-----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, BsLf5aBSfq9J4MFn577I3f3fkinT17404CUr4kKV7eYmb1awSkKB//UaNDFgPqpY nOMDF43RVQefbINZaevp/g== 0001013762-03-000094.txt : 20030428 0001013762-03-000094.hdr.sgml : 20030428 20030428123901 ACCESSION NUMBER: 0001013762-03-000094 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20030428 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030428 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: 03666211 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 april28-8k.txt 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): April 25, 2003 eMagin Corporation - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter)
Delaware 000-24757 56-1764501 - -------------------------------------- ------------------------------------- ---------------------------------- (State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification Incorporation) 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. eMagin Corporation ("eMagin" or the "Company") and a group of several accredited institutional and individual investors (collectively, the "Investors") entered into a Global Restructuring and Secured Note Purchase Agreement (the "Secured Note Purchase Agreement") dated as of April 25, 2003 (the "Closing Date") whereby Investors agreed to lend eMagin $6,000,000 in exchange for (i) the issuance of $6,000,000 principal amount of 9.00% Secured Convertible Promissory Notes due on November 1, 2005 (the "Secured Notes") and (ii) Warrants (the "Warrants") to purchase an aggregate of 7,749,921 shares of common stock of eMagin (subject to certain customary anti-dilution adjustments), which Warrants are exercisable for a period of three (3) years. Interest is payable on the Notes at a rate of 9% per annum and, at the option of the Company, may be paid through the delivery of shares of common stock of the Company (registered pursuant to the Registration Rights Agreement referred to below) in lieu of cash interest payments. Subject to certain limitations, the Notes may be converted, at the option of the holder, in whole or in part, into common shares with a conversion price equal to 105% of the volume weighted average of the closing price of the Company's common shares as reported on The American Stock Exchange by the Wall Street Journal, New York City edition, for the five (5) trading days immediately preceding the Closing Date (the "Conversion Price"). The exercise price of the warrants on a per share basis is $.8110, an amount equal to 110% of the volume weighted average of the closing price of the Company's common shares as reported on The American Stock Exchange by the Wall Street Journal, New York City edition, for the five (5) trading days immediately preceding the Closing Date. As part of the Transactions, the existing the holders of an aggregate of $1,625,000 principal amount of secured notes that were purchased pursuant to a secured note purchase agreement entered into as of November 27, 2001 (collectively, the "Original Secured Notes"), and the holder of a $200,000 principal amount secured note that was purchased pursuant to a Secured Note Purchase Agreement entered into as of June 20, 2002 (the "Bridge Note"), agreed to (a) amend their respective Original Secured Notes and Bridge Note issued to them, (b) terminate the Security Agreement dated November 20, 2001 that was entered into in connection with the purchase of the Original Secured Notes and the Security Agreements dated June 20, 2002 that were entered into in connection with the purchase of the Bridge Note and allow the new investors to enter into a New Security Agreement (as defined below) with them on a pari passu basis in order for the Company to continue its operations as a developer of virtual imaging technology, and (c) simultaneously participate in this new round of financing (subject to the terms and conditions set forth in the Secured Note Purchase Agreement). The amendments to the Original Secured Notes and Bridge Note included (i) amending the Bridge Note so as to provide that the Bridge Note shall be convertible and will have the same Conversion Price (as defined above) as the Notes issued pursuant to the Secured Note Purchase Agreement, (ii) extending the maturity dates of the Original Secured Notes and Bridge Note from June 30, 2003 to November 1, 2005, and (iii) revising and clarifying certain of the other terms and conditions of the Original Secured Notes and Bridge Note, including provisions relating to interest payments, conversions, default and assignments of the Original Secured Notes and Bridge Note. In connection with the completion of the transactions under the Securities Purchase Agreement, eMagin and the investors also entered into a Security Agreement dated as of April 25, 2003 (the "New Security Agreement"), and a Registration Rights Agreement dated as of April 25, 2003 providing the investors with certain registration rights under the Securities Act of 1933, as amended, with respect to the Company's common stock issued or issuable in lieu of cash interest payments on the Notes, upon conversion of the Notes and/or exercise of the Warrants. The issuance of the shares and the warrants was exempt from registration requirements of the Securities Act of 1933 pursuant to Section 4(2) of such Securities Act and Regulation D promulgated thereunder based upon the representations of each of the Investors that it was an "accredited investor" (as defined under Rule 501 of Regulation D) and that it was purchasing such securities without a present view toward a distribution of the securities. In addition, there was no general advertisement conducted in connection with the sale of the securities. In addition to the foregoing, as a condition to and simultaneously with the closing of the transaction pursuant to the Secured Note Purchase Agreement, certain holders of convertible notes issued by the Company agreed to convert approximately $4.9 million of notes and accrued interest into shares of the Company's common stock, subject to a "lock up" arrangement allowing only limited sales through private transactions for their remaining shares through December 31, 2003. Specifically, The Travelers Insurance Company agreed to convert their $1 million convertible note plus related interest into common stock of eMagin (at a conversion price of approximately $0.53 per share), and SK Corporation has agreed to convert its $3 million Convertible Note and accrued interest into the common stock of eMagin (at an approximate conversion price of approximately $1.28 per share). As further conditions to the closing of the transaction pursuant to the Secured Note Purchase Agreement, the Company has also entered into settlement or restructuring agreements with certain of its other creditors to whom it owed approximately $5.2 million of current payables, pursuant to which the creditors have agreed to accept shares of common stock of the Company in full or partial satisfaction of the amount owed to them, or which allow the Company to either make discounted payments to them or to make payments under more favorable payment terms than previously were in place. 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 form of Secured Convertible Promissory Note, the form of Stock Purchase Warrant, the Security Agreement and the Registration Rights Agreement attached as exhibits to this Form 8-K. The Company issued a press release on April 28, 2003 announcing the transactions described above which is also attached hereto as Exhibit 99.1. ITEM 7. EXHIBITS. Exhibit Number Description 10.1 Securities Purchase Agreement dated as of April 25, 2003 by and among eMagin and the investors identified on the signature pages thereto. 10.2 Security Agreement dated as of April 25, 2003 by and among eMagin and certain initial investors identified on the signature pages thereto. 10.3 Registration Rights Agreement dated as of April 25, 2003 by and among eMagin and certain initial investors identified on the signature pages thereto. 4.1 Form of Secured Convertible Promissory Note dated as of April 25, 2003. 4.2 Form of Amended and Restated Secured Convertible Promissory Note dated as of April 25, 2003. 4.3 Form of Warrant dated as of April 25, 2003. 99.1 Press Release of the Company dated April 28, 2003, announcing the subscription by the Investors of the purchased notes and warrants. SIGNATURES 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/ Gary W. Jones ----------------------- Name: Gary W. Jones Title: President and Chief Executive Officer Dated: April 28, 2003 EX-4 2 april2003-8kex43.txt EXHIBIT 4.3 FORM OF WARRANT DATED AS OF APRIL 25, 2003 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 To Purchase [_________] Shares of Common Stock of eMAGIN CORPORATION THIS CERTIFIES that, for value received, [___________] (the "Holder"), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after April 25, 2003 (the "Initial Exercise Date") and on or prior to the close of business on April 25, 2006 (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 [______] 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 $0.8110. 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 Global Restructuring and Secured Note Purchase Agreement dated as of April 25, 2003 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. 1. Title to Warrant, Transfer. Prior to the Termination Date and subject to compliance with applicable laws, this Warrant and all rights hereunder are transferable by the Holder, in whole or in part (other than pursuant to an effective registration statement under the U.S. Securities Act) only if: (i) the transfer is to the Company; (ii) the transfer is made pursuant to the exemption from registration under the U.S. Securities Act provided by Rule 144 thereunder; or (iii) the Warrants are transferred in a transaction that does not require registration under the U.S. Securities Act or any applicable United States state laws and regulations governing the offer and sale of securities, and Holder has furnished to the Company an opinion of counsel, reasonably satisfactory to the Company, to that effect. Such transfer may take place at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed as Exhibit C hereto properly endorsed. Transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached as Exhibit C hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. In the event that the Holder wishes to transfer a portion of this Warrant, the Holder shall transfer at least twenty-five thousand (25,000) shares underlying this Warrant to any such transferee. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. Notwithstanding the above, the Holder shall not transfer this warrant or any rights hereunder to any person or entity which is engaged in a business that is in the reasonable judgment of the Company is in competition with the Company. 11 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 then-current Holder, or any former Holder of this Warrant). 12 Exercise of Warrant. (a) Except as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date 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 as Exhibit A 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; provided, however, that notwithstanding the provisions of this Section 3, the number of shares of Common Stock that may be acquired by the Holder upon any exercise of this Warrant shall be limited to the extent necessary to ensure that, following such exercise, the total number of shares of Common Stock then beneficially owned by the Holder and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Securities Exchange Act, does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise of this Warrant). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act and the rules and regulations thereunder. Each delivery of a Notice of Exercise Form hereunder will constitute a representation by the Holder that it has evaluated the limitation set forth in this Section 3 and determined that issuance of the full number of shares of Common Stock requested in such Notice of Exercise Form is permitted under this Section 3. The Company's obligation to issue shares of Common Stock in excess of the limitation referred to in this Section 3 shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. By written notice to the Company at any time on or after the date hereof, the Holder may waive the provisions of this Section 3 or increase or decrease such limitation percentage to any other percentage specified in such notice, but not exceeding 9.999%. Any such waiver or increase will not be effective until the sixty-first day after such notice is delivered to the Company, provided, that any such waiver or increase delivered prior to or at the Initial Exercise Date will take effect as of the Initial Exercise Date. Any such waiver, increase or decrease will apply only to such Holder and not to any other Holder. Notwithstanding the foregoing, a Holder may elect to have the limitations of this Section 3 in their entirety not apply to such Holder and its subsequent transferees at any and all times by delivering, or causing to be delivered, a written notice to such effect to the Company at or prior to the Initial Exercise Date. 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 the 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 Holder a new Warrant evidencing the rights of 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", pursuant to the notice attached hereto as Exhibit B, 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)) 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. 13 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 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. 14 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 as Exhibit C 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. 15 Division and Combination. 15.1 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. Subject to compliance with Section 1, as to any transfer which may be involved in such division or combination, 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. 15.2 The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 6. 15.3 The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants. 16 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. 17 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. 18 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. 19 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 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. 20 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 a 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 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. 21 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. 22 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. 23 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 Holder, if lawful and practicable to do so, (i) at least ten (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 ten (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 (x) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, 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 (y) 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 Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16(d). 24 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 its 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 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 therefore 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. 25 Miscellaneous. 25.1 Jurisdiction. This Warrant shall constitute a contract under the laws of New York, without regard to its conflict of law, principles or rules. 25.2 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. 25.3 Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice 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 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 proceedings, incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 25.4 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. 25.5 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. 25.6 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. 25.7 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 and permitted assigns of the Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares. 25.8 Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder. 25.9 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. 25.10 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. (remainder of this page intentionally left blank) IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. Dated: April ___, 2003 eMAGIN CORPORATION By:________________________ Name: Gary W. Jones Title: Chief Executive Officer Exhibit A 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. (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: (3)______The Warrant Shares shall be delivered to the following: - --------- ---------------------------------------- - --------- ---------------------------------------- - --------- ---------------------------------------- (4)______Miscellaneous Information: Number of Shares of Common Stock to be Issued Under this Notice: [ ] Exercise Price: $0.[ ] per share Aggregate Price Being Exercised: $[ ] Remaining Warrant Shares After Issuance: [ ] [(5) The foregoing exercise is for less than the full amount of the Warrant; therefore, eMagin Corporation will issue a replacement Warrant representing the remainder of the Warrant Shares (of like form, tenor and effect) to the Warrant Holder along with the share certificate evidencing the Common Stock issued in response to this Notice of Exercise. [or] (5) The foregoing exercise is for the full amount of the Warrant; therefore, eMagin Corporation will not issue a replacement Warrant and will only issue to the Warrant Holder the share certificate evidencing the Common Stock issued in response to this Notice of Exercise.] WARRANT HOLDER: Dated: Exhibit B 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. 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 to the foregoing Notice of Exercise must exactly correspond to the name of the Holder on the Warrant Exhibit C ASSIGNMENT FORM (To assign the foregoing warrant, execute this form and supply required information. Do not use this form to exercise the warrant.) FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to _______________________________________________ whose address is - ---------------------------------------------------------------. - --------------------------------------------------------------- Dated: ______________, _______ Holder's Signature: ___________________________ Holder's Address:_____________________________ ----------------------------- Signature Guaranteed: ___________________________________________ NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in an fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. EX-4 3 april2003-8kex42.txt EXHIBIT 4.2 FORM OF AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE DATED AS OF APRIL 25, 2003 THIS AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE (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. AMENDED AND RESTATED SECURED CONVERTIBLE PROMISSORY NOTE $[Principal of outstanding note] [Date of outstanding note] Hopewell Junction, New York For value received, eMagin Corporation, a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to the order of [_____________________] or its 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 $[_________], plus interest, payable on the dates and in the manner set forth below. This Secured Convertible Promissory Note, as may be amended from time to time (the "Note") is one of the "Amended and Restated Notes" referred to in that certain Global Restructuring and Secured Note Purchase Agreement, dated as of April 25, 2003 (the "Closing Date"), by and among the Borrower, the Original Secured Parties (as defined therein) and the New Investors (as defined therein) as may from time to time be listed therein (as the same may from time to time be amended, modified or supplemented, the "Note Purchase Agreement"), which have been or are 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 November 1, 2005 (the "Maturity Date"), unless this Note has been converted or redeemed as described in Section 5, Section 9 or Section 10 below (each 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 nine percent (9%) per annum. 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 eleven percent (11%) or the maximum rate permissible by law, whichever is less. 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 and shall be payable, at the option of the Lender, either quarterly on March 31, June 30, September 30 and December 31 of each year beginning on June 30, 2003, or at the time of conversion of the principal to which such interest relates. All payments due hereunder (to the extent not converted into common stock, $.001 par value per share, of the Borrower (the "Common Stock") in accordance with the terms hereof) shall be made in lawful money of the United States of America or, at the option of the Borrower, in whole or in part, in shares of Common Stock of the Borrower valued at the then applicable Conversion Price (as defined below). 3. SECURITY. The full amount of the Note is secured by a general security interest under a Security Agreement (the "Security Agreement"), dated as of April 25, 2003, by and among the Borrower, as Assignor, the Secured Creditors and Alligator Holdings, Inc., as collateral agent for the benefit of the holders of Notes, with such security interest granted for the ratable benefit of the holder of the Notes. Reference is hereby made to the 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. The 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 Collateral, or in any portion thereof, except as permitted pursuant to the 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. MANDATORY CONVERSION. Subject to the last sentence of this Section 5, at any time after the closing of a bona fide sale of convertible debt securities or equity securities of the Borrower, on terms, and considering all material terms of such transaction, that are equal to or are accretive or no less favorable to the Borrower to those of the transactions represented by the Note Purchase Agreement under which this Note is issued and in which the gross proceeds received by the Borrower are, in the aggregate, in the minimum amount of $10 million, prior to the Maturity Date (collectively, the "Next Round of Financing"), the aggregate principal amount of and accrued interest (subject to the following) on this Note, at the Borrower's option, shall be converted (the "Mandatory Conversion") at the Conversion Price into an amount of shares of the common stock of the Borrower (the "Common Stock"). The "Conversion Price" shall be equal to one hundred fifteen and one-half percent (115.5%) of the average of the volume weighted average closing prices of the shares of the Common Stock of the Borrower as reported on The American Stock Exchange by the Wall Street Journal, New York City edition, for the ten (10) trading days immediately preceding January 8, 2002 (subject to adjustment for any stock-split, stock dividends, stock combination, recapitalization and like occurrences to occur after the date hereof). Notwithstanding anything to the contrary, the Borrower shall not be entitled to convert the Notes pursuant to a Mandatory Conversion if (a) the shares of Common Stock to be issued to the Lender pursuant to such conversion (i) have not been registered under the Securities Act and (ii) are not listed on the principal stock exchange or automated quotation system on which the Common Stock is then listed; (b) the Lender is contractually restricted from selling shares of Common Stock pursuant to an agreement with the Borrower; (c) any Sale by the Lender of shares of Common Stock would be subject to liability under Section 16(b) of the Securities Act or any successor provision; (d) an Event of Default (as defined below) is continuing and has not been waived in writing by the Lender; (e) one year has not elapsed from the Closing Date; or (f) the Borrower did not have a positive EBITDA for the most recent quarterly period reported to the Securities and Exchange Commission. 