two completed originals of a UCC Form 1 for each security agreement suitable for filing and the applicable federal assignment forms executed by the Company sufficient for the Collateral Agent to perfect the security interests created therein; (c) a letter dated June 20, 2002 from the Company to the Investor setting forth the Investor's registration rights with respect to the Warrant (the "Registration Rights Letter") in the form attached to this Agreement as Exhibit E which allows the Investors to have piggy-back registration rights; (d) the Warrant to be in the amount required to be issued to the Investor on the date of the Closing pursuant to Section 1(d) and in the form attached to this Agreement as Exhibit B; and (e) a legal opinion of Company's counsel to the effect that the entering into of this Agreement by the Company and the Subsidiary has been duly authorized by all necessary corporate action of the Company and the Subsidiary and that the execution, delivery and performance of this Agreement by the Company and the Subsidiary will not violate or conflict with the Amended and Restated Articles of Incorporation or Bylaws of the Company or the Subsidiary. 11 6. Additional Covenants of Subsidiary. The Subsidiary covenants and agrees with the Investor that the Subsidiary shall not issue any secured debt (excluding tangible equipment leased in the ordinary course of business and Permitted Liens, as defined in the Security Agreement) or any other security (excluding Permitted Liens, as defined in the Security Agreement) which in form or substance represent or are equal to or senior to the secured interests granted under the Security Agreement without the approval of the Investor. 7. Additional Covenants of Company. The Company covenants and agrees with the Investor that the Company shall not issue any secured debt (excluding tangible equipment leased in the ordinary course of business and Permitted Liens, as defined in the Subordinated Security Agreement) or any other security (excluding Permitted Liens, as defined in the Subordinated Security Agreement) which in form or substance represent or are equal to or senior to the secured interests granted under the Subordinated Security Agreement without the approval of the Investor. 8. Use of Proceeds. The Company shall use the net proceeds from the Note for the funding of the Company's and the Subsidiary's salary obligations only. On or before the date which is thirty (30) days from the date of the Closing, the Company shall furnish to the Investor a written certification of the Company, signed by the Chief Executive Officer, certifying that the net proceeds from the Note were used for the purposes permitted by the terms of this section and no other purpose or purposes. The Company hereby authorizes the Investor and his designated representatives to conduct a review of the Company's books and records sufficient to satisfy the Investor, in the exercise of reasonable discretion, that the proceeds of the Note were used for the purposes permitted by the terms of this section and no other purpose or purposes. [Signature Pages Follow] 12 This Agreement has been duly executed as of the date and year first written above. EMAGIN CORPORATION By ------------------------------------- Name: Title: VIRTUAL VISION, INC. By ------------------------------------- Name: Title: INVESTOR: --------------------------------------- Mortimer D. A. Sackler Address: 15 East 62nd Street New York, NY 10021 13 EX-4.2 4 securedpromissorynote.txt SECURED PROMISSORY NOTE SECURED PROMISSORY NOTE $200,000 June 20, 2002 Hopewell Junction, New York For value received, eMagin Corporation, a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to the order of Mr. MORTIMER D.A. SACKLER or his assigns (the "Lender"), subject to the provisions set forth below, in lawful money of the United States of America and in immediately available funds, the principal sum of $200,000, plus interest, payable on the dates and in the manner set forth below. This Secured Promissory Note (the "Note") is the note (the "Note") referred to in that certain Secured Note Purchase Agreement, dated as of June 20, 2002 (the "Closing Date"), by and between the Borrower and the Investor listed therein (as the same may from time to time be amended, modified or supplemented, the "Note Purchase Agreement"), which is to be issued by the Borrower pursuant to, and subject to the terms of, the Note Purchase Agreement, and this Note is entitled to the benefits provided for therein. All capitalized terms used herein and not otherwise defined herein shall have the respective meanings given to them in the Security Agreement (as defined below). 1. PRINCIPAL REPAYMENT. The outstanding principal amount of this Note shall be payable on August 30, 2002 (the "Maturity Date"), unless this Note has been redeemed as described in Section 10 below (such event, an "Early Termination Event"). 2. INTEREST RATE. The Borrower further promises to pay interest on the sum of the unpaid principal amount of this Note outstanding on each day, from the date of this Note until all of the principal shall have been repaid in full or pursuant to an Early Termination Event. Interest shall accrue at the rate of eleven percent (11%) per annum. Interest shall be payable on the Maturity Date (or on the effective date of an Early Termination Event) and shall be calculated on the basis of a 360-day year for the actual number of days elapsed. Any principal payment or interest payment on the unpaid principal amount of this Note not paid when due, whether at the Maturity Date, on the effective date of an Early Termination Event, by acceleration or otherwise, shall bear interest at thirteen percent (13%) or the maximum rate permissible by law, whichever is less. 3. SECURITY. The full amount of the Notes are secured by (i) a general security interest under a Security Agreement (the "Security Agreement"), dated as of June 20, 2002, between the Borrower's wholly owned subsidiary, Virtual Vision, Inc., a Delaware corporation ("Subsidiary"), as Assignor, and Alligator Holdings, Inc. ("AHI"), as collateral agent for the benefit of the holder of the Note, and (ii) a general security interest under a Subordinated Security Agreement (the "Subordinated Security Agreement"), dated as of June 20, 2002, between the Borrower, as Assignor, and AHI, as collateral agent for the benefit of the holder of the Note. Reference is hereby made to the Security Agreement and the Subordinated Security Agreement for a statement of the rights and obligations of the holder of, and the nature and extent of the security for, this Note. Borrower shall not, directly or indirectly create, permit or suffer to exist, and shall defend the Collateral against and take such further action as is necessary to remove any Liens (excluding Permitted Liens) on or in the Subsidiary Collateral or Company Collateral, or in any portion thereof, except as permitted pursuant to the Security Agreement and the Subordinated Security Agreement. 4. PLACE OF PAYMENT. All amounts payable hereunder shall be payable to the Lender in the manner specified by the Lender to the Borrower in writing. In the event that payment is to be made by wire transfer, such payment shall be made on a day that banks are open for business in New York, New York (each, a "Business Day"). If any payment becomes due on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day, and such extension shall be included in computing interest in connection with such payment. 5. DEFAULT. It shall be an event of default ("Event of Default") and the entire unpaid principal of this Note, together with accrued interest, shall become immediately due and payable, automatically and without presentment, protest, demand or notice of any kind, all of which are expressly waived by the undersigned, in the case of those events described in paragraphs (d), (e) and (f), and in the case of any other such event at the election of Lender, upon the occurrence of any of the following events: (a) Any failure on the part of Borrower to make any payment in respect of this Note when due, whether by acceleration or otherwise (including without limitation in connection with any repurchase obligation); (b) Borrower or the Subsidiary shall default in the performance or compliance with any other covenant or agreement of Borrower or the Subsidiary contained in this Note or the Note Purchase Agreement; (c) Any representation or warranty of Borrower or the Subsidiary contained in the Note Purchase Agreement shall prove to have been untrue in any material respect as of the date of the Note Purchase Agreement; (d) Borrower or the Subsidiary shall default in the payment of principal, premium or interest on any material indebtedness for borrowed money, or shall default in the performance of or compliance with the terms of any related documentation, and in connection with any such default such indebtedness becomes due and payable prior to its stated maturity; 2 (e) Borrower or the Subsidiary shall commence or consent to any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or similar law or statute; (f) A proceeding shall be commenced against Borrower or the Subsidiary under any bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or similar law or statute, and such proceeding is not stayed or dismissed within 45 days after the commencement thereof; (g) Borrower or the Subsidiary consents to or suffers the appointment of a guardian, receiver, trustee or custodian to any substantial and material part of its assets that is not vacated within 45 days; (h) Final judgment in excess of $10,000 (excluding insured portions) is entered against Borrower or the Subsidiary and is not stayed, bonded or discharged within 30 days; (i) The dissolution or termination of existence of Borrower or the Subsidiary; or (j) Any material default by the Subsidiary under the Security Agreement or the Borrower under the Subordinated Security Agreement. So long as an Event of Default exists, the Lender may declare the entire principal and unpaid accrued interest herein immediately due and payable, without any cure period thereof, by notice in writing to the Borrower. 6. CHANGE OF CONTROL OF BORROWER. (a) Upon the occurrence of a Change of Control, the Borrower will have the right (the "Call Right"), at its sole option, upon five day's written notice to the Lender delivered not more than 30 days after the effective date of such Change of Control (the "Call Period") to purchase all (but not less than all) of the aggregate principal amount of this Note from the Lender at a price equal to 250% of the principal amount hereof, plus all accrued and unpaid interest thereon through, but not including the date on which this Note is repurchased (the "Repurchase Price"). If the Borrower shall not have exercised such right within the Call Period, the Lender shall have the right (the "Put Right"), at its sole option, for a period of 30 days commencing on the expiry of such Call Period (the "Put Period"), to require the Lender purchase all (but not less than all) of the aggregate principal amount of this Note at the applicable Repurchase Price. (b) Immediately upon the occurrence of any Change of Control, the Borrower shall provide notice to the Lender stating that a Change of Control has occurred and the applicable expiry dates for the Call Period and the Put Period. 3 (c) If the Borrower shall elect to exercise its Call Right, the Borrower shall provide written notice thereof to the Lender before the expiry of the Call Period, such notice to include the repurchase date for this Note which shall be no earlier than 15 days nor later than 30 days from the date such notice is delivered. (d) If the Lender shall elect to exercise its Put Right after the expiry of the Borrower's Call Right, the Lender shall provide written notice thereof to the Borrower (the "Put Notice") before the expiry of the Put Period and upon receipt thereof, the Borrower shall provide notice to the Lender of the applicable repurchase date for this Note which shall be no earlier than 15 days nor later than 30 days from the date such Put Notice is delivered to the Borrower. (e) On any purchase date of a redemption of this Note under this Section 6, the Borrower shall deliver to the Lender the Repurchase Price and the Lender shall deliver to the Borrower this Note for cancellation. (f) As used in this Section 6, the following capitalized terms shall have the following meanings: "Change of Control" shall mean the occurrence of any of the following events: (i) a majority of the Board of Directors of the Borrower shall consist of persons who are not Continuing Directors of the Borrower; or (ii) the acquisition by any person or Group of the power, directly or indirectly, to vote or direct the voting of Common Stock having a majority of the ordinary voting power for the election of directors of the Borrower. "Continuing Director" means, as of the date of determination, any person who (i) was a member of the Board of Directors of the Borrower on the Closing Date or (ii) was nominated for election or elected to the Board of Directors of the Borrower with the affirmative vote of a majority of the Continuing Directors of the Borrower who were members of such Board of Directors at the time of such nomination or election. "Group" shall mean any "group" for purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto. 7. WAIVER. The Borrower waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note, and shall pay all costs of collection when incurred, including, without limitation, reasonable attorney's fees, costs and other expenses. 8. GOVERNING LAW. This Note shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, excluding conflict of law principles that would cause the application of laws of any other jurisdiction. 4 9. SUCCESSORS AND ASSIGNS. The provisions of this Note shall inure to the benefit of and be binding on any successor to the Borrower and shall extend to any permitted holder hereof. The Borrower may not assign or transfer this Note or any of its obligations under this Note without the prior written consent of the Lender unless such transfer is to an institutional "accredited investor" within the meaning of Rule 501 under the Securities Act of 1933, as amended and provided that the transferee of such transfer is not a competitor, directly or indirectly, of the Borrower. 10. NOTICES. Any notices required to be delivered under this Note shall be delivered pursuant to the notice procedures set forth in the Note Purchase Agreement. 11. MODIFICATION. This Note may be altered only by prior written agreement signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought. [Signature Page Follows] IN WITNESS WHEREOF, the undersigned has executed this Note as of date first written above. EMAGIN CORPORATION By: ------------------------------------------ Name: Title: EX-4.3 5 stockpurchasewarrant.txt STOCK PURCHASE WARRANT NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY OTHER APPLICABLE SECURITIES LAWS. THIS WARRANT HAS BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, TRANSFERRED, ENCUMBERED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE PROVISIONS OF THE SECURITIES ACT AND ANY APPLICABLE STATE LAWS. STOCK PURCHASE WARRANT June 20, 2002 To Purchase 300,000 Shares of Common Stock of eMAGIN CORPORATION THIS CERTIFIES that, for value received, Mr. MORTIMER D.A. SACKLER (the "Holder"), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time that the Holder is not a Restricted Holder (as defined below) (the "Exercise Period") and on or prior to the close of business on June 20, 2007 (the "Termination Date") but not thereafter, to subscribe for and purchase from eMagin Corporation, a corporation incorporated in the State of Delaware (the "Company"), up to 300,000 shares (the "Warrant Shares") of Common Stock, $.001 par value per share, of the Company (the "Common Stock"). The purchase price of one share of Common Stock (the "Exercise Price") under this Warrant shall be $0.4419 (forty-four point nineteen cents). The Exercise Price and the number of Warrant Shares for which the Warrant is exercisable shall be subject to adjustment as provided herein. In the event of any conflict between the terms of this Warrant and the Secured Note Purchase Agreement dated as of June 20, 2002 pursuant to which this Warrant has been issued (the "Purchase Agreement"), the Purchase Agreement shall control. Capitalized terms used and not otherwise defined herein shall have the meanings set forth for such terms in the Purchase Agreement. For purposes of this Warrant, the Holder shall be considered a "Restricted Holder," if the Holder is the beneficial owner, directly or indirectly, of more than ten percent (10%) of the Common Stock for purposes of Section 16 of the Securities Exchange Act of 1934, as amended. 1. Title to Warrant. This Warrant and all rights hereunder are not transferable, in whole or in part, by the Holder. 2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than (x) taxes in respect of any transfer occurring contemporaneously with such issue) and (y) liens and charges created by the Holder). 3. Exercise of Warrant. (a) Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made by the Holder at any time or times during the Exercise Period and on or before the close of business on the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and upon payment on or before the Termination Date of the Exercise Price of the shares thereby purchased by wire transfer or cashier's check drawn on a United States bank, or by means of a cashless exercise, the Holder shall be entitled to receive a certificate for the number of Warrant Shares so purchased. Certificates for shares purchased hereunder shall be delivered to the Holder within three (3) business days after the date on which this Warrant shall have been exercised as aforesaid. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. (b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant. (c) This Warrant shall also be exercisable by means of a "cashless exercise" in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A - B) (X)] by (A), where: (A) = the closing price per share of Common Stock (as reported by the American Stock Exchange (or principal market in terms of volume)) on the trading day preceding the date of such election on the American Stock Exchange, or if the Common Stock is not traded on the American Stock Exchange, then the principal market (in terms of volume); (B) = the Exercise Price of this Warrant; and (X) = the number of Warrant Shares issuable upon exercise of this Warrant in accordance with the terms of this Warrant and the Notice of Exercise. 4. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price. 2 5. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder, provided, however, that in the event certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. 6. Transfer, Division and Combination. (a) This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. The Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. (b) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 6. (c) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of any division or combination of the Warrants. 7. No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price or by means of a cashless exercise, the Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment. 8. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. 9. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday. 10. Adjustments of Exercise Price and Number of Warrant Shares for Stock Splits, etc. The number and kind of securities purchasable upon the exercise of this Warrant and 3 the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event. 11. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property"), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter to elect to receive, (i) upon exercise of this Warrant at the Exercise Price written herein and consummation of the applicable event, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by the Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event, or (ii) cash equal to the value of this Warrant as determined in accordance with the Black-Scholes option pricing formula. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be deemed appropriate (as determined in good faith by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable to the adjustments provided for in this Section 11. For purposes of this Section 11, "common stock of the successor or acquiring corporation" shall 4 include stock of such corporation of any class which is not preferred as to dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 11 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 12. Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 13. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly mail by registered or certified mail, return receipt requested, to the Holder notice of such adjustment or adjustments setting forth the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such notice, in the absence of manifest error, shall be conclusive evidence of the correctness of such adjustment. 14. Notice of Corporate Action. If at any time: (a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation or, (c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in any one or more of such cases, the Company shall give to the Holder, if lawful and practicable to do so, (i) at least 10 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 10 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, 5 the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of the Holder appearing on the books of the Company and delivered in accordance with Section 16(d). 15. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company represents that issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the principal market (in terms of volume) upon which the Common Stock may be listed. The Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) use commercially reasonable efforts to take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 16. Miscellaneous. (a) Jurisdiction. This Warrant shall constitute a contract under the laws of the State of New York, without regard to its conflict of law, principles or rules, and be subject to arbitration pursuant to the terms set forth in the Purchase Agreement. (b) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws. (c) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Holder shall operate as a waiver of such right or otherwise prejudice the Holder's rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceeding and out of pocket costs and expenses, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. (d) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement. (e) Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. (f) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (g) Successors and Assigns. Subject to applicable securities laws and the provisions of this Warrant, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors of the Holder. The provisions of this Warrant are intended to be for the benefit of the Holder and shall be enforceable by the Holder. (h) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder. (i) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant. (j) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. Dated as of June 20, 2002 eMAGIN CORPORATION By: ------------------------------- Name: Title: NOTICE OF EXERCISE To: eMagin Corporation (1) The undersigned hereby elects to purchase _________ Warrant Shares (the "Common Stock"), of eMagin Corporation pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. The undersigned certifies that it is not a Restricted Holder, as defined in the Warrant. (2) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below: ------------------------------ The Warrant Shares shall be delivered to the following: ------------------------------ ------------------------------ ------------------------------ [PURCHASER] By: ------------------------------ Name: Title: Dated: --------------------------- NOTICE OF EXERCISE OF COMMON STOCK WARRANT PURSUANT TO CASHLESS EXERCISE PROVISIONS To: eMagin Corporation Aggregate Price of Warrant Before Exercise: $__________ Aggregate Price Being Exercised: $_________ Exercise Price: $________ per share Number of Shares of Common Stock to be Issued Under this Notice: _________ Remaining Aggregate Price (if any) After Issuance: $__________ Gentlemen: The undersigned, registered Holder of the Warrant delivered herewith, hereby irrevocably exercises such Warrant for, and purchases thereunder, shares of the Common Stock of eMagin Corporation, a Delaware corporation, as provided below. Capitalized terms used herein, unless otherwise defined herein, shall have the meanings given in the Warrant. The undersigned certifies that it is not a Restricted Holder, as defined in the Warrant. Holder hereby exercises this Warrant for an aggregate of _____ shares, leaving _______ shares remaining to be exercised. Such exercise shall be pursuant to the cashless exercise provisions of Section 3 of the Warrant; therefore, Holder makes no payment with this Notice of Exercise and authorizes the Company to reduce the number of shares of Common Stock to be delivered pursuant to the immediately preceding sentence in accordance with Section 3. Holder requests that the certificates for the purchased shares of Common Stock be issued in the name of _____________ and delivered to __________________. To the extent the foregoing exercise is for less than the full Aggregate Price of the Warrant, a replacement Warrant representing the remainder of the Aggregate Price (and otherwise of like form, tenor and effect) shall be delivered to Holder along with the share certificate evidencing the Common Stock issued in response to this Notice of Exercise. [PURCHASER] By: ------------------------------------------ Name: Title: Date: NOTE The execution of the foregoing Notice of Exercise must exactly correspond to the name of the Holder on the Warrant. EX-4.4 6 regrightssideletter.txt REGISTRATION RIGHTS AGREEMENT EMAGIN CORPORATION 2070 Route 52 Hopewell Junction, NY 12533 June 20, 2002 Mr. Mortimer D.A. Sackler 15 East 62nd Street New York, NY 10021 Dear Sir: Reference is hereby made to (i) the Stock Purchase Warrant, dated June 20, 2002 (the "Warrant") whereby Mortimer D.A. Sackler (the "Investor") is entitled, upon the terms and subject to the limitations on exercise and the conditions set forth therein to subscribe for and purchase from eMagin Corporation, a Delaware corporation (the "Company"), up to 300,000 shares (the "Warrant Shares") of common stock, $.001 par value per share, of the Company (the "Common Stock"); (ii) the Registration Rights Agreement, dated as of November 27, 2001 (the "November Agreement") by and among the Company and the investors named therein; and (iii) the Registration Rights Agreement, dated as of February 27, 2002 (the "February Agreement") by and among the Company and the investors named therein. This letter will confirm the understanding between the Company and the Investor regarding the piggyback registration rights of the Investor in connection with the Warrant Shares. The Company hereby agrees that if it shall at any time propose to file any registration statement with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended, or the rules and regulations of the Commission thereunder or any similar statute, the Company shall give written notice of such a proposed filing to the Investor as soon as reasonably practicable (but in no event less than fourteen (14) days before the anticipated date on which such registration statement will be filed with the Commission), undertaking to provide the Investor the opportunity to register such number of shares of Common Stock issued or issuable upon the exercise of the Warrant (the "Exercisable Shares"). In the event that such a registration statement is to be filed on behalf of a person other than the Company, the Company will use its best efforts to have the Exercisable Shares that the Investor wishes to sell included in such registration statement pursuant to the same terms and conditions as set forth in the February Agreement. The Investor hereby acknowledges that the piggyback registration rights granted by the Company pursuant to this letter are subject to the piggyback registration rights granted pursuant to each of the November Agreement and the February Agreement. This letter shall be governed by and construed in accordance with the laws of the State of New York. Sincerely, eMAGIN CORPORATION By: ---------------------------------------- Name: Title: AGREED AND ACKNOWLEDGED: Date: - ------------------------------- Mortimer D.A. Sackler EX-4.5 7 virtualvision_secagr.txt SECURITY AGREEMENT SECURITY AGREEMENT among VIRTUAL VISION, INC., the SECURED CREDITOR set out herein and ALLIGATOR HOLDINGS, INC., as COLLATERAL AGENT -------------------------------- Dated as of June 20, 2002 -------------------------------- ARTICLE I SECURITY INTERESTS.......................................................................................1 1.1 Grant of Security Interests.........................................................................1 1.2 Power of Attorney...................................................................................3 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS........................................................3 2.1 Necessary Filings...................................................................................3 2.2 No Liens............................................................................................4 2.3 Other Financing Statements..........................................................................4 2.4 Chief Executive Office, Record Locations............................................................4 2.5 Location of Inventory and Equipment.................................................................4 2.6 Legal Names; Type of Organization; Jurisdiction of Organization; Location; Organizational Identification Numbers; Changes Thereto; etc.............................4 2.7 Trade Names; Etc....................................................................................5 2.8 Certain Significant Transactions....................................................................5 2.9 Recourse............................................................................................5 ARTICLE III SPECIAL PROVISIONS CONCERNING ACCOUNTS; CONTRACT RIGHTS; INSTRUMENTS; AND CERTAIN OTHER SUBSIDIARY COLLATERAL................................................................5 3.1 Additional Representations and Warranties...........................................................5 3.2 Maintenance of Records..............................................................................6 3.3 Direction to Account Debtors; Contracting Parties; etc..............................................6 3.4 Modification of Terms; etc..........................................................................7 3.5 Collection..........................................................................................7 3.6 Instruments.........................................................................................7 3.7 Assignor Remains Liable Under Accounts..............................................................7 3.8 Assignor Remains Liable Under Contracts.............................................................8 3.9 Further Actions.....................................................................................8 ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS.................................................................8 4.1 Additional Representations and Warranties...........................................................8 i Table of Contents ----------------- (continued) Page ---- 4.2 Licenses and Assignments............................................................................9 4.3 Infringements.......................................................................................9 4.4 Preservation of Marks...............................................................................9 4.5 Maintenance of Registration.........................................................................9 4.6 Future Registered Marks.............................................................................9 4.7 Remedies............................................................................................9 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS....................................10 5.1 Additional Representations and Warranties..........................................................10 5.2 Licenses and Assignments...........................................................................10 5.3 Infringements......................................................................................10 5.4 Maintenance of Patents or Copyright................................................................11 5.5 Prosecution of Patent Applications.................................................................11 5.6 Other Patents and Copyrights.......................................................................11 5.7 Remedies...........................................................................................11 ARTICLE VI PROVISIONS CONCERNING ALL SUBSIDIARY COLLATERAL.........................................................11 6.1 Protection of Collateral Agent's Security..........................................................11 6.2 Warehouse Receipts Non-negotiable..................................................................12 6.3 Additional Information.............................................................................12 6.4 Further Actions....................................................................................12 6.5 Financing Statements...............................................................................12 ARTICLE VII REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT.........................................................13 7.1 Remedies; Obtaining the Subsidiary Collateral Upon Default.........................................13 7.2 Remedies; Disposition of the Subsidiary Collateral.................................................14 7.3 Waiver of Claims...................................................................................15 7.4 Application of Proceeds............................................................................15 7.5 Remedies Cumulative................................................................................16 7.6 Discontinuance of Proceedings......................................................................16 ii Table of Contents ----------------- (continued) Page ---- ARTICLE VIII INDEMNITY; APPOINTMENT OF COLLATERAL AGENT BY SECURED PARTIES...........................................16 8.1 Indemnity; Indemnity by Assignor...................................................................16 8.2 Indemnity Obligations Secured by Subsidiary Collateral; Survival...................................17 8.3 Appointment and Authorization of Collateral Agent..................................................17 8.4 Delegation of Duties...............................................................................18 8.5 Liability of Collateral Agent......................................................................18 8.6 Reliance by Collateral Agent.......................................................................19 8.7 Notice of Default..................................................................................19 8.8 Credit Decision....................................................................................19 8.9 Reimbursement......................................................................................20 8.10 Successor Agent....................................................................................20 8.11 Collateral Matters.................................................................................20 ARTICLE IX DEFINITIONS.............................................................................................21 ARTICLE X MISCELLANEOUS...........................................................................................26 10.1 Notices...........................................................................................26 10.2 Waiver; Amendment.................................................................................26 10.3 Obligations Absolute..............................................................................26 10.4 [Intentionally left blank]........................................................................27 10.5 Successors and Assigns............................................................................27 10.6 Headings Descriptive..............................................................................27 10.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL............................27 10.8 Assignor's Duties.................................................................................28 10.9 Termination; Release..............................................................................28 10.10 Counterparts......................................................................................28 10.11 Severability......................................................................................29 10.12 The Collateral Agent and the Secured Creditor.....................................................29 10.13 Benefit of Agreement..............................................................................29
ANNEX A Schedule of Chief Executive Offices Address(es) of Chief Executive Office ANNEX B Schedule of Inventory and Equipment Locations ANNEX C Schedule of Legal Names, Type of Organization (and Whether a Registered Organization and/or a Transmitting Utility), Jurisdiction of Organization, Location and Organizational Identification Numbers ANNEX D Schedule of Trade and Fictitious Names ANNEX E Description of Certain Significant Transactions Occurring Within One Year Prior to the Date of the Security Agreement ANNEX F Schedule of U.S. Marks ANNEX G Schedule of Patents ANNEX H Schedule of Copyrights ANNEX I Grant of Security Interest in United States Trademarks ANNEX J Grant of Security Interest in United States Patents ANNEX K Grant of Security Interest in United States Copyrights [Remainder of this page intentionally left blank] iii SECURITY AGREEMENT SECURITY AGREEMENT, dated as of June 20, 2002, made by the undersigned assignor (the "Assignor") in favor of the undersigned Alligator Holdings, Inc., as Collateral Agent, together with any successor Collateral Agent appointed hereunder pursuant to Section 8.10 (collectively, the "Collateral Agent"), for the benefit of the undersigned Secured Creditor (the "Secured Creditor"). Except as otherwise defined herein, capitalized terms used herein and defined in the Note Purchase Agreement (as defined below) shall be used herein as so defined. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Assignor proposes to enter into a Secured Note Purchase Agreement, dated as of June 20, 2002, with Mortimer D.A. Sackler ("the Secured Creditor under this Agreement), providing for the issuance of a secured note (the "Note") by the Assignor as contemplated therein (the "Note Purchase Agreement"); WHEREAS, the obligations accruing under the Note to the Assignor shall be secured by the Subsidiary Collateral upon the terms and conditions set out in this Agreement and the Company Collateral upon the terms and conditions set out in the Subordinated Security Agreement; WHEREAS, it is a condition precedent to execution on delivery of the Note Purchase Agreement that the Assignor shall have executed and delivered to the Collateral Agent this Agreement; and WHEREAS, it is a condition precedent to the delivery of this Agreement that the Assignor provide to the Collateral Agent completed copies of UCC form 1 documentation suitable for filing and applicable federal assignment forms required to perfect the security interests granted by the Assignor herein; and NOW, THEREFORE, in consideration of the benefits accruing to the Assignor, the receipt and sufficiency of which are hereby acknowledged, the Assignor hereby makes the following representations and warranties to the Collateral Agent for the benefit of the Secured Creditor and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditor as follows: ARTICLE I SECURITY INTERESTS 1.1 Grant of Security Interests. (a) As security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of all of its Obligations, in order to induce the Secured Creditor to enter into the Note Purchase Agreement the Assignor does hereby assign and transfer unto the Collateral Agent, and does hereby pledge and grant to the Collateral Agent, for the benefit of the Secured Creditor, a continuing security interest in all of the right, title and interest of the Assignor in, to and under all of the following (in each case whether now existing or hereafter from time to time acquired): (i) each and every Account; (ii) all cash; (iii) the Cash Collateral Account and all monies, securities, Instruments and other investments deposited or required to be deposited in the Cash Collateral Account; (iv) all computer programs of the Assignor and all intellectual property rights therein and all other proprietary information of the Assignor, including but not limited to Trade Secret Rights; (v) all Contracts, together with all Contract Rights arising thereunder, including, without limitation, joint venture agreements, partnership agreements, and limited liability company agreements); (vi) all Copyrights; (vii) all Equipment; (viii) all Documents; (ix) all Equipment; (x) all General Intangibles; (xi) all Goods; (xii) all Instruments; (xiii) all Inventory; (xiv) all Investment Property; (xv) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of the Assignor symbolized by the Marks; (xvi) all Patents; (xvii) all Permits; (xviii) all Software and all Software licensing rights, all writings, plans, specifications and schematics, all engineering drawings, customer lists, goodwill and licenses, and all recorded data of any kind or nature, regardless of the medium of recording; -2- (xix) all Supporting Obligations; (xx) all manuals, training material, diagrams, know how and other necessary or useful materials to utilize the Company's trade secrets and other business intangibles; and (xxi) all Proceeds and products of any and all of the foregoing (all of the above, the "Subsidiary Collateral"). (b) The security interest of the Collateral Agent under this Agreement extends to all Subsidiary Collateral which the Assignor may acquire, or with respect to which the Assignor may obtain rights, at any time during the term of this Agreement. 1.2 Power of Attorney. The Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of the Assignor or otherwise) to act, require, demand, receive, compound and give acquaintance for any and all moneys and claims for moneys due or to become due to the Assignor under or arising out of the Subsidiary Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Collateral Agent may deem to be necessary or advisable to protect the interests of the Secured Creditor, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS The Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1 Necessary Filings. All filings, registrations, recordings and other actions necessary or appropriate to create, preserve and perfect the security interest granted by the Assignor to the Collateral Agent hereby in respect of the Subsidiary Collateral have been accomplished and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Subsidiary Collateral creates a valid and, together with all such filings, registrations, recordings and other actions, a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (other than Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests, in each case to the extent that the Subsidiary Collateral consists of the type of property in which a security interest may be perfected by possession or control (within the meaning of the UCC as in effect on the date hereof in the State of New York), by filing a financing statement under the Uniform Commercial Code as enacted in any relevant jurisdiction or by a filing of a Grant of -3- Security Interest in the respective form attached hereto in the United States Patent and Trademark Office or in the United States Copyright Office. 2.2 No Liens. The Assignor is, and as to all Subsidiary Collateral acquired by it from time to time after the date hereof the Assignor will be, the owner of all Subsidiary Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens), and the Assignor shall defend the Subsidiary Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3 Other Financing Statements. As of the date hereof, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Subsidiary Collateral (other than financing statements filed in respect of Permitted Liens), and so long as the Termination Date has not occurred, the Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Subsidiary Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by the Assignor or in connection with Permitted Liens. 2.4 Chief Executive Office, Record Locations. The chief executive office of the Assignor is, on the date of this Agreement, located at the address indicated on Annex A hereto for the Assignor. During the period of the four calendar months preceding the date of this Agreement, the chief executive office of the Assignor has not been located at any address other than that indicated on Annex A in accordance with the immediately preceding sentence, in each case unless each such other address is also indicated on Annex A hereto for the Assignor. 2.5 Location of Inventory and Equipment. All Inventory and Equipment held on the date hereof, or held at any time during the four calendar months prior to the date hereof, by the Assignor is located at one of the locations shown on Annex B hereto for the Assignor. 2.6 Legal Names; Type of Organization; Jurisdiction of Organization; Location; Organizational Identification Numbers; Changes Thereto; etc. The exact legal name of the Assignor, the type of organization of the Assignor, the jurisdiction of organization of the Assignor, and the Assignor's Location, is listed on Annex C hereto for the Assignor. The Assignor shall not change its legal name, its type of organization, its jurisdiction of organization, its Location or its organizational identification number (if any) from that listed on Annex C hereto for the Assignor or those that may have been established after the date of this Agreement in accordance with the immediately succeeding sentence of this Section 2.6. The Assignor shall not change its legal name, its type of organization, its jurisdiction of organization, its Location, or its organizational identification number (if any), except that any such changes shall be permitted if (i) it shall have given to the Collateral Agent not less than 15 days' prior written notice of each change to the information listed on Annex C (as adjusted for any subsequent changes thereto previously made in accordance with this sentence), together with a supplement to Annex C which shall correct all information contained therein for the Assignor, and (ii) in connection with the respective change or changes, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interests of the Collateral Agent in the -4- Subsidiary Collateral intended to be granted hereby at all times fully perfected and in full force and effect. In addition, to the extent that the Assignor does not have an organizational identification number on the date hereof and later obtains one, the Assignor shall promptly thereafter notify the Collateral Agent of such organizational identification number and shall take all actions reasonably satisfactory to the Collateral Agent to the extent necessary to maintain the security interest of the Collateral Agent in the Subsidiary Collateral intended to be granted hereby fully perfected and in full force and effect. 2.7 Trade Names; Etc. The Assignor has not nor operates in any jurisdiction under, or in the preceding five years has had or has operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name as specified in Annex C and such other trade or fictitious names as are listed on Annex D hereto for the Assignor. The Assignor shall not assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 15 days' written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name will be used and providing such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to such new name, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interest of the Collateral Agent in the Subsidiary Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.8 Certain Significant Transactions. During the one year period preceding the date of this Agreement, no Person shall have merged or consolidated with or into the Assignor, and no Person shall have liquidated into, or transferred all or substantially all of its assets to, the Assignor, in each case except as described in Annex E hereto. With respect to any transactions so described in Annex E hereto, the Assignor shall have furnished such information with respect to the Person (and the assets of the Person and locations thereof) which merged with or into or consolidated with the Assignor, or was liquidated into or transferred all or substantially all of its assets to the Assignor, and shall have furnished to the Collateral Agent such UCC lien searches as may have been requested with respect to such Person and its assets, to establish that no security interest (excluding Permitted Liens) continues perfected on the date hereof with respect to any Person described above (or the assets transferred to the Assignor by such Person), including without limitation pursuant to Section 9-316(a)(3) of the UCC. 2.9 Recourse. This Agreement is made with full recourse to the Assignor and pursuant to and upon all the warranties, representations, covenants and agreements on the part of the Assignor contained herein and otherwise in writing in connection herewith. ARTICLE III SPECIAL PROVISIONS CONCERNING ACCOUNTS; CONTRACT RIGHTS; INSTRUMENTS; AND CERTAIN OTHER SUBSIDIARY COLLATERAL 3.1 Additional Representations and Warranties. As of the time when each of its Accounts arises, the Assignor shall be deemed to have represented and warranted that each such Account, and all records, papers and documents relating thereto (if any) are genuine and what they purport to be, and that all papers and documents (if any) relating thereto (i) will, to the -5- knowledge of the Assignor, represent the genuine, legal, valid and binding obligation of the account debtor evidencing indebtedness unpaid and owed by the respective account debtor arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes), (iii) will, to the knowledge of the Assignor, evidence true and valid obligations, enforceable in accordance with their respective terms, and (iv) will be in compliance and will conform in all material respects with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction. 3.2 Maintenance of Records. The Assignor will keep and maintain at its own cost and expense accurate records of its Accounts and Contracts, including, but not limited to, originals of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and the Assignor will make the same available on the Assignor's premises to the Collateral Agent for inspection, at the Assignor's own cost and expense, at any and all reasonable times upon prior notice to the Assignor. Upon the occurrence and during the continuance of an Event of Default and at the request of the Collateral Agent, the Assignor shall, at its own cost and expense, deliver all tangible evidence of its Accounts and Contract Rights (including, without limitation, all documents evidencing the Accounts and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by the Assignor). Upon the occurrence and during the continuance of an Event of Default and if the Collateral Agent so directs, the Assignor shall legend, in form and manner satisfactory to the Collateral Agent, the Accounts and the Contracts, as well as books, records and documents (if any) of the Assignor evidencing or pertaining to such Accounts and Contracts with an appropriate reference to the fact that such Accounts and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 3.3 Direction to Account Debtors; Contracting Parties; etc. Upon the occurrence and during the continuance of an Event of Default, if the Collateral Agent so directs the Assignor, the Assignor agrees (x) to cause all payments on account of the Accounts and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Accounts and/or under any Contracts to make payments with respect thereto as provided in the preceding clause (x), and (z) that the Collateral Agent may enforce collection of any such Accounts and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as the Assignor. Without notice to or assent by the Assignor, the Collateral Agent may, upon the occurrence and during the continuance of an Event of Default, apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account toward the payment of the Obligations in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses of collection (including reasonable attorneys' fees), whether incurred by an Assignor or the Collateral Agent, shall be borne by the Assignor. The Collateral Agent shall deliver a copy of each notice referred to in the preceding clause (y) to the Assignor, provided that the failure by the Collateral Agent to so notify the Assignor shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.3. -6- 3.4 Modification of Terms; etc. Except in accordance with the Assignor's ordinary course of business and consistent with reasonable business judgment, the Assignor shall not rescind nor cancel any indebtedness evidenced by any Account or under any Contract, or modify any material term thereof or make any material adjustment with respect thereto, nor extend or renew the same, nor compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, nor sell any Account or Contract, or interest therein, without the prior written consent of the Collateral Agent. The Assignor will not do anything to impair the rights of the Collateral Agent in the Accounts or Contracts. 3.5 Collection. The Assignor shall endeavor in accordance with reasonable business practices to cause to be collected from the account debtor named in each of its Accounts or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Account or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account or under such Contract. Except as otherwise directed by the Collateral Agent after the occurrence and during the continuation of an Event of Default, the Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Accounts and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which the Assignor finds appropriate in accordance with reasonable business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services or for other reasons which the Assignor finds appropriate in accordance with reasonable business judgment. The reasonable costs and expenses (including, without limitation, reasonable attorneys' fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the Assignor. 3.6 Instruments. If the Assignor owns or acquires any Instrument in excess of $80,000 constituting Subsidiary Collateral (other than checks and other payment instruments received and collected in the ordinary course of business), the Assignor will within 10 Business Days notify the Collateral Agent thereof. 3.7 Assignor Remains Liable Under Accounts. Anything herein to the contrary notwithstanding, the Assignor shall remain liable under each of the Accounts to observe and perform all of the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to such Accounts. Neither the Collateral Agent nor the Secured Creditor shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or the Secured Creditor of any payment relating to such Account pursuant hereto, nor shall the Collateral Agent or the Secured Creditor be obligated in any manner to perform any of the obligations of the Assignor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times. -7- 3.8 Assignor Remains Liable Under Contracts. Anything herein to the contrary notwithstanding, the Assignor shall remain liable under each of the Contracts to observe and perform all of the conditions and obligations to be observed and performed by it thereunder, all in accordance with and pursuant to the terms and provisions of each Contract. Neither the Collateral Agent nor the Secured Creditor shall have any obligation or liability under any Contract by reason of or arising out of this Agreement or the receipt by the Collateral Agent or the Secured Creditor of any payment relating to such Contract pursuant hereto, nor shall the Collateral Agent or the Secured Creditor be obligated in any manner to perform any of the obligations of the Assignor under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any performance by any party under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times. 3.9 Further Actions. The Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps, including any and all actions as may be necessary or required under the Federal Assignment of Claims Act, relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS 4.1 Additional Representations and Warranties. The Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use the registered Marks listed in Annex F hereto for the Assignor and that said listed Marks include all United States marks and applications for United States marks registered in the United States Patent and Trademark Office that the Assignor owns or uses in connection with its business as of the date hereof and that Assignor has not granted security interest in the listed Marks to any other Person. The Assignor represents and warrants that it owns, is licensed to use or otherwise has the right to use, all Marks that it uses. The Assignor further warrants that it has no knowledge of any third party claim received by it that any aspect of the Assignor's present or contemplated business operations infringes or will infringe any trademark, service mark or trade name of any other Person other than as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use all U.S. trademark registrations and applications listed in Annex F hereto and that said registrations are valid, subsisting, have not been canceled and that the Assignor is not aware of any third-party claim that any of said registrations is invalid or unenforceable, and is not aware that there is any reason that any of said registrations is invalid or unenforceable. The Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. -8- 4.2 Licenses and Assignments. The Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent. 4.3 Infringements. The Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who the Assignor believes is infringing or diluting or otherwise violating any of the Assignor's rights in and to any Mark in any manner that could reasonably be expected to have a Material Adverse Effect, or with respect to any party claiming that the Assignor's use of any Mark material to the Assignor's business violates in any material respect any property right of that party. The Assignor further agrees to prosecute in accordance with reasonable business practices any Person infringing any Mark in any manner that could reasonably be expected to have a Material Adverse Effect. 4.4 Preservation of Marks. The Assignor agrees to use its Marks which are material to the Assignor's business in interstate commerce during the time in which this Agreement is in effect and to take all such other actions as are reasonably necessary to preserve such Marks as trademarks or service marks under the laws of the United States (other than any such Marks which are no longer used or useful in its business or operations). 4.5 Maintenance of Registration. The Assignor shall, at its own expense, diligently process all documents reasonably required to maintain trademark registrations, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its material registered Marks, and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent (other than with respect to registrations and applications deemed by the Assignor to be no longer prudent to pursue). 4.6 Future Registered Marks. If any Mark registration is issued hereafter to the Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within 30 days of receipt of such certificate, the Assignor shall deliver to the Collateral Agent a copy of such certificate, and an assignment for security in such Mark, to the Collateral Agent and at the expense of the Assignor, confirming the assignment for security in such Mark to the Collateral Agent hereunder, the form of such security to be substantially in the form of Annex I hereto or in such other form as may be reasonably satisfactory to the Collateral Agent. 4.7 Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of the Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested in the Collateral Agent for the benefit of the Secured Creditor, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditor, and the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 hereof to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of the Assignor's -9- business symbolized by the Marks and the right to carry on the business and use the assets of the Assignor in connection with which the Marks have been used; and (iii) direct the Assignor to refrain, in which event the Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and the Assignor shall execute such further documents that the Collateral Agent may reasonably request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS 5.1 Additional Representations and Warranties. The Assignor represents and warrants that it is the true and lawful owner of all rights in (i) all United States trade secrets and proprietary information necessary to operate the business of the Assignor (the "Trade Secret Rights"), (ii) the Patents listed in Annex G hereto for the Assignor and that said Patents include all the United States patents and applications for United States patents that the Assignor owns as of the date hereof and (iii) the Copyrights listed in Annex H hereto for the Assignor and that said Copyrights constitute all the United States copyrights registered with the United States Copyright Office and applications to United States copyrights that the Assignor owns as of the date hereof, and has not granted a security interest in the Trade Secret Rights, Patents or Copyrights to any other Person. The Assignor further warrants that it has no knowledge of any third party claim that any aspect of the Assignor's present or contemplated business operations infringes or will infringe any patent of any other Person or the Assignor has misappropriated any trade secret or proprietary information which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of Default, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Patent, and to record the same. 5.2 Licenses and Assignments. The Assignor hereby agrees not to divest itself of any right under any Patent or Copyright absent prior written approval of the Collateral Agent. 5.3 Infringements. The Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to the Assignor with respect to any infringement, contributing infringement or active inducement to infringe in any Patent or Copyright or to any claim that the practice of any Patent or use of any Copyright violates any property right of a third party, or with respect to any misappropriation of any Trade Secret Right or any claim that practice of any Trade Secret Right violates any property right of a third party, in each case, in any manner which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Assignor further agrees, absent direction of the Collateral Agent to the contrary, to diligently prosecute, in accordance with its reasonable business judgment, any Person infringing any Patent or Copyright or any Person misappropriating any Trade Secret Right, in each case to the extent that such infringement or -10- misappropriation, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.4 Maintenance of Patents or Copyright. At its own expense, the Assignor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. ss. 41 to maintain in force its rights under each Patent or Copyright, absent prior written consent of the Collateral Agent (other than any such Patents or Copyrights which are no longer used or useful in its business or operations). 5.5 Prosecution of Patent Applications. At its own expense, the Assignor shall diligently prosecute all material applications for (i) United States Patents listed in Annex G hereto and (ii) Copyrights listed on Annex H hereto, in each case for the Assignor and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies (other than applications deemed by the Assignor to be no longer prudent to pursue), absent written consent of the Collateral Agent. 5.6 Other Patents and Copyrights. Within 30 days of the acquisition or issuance of a United States Patent, registration of a Copyright, or acquisition of a registered Copyright, or of filing of an application for a United States Patent or Copyright, the Assignor shall deliver to the Collateral Agent a copy of said Copyright or Patent, or certificate or registration of, or application therefor, as the case may be, with an assignment for security as to such Patent or Copyright, as the case may be, to the Collateral Agent and at the expense of the Assignor, confirming the assignment for security, the form of such assignment for security to be substantially in the form of Annex J or K hereto, as appropriate, or in such other form as may be reasonably satisfactory to the Collateral Agent. 5.7 Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the Assignor, take any or all of the following actions: (i) declare the entire right, title, and interest of the Assignor in each of the Patents and Copyrights vested in the Collateral Agent for the benefit of the Secured Creditor, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditor, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 hereof to execute, cause to be acknowledged and notarized and to record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct the Assignor to refrain, in which event the Assignor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and the Assignor shall execute such further documents as the Collateral Agent may reasonably request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditor. ARTICLE VI PROVISIONS CONCERNING ALL SUBSIDIARY COLLATERAL 6.1 Protection of Collateral Agent's Security. The Assignor will do nothing to impair the rights of the Collateral Agent in the Subsidiary Collateral. The Assignor will at all times maintain insurance, at the Assignor's own expense, to the extent and in a manner -11- consistent with commercially reasonable business practice. Except to the extent otherwise permitted to be retained by the Assignor, the Collateral Agent shall, at the time any proceeds of such insurance are distributed to the Secured Creditor, apply such proceeds in accordance with Section 7.4 hereof. The Assignor assumes all liability and responsibility in connection with the Subsidiary Collateral acquired by it and the liability of the Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Subsidiary Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to the Assignor. 6.2 Warehouse Receipts Non-negotiable. To the extent practicable, the Assignor agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, the Assignor shall request that such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law). 