6. MECHANICS OF CONVERSION. Upon any conversion of this Note, (i) the entire principal balance of and all accrued but unpaid interest under this Note shall be converted and this Note shall become fully paid and satisfied, (ii) the Lender shall surrender and deliver this Note, duly endorsed, to the Borrower's office or such other address which the Borrower shall designate against delivery of the certificates representing the new securities of the Borrower, and (iii) in exchange for the surrendered Note described in the preceding clause 6(ii), the Borrower shall provide the Lender with irrevocable instructions addressed to the Borrower's transfer and exchange agent to issue such number of unrestricted, freely tradeable shares of Common Stock and listed on the principal stock exchange or automated quotation system on which the Common Stock is then listed. 7. ISSUE TAXES. The Borrower shall pay any and all issue and other taxes that may be payable with respect to any issue or delivery of shares of capital stock on conversion of this Note pursuant hereto; provided, however, that the Borrower shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion. 8. 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), (f), (g) and (k) of this Section 8, 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 shall default in the performance or compliance with any other covenant or agreement of Borrower contained in this Note or the Note Purchase Agreement, and the continuation of such default for a period of thirty (30) days; (c) Any representation or warranty of Borrower 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 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; (e) Borrower 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 under any bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or similar law or statute, and such proceeding is not stayed or dismissed within forty-five (45) days after the commencement thereof; (g) Borrower 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 forty-five (45) days; (h) Final judgment in excess of $50,000 (excluding insured portions) is entered against Borrower and is not stayed, bonded or discharged within thirty (30) days; (i) The dissolution or termination of existence of Borrower; (j) Any material default by the Borrower under the Security Agreement; and (k) The Borrower ceases operations or fails to carry on its operations in the ordinary course of business. 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. 9. OPTIONAL CONVERSION BY HOLDER. Upon twenty (20) calendar days' notice to the Borrower, the Lender may convert the aggregate principal amount of and accrued interest outstanding (as of the date for such conversion provided in such notice) on this Note at the Conversion Price into an amount of shares of the Common Stock. 10. 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 thirty (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 two hundred fifty percent (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 thirty (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. (c) If the Borrower shall elect to exercise its Call Right, the Borrower shall provide written notice thereof to the Lender (the "Call Notice") before the expiry of the Call Period, such Call Notice to include the repurchase date for this Note which shall be no earlier than fifteen (15) days nor later than thirty (30) days from the date such Call Notice is delivered. Notwithstanding anything to the contrary set forth herein, any Note called for repurchase by the Borrower may be voluntarily converted by the Lender at any time prior to the repurchase date specified in the Borrower's Call Notice. (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 fifteen (15) days nor later than thirty (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 10, 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 10, 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" shall mean, 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. 11. 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. 12. 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. 13. SUCCESSORS AND ASSIGNS. The provisions of this Note shall be binding upon, and shall inure to the benefit of, the Borrower and the Lender and their respective successors and assigns; provided, however, that the Borrower shall not assign its rights or obligations hereunder without the prior written consent of the Lender. This Note may be freely assigned by the Lender without the consent of the Borrower. 14. 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. 15. 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. IN WITNESS WHEREOF, the undersigned has executed this Note as of date first written above. EMAGIN CORPORATION By: ---------------------- Name: Title: EX-4 4 april2003-8kex41.txt EXHIBIT 4.1 FORM OF SECURED CONVERTIBLE PROMISSORY NOTE DATED AS OF APRIL 25, 2003 THIS SECURED CONVERTIBLE PROMISSORY NOTE (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. SECURED CONVERTIBLE PROMISSORY NOTE $[Note Amount] April 25, 2003 CUSIP # 29076N AA 5 Hopewell Junction, New York For value received, eMagin Corporation, a Delaware corporation (the "Company") and Virtual Vision, Inc. ("VV" together with the Company, the "Borrower"), hereby unconditionally promise to pay to the order of [_____________________] or its 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 $[_________], plus interest, payable on the dates and in the manner set forth below. This Secured Convertible Promissory Note, as may be amended from time to time (the "Note") is one of the "New Notes" referred to in that certain Global Restructuring and Secured Note Purchase Agreement, dated as of April 25, 2003 (the "Closing Date"), by and among the Borrower, the Original Secured Parties (as defined therein) and the New Investors (as defined therein) as may from time to time be listed therein (as the same may from time to time be amended, modified or supplemented, the "Note Purchase Agreement"), which have been or are 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 November 1, 2005 (the "Maturity Date"), unless this Note has been converted or redeemed as described in Sections 5, 9, 10 or 11 below (each 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 nine percent (9%) per annum. 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 eleven percent (11%) or the maximum rate permissible by law, whichever is less. 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 and shall be payable, at the option of the Lender, either quarterly on March 31, June 30, September 30 and December 31 of each year beginning on June 30, 2003, or at the time of conversion of the principal to which such interest relates. All payments due hereunder (to the extent not converted into common stock, $.001 par value per share, of the Company (the "Common Stock") in accordance with the terms hereof) shall be made in lawful money of the United States of America or, at the option of the Borrower, in whole or in part, in shares of Common Stock of the Borrower valued at the then applicable Conversion Price (as defined below). 3. SECURITY. The full amount of the Note is secured by a general security interest under a Security Agreement (the "Security Agreement"), dated as of April 25, 2003, by and among the Borrower, as Assignor, the Secured Creditors, and Alligator Holdings, Inc., as collateral agent for the benefit of the holders of Notes, with such security interest granted for the ratable benefit of the holder of the Notes. Reference is hereby made to the 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. The 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 Collateral, or in any portion thereof, except as permitted pursuant to the 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. MANDATORY CONVERSION. Subject to the last sentence of this Section 5, at any time that the rolling weighted average closing price of the shares of the Common Stock, as reported on The American Stock Exchange by The Wall Street Journal, New York City edition, is equal to or greater than two times the Conversion Price (as defined below, and subject to adjustment for any stock-split, stock dividends, stock combination, recapitalization and like occurrences to occur after the date hereof) for a period exceeding three (3) months and the price of the Common Stock of the Company is currently greater than two times the Conversion Price, then all or any part of the aggregate principal amount of and accrued interest on this Note, at the Borrower's option, shall be converted (the "Mandatory Conversion") at the Conversion Price into an amount of shares of the Common Stock of the Company. The "Conversion Price" shall be equal to one hundred and five percent (105%) of the closing price of the volume weighted average closing price of the shares of the Common Stock of the Company as reported on The American Stock Exchange by the Wall Street Journal, New York City edition, for the five (5) trading days immediately preceding the Closing Date (subject to adjustment for any stock-split, stock dividends, stock combination, recapitalization and like occurrences to occur after the date hereof). Notwithstanding anything to the contrary, the Borrower shall not be entitled to convert the Notes pursuant to a Mandatory Conversion if (a) the shares of Common Stock to be issued to the Lender pursuant to such conversion (i) have not been registered under the Securities Act and (ii) are not listed on the principal stock exchange or automated quotation system on which the Common Stock is then listed; (b) the Lender is contractually restricted from selling shares of Common Stock pursuant to an agreement with the Company; (c) any sale by the Lender of shares of Common Stock would be subject to liability under Section 16(b) of the Securities Act or any successor provision; (d) an Event of Default (as defined below) is continuing and has not been waived in writing by the Lender; (e) one year has not elapsed from the Closing Date; or (f) the Company did not have a positive EBITDA for the most recent quarterly period reported to the Securities and Exchange Commission. 6. MECHANICS OF CONVERSION. Upon any conversion of this Note, (i) the entire principal balance of and all accrued but unpaid interest under this Note shall be converted and this Note shall become fully paid and satisfied, (ii) the Lender shall surrender and deliver this Note, duly endorsed, to the Borrower's office or such other address which the Borrower shall designate against delivery of the certificates representing the new securities of the Borrower, and (iii) in exchange for the surrendered Note described in the preceding clause 6(ii), the Company shall provide the Lender with irrevocable instructions addressed to the Company's transfer and exchange agent to issue such number of unrestricted, freely tradeable shares of Common Stock and listed on the principal stock exchange or automated quotation system on which the Common Stock is then listed. 7. ISSUE TAXES. The Borrower shall pay any and all issue and other taxes that may be payable with respect to any issue or delivery of shares of capital stock on conversion of this Note pursuant hereto; provided, however, that the Borrower shall not be obligated to pay any transfer taxes resulting from any transfer requested by any holder in connection with any such conversion. 8. 