6.3 Additional Information. The Assignor will, at its own expense, from time to time upon the reasonable request of the Collateral Agent, promptly (and in any event within 10 days after its receipt of the respective request) furnish to the Collateral Agent such information with respect to the Subsidiary Collateral (including the identity of the Subsidiary Collateral or such components thereof as may have been requested by the Collateral Agent, the value and location of such Subsidiary Collateral, etc.) as may be requested by the Collateral Agent. Without limiting the forgoing, the Assignor agrees that it shall promptly (and in any event within 10 days after its receipt of the respective request) furnish to the Collateral Agent such updated Annexes hereto as may from time to time be reasonably requested by the Collateral Agent. 6.4 Further Actions. The Assignor will, at its own expense and upon the reasonable request of the Collateral Agent, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Subsidiary Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps relating to the Subsidiary Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Subsidiary Collateral. 6.5 Financing Statements. The Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are reasonably necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, perfected security interest in the Subsidiary Collateral as provided herein and the other rights and security contemplated hereby. The Assignor will pay any applicable filing fees, recordation taxes and related expenses relating to its Subsidiary Collateral. The Assignor hereby authorizes the Collateral Agent to file any such financing statements without the signature of the Assignor where permitted by law (and such authorization includes describing the Subsidiary Collateral as "all assets" of the Assignor). -12- ARTICLE VII REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT 7.1 Remedies; Obtaining the Subsidiary Collateral Upon Default. The Assignor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law and under the other provisions of this Agreement, shall have all rights as a secured creditor under any UCC, and such additional rights and remedies to which a secured creditor is entitled under the laws in effect in all relevant jurisdictions and may: (i) personally, or by agents or attorneys, immediately take possession of the Subsidiary Collateral or any part thereof, from the Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Assignor's premises where any of the Subsidiary Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of the Assignor; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Accounts and the Contracts) constituting the Subsidiary Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent and may exercise any and all remedies of the Assignor in respect of such Subsidiary Collateral; (iii) instruct all banks which have entered into a control agreement with the Collateral Agent to transfer all monies, securities and instruments held by such depositary bank to the Cash Collateral Account; (iv) sell, assign or otherwise liquidate any or all of the Subsidiary Collateral or any part thereof in accordance with Section 7.2 hereof, or direct the Assignor to sell, assign or otherwise liquidate any or all of the Subsidiary Collateral or any part thereof, and, in each case, take possession of the proceeds of any such sale or liquidation; (v) take possession of the Subsidiary Collateral or any part thereof, by directing the Assignor in writing to deliver the same to the Collateral Agent at any reasonable place or places designated by the Collateral Agent, in which event the Assignor shall at its own expense: (x) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent; (y) store and keep any Subsidiary Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2 hereof; and (z) while the Subsidiary Collateral shall be so stored and kept, provide such security and maintenance services as shall be reasonably necessary to protect the same and to preserve and maintain it in good condition; -13- (vi) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Subsidiary Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine; (vii) apply any monies constituting Subsidiary Collateral or proceeds thereof in accordance with the provisions of Section 7.4; and (viii) take any other action as specified in clauses (1) through (5), inclusive, of Section 9-607(a) of the UCC; it being understood that the Assignor's obligation so to deliver the Subsidiary Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by the Assignor of said obligation. 7.2 Remedies; Disposition of the Subsidiary Collateral. If any Event of Default shall have occurred and be continuing, then any Subsidiary Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and any other Subsidiary Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Subsidiary Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair at the expense of the Assignor which the Collateral Agent shall determine to be commercially reasonable. Any such sale, lease or other disposition may be effected by means of a public disposition or private disposition, effected in accordance with the applicable requirements (in each case if and to the extent applicable) of Sections 9-610 through 9-613 of the UCC and/or such other mandatory requirements of applicable law as may apply to the respective disposition. The Collateral Agent may, without notice or publication, adjourn any public or private disposition or cause the same to be adjourned from time to time by announcement at the time and place fixed for the disposition, and such disposition may be made at any time or place to which the disposition may be so adjourned. To the extent permitted by any such requirement of law, the Secured Creditor may bid for and become the purchaser (and may pay all or any portion of the purchase price by crediting Obligations against the purchase price) of the Subsidiary Collateral or any item thereof, offered for disposition in accordance with this Section 7.2 without accountability to the Assignor. If, under applicable law, the Collateral Agent shall be permitted to make disposition of the Subsidiary Collateral within a period of time which does not permit the giving of notice to the Assignor as herein above specified, the Collateral Agent need give the Assignor only such notice of disposition as shall be required by such applicable law. The Assignor agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make such disposition or dispositions of all or any portion of the Subsidiary Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental -14- instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Assignor's expense. 7.3 Waiver of Claims. Except as otherwise provided in this Agreement, THE ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE SUBSIDIARY COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES, and the Assignor hereby further waives, to the extent permitted by law: (i) all damages occasioned by such taking of possession or any such disposition except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision); (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Subsidiary Collateral or any portion thereof, and the Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Subsidiary Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against the Assignor and against any and all Persons claiming or attempting to claim the Subsidiary Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the Assignor. 7.4 Application of Proceeds. (a) All moneys collected by the Collateral Agent upon any sale or other disposition of the Subsidiary Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows. (i) first, to the payment of all amounts owing the Collateral Agent of the type described in clauses (iii) and (iv) of the definition of "Obligations"; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Obligations shall be paid to the Secured Creditor; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (ii), inclusive, and following the termination of this -15- Agreement pursuant to Section 10.9(a) hereof, to the Assignor or to whomever may be lawfully entitled to receive such surplus. (b) This Agreement is made with full recourse to the Assignor (including, without limitation, with full recourse to all assets of the Assignor) and pursuant to and upon all the warranties, representations, covenants and agreements on the part of the Assignor contained herein, and otherwise in writing in connection herewith. 7.5 Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given to the Collateral Agent under this Agreement, or now or hereafter existing at law, in equity or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of the exercise of one shall not be deemed a waiver of the right to exercise any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence thereof. No notice to or demand on the Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including reasonable attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6 Discontinuance of Proceedings. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Subsidiary Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. ARTICLE VIII INDEMNITY; APPOINTMENT OF COLLATERAL AGENT BY SECURED PARTIES 8.1 Indemnity; Indemnity by Assignor. (a) The Assignor agrees to indemnify, reimburse and hold the Collateral Agent, the Secured Creditor and their respective successors, assigns, employees, affiliates and agents (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, -16- claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1 and Section 8.5(b) the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement or any other document executed in connection herewith or in any other way connected with the administration of the transactions contemplated hereby or thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Subsidiary Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other governmental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage), or contract claim; provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Indemnitee (as determined by a court of competent jurisdiction in a final and non-appealable decision). The Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the Assignor of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a) hereof, the Assignor agrees to pay or reimburse the Collateral Agent for any and all reasonable fees, costs and expenses incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Subsidiary Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Subsidiary Collateral, premiums for insurance with respect to the Subsidiary Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Subsidiary Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Subsidiary Collateral. (c) If and to the extent that the obligations of the Assignor under this Section 8.1 are unenforceable for any reason, the Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2 Indemnity Obligations Secured by Subsidiary Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Subsidiary Collateral. The indemnity obligations of the Assignor contained in Section 8.1 and this Section 8.2 shall continue in full force and effect notwithstanding the full payment of all of the other Obligations and notwithstanding the full payment of the Note issued under the Note Purchase Agreement. 8.3 Appointment and Authorization of Collateral Agent. The Secured Creditor hereby irrevocably (subject to Section 8.10) appoints, designates and authorizes the Collateral -17- Agent to take such action on his behalf under the provisions of this Agreement and the Note and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or the Note, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or the Note, the Collateral Agent shall not have any duty or responsibility except those expressly set forth herein, nor shall the Collateral Agent have or be deemed to have any fiduciary relationship with the Secured Creditor, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the Note or otherwise exist against the Collateral Agent. 8.4 Delegation of Duties. The Collateral Agent may execute any of its duties under this Agreement or the Note by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 8.5 Liability of Collateral Agent. (a) None of the Collateral Agent nor any of its directors, officers, employees or agents shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or the Note or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to the Secured Creditor for any recital, statement, representation or warranty made by the Assignor or any subsidiary or affiliate of the Assignor, or any officer thereof, contained in this Agreement or in the Note, or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, this Agreement or the Note, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Note, or for any failure of the Assignor or any other party to this Agreement or the Note to perform its obligations hereunder or thereunder. The Collateral Agent shall not be under any obligation to the Secured Creditor to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or the Note, or to inspect the properties, books or records of the Assignor or any of the Assignor's subsidiaries or affiliates. (b) The Secured Creditor hereby agrees to indemnify, reimburse and hold the Collateral Agent and its respective successors, assigns and employees (hereinafter in this Section 8.5(b) referred to individually as an "Agent Indemnitee," and collectively as "Agent Indemnitees") harmless from any and all expenses of whatsoever kind and nature imposed on, asserted against or incurred by any of the Agent Indemnitees relating to or arising out of the performance by the Collateral Agent of its obligations under this Agreement as Collateral Agent or other document executed in connection herewith or in any other way connected with the administration of the transactions contemplated hereby or thereby by the Collateral Agent as the Collateral Agent or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Subsidiary Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any -18- country, state or other governmental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Agent Indemnitee), or property damage), or contract claim; provided that no Agent Indemnitee shall be indemnified pursuant to this Section 8.5(b) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Agent Indemnitee (as determined by a court of competent jurisdiction in a final and non-appealable decision). 8.6 Reliance by Collateral Agent. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon advice and statements of legal counsel (including counsel to the Assignor), independent accountants and other experts selected by the Collateral Agent. The Collateral Agent shall be fully justified in failing or refusing to take any action under this Agreement or the Note unless it shall first receive such advice or concurrence of the Secured Creditor as it deems appropriate and, if it so requests, confirmation from the Secured Creditor of his obligation to indemnify the Collateral Agent against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or the Note in accordance with a request or consent of the Secured Creditor and such request and any action taken or failure to act pursuant thereto shall be binding upon the Secured Creditor. 8.7 Notice of Default. The Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any Default unless the Collateral Agent shall have received written notice from the Secured Creditor or the Assignor referring to this Agreement, describing such Default and stating that such notice is a "notice of default". The Collateral Agent will notify the Secured Creditor of its receipt of any such notice. The Collateral Agent shall take such action with respect to such Default as may be requested by the Secured Creditor; provided that unless and until the Collateral Agent has received any such request, the Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to Default as it shall deem advisable or in the best interest of the Secured Creditor. 8.8 Credit Decision. The Secured Creditor acknowledges that the Collateral Agent has not made any representation or warranty to it, and that no act by the Collateral Agent hereafter taken, including any review of the affairs of the Assignor, shall be deemed to constitute any representation or warranty by the Collateral Agent to the Secured Creditor. The Secured Creditor represents to the Collateral Agent that he has, independently and without reliance upon the Collateral Agent and based on such documents and information as he has deemed appropriate, made his own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Assignor, and made his own decision to enter into this Agreement and the Note and to complete the transactions contemplated hereunder and thereunder. The Secured Creditor also represents that he will, independently and without reliance upon the Collateral Agent and based on such documents and information as he shall deem appropriate at the time, continue to make his own analysis, appraisals and decisions in taking or not taking action under this Agreement, the Note and the transactions contemplated -19- thereby, and to make such investigations as he deems necessary to inform himself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Assignor. The Collateral Agent shall not have any duty or responsibility to provide the Secured Creditor with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of the Assignor which may come into the possession of the Collateral Agent. 8.9 Reimbursement. To the extent the Assignor does not reimburse the Collateral Agent within 60 days of billing, the Secured Creditor shall reimburse the Collateral Agent upon demand for any costs or out-of-pocket expenses (including attorneys fees and costs) incurred by the Collateral Agent to the extent such costs or out-of-pocket expenses arise in connection with the administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, , or any document contemplated by or referred to herein, to the extent that the Collateral Agent is not reimbursed for such expenses by or on behalf of the Assignor; provided that the Collateral Agent will use its reasonable efforts to obtain the approval of the Secured Creditor before incurring any material reimbursable costs or expenses. The undertaking in this Section shall survive the cancellation of the Note, any foreclosure under, or modification, release or discharge of, any or all of the documents contemplated by the Note, termination of this Agreement and the resignation or replacement of the Collateral Agent. 8.10 Successor Agent. The Collateral Agent may resign as Collateral Agent at any time, and shall resign as Collateral Agent if requested to do so by the Secured Creditor. If the Collateral Agent resigns under this Agreement, the Secured Creditor shall appoint a new Collateral Agent by the effective date of such resignation notice. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Collateral Agent and the term "Collateral Agent" shall mean such successor agent, and the retiring Collateral Agent's appointment, powers and duties as Collateral Agent shall be terminated. After any retiring Collateral Agent's resignation hereunder as Collateral Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement. If no successor agent has accepted appointment as Collateral Agent by the date which is 30 days following a retiring Collateral Agent's notice of resignation, the retiring Collateral Agent's resignation shall nevertheless thereupon become effective and the Secured Creditor shall perform all of the duties of the Collateral Agent hereunder until such time, if any, as the Secured Creditor shall appoint a successor agent as provided for above. 8.11 Collateral Matters. The Secured Creditor irrevocably authorizes the Collateral Agent, at its option and in its discretion, to release any Lien or security interest granted to or held by the Collateral Agent under the Security Agreements (a) upon cancellation of the Note and payment in full of all obligations of the Assignor thereunder; (b) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted by this Agreement or the Note; or (c) if approved, authorized or ratified in writing by the Secured Creditor. Upon request by the Collateral Agent at any time, the Secured Creditor will confirm in writing the Collateral Agent's authority to release, or subordinate its interest in, particular types or items of Subsidiary Collateral pursuant to this Section 8.11. -20- ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Account" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, and in any event shall include but shall not be limited to, all rights to payment of any monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State. "Agreement" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignor" shall have the meaning provided in the first paragraph of this Agreement. "Cash Collateral Account" shall mean a Cash Collateral Account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditor. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of the Assignor under each Contract, including, without limitation, (i) any and all rights to receive and demand payments under any or all Contracts, (ii) any and all rights to receive and compel performance under any or all Contracts and (iii) any and all other rights, interests and claims now existing or in the future arising in connection with any or all Contracts. "Contracts" shall mean all contracts between the Assignor and one or more additional parties (including, without limitation, licensing agreements and any partnership agreements, joint venture agreements and limited liability company agreements). "Copyrights" shall mean any United States copyright owned by the Assignor, including any registrations of any copyrights, in the United States Copyright Office or any foreign equivalent office, as well as any application for a copyright registration now or hereafter made with the United States Copyright Office or any foreign equivalent office by the Assignor. -21- "Default" shall mean any event which with notice or lapse of time, or both, would constitute an Event of Default. "Documents" shall mean "documents" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, and in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, fixtures and vehicles now or hereafter owned by the Assignor and any and all additions, substitutions and replacements of any of the foregoing and all accessions thereto, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Event of Default" shall mean any payment default on any of the Obligations after the expiration of any applicable grace period. "General Intangibles" shall mean "general intangibles" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Goods" shall mean "goods" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Indemnitee" shall have the meaning provided in Section 8.1(a) of this Agreement. "Instrument" shall mean "instruments" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof and all accessions thereto, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same, in all stages of production from raw materials through work in process to finished goods, and all products and proceeds of whatever sort and wherever located any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from the Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Investment Property" shall mean "investment property" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Liens" shall mean any security interest, deed of trust, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on the Assignor's property. "Location" of the Assignor, shall mean the Assignor's "location" as determined pursuant to Section 9-307 of the UCC. -22- "Marks" shall mean all right, title and interest in and to any trademarks, service marks and trade names now held or hereafter acquired by the Assignor, including any registration of any trademarks and service marks in the United States Patent and Trademark Office or in any equivalent foreign office and any trade dress including logos and/or designs used by the Assignor. "Material Adverse Effect" shall mean a material adverse effect on the business, property, assets, liabilities (actual or contingent), operations or condition (financial or otherwise) of the Assignor and its subsidiaries taken as a whole. "Obligations" shall mean (i) the full and prompt payment when due of all obligations and indebtedness (including, without limitation, indemnities, fees and interest thereon) of the Assignor to the Secured Creditor, whether now existing or hereafter incurred under, arising out of, or in connection with the Note Purchase Agreement and the Note issued thereunder and the due performance and compliance by the Assignor with all of the terms, conditions and agreements contained in the Note Purchase Agreement and the Note issued thereunder; (ii) any and all sums advanced by the Assignee in order to preserve the Subsidiary Collateral or preserve its security interest in the Subsidiary Collateral; (iii) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Assignor after an Event of Default shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Subsidiary Collateral, or of any exercise by the Assignee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (iv) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement. "Patents" shall mean any patent to which the Assignor now or hereafter has any right, title or interest therein, and any divisions, continuations (including, but not limited to, continuations-in-parts) and improvements thereof, as well as any application for a patent now or hereafter made by the Assignor. "Permits" shall mean, to the extent permitted to be assigned by the terms thereof or by applicable law, all licenses, permits, rights, orders, variances, franchises or authorizations of or from any governmental authority or agency. "Permitted Liens" shall mean (i) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles; (ii) Liens in respect of property or assets of the Assignor or any of its subsidiaries imposed by law, which were incurred in the ordinary course of business and do not secure indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of -23- Assignor's or such subsidiary's property or assets or materially impair the use thereof in the operation of the business of Assignor or such subsidiary or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (iii) leases or subleases granted to other Persons not materially interfering with the conduct or value of the business of Assignor or any of its subsidiaries and non-assignable, non-exclusive licenses and sub-licenses to third parties; (iv) Liens upon assets of the Assignor or any of its subsidiaries subject to capitalized lease obligations, provided that (x) such Liens only serve to secure the payment of indebtedness arising under such capitalized lease obligation and (y) the Lien encumbering the asset giving rise to the capitalized lease obligation does not encumber any asset of Assignor or any subsidiary of the Assignor; (v) Liens placed upon equipment or machinery and used in the ordinary course of business of the Assignor or any of its subsidiaries and placed at the time of the acquisition thereof by the Assignor or such subsidiary or within 90 days thereafter to secure indebtedness incurred to pay all or a portion of the purchase price thereof or to secure indebtedness incurred solely for the purpose of financing the acquisition of any such equipment or machinery or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; (vi) easements, rights-of-way, restrictions, encroachments and other similar charges or encumbrances, and minor title deficiencies, in each case not securing indebtedness and not materially interfering with the conduct or value of the business of Assignor or any of its subsidiaries; (vii) Liens arising from precautionary UCC financing statement filings regarding operating leases or bailee arrangements entered into in the ordinary course of business; (viii) Liens arising out of the existence of judgments or awards in respect of which Assignor or any of its subsidiaries shall in good faith be prosecuting an appeal or proceedings for review and in respect of which there shall have been secured a subsisting stay of execution pending such appeal or proceedings, provided that the aggregate amount of all cash and the fair market value of all other property subject to such Liens does not exceed $50,000 at any time outstanding; (ix) statutory and common law landlords' liens under leases to which the Assignor or any of its subsidiaries is a party; (x) Liens incurred in the ordinary course of business in connection with workers compensation claims, unemployment insurance and social security benefits and Liens securing the performance of bids, tenders, leases and contracts in the ordinary course of business, statutory obligations, surety bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business and consistent with past practice (exclusive of obligations in respect of the payment for borrowed money), provided that -24- the aggregate amount of all cash and the fair market value of all other property subject to all Liens permitted by this clause (x) shall not at any time exceed $50,000; and (xi) other Liens incidental to the conduct of the business of the Assignor or any of its subsidiaries that (i) were not incurred in connection with indebtedness, (ii) do not materially detract from the value of the assets subject to such Liens or materially impair the use thereof in the operation of such business (provided to the extent that any such Liens attach to any Subsidiary Collateral such Liens shall be junior to the Liens created in favor of the Collateral Agent) and (iii) do not at any time for all such Liens encumber cash and other property having an aggregate value in excess of, or secure outstanding obligations in the aggregate in excess of, $10,000. "Proceeds" shall mean all "proceeds" as such term is defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof and, in any event, shall also include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or the Assignor from time to time with respect to any of the Subsidiary Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to the Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Subsidiary Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Subsidiary Collateral. "Secured Creditor" shall have the meaning provided in the preamble to this Agreement. "Software" shall mean "software" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Subsidiary Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Supporting Obligations" shall mean any "supporting obligation" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Assignor, or in which the Assignor has any rights, and, in any event, shall include, but shall not be limited to all of the Assignor's rights in any letter-of-credit right or secondary obligation that supports the payment or performance of, and all security for, any Account, Document, General Intangible, Instrument or Investment Property. "Termination Date" shall have the meaning provided in Section 10.9(a) of this Agreement. "Trade Secret Rights" shall have the meaning provided in Section 5.1 of this Agreement. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction. -25- ARTICLE X MISCELLANEOUS 10.1 Notices. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be sent or delivered by hand, overnight mail or courier service and all such notices and communications shall, when mailed, delivered or sent by courier, be effective when deposited in the mails, delivered or overnight courier, as the case may be, except that notices and communications to the Collateral Agent or the Assignor shall not be effective until received by the Collateral Agent or the Assignor, as the case may be. All notices and other communications shall be in writing and addressed as follows: (a) if to the Assignor: eMagin Corporation 2070 Route 52 Hopewell Junction, NY 12533 Attention: Chief Financial Officer Telephone No.: (845) 892-1900 Telecopier No.: (845) 892-1901 (b) if to the Collateral Agent, at: Alligator Holdings, Inc. 444 Park Avenue South, 11th Floor New York, New York 10016 Attention: Mr. Steven W. Gold, President Telephone No.: (212) 696-4848 Telecopier No.: (212) 696-1231 (c) if to the Secured Creditor, at such address as the Secured Creditor shall have specified in the Note Purchase Agreement; or at such other address or addressed to such other individual as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 10.2 Waiver; Amendment. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Assignor and the Collateral Agent (with the written consent of the Secured Creditor); 10.3 Obligations Absolute. The obligations of the Assignor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement; or (c) any amendment to or -26- modification of any security for any of the Obligations; whether or not the Assignor shall have notice or knowledge of any of the foregoing. 10.4 [Intentionally left blank]. 10.5 Successors and Assigns. This Agreement shall be binding upon the Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and the Secured Creditor and their respective successors and assigns. All agreements, statements, representations and warranties made by the Assignor herein or in any certificate or other instrument delivered by the Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditor and shall survive the execution and delivery of this Agreement regardless of any investigation made by the Secured Creditor or on his behalf. 10.6 Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 10.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE ASSIGNOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE ASSIGNOR HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK JURISDICTION OVER THE ASSIGNOR, AND AGREES NOT TO PLEAD OR CLAIM IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT BROUGHT IN ANY OF THE AFORESAID COURTS THAT ANY SUCH COURT LACKS JURISDICTION OVER THE ASSIGNOR. THE ASSIGNOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE ASSIGNOR AT ITS ADDRESS FOR NOTICES AS PROVIDED IN SECTION 10.1 ABOVE, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE ASSIGNOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER THAT SUCH SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT UNDER THIS AGREEMENT, OR THE SECURED CREDITOR, TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE -27- LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ASSIGNOR IN ANY OTHER JURISDICTION. (b) THE ASSIGNOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 10.8 Assignor's Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that the Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Subsidiary Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Subsidiary Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of the Assignor under or with respect to any Subsidiary Collateral. 10.9 Termination; Release. (a) After the Termination Date, this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation in Section 8.1 hereof, shall survive such termination) and the Collateral Agent, at the request and expense of the Assignor, will promptly execute and deliver to the Assignor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Assignor (without recourse and without any representation or warranty) such of the Subsidiary Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Note issued under the Note Purchase Agreement is not outstanding and all Obligations then due and payable have been paid in full. (b) At any time that the Assignor desires that the Collateral Agent take any action to acknowledge or give effect to any release of Subsidiary Collateral pursuant to the foregoing Section 10.9(a), the Assignor shall deliver to the Collateral Agent a certificate signed by a senior officer of the Assignor stating that the release of the respective Subsidiary Collateral is permitted pursuant to such Section 10.9(a). 10.10 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so -28- executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Assignor and the Collateral Agent. Execution of counterparts may be by facsimile. 10.11 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.12 The Collateral Agent and the Secured Creditor. The Collateral Agent will hold in accordance with this Agreement all items of the Subsidiary Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Collateral Agent as holder of the Subsidiary Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Collateral Agent shall act hereunder on the terms and conditions set forth herein. 10.13 Benefit of Agreement. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and its successors and assigns. [Remainder of this page intentionally left blank; signature page follows] -29- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ASSIGNOR: VIRTUAL VISION, Inc., as Assignor By: ------------------------------------ Name: Title: SECURED PARTY: ---------------------------------------- Mortimer D. A. Sackler Address: 15 East 62nd Street New York, NY 10021 EX-4.6 8 emasubordinatedsecagr.txt SUBORDINATED SECURITY AGREEMENT ================================================================================ SUBORDINATED SECURITY AGREEMENT among EMAGIN CORPORATION, the SECURED CREDITOR set out herein and ALLIGATOR HOLDINGS, INC., as COLLATERAL AGENT -------------------------------- Dated as of June 20, 2002 -------------------------------- ================================================================================ ARTICLE I SECURITY INTERESTS.........................................1 1.1 Grant of Security Interests..................................1 1.2 Power of Attorney............................................3 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS..........3 2.1 Necessary Filings............................................3 2.2 No Liens.....................................................4 2.3 Other Financing Statements...................................4 2.4 Chief Executive Office, Record Locations.....................4 2.5 Location of Inventory and Equipment..........................4 2.6 Legal Names; Type of Organization; Jurisdiction of Organization; Location; Organizational Identification Numbers; Changes Thereto; etc................................4 2.7 Trade Names; Etc.............................................5 2.8 Certain Significant Transactions.............................5 2.9 Recourse.....................................................5 ARTICLE III SPECIAL PROVISIONS CONCERNING ACCOUNTS; CONTRACT RIGHTS; INSTRUMENTS; AND CERTAIN OTHER COMPANY COLLATERAL.................................................5 3.1 Additional Representations and Warranties....................5 3.2 Maintenance of Records.......................................6 3.3 Direction to Account Debtors; Contracting Parties; etc.......6 3.4 Modification of Terms; etc...................................7 3.5 Collection...................................................7 3.6 Instruments..................................................7 3.7 Assignor Remains Liable Under Accounts.......................7 3.8 Assignor Remains Liable Under Contracts......................8 3.9 Further Actions..............................................8 ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS...................8 4.1 Additional Representations and Warranties....................8 4.2 Licenses and Assignments.....................................9 4.3 Infringements................................................9 4.4 Preservation of Marks........................................9 4.5 Maintenance of Registration..................................9 4.6 Future Registered Marks......................................9 4.7 Remedies.....................................................9 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS.........................................10 5.1 Additional Representations and Warranties...................10 5.2 Licenses and Assignments....................................10 5.3 Infringements...............................................10 (i) 5.4 Maintenance of Patents or Copyright.........................11 5.5 Prosecution of Patent Applications..........................11 5.6 Other Patents and Copyrights................................11 5.7 Remedies....................................................11 ARTICLE VI PROVISIONS CONCERNING ALL COMPANY COLLATERAL..............11 6.1 Protection of Collateral Agent's Security...................11 6.2 Warehouse Receipts Non-negotiable...........................12 6.3 Additional Information......................................12 6.4 Further Actions.............................................12 6.5 Financing Statements........................................12 ARTICLE VII REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT...........13 7.1 Remedies; Obtaining the Company Collateral Upon Default.....13 7.2 Remedies; Disposition of the Company Collateral.............14 7.3 Waiver of Claims............................................15 7.4 Application of Proceeds.....................................15 7.5 Remedies Cumulative.........................................16 7.6 Discontinuance of Proceedings...............................16 ARTICLE VIII INDEMNITY; APPOINTMENT OF COLLATERAL AGENT BY SECURED PARTIES...........................................16 8.1 Indemnity; Indemnity by Assignor............................16 8.2 Indemnity Obligations Secured by Company Collateral; Survival....................................................17 8.3 Appointment and Authorization of Collateral Agent...........17 8.4 Delegation of Duties........................................18 8.5 Liability of Collateral Agent...............................18 8.6 Reliance by Collateral Agent................................19 8.7 Notice of Default...........................................19 8.8 Credit Decision.............................................19 8.9 Reimbursement...............................................20 8.10 Successor Agent.............................................20 8.11 Company Collateral Matters..................................20 ARTICLE IX DEFINITIONS...............................................21 ARTICLE X MISCELLANEOUS.............................................26 10.1 Notices.....................................................26 10.2 Waiver; Amendment...........................................26 10.3 Obligations Absolute........................................27 10.4 [Intentionally left blank.].................................27 10.5 Successors and Assigns......................................27 10.6 Headings Descriptive........................................27 10.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL........................................27 (ii) 10.8 Assignor's Duties...........................................28 10.9 Termination; Release........................................28 10.10 Counterparts................................................29 10.11 Severability................................................29 10.12 The Collateral Agent and the Secured Creditor...............29 10.13 Benefit of Agreement........................................29 10.14 Subordination...............................................29 ANNEX A Schedule of Chief Executive Offices Address(es) of Chief Executive Office ANNEX B Schedule of Inventory and Equipment Locations ANNEX C Schedule of Legal Names, Type of Organization (and Whether a Registered Organization and/or a Transmitting Utility), Jurisdiction of Organization, Location and Organizational Identification Numbers ANNEX D Schedule of Trade and Fictitious Names ANNEX E Description of Certain Significant Transactions Occurring Within One Year Prior to the Date of the Security Agreement ANNEX F Schedule of Deposit Accounts ANNEX G Form of Control Agreement Regarding Deposit Accounts ANNEX H Schedule of Commercial Tort Claims ANNEX I Schedule of Marks ANNEX J Schedule of Patents ANNEX K Schedule of Copyrights ANNEX L Grant of Security Interest in United States Trademarks ANNEX M Grant of Security Interest in United States Patents ANNEX N Grant of Security Interest in United States Copyrights [Remainder of this page intentionally left blank] (iii) SUBORDINATED SECURITY AGREEMENT SUBORDINATED SECURITY AGREEMENT, dated as of June 20, 2002, made by the undersigned assignor (the "Assignor") in favor of the undersigned Alligator Holdings, Inc., as Collateral Agent, together with any successor Collateral Agent appointed hereunder pursuant to Section 8.10 (collectively, the "Collateral Agent"), for the benefit of the undersigned Secured Creditor (the "Secured Creditor"). Except as otherwise defined herein, capitalized terms used herein and defined in the Note Purchase Agreement (as defined below) shall be used herein as so defined. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Assignor proposes to enter into a Secured Note Purchase Agreement, dated as of June 20, 2002, with Mortimer D.A. Sackler (the Secured Creditor under this Agreement), providing for the issuance of a secured note (the "Note") by the Assignor as contemplated therein (the "Note Purchase Agreement"); WHEREAS, the obligations accruing under the Note to the Assignor shall be secured by the Subsidiary Collateral upon the terms and conditions set out in the Security Agreement and the Company Collateral upon the terms and conditions set out in this Agreement; WHEREAS, it is a condition precedent to execution on delivery of the Note Purchase Agreement that the Assignor shall have executed and delivered to the Collateral Agent this Agreement; and WHEREAS, it is a condition precedent to the delivery of this Agreement that the Assignor provide to the Collateral Agent completed copies of UCC form 1 documentation suitable for filing and applicable federal assignment forms required to perfect the security interests granted by the Assignor herein; and NOW, THEREFORE, in consideration of the benefits accruing to the Assignor, the receipt and sufficiency of which are hereby acknowledged, the Assignor hereby makes the following representations and warranties to the Collateral Agent for the benefit of the Secured Creditor and hereby covenants and agrees with the Collateral Agent for the benefit of the Secured Creditor as follows: ARTICLE I SECURITY INTERESTS 1.1 Grant of Security Interests. (a) As security for the prompt and complete payment and performance when due (whether at stated maturity, by acceleration or otherwise) of all of its Obligations, in order to induce the Secured Creditor to enter into the Note Purchase Agreement the Assignor does hereby assign and transfer unto the Collateral Agent, and does hereby pledge and grant to the Collateral Agent, for the benefit of the Secured Creditor, a continuing security interest in all of the right, title and interest of the Assignor in, to and under all of the following (in each case whether now existing or hereafter from time to time acquired): (i) each and every Account; (ii) all cash; (iii) the Cash Collateral Account and all monies, securities, Instruments and other investments deposited or required to be deposited in the Cash Collateral Account; (iv) all computer programs of the Assignor and all intellectual property rights therein and all other proprietary information of the Assignor, including but not limited to Trade Secret Rights; (v) all Contracts, together with all Contract Rights arising thereunder, including, without limitation, joint venture agreements, partnership agreements, and limited liability company agreements); (vi) all Copyrights; (vii) all Equipment; (viii) all Documents; (ix) all Equipment; (x) all General Intangibles; (xi) all Goods; (xii) all Instruments; (xiii) all Inventory; (xiv) all Investment Property; (xv) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of the Assignor symbolized by the Marks; (xvi) all Patents; (xvii) all Permits; (xviii) all Software and all Software licensing rights, all writings, plans, specifications and schematics, all engineering drawings, customer lists, goodwill -2- and licenses, and all recorded data of any kind or nature, regardless of the medium of recording; (xix) all Supporting Obligations; (xx) all manuals, training material, diagrams, know how and other necessary or useful materials to utilize the Company's trade secrets and other business intangibles; and (xxi) all Proceeds and products of any and all of the foregoing (all of the above, the "Company Collateral"). (b) The security interest of the Collateral Agent under this Agreement extends to all Company Collateral which the Assignor may acquire, or with respect to which the Assignor may obtain rights, at any time during the term of this Agreement. 1.2 Power of Attorney. The Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of the Assignor or otherwise) to act, require, demand, receive, compound and give acquaintance for any and all moneys and claims for moneys due or to become due to the Assignor under or arising out of the Company Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Collateral Agent may deem to be necessary or advisable to protect the interests of the Secured Creditor, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS The Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1 Necessary Filings. All filings, registrations, recordings and other actions necessary or appropriate to create, preserve and perfect the security interest granted by the Assignor to the Collateral Agent hereby in respect of the Company Collateral have been accomplished and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Company Collateral creates a valid and, together with all such filings, registrations, recordings and other actions, a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (other than Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests, in each case to the extent that the Company Collateral consists of the type of property in which a security interest may be perfected by possession or control (within the meaning of the UCC as in effect on the date hereof in the State of New York), by filing a financing statement under the Uniform Commercial Code as enacted in any relevant jurisdiction or by a filing of a Grant of Security -3- Interest in the respective form attached hereto in the United States Patent and Trademark Office or in the United States Copyright Office. 2.2 No Liens. The Assignor is, and as to all Company Collateral acquired by it from time to time after the date hereof the Assignor will be, the owner of all Company Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens), and the Assignor shall defend the Company Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3 Other Financing Statements. As of the date hereof, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Company Collateral (other than financing statements filed in respect of Permitted Liens), and so long as the Termination Date has not occurred, the Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Company Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by the Assignor or in connection with Permitted Liens. 2.4 Chief Executive Office, Record Locations. The chief executive office of the Assignor is, on the date of this Agreement, located at the address indicated on Annex A hereto for the Assignor. During the period of the four calendar months preceding the date of this Agreement, the chief executive office of the Assignor has not been located at any address other than that indicated on Annex A in accordance with the immediately preceding sentence, in each case unless each such other address is also indicated on Annex A hereto for the Assignor. 2.5 Location of Inventory and Equipment. All Inventory and Equipment held on the date hereof, or held at any time during the four calendar months prior to the date hereof, by the Assignor is located at one of the locations shown on Annex B hereto for the Assignor. 2.6 Legal Names; Type of Organization; Jurisdiction of Organization; Location; Organizational Identification Numbers; Changes Thereto; etc. The exact legal name of the Assignor, the type of organization of the Assignor, the jurisdiction of organization of the Assignor, and the Assignor's Location, is listed on Annex C hereto for the Assignor. The Assignor shall not change its legal name, its type of organization, its jurisdiction of organization, its Location or its organizational identification number (if any) from that listed on Annex C hereto for the Assignor or those that may have been established after the date of this Agreement in accordance with the immediately succeeding sentence of this Section 2.6. The Assignor shall not change its legal name, its type of organization, its jurisdiction of organization, its Location, or its organizational identification number (if any), except that any such changes shall be permitted if (i) it shall have given to the Collateral Agent not less than 15 days' prior written notice of each change to the information listed on Annex C (as adjusted for any subsequent changes thereto previously made in accordance with this sentence), together with a supplement to Annex C which shall correct all information contained therein for the Assignor, and (ii) in connection with the respective change or changes, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interests of the Collateral Agent in the -4- Company Collateral intended to be granted hereby at all times fully perfected and in full force and effect. In addition, to the extent that the Assignor does not have an organizational identification number on the date hereof and later obtains one, the Assignor shall promptly thereafter notify the Collateral Agent of such organizational identification number and shall take all actions reasonably satisfactory to the Collateral Agent to the extent necessary to maintain the security interest of the Collateral Agent in the Company Collateral intended to be granted hereby fully perfected and in full force and effect. 2.7 Trade Names; Etc. The Assignor has not nor operates in any jurisdiction under, or in the preceding five years has had or has operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name as specified in Annex C and such other trade or fictitious names as are listed on Annex D hereto for the Assignor. The Assignor shall not assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 15 days' written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name will be used and providing such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to such new name, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interest of the Collateral Agent in the Company Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.8 Certain Significant Transactions. During the one year period preceding the date of this Agreement, no Person shall have merged or consolidated with or into the Assignor, and no Person shall have liquidated into, or transferred all or substantially all of its assets to, the Assignor, in each case except as described in Annex E hereto. With respect to any transactions so described in Annex E hereto, the Assignor shall have furnished such information with respect to the Person (and the assets of the Person and locations thereof) which merged with or into or consolidated with the Assignor, or was liquidated into or transferred all or substantially all of its assets to the Assignor, and shall have furnished to the Collateral Agent such UCC lien searches as may have been requested with respect to such Person and its assets, to establish that no security interest (excluding Permitted Liens) continues perfected on the date hereof with respect to any Person described above (or the assets transferred to the Assignor by such Person), including without limitation pursuant to Section 9-316(a)(3) of the UCC. 2.9 Recourse. This Agreement is made with full recourse to the Assignor and pursuant to and upon all the warranties, representations, covenants and agreements on the part of the Assignor contained herein and otherwise in writing in connection herewith. ARTICLE III SPECIAL PROVISIONS CONCERNING ACCOUNTS; CONTRACT RIGHTS; INSTRUMENTS; AND CERTAIN OTHER COMPANY COLLATERAL 3.1 Additional Representations and Warranties. As of the time when each of its Accounts arises, the Assignor shall be deemed to have represented and warranted that each such Account, and all records, papers and documents relating thereto (if any) are genuine and what they purport to be, and that all papers and documents (if any) relating thereto (i) will, to the -5- knowledge of the Assignor, represent the genuine, legal, valid and binding obligation of the account debtor evidencing indebtedness unpaid and owed by the respective account debtor arising out of the performance of labor or services or the sale or lease and delivery of the merchandise listed therein, or both, (ii) will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes), (iii) will, to the knowledge of the Assignor, evidence true and valid obligations, enforceable in accordance with their respective terms, and (iv) will be in compliance and will conform in all material respects with all applicable federal, state and local laws and applicable laws of any relevant foreign jurisdiction. 3.2 Maintenance of Records. The Assignor will keep and maintain at its own cost and expense accurate records of its Accounts and Contracts, including, but not limited to, originals of all documentation (including each Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and the Assignor will make the same available on the Assignor's premises to the Collateral Agent for inspection, at the Assignor's own cost and expense, at any and all reasonable times upon prior notice to the Assignor. Upon the occurrence and during the continuance of an Event of Default and at the request of the Collateral Agent, the Assignor shall, at its own cost and expense, deliver all tangible evidence of its Accounts and Contract Rights (including, without limitation, all documents evidencing the Accounts and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by the Assignor). Upon the occurrence and during the continuance of an Event of Default and if the Collateral Agent so directs, the Assignor shall legend, in form and manner satisfactory to the Collateral Agent, the Accounts and the Contracts, as well as books, records and documents (if any) of the Assignor evidencing or pertaining to such Accounts and Contracts with an appropriate reference to the fact that such Accounts and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 3.3 Direction to Account Debtors; Contracting Parties; etc. Upon the occurrence and during the continuance of an Event of Default, if the Collateral Agent so directs the Assignor, the Assignor agrees (x) to cause all payments on account of the Accounts and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Accounts and/or under any Contracts to make payments with respect thereto as provided in the preceding clause (x), and (z) that the Collateral Agent may enforce collection of any such Accounts and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as the Assignor. Without notice to or assent by the Assignor, the Collateral Agent may, upon the occurrence and during the continuance of an Event of Default, apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account toward the payment of the Obligations in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses of collection (including reasonable attorneys' fees), whether incurred by an Assignor or the Collateral Agent, shall be borne by the Assignor. The Collateral Agent shall deliver a copy of each notice referred to in the preceding clause (y) to the Assignor, provided that the failure by the Collateral Agent to so notify the Assignor shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.3. -6- 3.4 Modification of Terms; etc. Except in accordance with the Assignor's ordinary course of business and consistent with reasonable business judgment, the Assignor shall not rescind nor cancel any indebtedness evidenced by any Account or under any Contract, or modify any material term thereof or make any material adjustment with respect thereto, nor extend or renew the same, nor compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, nor sell any Account or Contract, or interest therein, without the prior written consent of the Collateral Agent. The Assignor will not do anything to impair the rights of the Collateral Agent in the Accounts or Contracts. 3.5 Collection. The Assignor shall endeavor in accordance with reasonable business practices to cause to be collected from the account debtor named in each of its Accounts or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Account or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account or under such Contract. Except as otherwise directed by the Collateral Agent after the occurrence and during the continuation of an Event of Default, the Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Accounts and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which the Assignor finds appropriate in accordance with reasonable business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services or for other reasons which the Assignor finds appropriate in accordance with reasonable business judgment. The reasonable costs and expenses (including, without limitation, reasonable attorneys' fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the Assignor. 3.6 Instruments. If the Assignor owns or acquires any Instrument in excess of $50,000 constituting Company Collateral (other than checks and other payment instruments received and collected in the ordinary course of business), the Assignor will within 10 Business Days notify the Collateral Agent thereof. 3.7 Assignor Remains Liable Under Accounts. Anything herein to the contrary notwithstanding, the Assignor shall remain liable under each of the Accounts to observe and perform all of the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise to such Accounts. Neither the Collateral Agent nor the Secured Creditor shall have any obligation or liability under any Account (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or the Secured Creditor of any payment relating to such Account pursuant hereto, nor shall the Collateral Agent or the Secured Creditor be obligated in any manner to perform any of the obligations of the Assignor under or pursuant to any Account (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party under any Account (or any agreement giving rise thereto), to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times. -7- 3.8 Assignor Remains Liable Under Contracts. Anything herein to the contrary notwithstanding, the Assignor shall remain liable under each of the Contracts to observe and perform all of the conditions and obligations to be observed and performed by it thereunder, all in accordance with and pursuant to the terms and provisions of each Contract. Neither the Collateral Agent nor the Secured Creditor shall have any obligation or liability under any Contract by reason of or arising out of this Agreement or the receipt by the Collateral Agent or the Secured Creditor of any payment relating to such Contract pursuant hereto, nor shall the Collateral Agent or the Secured Creditor be obligated in any manner to perform any of the obligations of the Assignor under or pursuant to any Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any performance by any party under any Contract, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to them or to which they may be entitled at any time or times. 3.9 Further Actions. The Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps, including any and all actions as may be necessary or required under the Federal Assignment of Claims Act, relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS 4.1 Additional Representations and Warranties. The Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use the registered Marks listed in Annex F hereto for the Assignor and that said listed Marks include all United States marks and applications for United States marks registered in the United States Patent and Trademark Office that the Assignor owns or uses in connection with its business as of the date hereof and that Assignor has not granted any security interest in the listed Marks to any other Person, except as granted pursuant to the Company Senior Security Agreement. The Assignor represents and warrants that it owns, is licensed to use or otherwise has the right to use, all Marks that it uses. The Assignor further warrants that it has no knowledge of any third party claim received by it that any aspect of the Assignor's present or contemplated business operations infringes or will infringe any trademark, service mark or trade name of any other Person other than as could not, either individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use all U.S. trademark registrations and applications listed in Annex F hereto and that said registrations are valid, subsisting, have not been canceled and that the Assignor is not aware of any third-party claim that any of said registrations is invalid or unenforceable, and is not aware that there is any reason that any of said registrations is invalid or unenforceable. The Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any docu- -8- ment which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. 4.2 Licenses and Assignments. The Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent. 4.3 Infringements. The Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who the Assignor believes is infringing or diluting or otherwise violating any of the Assignor's rights in and to any Mark in any manner that could reasonably be expected to have a Material Adverse Effect, or with respect to any party claiming that the Assignor's use of any Mark material to the Assignor's business violates in any material respect any property right of that party. The Assignor further agrees to prosecute in accordance with reasonable business practices any Person infringing any Mark in any manner that could reasonably be expected to have a Material Adverse Effect. 4.4 Preservation of Marks. The Assignor agrees to use its Marks which are material to the Assignor's business in interstate commerce during the time in which this Agreement is in effect and to take all such other actions as are reasonably necessary to preserve such Marks as trademarks or service marks under the laws of the United States (other than any such Marks which are no longer used or useful in its business or operations). 4.5 Maintenance of Registration. The Assignor shall, at its own expense, diligently process all documents reasonably required to maintain trademark registrations, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its material registered Marks, and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent (other than with respect to registrations and applications deemed by the Assignor to be no longer prudent to pursue). 4.6 Future Registered Marks. If any Mark registration is issued hereafter to the Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within 30 days of receipt of such certificate, the Assignor shall deliver to the Collateral Agent a copy of such certificate, and an assignment for security in such Mark, to the Collateral Agent and at the expense of the Assignor, confirming the assignment for security in such Mark to the Collateral Agent hereunder, the form of such security to be substantially in the form of Annex I hereto or in such other form as may be reasonably satisfactory to the Collateral Agent. 