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), (f) and (g) of this Section 8, and in the case of any other such event at the election of Lender, upon the occurrence of any of the following events; provided, however, that events described in paragraphs (k), (l), (m), (n), (o) (p) and (q) of this Section 8 may only be an Event of Default at the election of Lender if approved by 50% or more of the holder of the Notes (in terms of the aggregate dollar value of the principal of the Notes then issued and outstanding under the Purchase Agreement): (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 shall default in the performance or compliance with any other covenant or agreement of Borrower contained in this Note or the Note Purchase Agreement, and the continuation of such default for a period of thirty (30) days; (c) Any representation or warranty of Borrower 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 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; (e) Borrower 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 under any bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or similar law or statute, and such proceeding is not stayed or dismissed within forty-five (45) days after the commencement thereof; (g) Borrower 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 forty-five (45) days; (h) Final judgment in excess of $250,000 (excluding insured portions) is entered against Borrower and is not stayed, bonded or discharged within thirty (30) days; (i) The dissolution or termination of existence of Borrower; (j) Any material default by the Borrower under the Security Agreement; (k) The Borrower's actual Expenses (as defined in the Note Purchase Agreement) for any month starting May 2003 through December 2003 ("Monthly Reporting Period") is greater than one hundred twenty percent (120%) of the projected Expense amount for such month as set forth in Schedule 6(e)(i) of the Note Purchase Agreement; (l) The Borrower's actual Direct Costs of Goods Sold (as defined in the Note Purchase Agreement) in any month during the Monthly Reporting Period is no greater than one hundred twenty percent (120%) of the percentage stated in Schedule 6(e)(ii) of the Note Purchase Agreement; (m) The sum of (i) the cumulative total of the Borrower's actual Revenue (as defined in the Note Purchase Agreement) from the Closing Date, and (ii) the amount of Firm Purchase Orders (as defined in the Note Purchase Agreement) specifying delivery within four (4) months of the date on which such calculations are made for any month during the Monthly Reporting Period, is less than eighty percent (80%) of the amount set forth in Schedule 6(e)(iii) of the Note Purchase Agreement; (n) The actual Quarterly Revenue (as defined in the Note Purchase Agreement) for any quarter, starting with the quarter ending December 31, 2003, is less than eighty percent (80%) of the amount set forth in Schedule 6(e)(iv) of the Note Purchase Agreement; (o) The failure of the Company to file with Securities and Exchange Commission a registration statement under the Securities Act prior to May 31, 2003 pursuant to the Registration Rights Agreement dated April 25, 2003 between the Company and the Secured Creditors; (p) The failure of the Company to add three (3) new independent directors to its board of directors by June 30, 2003; and (q) The failure of the Company take appropriate steps to raise additional capital pursuant to its business plan, including the authorization of 100 million additional shares of Common Stock by June 30, 2003. 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. 9. OPTIONAL CONVERSION BY HOLDER. Upon ten (10) calendar days' notice to the Borrower, the Lender may convert the aggregate principal amount of and accrued interest outstanding (as of the date for such conversion provided in such notice) on this Note at the Conversion Price into an amount of shares of the Common Stock. 10. CONVERSION LIMITATION. Notwithstanding the provisions of Sections 5 and 9 hereof, the number of shares of Common Stock that may be acquired by the Lender upon any conversion of the Note shall be limited to the extent necessary to ensure that, following such exercise, the total number of shares of Common Stock then beneficially owned by the Lender and its affiliates and any other persons whose beneficial ownership of Common Stock would be aggregated with the Lender's for purposes of Section 13(d) of the Securities Exchange Act, does not exceed 4.999% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion of the Note). For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act and the rules and regulations thereunder. Each delivery of a conversion notice hereunder will constitute a representation by the Lender that it has evaluated the limitation set forth in this Section 10 and determined that issuance of the full number of shares of Common Stock requested in such conversion notice is permitted under this Section 10. The Company's obligation to issue shares of Common Stock in excess of the limitation referred to in this Section 10 shall be suspended (and shall not terminate or expire notwithstanding any contrary provisions hereof) until such time, if any, as such shares of Common Stock may be issued in compliance with such limitation. By written notice to the Company at any time on or after the date hereof, the Lender may waive the provisions of this Section 10 or increase or decrease such limitation percentage to any other percentage specified in such notice, but not exceeding 9.999%. Any such waiver or increase will not be effective until the sixty-first day after such notice is delivered to the Company, provided, that any such waiver or increase delivered prior to or at the Closing Date will take effect as of the Closing Date. Any such waiver, increase or decrease will apply only to such Lender and not to any other Lender. Notwithstanding the foregoing, a Lender may elect to have the limitations of this Section 10 in their entirety not apply to such Lender and its subsequent transferees at any and all times by delivering, or causing to be delivered, a written notice to such effect to the Company at or prior to the Closing Date. 11. 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 thirty (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 two hundred fifty percent (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 thirty (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. (c) If the Borrower shall elect to exercise its Call Right, the Borrower shall provide written notice thereof to the Lender (the "Call Notice") before the expiry of the Call Period, such Call Notice to include the repurchase date for this Note which shall be no earlier than fifteen (15) days nor later than thirty (30) days from the date such Call Notice is delivered. Notwithstanding anything to the contrary set forth herein, any Note called for repurchase by the Borrower may be voluntarily converted by the Lender at any time prior to the repurchase date specified in the Borrower's Call Notice. (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 fifteen (15) days nor later than thirty (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 11, 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 11, 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" shall mean, 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. 12. 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 attorneys' fees, costs and other expenses. 13. 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. 14. SUCCESSORS AND ASSIGNS. The provisions of this Note shall be binding upon, and shall inure to the benefit of, the Borrower and the Lender and their respective successors and assigns; provided, however, that the Borrower shall not assign its rights or obligations hereunder without the prior written consent of the Lender. This Note may be freely assigned by the Lender without the consent of the Borrower. 15. 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. 16. 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. (remainder of this page intentionally left blank) IN WITNESS WHEREOF, the undersigned has executed this Note as of date first written above. EMAGIN CORPORATION By: ---------------------- Name: Title: VIRTUAL VISION, INC. By: ---------------------- Name: Title: EX-10 5 april2003-8kex101.txt EXHIBIT 10.1 SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL 25, 2003 BY AND AMONG EMAGIN AND THE INVESTORS IDENTIFIED ON THE SIGNATURE PAGES THERETO. EMAGIN CORPORATION EMAGIN CORPORATION GLOBAL RESTRUCTURING AND SECURED NOTE PURCHASE AGREEMENT THIS GLOBAL RESTRUCTURING AND SECURED NOTE PURCHASE AGREEMENT (this "Agreement") is entered into as of April 25, 2003, by and among eMagin Corporation, a Delaware corporation ("eMagin"), Virtual Vision, Inc., a Delaware corporation and the wholly owned subsidiary of eMagin ("eMagin Sub", and together with eMagin, the "Company"), Mr. Mortimer D.A. Sackler ("MDAS"), Mr. Jack Rivkin ("JR"), Ginola Limited ("Ginola" together with MDAS and JR, individually an "Original Secured Party" and collectively, the "Original Secured Parties") and Stillwater LLC ("Stillwater") and the other purchasers of New Notes (as defined below) listed on Schedule 1 attached hereto (unless identified specifically by name, individually a "New Investor", and collectively, the "New Investors"). W I T N E S S E T H : WHEREAS, eMagin and the Original Secured Parties are each a party to the Secured Note Purchase Agreement entered into as of November 27, 2001, as amended by the Omnibus Amendment, Waiver and Consent Agreement dated January 14, 2002 (the "Original Secured Purchase Agreement") pursuant to which five Secured Convertible Promissory Notes were issued in the aggregate principal amount of $1,625,000 (collectively, the "Original Secured Notes"); WHEREAS, eMagin and the Original Secured Parties pursuant to the Original Secured Purchase Agreement entered into a Security Agreement dated November 20, 2001 (the "Original Security Agreement") and Registration Rights Agreement dated November 27, 2001 (the "Original Registration Rights Agreement"); WHEREAS, eMagin, eMagin Sub and MDAS are each a party to the Secured Note Purchase Agreement entered into as of June 20, 2002 (the "Bridge Financing Purchase Agreement") pursuant to which a Secured Promissory Note was issued in the principal amount of $200,000 (the "Bridge Note"); WHEREAS, eMagin and MDAS pursuant to the Bridge Financing Purchase Agreement entered into a Subordinated Security Agreement dated June 20, 2002 (the "Subordinated Security Agreement"); WHEREAS, eMagin Sub and MDAS pursuant to the Bridge Financing Purchase Agreement entered into a Security Agreement dated June 20, 2002 ("eMagin Sub Security Agreement", together with the Subordinated Security Agreement, the "Bridge Security Agreements"); WHEREAS, the Company has requested funding for its continued operations as a developer of virtual imaging technology; WHEREAS, the New Investors have agreed to lend financing to the Company (subject to the terms and conditions set forth in this Agreement) in order for the Company to continue its operations as a developer of virtual imaging technology; WHEREAS, each of the Original Secured Parties have agreed to amend its respective Original Secured Notes and Bridge Note and any warrants ("Original Warrants") issued to the Original Secured Parties that are listed on Exhibit G attached hereto, and terminate the Original Security Agreement and Bridge Security Agreements and simultaneously participate in this new round of financing (subject to the terms and conditions set forth in this Agreement) and allow the New Investors to enter into the New Security Agreement (as defined below) with them on a pari passu basis in order for the Company to continue its operations as a developer of virtual imaging technology; WHEREAS, in order to induce the Original Secured Parties and the New Investors to enter into this Agreement and to allow the New Investors to share in the collateral previously granted to the Original Secured Parties, the Company and the Original Secured Parties have agreed to terminate the Original Security Agreement and Bridge Security Agreements in order to grant simultaneously to all Original Secured Parties and New Investors a first priority security interest in and to the Collateral (as such term is defined in the "New Security Agreement" attached hereto as Exhibit A), which is substantially the same as the collateral granted to the Original Secured Parties under the Original Security Agreement and Bridge Security Agreements; 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. Amendment of Notes and Warrants. By executing this Agreement the Company and each of the Original Secured Parties hereby agree, acknowledge and consent that each of the outstanding Original Secured Notes and Bridge Note issued to each Original Secured Party shall be amended and restated such that each Original Secured Party shall receive an "Amended and Restated Note", as may be further amended from time to time, in the form attached hereto as Exhibit B, for each Original Secured Note and Bridge Note such Original Secured Party owned with the same terms and conditions as the Original Secured Notes and Bridge Note except for (a) the Bridge Note will now be convertible and will have the same Conversion Price (as defined below) as the New Note (as defined below), (b) the extension of the maturity date to November 1, 2005 (the "Maturity Date") and clarification of interest payment terms, (c) revised references to this Agreement and the New Security Agreement, (d) clarification of when the Original Secured Party is not subject to a Mandatory Conversion, (e) revising the final judgment amount to $50,000 in Section 8(h) in the Amended and Restated Note, and (f) clarification of the permitted assigns allowed under Section 13 in the Amended and Restated Note. In addition, the Company and each of the Original Secured Parties hereby agree, acknowledge and consent that each of the outstanding Original Warrants issued to each Original Secured Party that is listed on Exhibit G shall be amended and restated such that each Original Secured Party, if applicable, shall receive an "Amended and Restated Warrant" in the form attached hereto as Exhibit H, for each Original Warrant listed on Exhibit G with the same terms and conditions as the Original Warrant except for the addition of a warrant exercise limitation. 