4.7 Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of the Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested in the Collateral Agent for the benefit of the Secured Creditor, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditor, and the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 hereof to -9- execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of the Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of the Assignor in connection with which the Marks have been used; and (iii) direct the Assignor to refrain, in which event the Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and the Assignor shall execute such further documents that the Collateral Agent may reasonably request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS 5.1 Additional Representations and Warranties. The Assignor represents and warrants that it is the true and lawful owner of all rights in (i) all United States trade secrets and proprietary information necessary to operate the business of the Assignor (the "Trade Secret Rights"), (ii) the Patents listed in Annex G hereto for the Assignor and that said Patents include all the United States patents and applications for United States patents that the Assignor owns as of the date hereof and (iii) the Copyrights listed in Annex H hereto for the Assignor and that said Copyrights constitute all the United States copyrights registered with the United States Copyright Office and applications to United States copyrights that the Assignor owns as of the date hereof, and has not granted a security interest in the Trade Secret Rights, Patents or Copyrights to any other Person, except as granted pursuant to the Company Senior Security Agreement. The Assignor further warrants that it has no knowledge of any third party claim that any aspect of the Assignor's present or contemplated business operations infringes or will infringe any patent of any other Person or the Assignor has misappropriated any trade secret or proprietary information which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of Default, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Patent, and to record the same. 5.2 Licenses and Assignments. The Assignor hereby agrees not to divest itself of any right under any Patent or Copyright absent prior written approval of the Collateral Agent. 5.3 Infringements. The Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to the Assignor with respect to any infringement, contributing infringement or active inducement to infringe in any Patent or Copyright or to any claim that the practice of any Patent or use of any Copyright violates any property right of a third party, or with respect to any misappropriation of any Trade Secret Right or any claim that practice of any Trade Secret Right violates any property right of a third party, in each case, in any manner which, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. The Assignor further agrees, absent direction of the Collateral Agent to the contrary, to diligently prosecute, in accordance with its reasonable business judgment, any Person infringing any Patent or Copyright or any Person -10- misappropriating any Trade Secret Right, in each case to the extent that such infringement or misappropriation, either individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. 5.4 Maintenance of Patents or Copyright. At its own expense, the Assignor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. ss. 41 to maintain in force its rights under each Patent or Copyright, absent prior written consent of the Collateral Agent (other than any such Patents or Copyrights which are no longer used or useful in its business or operations). 5.5 Prosecution of Patent Applications. At its own expense, the Assignor shall diligently prosecute all material applications for (i) United States Patents listed in Annex G hereto and (ii) Copyrights listed on Annex H hereto, in each case for the Assignor and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies (other than applications deemed by the Assignor to be no longer prudent to pursue), absent written consent of the Collateral Agent. 5.6 Other Patents and Copyrights. Within 30 days of the acquisition or issuance of a United States Patent, registration of a Copyright, or acquisition of a registered Copyright, or of filing of an application for a United States Patent or Copyright, the Assignor shall deliver to the Collateral Agent a copy of said Copyright or Patent, or certificate or registration of, or application therefor, as the case may be, with an assignment for security as to such Patent or Copyright, as the case may be, to the Collateral Agent and at the expense of the Assignor, confirming the assignment for security, the form of such assignment for security to be substantially in the form of Annex J or K hereto, as appropriate, or in such other form as may be reasonably satisfactory to the Collateral Agent. 5.7 Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the Assignor, take any or all of the following actions: (i) declare the entire right, title, and interest of the Assignor in each of the Patents and Copyrights vested in the Collateral Agent for the benefit of the Secured Creditor, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditor, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 hereof to execute, cause to be acknowledged and notarized and to record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct the Assignor to refrain, in which event the Assignor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and the Assignor shall execute such further documents as the Collateral Agent may reasonably request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditor. ARTICLE VI PROVISIONS CONCERNING ALL COMPANY COLLATERAL 6.1 Protection of Collateral Agent's Security. The Assignor will do nothing to impair the rights of the Collateral Agent in the Company Collateral. The Assignor will at all -11- times maintain insurance, at the Assignor's own expense, to the extent and in a manner consistent with commercially reasonable business practice. Except to the extent otherwise permitted to be retained by the Assignor, the Collateral Agent shall, at the time any proceeds of such insurance are distributed to the Secured Creditor, apply such proceeds in accordance with Section 7.4 hereof. The Assignor assumes all liability and responsibility in connection with the Company Collateral acquired by it and the liability of the Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Company Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to the Assignor. 6.2 Warehouse Receipts Non-negotiable. To the extent practicable, the Assignor agrees that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, the Assignor shall request that such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law). 6.3 Additional Information. The Assignor will, at its own expense, from time to time upon the reasonable request of the Collateral Agent, promptly (and in any event within 10 days after its receipt of the respective request) furnish to the Collateral Agent such information with respect to the Company Collateral (including the identity of the Company Collateral or such components thereof as may have been requested by the Collateral Agent, the value and location of such Company Collateral, etc.) as may be requested by the Collateral Agent. Without limiting the forgoing, the Assignor agrees that it shall promptly (and in any event within 10 days after its receipt of the respective request) furnish to the Collateral Agent such updated Annexes hereto as may from time to time be reasonably requested by the Collateral Agent. 6.4 Further Actions. The Assignor will, at its own expense and upon the reasonable request of the Collateral Agent, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Company Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, certificates, reports and other assurances or instruments and take such further steps relating to the Company Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Company Collateral. 6.5 Financing Statements. The Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are reasonably necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, perfected security interest in the Company Collateral as provided herein and the other rights and security contemplated hereby. The Assignor will pay any applicable filing fees, recordation taxes and related expenses relating to its Company Collateral. The Assignor hereby authorizes the Collateral Agent to file any such financing statements without the signature of the Assignor where permitted by law (and such authorization includes describing the Company Collateral as "all assets" of the Assignor). -12- ARTICLE VII REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT 7.1 Remedies; Obtaining the Company Collateral Upon Default. The Assignor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law and under the other provisions of this Agreement, shall have all rights as a secured creditor under any UCC, and such additional rights and remedies to which a secured creditor is entitled under the laws in effect in all relevant jurisdictions and may: (i) personally, or by agents or attorneys, immediately take possession of the Company Collateral or any part thereof, from the Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon the Assignor's premises where any of the Company Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of the Assignor; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Accounts and the Contracts) constituting the Company Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent and may exercise any and all remedies of the Assignor in respect of such Company Collateral; (iii) instruct all banks which have entered into a control agreement with the Collateral Agent to transfer all monies, securities and instruments held by such depositary bank to the Cash Collateral Account; (iv) sell, assign or otherwise liquidate any or all of the Company Collateral or any part thereof in accordance with Section 7.2 hereof, or direct the Assignor to sell, assign or otherwise liquidate any or all of the Company Collateral or any part thereof, and, in each case, take possession of the proceeds of any such sale or liquidation; (v) take possession of the Company Collateral or any part thereof, by directing the Assignor in writing to deliver the same to the Collateral Agent at any reasonable place or places designated by the Collateral Agent, in which event the Assignor shall at its own expense: (x) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent; (y) store and keep any Company Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2 hereof; and (z) while the Company Collateral shall be so stored and kept, provide such security and maintenance services as shall be reasonably necessary to protect the same and to preserve and maintain it in good condition; -13- (vi) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Company Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine; (vii) apply any monies constituting Company Collateral or proceeds thereof in accordance with the provisions of Section 7.4; and (viii) take any other action as specified in clauses (1) through (5), inclusive, of Section 9-607 of the UCC; it being understood that the Assignor's obligation so to deliver the Company Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by the Assignor of said obligation. 7.2 Remedies; Disposition of the Company Collateral. If any Event of Default shall have occurred and be continuing, then any Company Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and any other Company Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Company Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair at the expense of the Assignor which the Collateral Agent shall determine to be commercially reasonable. Any such sale, lease or other disposition may be effected by means of a public disposition or private disposition, effected in accordance with the applicable requirements (in each case if and to the extent applicable) of Sections 9-610 through 9-613 of the UCC and/or such other mandatory requirements of applicable law as may apply to the respective disposition. The Collateral Agent may, without notice or publication, adjourn any public or private disposition or cause the same to be adjourned from time to time by announcement at the time and place fixed for the disposition, and such disposition may be made at any time or place to which the disposition may be so adjourned. To the extent permitted by any such requirement of law, the Secured Creditor may bid for and become the purchaser (and may pay all or any portion of the purchase price by crediting Obligations against the purchase price) of the Company Collateral or any item thereof, offered for disposition in accordance with this Section 7.2 without accountability to the Assignor. If, under applicable law, the Collateral Agent shall be permitted to make disposition of the Company Collateral within a period of time which does not permit the giving of notice to the Assignor as herein above specified, the Collateral Agent need give the Assignor only such notice of disposition as shall be required by such applicable law. The Assignor agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make such disposition or dispositions of all or any portion of the Company Collateral valid and binding and in compliance with any and all applicable laws, regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Assignor's expense. -14- 7.3 Waiver of Claims. Except as otherwise provided in this Agreement, THE ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COMPANY COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES, and the Assignor hereby further waives, to the extent permitted by law: (i) all damages occasioned by such taking of possession or any such disposition except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision); (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights hereunder; and (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Company Collateral or any portion thereof, and the Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Company Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against the Assignor and against any and all Persons claiming or attempting to claim the Company Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the Assignor. 7.4 Application of Proceeds. (a) All moneys collected by the Collateral Agent upon any sale or other disposition of the Company Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows. (i) first, to the payment of all amounts owing the Collateral Agent of the type described in clauses (iii) and (iv) of the definition of "Obligations"; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Obligations shall be paid to the Secured Creditor; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) through (ii), inclusive, and following the termination of this Agreement pursuant to Section 10.9(a) hereof, to the Assignor or to whomever may be lawfully entitled to receive such surplus. -15- (b) This Agreement is made with full recourse to the Assignor (including, without limitation, with full recourse to all assets of the Assignor) and pursuant to and upon all the warranties, representations, covenants and agreements on the part of the Assignor contained herein, and otherwise in writing in connection herewith. 7.5 Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given to the Collateral Agent under this Agreement, or now or hereafter existing at law, in equity or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of the exercise of one shall not be deemed a waiver of the right to exercise any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence thereof. No notice to or demand on the Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including reasonable attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6 Discontinuance of Proceedings. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Company Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. ARTICLE VIII INDEMNITY; APPOINTMENT OF COLLATERAL AGENT BY SECURED PARTIES 8.1 Indemnity; Indemnity by Assignor. (a) The Assignor agrees to indemnify, reimburse and hold the Collateral Agent, the Secured Creditor and their respective successors, assigns, employees, affiliates and agents (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including reasonable attorneys' fees and expenses) (for the purposes of this Section 8.1 and Section 8.5(b) the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or -16- arising out of this Agreement or any other document executed in connection herewith or in any other way connected with the administration of the transactions contemplated hereby or thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Company Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other governmental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage), or contract claim; provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Indemnitee (as determined by a court of competent jurisdiction in a final and non-appealable decision). The Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the Assignor of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a) hereof, the Assignor agrees to pay or reimburse the Collateral Agent for any and all reasonable fees, costs and expenses incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Company Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Company Collateral, premiums for insurance with respect to the Company Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Company Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Company Collateral. (c) If and to the extent that the obligations of the Assignor under this Section 8.1 are unenforceable for any reason, the Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2 Indemnity Obligations Secured by Company Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Company Collateral. The indemnity obligations of the Assignor contained in this Section 8.1 and 8.2 shall continue in full force and effect notwithstanding the full payment of all of the other Obligations and notwithstanding the full payment of the Note issued under the Note Purchase Agreement. 8.3 Appointment and Authorization of Collateral Agent. The Secured Creditor hereby irrevocably (subject to Section 8.10) appoints, designates and authorizes the Collateral Agent to take such action on his behalf under the provisions of this Agreement and the Note and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or the Note, together with such powers as are reasonably incidental thereto. -17- Notwithstanding any provision to the contrary contained elsewhere in this Agreement or the Note, the Collateral Agent shall not have any duty or responsibility except those expressly set forth herein, nor shall the Collateral Agent have or be deemed to have any fiduciary relationship with the Secured Creditor, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or the Note or otherwise exist against the Collateral Agent. 8.4 Delegation of Duties. The Collateral Agent may execute any of its duties under this Agreement or the Note by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Collateral Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care. 8.5 Liability of Collateral Agent. (a) None of the Collateral Agent nor any of its directors, officers, employees or agents shall (i) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or the Note or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to the Secured Creditor for any recital, statement, representation or warranty made by the Assignor or any subsidiary or affiliate of the Assignor, or any officer thereof, contained in this Agreement or in the Note, or in any certificate, report, statement or other document referred to or provided for in, or received by the Collateral Agent under or in connection with, this Agreement or the Note, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Note, or for any failure of the Assignor or any other party to this Agreement or the Note to perform its obligations hereunder or thereunder. The Collateral Agent shall not be under any obligation to the Secured Creditor to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or the Note, or to inspect the properties, books or records of the Assignor or any of the Assignor's subsidiaries or affiliates. (b) The Secured Creditor hereby agrees to indemnify, reimburse and hold the Collateral Agent and its respective successors, assigns and employees (hereinafter in this Section 8.5(b) referred to individually as an "Agent Indemnitee," and collectively as "Agent Indemnitees") harmless from any and all expenses of whatsoever kind and nature imposed on, asserted against or incurred by any of the Agent Indemnitees relating to or arising out of the performance by the Collateral Agent of its obligations under this Agreement as Collateral Agent or other document executed in connection herewith or in any other way connected with the administration of the transactions contemplated hereby or thereby by the Collateral Agent as the Collateral Agent or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Company Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other governmental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Agent Indemnitee), or property damage), or contract claim; -18- provided that no Agent Indemnitee shall be indemnified pursuant to this Section 8.5(b) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Agent Indemnitee (as determined by a court of competent jurisdiction in a final and non-appealable decision). 8.6 Reliance by Collateral Agent. The Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone message, statement or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper person or persons, and upon advice and statements of legal counsel (including counsel to the Assignor), independent accountants and other experts selected by the Collateral Agent. The Collateral Agent shall be fully justified in failing or refusing to take any action under this Agreement or the Note unless it shall first receive such advice or concurrence of the Secured Creditor as it deems appropriate and, if it so requests, confirmation from the Secured Creditor of his obligation to indemnify the Collateral Agent against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Collateral Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or the Note in accordance with a request or consent of the Secured Creditor and such request and any action taken or failure to act pursuant thereto shall be binding upon the Secured Creditor. 8.7 Notice of Default. The Collateral Agent shall not be deemed to have knowledge or notice of the occurrence of any Default unless the Collateral Agent shall have received written notice from the Secured Creditor or the Assignor referring to this Agreement, describing such Default and stating that such notice is a "notice of default". The Collateral Agent will notify the Secured Creditor of its receipt of any such notice. The Collateral Agent shall take such action with respect to such Default as may be requested by the Secured Creditor; provided that unless and until the Collateral Agent has received any such request, the Collateral Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to Default as it shall deem advisable or in the best interest of the Secured Creditor. 8.8 Credit Decision. The Secured Creditor acknowledges that the Collateral Agent has not made any representation or warranty to it, and that no act by the Collateral Agent hereafter taken, including any review of the affairs of the Assignor, shall be deemed to constitute any representation or warranty by the Collateral Agent to the Secured Creditor. The Secured Creditor represents to the Collateral Agent that he has, independently and without reliance upon the Collateral Agent and based on such documents and information as he has deemed appropriate, made his own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Assignor, and made his own decision to enter into this Agreement and the Note and to complete the transactions contemplated hereunder and thereunder. The Secured Creditor also represents that he will, independently and without reliance upon the Collateral Agent and based on such documents and information as he shall deem appropriate at the time, continue to make his own analysis, appraisals and decisions in taking or not taking action under this Agreement, the Note and the transactions contemplated thereby, and to make such investigations as he deems necessary to inform himself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Assignor. The Collateral Agent shall not have any duty or responsibility to provide the -19- Secured Creditor with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of the Assignor which may come into the possession of the Collateral Agent. 8.9 Reimbursement. To the extent the Assignor does not reimburse the Collateral Agent within 60 days of billing, the Secured Creditor shall reimburse the Collateral Agent upon demand for any costs or out-of-pocket expenses (including attorneys fees and costs) incurred by the Collateral Agent to the extent such costs or out-of-pocket expenses arise in connection with the administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under this Agreement, or any document contemplated by or referred to herein, to the extent that the Collateral Agent is not reimbursed for such expenses by or on behalf of the Assignor; provided that the Collateral Agent will use its reasonable efforts to obtain the approval of the Secured Creditor before incurring any material reimbursable costs or expenses. The undertaking in this Section shall survive the cancellation of the Note, any foreclosure under, or modification, release or discharge of, any or all of the documents contemplated by the Note, termination of this Agreement and the resignation or replacement of the Collateral Agent. 8.10 Successor Agent. The Collateral Agent may resign as Collateral Agent at any time, and shall resign as Collateral Agent if requested to do so by the Secured Creditor. If the Collateral Agent resigns under this Agreement, the Secured Creditor shall appoint a new Collateral Agent by the effective date of such resignation notice. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Collateral Agent and the term "Collateral Agent" shall mean such successor agent, and the retiring Collateral Agent's appointment, powers and duties as Collateral Agent shall be terminated. After any retiring Collateral Agent's resignation hereunder as Collateral Agent, the provisions of this Section 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Collateral Agent under this Agreement. If no successor agent has accepted appointment as Collateral Agent by the date which is 30 days following a retiring Collateral Agent's notice of resignation, the retiring Collateral Agent's resignation shall nevertheless thereupon become effective and the Secured Creditor shall perform all of the duties of the Collateral Agent hereunder until such time, if any, as the Secured Creditor shall appoint a successor agent as provided for above. 8.11 Company Collateral Matters. The Secured Creditor irrevocably authorizes the Collateral Agent, at its option and in its discretion, to release any Lien or security interest granted to or held by the Collateral Agent under the Security Agreements (a) upon cancellation of the Note and payment in full of all obligations of the Assignor thereunder; (b) constituting property sold or to be sold or disposed of as part of or in connection with any disposition permitted by this Agreement or the Note; or (c) if approved, authorized or ratified in writing by the Secured Creditor. Upon request by the Collateral Agent at any time, the Secured Creditor will confirm in writing the Collateral Agent's authority to release, or subordinate its interest in, particular types or items of Company Collateral pursuant to this Section 8.11. -20- ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Account" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, and in any event shall include but shall not be limited to, all rights to payment of any monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State. "Agreement" shall mean this Subordinated Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignor" shall have the meaning provided in the first paragraph of this Agreement. "Cash Collateral Account" shall mean a Cash Collateral Account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditor. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Company Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Company Senior Security Agreement" shall mean the Security Agreement dated as of November 20, 2001 among the Assignor, the Secured Creditors named therein and Versus Support Services, Inc., as Collateral Agent. "Contract Rights" shall mean all rights of the Assignor under each Contract, including, without limitation, (i) any and all rights to receive and demand payments under any or all Contracts, (ii) any and all rights to receive and compel performance under any or all Contracts and (iii) any and all other rights, interests and claims now existing or in the future arising in connection with any or all Contracts. "Contracts" shall mean all contracts between the Assignor and one or more additional parties (including, without limitation, licensing agreements and any partnership agreements, joint venture agreements and limited liability company agreements). -21- "Copyrights" shall mean any United States copyright owned by the Assignor, including any registrations of any copyrights, in the United States Copyright Office or any foreign equivalent office, as well as any application for a copyright registration now or hereafter made with the United States Copyright Office or any foreign equivalent office by the Assignor. "Default" shall mean any event which with notice or lapse of time, or both, would constitute an Event of Default. "Documents" shall mean "documents" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, and in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, fixtures and vehicles now or hereafter owned by the Assignor and any and all additions, substitutions and replacements of any of the foregoing and all accessions thereto, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Event of Default" shall mean any payment default on any of the Obligations after the expiration of any applicable grace period. "General Intangibles" shall mean "general intangibles" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Goods" shall mean "goods" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Indemnitee" shall have the meaning provided in Section 8.1(a) of this Agreement. "Instrument" shall mean "instruments" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof and all accessions thereto, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same, in all stages of production from raw materials through work in process to finished goods, and all products and proceeds of whatever sort and wherever located any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from the Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Investment Property" shall mean "investment property" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. -22- "Liens" shall mean any security interest, deed of trust, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on the Assignor's property. "Location" of the Assignor, shall mean the Assignor's "location" as determined pursuant to Section 9-307 of the UCC. "Marks" shall mean all right, title and interest in and to any trademarks, service marks and trade names now held or hereafter acquired by the Assignor, including any registration of any trademarks and service marks in the United States Patent and Trademark Office or in any equivalent foreign office and any trade dress including logos and/or designs used by the Assignor. "Material Adverse Effect" shall mean a material adverse effect on the business, property, assets, liabilities (actual or contingent), operations or condition (financial or otherwise) of the Assignor, the Subsidiary, and any other subsidiary of the Company or Subsidiary taken as a whole. "Obligations" shall mean (i) the full and prompt payment when due of all obligations and indebtedness (including, without limitation, indemnities, fees and interest thereon) of the Assignor to the Secured Creditor, whether now existing or hereafter incurred under, arising out of, or in connection with the Note Purchase Agreement and the Note issued thereunder and the due performance and compliance by the Assignor with all of the terms, conditions and agreements contained in the Note Purchase Agreement and the Note issued thereunder; (ii) any and all sums advanced by the Assignee in order to preserve the Company Collateral or preserve its security interest in the Company Collateral; (iii) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Assignor after an Event of Default shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Company Collateral, or of any exercise by the Assignee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (iv) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement. "Patents" shall mean any patent to which the Assignor now or hereafter has any right, title or interest therein, and any divisions, continuations (including, but not limited to, continuations-in-parts) and improvements thereof, as well as any application for a patent now or hereafter made by the Assignor. "Permits" shall mean, to the extent permitted to be assigned by the terms thereof or by applicable law, all licenses, permits, rights, orders, variances, franchises or authorizations of or from any governmental authority or agency. "Permitted Liens" shall mean (i) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with generally accepted accounting principles; -23- (ii) Liens in respect of property or assets of the Assignor or any of its subsidiaries imposed by law, which were incurred in the ordinary course of business and do not secure indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's and mechanics' liens and other similar Liens arising in the ordinary course of business, and (x) which do not in the aggregate materially detract from the value of Assignor's or the Subsidiary's property or assets or materially impair the use thereof in the operation of the business of Assignor or the Subsidiary or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien; (iii) leases or subleases granted to other Persons not materially interfering with the conduct or value of the business of Assignor or any of its subsidiaries and non-assignable, non-exclusive licenses and sub-licenses to third parties; (iv) Liens upon assets of the Assignor or the Subsidiary subject to capitalized lease obligations, provided that (x) such Liens only serve to secure the payment of indebtedness arising under such capitalized lease obligation and (y) the Lien encumbering the asset giving rise to the capitalized lease obligation does not encumber any asset of Assignor or the Subsidiary; (v) Liens placed upon equipment or machinery and used in the ordinary course of business of the Assignor or the Subsidiary and placed at the time of the acquisition thereof by the Assignor or the Subsidiary or within 90 days thereafter to secure indebtedness incurred to pay all or a portion of the purchase price thereof or to secure indebtedness incurred solely for the purpose of financing the acquisition of any such equipment or machinery or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount; (vi) easements, rights-of-way, restrictions, encroachments and other similar charges or encumbrances, and minor title deficiencies, in each case not securing indebtedness and not materially interfering with the conduct or value of the business of Assignor or the Subsidiary; (vii) Liens arising from precautionary UCC financing statement filings regarding operating leases or bailee arrangements entered into in the ordinary course of business; (viii) Liens arising out of the existence of judgments or awards in respect of which Assignor or the Subsidiary shall in good faith be prosecuting an appeal or proceedings for review and in respect of which there shall have been secured a subsisting stay of execution pending such appeal or proceedings, provided that the aggregate amount of all cash and the fair market value of all other property subject to such Liens does not exceed $50,000 at any time outstanding; (ix) statutory and common law landlords' liens under leases to which the Assignor or the Subsidiary is a party; (x) Liens incurred in the ordinary course of business in connection with workers compensation claims, unemployment insurance and social security benefits and Liens -24- securing the performance of bids, tenders, leases and contracts in the ordinary course of business, statutory obligations, surety bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business and consistent with past practice (exclusive of obligations in respect of the payment for borrowed money), provided that the aggregate amount of all cash and the fair market value of all other property subject to all Liens permitted by this clause (x) shall not at any time exceed $50,000; and (xi) other Liens incidental to the conduct of the business of the Assignor or any of the Subsidiary that (i) were not incurred in connection with indebtedness, (ii) do not materially detract from the value of the assets subject to such Liens or materially impair the use thereof in the operation of such business (provided to the extent that any such Liens attach to any Company Collateral such Liens shall be junior to the Liens created in favor of the Collateral Agent) and (iii) do not at any time for all such Liens encumber cash and other property having an aggregate value in excess of, or secure outstanding obligations in the aggregate in excess of $10,000; and (xii) first Lien in favor of the secured creditors under the Company Senior Security Agreement. "Proceeds" shall mean all "proceeds" as such term is defined in the Uniform Commercial Code as in effect in the State of New York on the date hereof and, in any event, shall also include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or the Assignor from time to time with respect to any of the Company Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to the Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Company Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Company Collateral. "Secured Creditor" shall have the meaning provided in the preamble to this Agreement. "Software" shall mean "software" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Subsidiary" shall mean Virtual Vision, Inc., a Delaware corporation. "Supporting Obligations" shall mean any "supporting obligation" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by the Assignor, or in which the Assignor has any rights, and, in any event, shall include, but shall not be limited to all of the Assignor's rights in any letter-of-credit right or secondary obligation that supports the payment or performance of, and all security for, any Account, Document, General Intangible, Instrument or Investment Property. "Termination Date" shall have the meaning provided in Section 10.9(a) of this Agreement. -25- "Trade Secret Rights" shall have the meaning provided in Section 5.1 of this Agreement. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction. ARTICLE X MISCELLANEOUS 10.1 Notices. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be sent or delivered by hand, overnight mail or courier service and all such notices and communications shall, when mailed, delivered or sent by courier, be effective when deposited in the mails, delivered or overnight courier, as the case may be, except that notices and communications to the Collateral Agent or the Assignor shall not be effective until received by the Collateral Agent or the Assignor, as the case may be. All notices and other communications shall be in writing and addressed as follows: (a) if to the Assignor: eMagin Corporation 2070 Route 52 Hopewell Junction, NY 12533 Attention: Chief Financial Officer Telephone No.: (845) 892-1900 Telecopier No.: (845) 892-1901 (b) if to the Collateral Agent, at: Alligator Holdings, Inc. 444 Park Avenue South, 11th Floor New York, NY 10016 Attn: Mr. Steven W. Gold, President Telephone No.: (212) 696-4848 Fax. No.: (212) 696-1231; and (c) if to the Secured Creditor, at such address as the Secured Creditor shall have specified in the Note Purchase Agreement; or at such other address or addressed to such other individual as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 10.2 Waiver; Amendment. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by the Assignor and the Collateral Agent (with the written consent of the Secured Creditor); -26- 10.3 Obligations Absolute. The obligations of the Assignor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of the Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement; or (c) any amendment to or modification of any security for any of the Obligations; whether or not the Assignor shall have notice or knowledge of any of the foregoing. 10.4 [Intentionally left blank.] 10.5 Successors and Assigns. This Agreement shall be binding upon the Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and the Secured Creditor and their respective successors and assigns. All agreements, statements, representations and warranties made by the Assignor herein or in any certificate or other instrument delivered by the Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditor and shall survive the execution and delivery of this Agreement regardless of any investigation made by the Secured Creditor or on his behalf. 10.6 Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 10.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF JURY TRIAL. (a) THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE ASSIGNOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. THE ASSIGNOR HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK JURISDICTION OVER THE ASSIGNOR, AND AGREES NOT TO PLEAD OR CLAIM IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT BROUGHT IN ANY OF THE AFORESAID COURTS THAT ANY SUCH COURT LACKS JURISDICTION OVER THE ASSIGNOR. THE ASSIGNOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE ASSIGNOR AT ITS ADDRESS FOR NOTICES AS PROVIDED IN SECTION 10.1 ABOVE, SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE ASSIGNOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COM- -27- MENCED HEREUNDER THAT SUCH SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE COLLATERAL AGENT UNDER THIS AGREEMENT, OR THE SECURED CREDITOR, TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ASSIGNOR IN ANY OTHER JURISDICTION. (b) THE ASSIGNOR HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. (c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 10.8 Assignor's Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that the Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Company Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Company Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of the Assignor under or with respect to any Company Collateral. 10.9 Termination; Release. (a) After the Termination Date, this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation in Section 8.1 hereof, shall survive such termination) and the Collateral Agent, at the request and expense of the Assignor, will promptly execute and deliver to the Assignor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to the Assignor (without recourse and without any representation or warranty) such of the Company Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Note issued under the Note Purchase Agreement is not outstanding and all Obligations then due and payable have been paid in full. (b) At any time that the Assignor desires that the Collateral Agent take any action to acknowledge or give effect to any release of Company Collateral pursuant to the foregoing Section 10.9(a), the Assignor shall deliver to the Collateral Agent a certificate signed -28- by a senior officer of the Assignor stating that the release of the respective Company Collateral is permitted pursuant to such Section 10.9(a). 10.10 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Assignor and the Collateral Agent. Execution of counterparts may be by facsimile. 10.11 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 10.12 The Collateral Agent and the Secured Creditor. The Collateral Agent will hold in accordance with this Agreement all items of the Company Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Collateral Agent as holder of the Company Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Collateral Agent shall act hereunder on the terms and conditions set forth herein. 10.13 Benefit of Agreement. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure to the benefit of and be enforceable by each of the parties hereto and its successors and assigns. 10.14 Subordination. Notwithstanding anything contained herein to the contrary, the Secured Creditor recognizes and acknowledges that all of the Collateral Agent's and its respective rights and remedies hereunder are junior and subordinate in right to the prior rights and remedies of the "Collateral Agent" and the "Secured Creditors" (each as defined in the Company Senior Security Agreement) under the Company Senior Security Agreement, and that the relative rights and priorities to and in the Company Collateral as between the Collateral Agent and the Secured Creditor, on the one hand, and the "Collateral Agent" and the "Secured Creditors" (each as defined in the Company Senior Security Agreement), on the other hand is set forth in Section 4 of the Note Purchase Agreement. [Remainder of this page intentionally left blank; signature page follows] -29- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. ASSIGNOR: EMAGIN CORPORATION, as Assignor By: ------------------------------------ Name: Title: SECURED PARTY: ---------------------------------------- Mortimer D. A. Sackler Address: 15 East 62nd Street New York, NY 10021 Accepted and Agreed to: ALLIGATOR HOLDINGS, INC., as Collateral Agent By: ------------------------------------ Name: Mr. Steven W. Gold Title: President -----END PRIVACY-ENHANCED MESSAGE-----