2. Purchase and Sale of New Secured Notes; Issuance of Warrants. (a) The Company has duly authorized for sale, issuance and delivery new secured convertible notes, as may be amended from time to time (the "New Notes", and together with the Amended and Restated Notes, the "Notes") for a total aggregate principal amount not to exceed $9,000,000 (the "Maximum Note Amount"). All such New Notes shall be due and payable on the Maturity Date (unless prepaid or converted prior to such date pursuant to the terms of such New Notes) and shall otherwise be substantially in the form attached hereto as Exhibit C. (b) The Company has duly authorized for sale, issuance and delivery the three year warrants (the "Warrants", and together with the Notes and any Common Stock (as defined below) issued thereunder, the "Securities") to purchase up to 11,624,903 shares, subject to adjustment (the "Maximum Warrant Amount") of the Company's common stock, par value $.001 per share (the "Common Stock"), such Warrants to be substantially in the form attached hereto as Exhibit D. (c) Subject to the terms of this Agreement, the Original Secured Parties and the New Investors agree to exchange and/or purchase, as the case may be, and the Company agrees to issue to each Original Secured Party and New Investor, the Notes and Warrants for an exchange/purchase price and amount on or before the certain dates set forth on Schedule 2 attached hereto. The New Investors' obligation to pay and the Company's obligation to deliver the Notes and Warrants committed to by the New Investors at the Initial Closing (as defined below) to be paid for and delivered on or before the dates specified in Schedule 2 (the "Tranche Closing Schedule," and each additional closing is a "Tranche Closing"), is subject to certain conditions set forth in Section 7 being true and correct prior to each Tranche Closing. Notwithstanding the foregoing, any and all such Tranche Closings shall take place no later than five (5) days after the effectiveness of the registration statement that is required to be filed pursuant to the Registration Rights Agreement (as defined below in Section 6(j)). The New Notes issued pursuant to this Section 2(c) shall have a Conversion Price (as such term is defined in Section 5 of the New Notes) equal to 105% of the volume weighted average closing price of the Common Stock on the American Stock Exchange ("AMEX") (or the over-the-counter market) for the five (5) trading days immediately preceding the date of this Agreement as reported by the Wall Street Journal, New York City edition. (d) The initial exchange/purchase and sale of the Notes and Warrants shall take place concurrently with the execution of this Agreement (the "Initial Closing", together with the Tranche Closing and any Additional Closing (as defined below), the "Closings"). At each Closing the Company shall deliver to each New Investor, and at the Initial Closing the Company shall deliver to each Original Secured Party, (i) an executed counterpart to this Agreement and (ii) a Note in the respective principal amount set forth on Schedule 2, in all cases against delivery to the Company by each New Investor of (x) an executed counterpart to this Agreement and (y) the respective purchase price of each such Note and the Warrants 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; and by each of Original Secured Party of (I) an executed counterpart to this Agreement and (II) delivery to the Company or its legal counsel for cancellation the Original Secured Notes and the Bridge Note certificates owned by such Original Secured Party. Immediately upon receipt of such Original Secured Notes and Bridge Note from the Original Secured Parties pursuant to this section, the Company shall cancel such instruments (which shall be void and of no further force and effect) and issue in substitution therefor to such Original Secured Party an Amended and Restated Note as set forth above. (e) At each Closing, the Company will promptly issue to each New Investor a Warrant to purchase such number of shares, subject to adjustment, as specified opposite each party's name under the heading "Warrant Amount" for such Closing on Schedule 2A attached hereto, each such Warrant to have an exercise price per share equal to 110% of the volume weighted average closing price of the Common Stock on the AMEX (or the over-the-counter market) for the five (5) trading days immediately preceding the date of this Agreement as reported by the Wall Street Journal, New York City edition. The Warrants shall be substantially in the form attached to this Agreement as Exhibit D. (f) Subsequent to the Initial Closing and prior to the filing of the registration statement with the U.S. Securities and Exchange Commission (the "SEC") that is required to be filed pursuant to the Registration Rights Agreement, provided that the respective Maximum Note Amount and Maximum Warrant Amount have not been issued by the Company and subject to Section 2(g), the Company may, at its sole discretion, agree to permit additional investors to subscribe for additional New Notes (provided each such additional New Note shall have a principal amount of not less than $25,000) and related Warrants, on similar terms as Sections 2(d) and 2(e) (and provided that each such additional New Note and Warrant, as the case may be, shall be issued on the same terms, including conversion price for the New Notes and Warrant exercise price (but not recipient, date and amount) as the New Notes and Warrants issued by the Company at the Initial Closing) until the Maximum Note Amount and the Maximum Warrant Amount have been issued by the Company; provided further, that no additional New Notes or Warrants shall be issued under this Section 2(f) unless each transferee thereof shall have concurrently with the entering into of this Agreement, entered into the New Security Agreement (as defined below in Section 5(a)). The closing of each additional subscription of New Notes and Warrants (the "Additional Closings") pursuant to this Section 2(f) shall occur at such place and time as may be agreed upon by such additional investors and the Company (provided, however, that any and all such Additional Closings shall take place no later than 5 days after the effectiveness of the registration statement that is required to be filed pursuant to the Registration Rights Agreement), and such additional investor shall be added to Schedule 1 and be deemed a New Investor. (g) Any additional New Notes or Warrants issued up to the Maximum Note Amount or the Maximum Warrant Amount, as the case may be, under Section 2(f) shall be restricted to issuances to such persons approved by 50% or more of the holder of Notes (in terms of the aggregate dollar value of the principal of the Notes then issued under this Agreement). In addition, after the Initial Closing, if the Company allows a third party or any New Investor to purchase any New Notes pursuant to Section 2(f) or make any other type of financing investment in the Company ("New Investment"), then Stillwater's obligation and right to acquire New Notes pursuant to the Tranche Closings set forth on the Tranche Closing Schedule shall automatically terminate and expire in an amount equal to the New Investment. The Tranche Closing Schedule shall be revised to reflect such reduction by decreasing the remaining unpaid New Note amounts by the New Investment, starting in the last period first (i.e. October 15, 2003); provided, however, that any and all such Tranche Closings shall take place no later than 5 days after the effectiveness of the registration statement that is required to be filed pursuant to the Registration Rights Agreement. The Company shall give each New Investor at least 15 days written notice (unless waived in writing) prior to closing a New Investment. Notwithstanding the foregoing, each New Investor shall have the right to purchase additional New Notes and/or participate in any financing offered to any third party on the same terms and conditions as those offered to such third parties. 3. Representations and Warranties of each Original Secured Party and New Investor. As of the date of the Initial Closing, each Tranche Closing and any Additional Closing, as the case may be, each Original Secured Party and New Investor (together, the "Investors" and individually, an "Investor") severally as to itself and not jointly hereby, represents and warrants to the Company as follows: (a) Such Investor is acquiring its respective Note and will acquire its respective Warrants 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, such 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) Such 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, such 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) Such Investor has been furnished with such materials and has been given access to such information relating to the Company as the Investor has requested. 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. Such Investor has been solely responsible for its own due diligence investigation of the Company and its business, for its own analysis of the merits and risks of its investment made pursuant to this Agreement and for its own analysis of the terms of its investment. (d) Such Investor is an "accredited investor" within the meaning of Rule 501 of 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 itself 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) (i) Such Investor has the requisite corporate power and corporate authority or such similar authority to enter into and perform its obligations under this Agreement, (ii) the execution and delivery of this Agreement by the Investor and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Investor, or its Board of Directors or stockholders, as the case may be, is required, and (iii) this Agreement has been duly executed and delivered by such Investor and constitutes 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 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. 4. Representations and Warranties of the Company. As of the date of the Initial Closing, each Tranche Closing and any Additional Closing, as the case may be, the Company represents and warrants to each Investor as follows: (a) Organization, Good Standing and Power. eMagin and eMagin Sub 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 eMagin and eMagin Sub 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 to so 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 taken as a whole, and/or any condition, circumstance or situation that would prohibit or otherwise materially interfere with the ability of the Company to perform any of its material obligations under this Agreement or the Securities. (b) Authorization; Enforcement. (i) The Company has the requisite corporate power and corporate authority to enter into and perform their respective 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 actions, and no further consent or authorization of the Company or its Board of Directors or stockholders is required, and (iii) each of this Agreement, the Notes and the Warrants 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) Capitalization. The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, of which 30,854,980 shares are issued and outstanding and 10,000,000 shares are 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 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 (as defined below in Section 4(f)) and Schedule 4(c) attached hereto, 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 Schedule 4(c) attached hereto, 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 Initial 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"). eMagin has not received any notice from the AMEX questioning or threatening the continued inclusion of the Common Stock on such market, except for a letter to eMagin requesting that eMagin hold an annual meeting prior to June 30, 2003. (d) Issuance of Securities. The Notes and Warrants (and the shares of Common Stock underlying such Warrants) to be issued under this Agreement have been duly authorized by all necessary corporate actions and, when paid for and issued in accordance with the terms of the Notes and Warrants, the Common Stock issued on exercise of the Warrants and the conversion of the Notes 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 consummation by the Company of the transactions contemplated herein do not and will not (i) violate any provision of the Company'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 is a party, (iii) create or impose a lien, charge or encumbrance on any property of the Company under any agreement or any commitment to which the Company is a party or by which the Company 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 or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries are bound or affected. To the knowledge of the Company, the business of the Company and its subsidiaries is not being conducted in violation of any laws, ordinances or regulations of any governmental entity, except for possible violations which singularly or in the aggregate do not and will not have a Material Adverse Effect. The Company is 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 it to execute, deliver or perform any of its obligations under this Agreement, or 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 Initial 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 named herein. (f) SEC Documents; Financial Statements. The Common Stock is registered pursuant to Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act"), and, except as disclosed in the SEC Documents, the Company has timely filed all reports, schedules, forms, statements and other documents required to be filed by it with 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 statements 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. Except as disclosed therein, 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 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 has provided each Investor with all the information reasonably available to it without undue expense that such Investor has requested in order to decide whether to purchase the Notes and Warrants. To the best of the Company'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 Initial 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. (h) No Liens. Other than in respect of leased tangible equipment used by the Company in the ordinary course of business and the Original Security Agreement and the Bridge Security Agreements that will be superceded on the Initial Closing date, the Company is the owner of all Collateral (as such term is defined in the New Security Agreement referred to in Section 5(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 New Security Agreement, and any liens created by the New 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 Collateral under the New Security Agreement to secure the obligations under the Notes. (i) Creditor Actions. Except as set forth in Schedule 4(i), the Company has not received any written notice of foreclosure, involuntary bankruptcy or other material adverse creditor actions against the Company and has no actual knowledge of potential foreclosure, involuntary bankruptcy or other material adverse creditor actions affecting the Company. (j) 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 "Security Agreement Patents") listed on Annex G to the New Security Agreement or alleging any violation or infringement by the Company 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 Initial Closing without any material defect. (k) Litigation. Except as set forth in Schedule 4(i), the Company is not party to or aware of any actual or asserted litigation claims filed in any court that in the aggregate could result in damages in excess of $25,000. 5. Miscellaneous. (a) Security. The Notes shall be secured by a general security interest under the New Security Agreement, dated as of April 25, 2003, by and among eMagin and eMagin Sub, as assignors of the security interest, the Investors, and Alligator Holdings Inc., as collateral agent for the Investors, with such security granted for the ratable benefit of all of the Investors as holders of the Notes. Reference is hereby made to the New Security Agreement for a statement of the rights and obligations of the Investors, and the nature and extent of the security for the Notes. (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 Initial Closing or the date of any Tranche Closing, as the case may be. (d) Entire Agreement; Amendment. This Agreement, including, but not limited to, the form of New Security Agreement (attached hereto as Exhibit A), the form of Amended and Restated Note (attached hereto as Exhibit B), the form of New Note (attached hereto as Exhibit C), the form of Warrant (attached hereto as Exhibit D), the form of Registration Rights Agreement (attached hereto as Exhibit E) and 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 any 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 75% or more of such Notes (in terms of the aggregate dollar value of the principal of the Notes then issued under 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. 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. Each Investor may assign any of its 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 each 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 thereof. The Company and each 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. The Company and the Investors may agree upon a press release to be issued by the Company immediately upon execution of this Agreement describing this Agreement and the transactions contemplated hereby. Thereafter, any party may make a public statement or announcement with respect to this Agreement or the transactions contemplated hereby or the existence of this Agreement; provided, however, that prior to issuing any such press release or making any such public statement or announcement, such party must obtain a 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, 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 Investors or the Company, each of the Company and the Investors 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. 6. Conditions to Initial Closing. It shall be a condition to the consummation of the transactions contemplated by this Agreement at the Initial Closing that the Company shall have, concurrently with the execution of this Agreement by the Investors, executed and delivered: (a) a copy of an agreement between The Travelers Insurance Company ("Travelers") and the Company that requires Travelers to convert its Convertible Promissory Note, dated August 21, 2001, into Common Stock upon the Company entering into this Agreement; (b) a copy of an agreement between SK Corporation ("SK") and the Company that requires SK to convert its Series A Convertible Debentures, dated September 18, 2001, into Common Stock upon the Company entering into this Agreement; (c) a copy of a settlement agreement between Finova Group Inc. and the Company that contains terms satisfactory to the Investors; (d) a detailed plan regarding the restructuring of the Company's payables and outstanding debt, and copies of agreements between the Company and each of its creditors that requires each creditor to settle its claim with the Company upon the Company entering into this Agreement; (e) a detailed chart of the Company's financial targets for the covenants in the New Notes, as set forth in Schedule 6(e) attached hereto; (f) to the Collateral Agent (as defined in the New Security Agreement), the New Security Agreement and two completed originals of a UCC Form 1 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 with the United States Patent and Trademark Office; (g) the Amended and Restated Notes, each such Amended and Restated Note to be in the amount required to be issued to each Original Secured Party on the date of the Initial Closing pursuant to Section 1(a); (h) the New Notes, each such New Note to be in the amount required to be issued to each New Investor on the date of the Initial Closing pursuant to Section 2(d); (i) the Warrants, each such Warrant to be in the amount required to be issued to each Investor on the date of each Tranche Closing pursuant to Section 2(e); (j) the Registration Rights Agreement, dated as of April 25, 2003, by and among the Company and the Investors (the "Registration Rights Agreement"); (k) to the Investors a legal opinion from the Company's outside legal counsel, dated as of April 25, 2003, in the form attached to this Agreement as Exhibit F; (l) to the Collateral Agent in immediately available funds the amount of $7,500 as payment of the Collateral Agent's fee and for legal fees incurred by the Collateral Agent in connection with the negotiation of this Agreement and the New Security Agreement; (m) to Chadbourne & Parke LLP in immediately available funds the amount of $105,000, constituting as of the date of this Agreement $15,000 in reimbursable fees and expenses regarding filings with the Patent and Trademark Office and UCC filings under the Original Secured Note Purchase Agreement, Bridge Financing Agreement, Original Security Agreement, Bridge Security Agreements and New Security Agreement and $90,000 in legal fees and expenses pursuant the this Agreement and the related transactions; and (n) a certificate to the Investors signed by the Company's Chief Executive Officer, certifying that (i) each of the representations and warranties in Section 4 are true and correct on and as of the Initial Closing date, and (ii) eMagin's and Virtual Vision's board of directors have approved this Agreement and the related transactions. 7. Conditions to each Tranche Closing. It shall be a condition to the consummation of the transactions contemplated by this Agreement at each Tranche Closing that the following conditions have taken place: (a) the Company shall have, concurrently with the payment by the Investors of the purchase price of each Note and the Warrants, executed and delivered the New Notes and Warrants, each such New Note and Warrant to be in the amount required to be issued to each New Investor on the date of the Tranche Closing pursuant to Section 2(c); (b) each of the representations and warranties in Section 4 will be true and correct on and as of the Tranche Closing date with the same effect as though all such representations and warranties had been made on and as of the Tranche Closing date; and (c) the Company shall not have commenced or consented to any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or similar law or statute, no proceeding shall have commenced against the Company under any bankruptcy, reorganization, arrangement, readjustment of debt, moratorium or similar law or statute, and the Company has not consented to or suffered the appointment of a guardian, receiver, trustee or custodian to any substantial and material part of its assets. 7. Conditions to Additional Closings. It shall be a condition to the consummation of the transactions contemplated by this Agreement at any Additional Closing that the Company shall have, concurrently with the payment by the Investors of the purchase price of each Note and the Warrants, executed and delivered: (a) a joinder agreement allowing the New Investor to become a party to the New Security Agreement; (b) the New Notes, each such New Note to be in the amount required to be issued to each New Investor on the date of any Additional Closing pursuant to Section 2(f); (c) the Warrants, each such Warrant to be in the amount required to be issued to each Investor on the date of any Additional Closing pursuant to Section 2(f); (d) a joinder agreement allowing the New Investor to become a party to the Registration Rights Agreement; and (e) a certificate stating that each of the representations and warranties in Section 4 will be true and correct on and as of the Additional Closing date with the same effect as though all such representations and warranties had been made on and as of the Additional Closing date. 9. Additional Covenants of the Company. The Company covenants and agrees with the Investors that the Company shall: (a) not issue any secured debt (excluding tangible equipment leased in the ordinary course of business and Permitted Liens, as defined in the New Security Agreement) or any other security (excluding Permitted Liens, as defined in the New Security Agreement) which in form or substance represent or are equal to or senior to the secured interests granted under the New Security Agreement without the approval of holders of such Notes who hold in the aggregate 75% or more of such Notes (in terms of the aggregate dollar value of the principal of the Notes then issued under this Agreement); (b) deliver to each Investor a report detailing the Company's actual Expenses, Direct Costs of Goods Sold, Revenues and Firm Purchase Orders for each month, no later than ten (10) calendar days after such month has ended, and Quarterly Revenue for each quarter, no later than twenty (20) calendar days after such quarter has ended, for so long as such Investor has any Notes outstanding. For purposes of this Section 9(b) and Section 8 of the New Notes, Expenses, Direct Cost of Goods Sold, Revenue, Firm Purchase Orders and Quarterly Revenue shall have the meanings set forth in Schedule 6(e) of this Agreement; (c) reserve and the Company shall continue to reserve and keep available at all times, free of preemptive rights, shares of Common Stock for the purpose of enabling the Company to issue the Securities pursuant to this Agreement; (d) use its commercially reasonable efforts to cause its Common Stock to continue to be registered under Section 12(b) or (g) of the Exchange Act, to comply in all respects with its reporting and filing obligations under the Exchange Act, and will not take any action or file any document (whether or not permitted by the Exchange Act or the rules thereunder) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under said Exchange Act until the earlier of (i) that date that the Investors have disposed of all of their Securities, or (ii) five (5) years from the date hereof; (e) not, and shall cause its subsidiaries not to, (i) declare or pay any dividend or make any other distribution on any equity securities of the Company, except dividends or distributions payable in equity securities of the Company, or (ii) purchase, redeem or otherwise acquire or retire for value any equity securities of the Company, except equity securities acquired upon conversion thereof into other equity securities of the Company, without the prior written consent of 50% or more of the holder of Notes (in terms of the aggregate dollar value of the principal of the Notes then issued under this Agreement); and (f) not enter into any transaction or agreement with any affiliate or Related Party (as defined below) or with any person or entity which has an affiliation with any Related Party or affiliate of the Company not on an arms-length basis with terms and conditions no less favorable to the Company than could be obtained from unrelated persons without the prior written consent of 50% or more of the holder of Notes (in terms of the aggregate dollar value of the principal of the Notes then issued under this Agreement); provided, however, (i) the issuance of any Securities under this Agreement, (ii) payment of salaries for services rendered, (iii) reimbursement for reasonable expenses incurred on behalf of the Company, and (iv) other standard employee benefits made generally available to all of the Company's employees, shall not be prohibited. For purposes of this Agreement, a "Related Party" shall be any 10% shareholder, director, officer or employee of the Company, or any "associate" (as defined in the rules and regulations promulgated under the Securities Act) of any such person. 10. Use of Proceeds. The Company shall use the net proceeds from the Notes first for the payment of the outstanding amounts currently owed IBM under the terms of eMagin's lease, and thereafter for working capital and general corporate purposes. The Company hereby authorizes the Investors and their designated representatives to conduct a review of the Company's books and records sufficient to satisfy the Investors, in the exercise of reasonable discretion, that the proceeds of the Notes were used for the purposes permitted by the terms of this section and no other purpose or purposes. (remainder of this page intentionally left blank) This Agreement has been duly executed as of the date and year first written above. EMAGIN CORPORATION By/s/Gary W. Jones ----------------------- Name: Gary W. Jones Title: Chief Executive Officer VIRTUAL VISION, INC. By/s/Gary W. Jones ----------------------- Name: Gary W. Jones Title: Chief Executive Officer ORIGINAL SECURED PARTIES: /s/ Mortimer D.A. Sackler --------------------------- MORTIMER D.A. SACKLER Address: 15 East 62nd Street New York, NY 10021 with a copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Stuart D. Baker, Esq. Telecopy: (212) 541-5369 GINOLA LIMITED By: /s/Jonathan White ------------------------ Name: Jonathan White Title: Director /s/JACK RIVKIN JACK RIVKIN Address: NEW INVESTORS: STILLWATER LLC By: Mortimer D.A. Sackler, its sole member /s/Mortimer D.A. Sackler --------------------------- MORTIMER D.A. SACKLER Address: 15 East 62nd Street New York, NY 10021 with a copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Stuart D. Baker, Esq. Telecopy: (212) 541-5369 GINOLA LIMITED By: /s/Jonathan White ------------------------ Name: Jonathan White Title: Director /s/JACK RIVKIN JACK RIVKIN Address: EMERALD ADVANTAGE FUND LP By:/s/ Joseph E Besecker ------------------------ Name: Joseph E Besecker Title: Managing Member Address: 500 North Gulph Road Suite 101 King of Prussia, Pa. 19406 EMERALD ADVANTAGE OFFSHORE FUND LTD By: /s/ Joseph E Besecker Name: Joseph E Besecker Title: Managing Member Address: 500 North Gulph Road Suite 101 King of Prussia, Pa. 19406 EMERALD VENTURE CAPITAL I LP By: /s/ Joseph E Besecker Name: Joseph E. Besecker Title: President Address: 1703 Oregon Pike Lancaster, PA. 17601 /s/ROBERT N. VERRATTI ------------------------ ROBERT N. VERRATTI Address: 13766 Sunset BLVD Pacific Palisades, CA. 90272 /s/GEORGE HAYWOOD GEORGE HAYWOOD Address: 642 Second Street Brooklyn, NY 11215 Schedule 1 - New Investors Stillwater LLC Ginola Limited Jack Rivkin George Haywood Emerald Advantage Fund LP Emerald Advantage Offshore Fund LTD Emerald Venture Capital I LP Robert N. Verratti Schedule 2 - Investors NEW INVESTORS
- ------------------------------ ------------------------------------- ------------------------- ------------------------ Notes to be Purchased on or Note Amount Investor before the following Dates per Tranche Warrant Amount - ------------------------------ ------------------------------------- ------------------------- ------------------------ Stillwater LLC Initial Closing Date (April 25) $800,000 3,358,300 ========= - ------------------------------ ------------------------------------- ------------------------- ------------------------ April 30* $225,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ May 15* $225,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ June 15* $225,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ June 25* $225,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ July 15* $225,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ August 15* $225,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ September 15* $225,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ October 15* $225,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ TOTAL $2,600,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ - ------------------------------ ------------------------------------- ------------------------- ------------------------ Ginola Limited Initial Closing Date (April 25) $200,000 1,291,651 ========= - ------------------------------ ------------------------------------- ------------------------- ------------------------ April 30* $100,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ May 15* $100,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ June 15* $100,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ June 25 $100,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ July 15* $100,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ August 15* $100,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ September 15* $100,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ October 15* $100,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ - ------------------------------ ------------------------------------- ------------------------- ------------------------ TOTAL $1,000,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ Jack Rivkin Initial Closing Date (April 25) $125,000 161,456 ======== ======= - ------------------------------ ------------------------------------- ------------------------- ------------------------ - ------------------------------ ------------------------------------- ------------------------- ------------------------ Emerald Advantage Fund LP Initial Closing Date (April 25) $40,000 51,666 ======= ====== - ------------------------------ ------------------------------------- ------------------------- ------------------------ Emerald Advantage Offshore Initial Closing Date (April 25) $40,000 51,666 ======= ====== Fund LTD - ------------------------------ ------------------------------------- ------------------------- ------------------------ - ------------------------------ ------------------------------------- ------------------------- ------------------------ Emerald Venture Capital I LP Initial Closing Date (April 25) $145,000 187,290 ======== ======= - ------------------------------ ------------------------------------- ------------------------- ------------------------
- ------------------------------ ------------------------------------- ------------------------- ------------------------ Robert N. Verratti Initial Closing Date (April 25) $50,000 64,582 ======= ====== - ------------------------------ ------------------------------------- ------------------------- ------------------------ - ------------------------------ ------------------------------------- ------------------------- ------------------------ George Haywood Initial Closing Date (April 25) $400,000 2,583,310 ========= - ------------------------------ ------------------------------------- ------------------------- ------------------------ April 30* $200,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ May 15* $200,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ June 15* $200,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ June 25* $200,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ July 15* $200,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ August 15* $200,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ September 15* $200,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ October 15* $200,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ - ------------------------------ ------------------------------------- ------------------------- ------------------------ TOTAL $2,000,000 - ------------------------------ ------------------------------------- ------------------------- ------------------------ - -----------------------------------------------------------------------------------------------------------------------
* The purchase of the Notes in each Tranche Closing pursuant to this Schedule 2 shall in no event take place later than 5 days after the effectiveness of the registration statement that is required to be filed pursuant to the Registration Rights Agreement (as defined in Section 6(j) of the Agreement). In addition, the purchases of the Notes set forth in this Schedule 2 are subject to reduction pursuant to Section 2(g) of the Agreement.
ORIGINAL SECURED PARTIES - -------------------------------------- ------------------------------------- ---------------------- ------------------- Notes to be Exchanged on the Investor Initial Closing Date Date of Note Interest Rate - -------------------------------------- ------------------------------------- ---------------------- ------------------- Mortimer D.A. Sackler $200,000 11/27/01 9% - -------------------------------------- ------------------------------------- ---------------------- ------------------- $300,000 1/14/02 9% - -------------------------------------- ------------------------------------- ---------------------- ------------------- $700,000 1/14/02 9% - -------------------------------------- ------------------------------------- ---------------------- ------------------- $200,000 6/20/02 11% - -------------------------------------- ------------------------------------- ---------------------- ------------------- - -------------------------------------- ------------------------------------- ---------------------- ------------------- Ginola Limited $300,000 11/27/01 9% - -------------------------------------- ------------------------------------- ---------------------- ------------------- - -------------------------------------- ------------------------------------- ---------------------- ------------------- Jack Rivkin $125,000 11/27/01 9% - -------------------------------------- ------------------------------------- ---------------------- -------------------
Schedule 4(c) - Capitalization eMagin Corporation Capitalization Data Estimated as at April 25th 2003
Capitalization Schedule Face Amount Shares Wts and Options ------------------------------------------------------------ 31,494,280 16,606,019 Payables and Accrued Written off 4,494,187 0 0 Payables Converted 1,612,765 2,080,075 0 ConvertibleNotes 4,964,239 6,470,153 0 Extended Maturity Old Senior Notes 2,045,450 3,885,733 777,147 ------------------------------------------------------------ Total Before New Investors $ 13,116,641 43,930,241 17,383,166 ------------------------------------------------------------ Other Stock/Wts Issued for Future Services, Fees and Registration Penalties 245,000 332,290 387,511 - ----------------------------------------------------------------------------------------------------------------------- Total Restructured Before New Investors $ 13,361,641 44,262,532 17,770,877 - -----------------------------------------------------------------------------------------------------------------------
Payables/Debt Convertible Owed and Debt Converted/Paid Convertible Remaining and in stock on Debt Converted New Stock For Warrants Total Fully Investors Existing Shares Closing On Closing Services /Option Shares - ------------------------------------------------------------------------------------------------------------------------------------ SK - 2,468,750 - 205,479 2,674,229 Original Secured Note Holders - - 3,885,733 - 3,885,733 Mortimer D. Sackler - - - 1,367,781 1,367,781 Rainbow Gate/Ginola 983,295 - - - 631,255 1,272,605 Citigroup Investments / Travelers 5,692,119 - 2,111,779 - 1,783,137 9,587,035 Farmers & Mid Century Note - - 1,352,363 - - 1,352,363 Finova/ASML/Other Payables (1) - 2,080,075 - 332,290 - 2,412,366 Other Shares To be issued for Fees , Services and Penalti-s (1) - 537,261 - 387,511 924,772 ------------------------------------------------------------------------------------------------ Subtotal 6,675,414 2,080,075 6,470,153 4,218,024 4,375,163 23,476,884 ------------------------------------------------------------------------------------------------ Other Staff Options - - - - 10,942,681 10,942,681 All Others 24,818,866 - (2,252,129) - 2,452,833 27,613,644 ------------------------------------------------------------------------------------------------ Total Before New Investors 31,494,280 2,080,075 6,470,153 4,218,024 17,770,877 62,033,209 ------------------------------------------------------------------------------------------------
**All values are approximate range estimates (1) Shares issued at future points and based at then current market prices are calculated based on todays price (2) Staff options incude amounts authorized but not yet awarded Schedule 4(i) - Creditor Actions International Business Machines Corporation v. eMagin Corporation, Justice Court: Town of East Fishkill, County of Dutchess: State of New York. On or about April 9, 2003, the Company's landlord, International Business Machines Corporation ("IBM") caused a Lease Termination Notice to be served upon the Company for non-payment of rent. Thereafter, on or about April 17, 2003, IBM filed a Notice of Petition to evict the Company from its premises. Subsequently, on or about April 22, 2003, the Company entered into a Stipulation with IBM pursuant to which the Company and IBM agreed: (i) that the Company would pay to IBM, within 24 hours of the Execution of the Stipulation, the sum of Five Hundred Fifty Four Thousand Six Hundred Fifteen and 83/100 ($554,615.83) Dollars, which sum includes (a) Five Hundred Four Thousand Eighty Five and 74/100 ($504,085.74) Dollars as stated in the Lease Termination Notice dated April 9, 2003 and (b) the additional sum of Fifty Thousand Five Hundred Thirty and 09/100 ($50,530.09) Dollars which has been billed by IBM and is due on April 20, 2003; (ii) that the Lease, which had been terminated as of April 16, 2003, would be reinstated, subject to the terms and conditions of the Stipulation, including the acceleration of the rent payments for the remainder of the original lease term (March 31, 2004) in the sum of Eight Hundred Thirteen Thousand Fifty Five and 65/100 ($813,055.65) Dollars, which sum will then be due in accordance with the terms of the Stipulation in equal monthly installments of Seventy Three Thousand Nine Hundred Fourteen and 15/100 ($73,914.15) commencing on May 1, 2003 and on the first day of each month thereafter up to and including March 1, 2004; and (iii) that a Judgment be issued in favor of IBM (a) awarding them possession of the premises, (b) providing for the issuance of a warrant to remove eMagin from possession of the premises, and (c) further providing for a monetary judgment for rent arrears in the sum of Eight Hundred Thirteen Thousand Fifty Five and 65/100 ($813,055.65) Dollars, which Judgment will be held in escrow by IBM's attorney and which warrant of eviction will be stayed, in accordance with the terms and conditions of the Stipulation. In the event that the Company fails to timely make any of the installment payments or in the payment of any additional rent and/or other sums due under the Lease, IBM has the right to enter the Judgment and shall have the right to execute upon the warrant of eviction on five (5) days prior written notice to the Company of its intent to file such Judgment and execute upon such warrant of eviction. Schedule 6(e) - Financial targets for New Note Covenants [*] [*] - Confidential Information has been omitted and has been separately filed with the Securities and Exchange Commission Exhibit A - Form Of New Security Agreement Filed as Exhibit 10.2 to this Form 8-K Exhibit B - Form of Amended and Restated Secured Convertible Promissory Note Filed as Exhibit 4.2 to this Form 8-K Exhibit A Page 2 Exhibit C - Form of New Note Filed as Exhibit 4.1 to this Form 8-K Exhibit D - Form of Warrant Filed as Exhibit 4.3 to this Form 8-K Exhibit E - Form of Registration Rights Agreement Filed as Exhibit 10.3 to this Form 8-K Exhibit F - Form of Legal Opinion To: The Investors (as defined in the Agreement defined below) Re: Emagin Corporation Ladies and Gentlemen: We have acted as special counsel to Emagin Corporation, a Delaware corporation and Virtual Vision, Inc., a Delaware Corporation (collectively the "Company"), in connection with a $_______ closing pursuant to the Global Restructuring and Secured Note Purchase Agreement, dated as of April __, 2003, between you and the Company (the "Agreement") and the transactions contemplated therein. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Agreement. The Agreement, the Registration Rights Agreement, the New Notes, the Amended and Restated Notes, the Warrants, and the Security Agreement, are hereinafter referred to as the "Transaction Agreements." In so acting, we have examined (i) the Transaction Agreements, (ii) the Company's Article's of Incorporation, as in effect on the date hereof (the "Articles of Incorporation"), and (iii) the Company's Bylaws, as in effect on the date hereof (the "Bylaws"), and we have examined and considered such corporate records, certificates and matters of law as we have deemed appropriate as a basis for our opinions set forth below. In rendering the opinions set forth in this opinion letter, we assume the following: a. the legal capacity of each natural person and the legal existence of all parties (other than the Company) to the transactions referred to in the Transaction Agreements; b. the power and authority of each person other than the Company or person(s) acting on behalf of the Company to execute, deliver and perform each document executed and delivered and to do each other act done or to be done by such person; c. the legality, validity, binding effect and enforceability as to each person other than the Company or person(s) acting on behalf of the Company of each document executed and delivered or to be executed or delivered and of each other act done or to be done by such person; d. the genuineness of all signatures and the completeness of each document submitted to us; e. that the Investors have acted in good faith, without notice of adverse claims, and have complied with all laws applicable to them that affect the transactions referred to in the Transaction Agreements; f. that no action, discretionary or otherwise, will be taken by or on behalf of the Company in the future that might result in a violation of law; and g. that with respect to the Transaction Agreements and to the transactions referred to therein, there has been no mutual mistake of fact and there exists no fraud or duress. As to certain questions of fact material to this opinion, we have relied upon statements or certificates of public officials and officers of the Company. Based upon the foregoing and subject to the assumptions, limitations, qualifications and exceptions stated herein, we are of the opinion that as of the date hereof: (1) The Company is a corporation duly authorized, validly existing, and is in good standing in its state of incorporation. Based on the Company's business description, as described in its Exchange Act of 1934 reports, the Company is duly qualified to conduct its business in each other jurisdiction where the failure to be so qualified would have a material adverse effect on the Company. The Company has all requisite corporate power and authority to (i) conduct its business; (ii) own and operate its property; and (iii) lease the property its leases. (2) The Company has the requisite corporate power and authority to enter into and perform the Transaction Agreements, and to issue the New Notes, the Amended and Restated Notes and the Warrants (collectively the "Securities") in accordance with their terms. The execution and delivery of the Transaction Agreements by the Company, the consummation by it of the transactions contemplated thereby and the grant of security interests by it contemplated therein have been duly authorized by the Company's Board of Directors and no further consent or authorization of the Company, its Board or Directors, or its stockholders is required. The Transaction Agreements have been duly executed and delivered by the Company, and constitute valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement or creditors' rights and remedies or by other equitable principles of general application and subject to the limitations that the indemnification and contribution provisions of the Registration Rights Agreement may be unenforceable as a matter of public policy. (3) To the best of our knowledge, no authorization approval or consent of any court, governmental body, regulatory agency, self-regulatory organization or stock exchange or market, or the stockholders of the Company or, to our knowledge, any third party is required to be obtained by the Company for the issuance and sale of the Securities as contemplated by the Transaction Agreements or the consummation of the other transactions contemplated thereby. (4) To the best of our knowledge, other than as set forth in Schedule __ to the Agreement, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body or any governmental agency or self-regulatory organization pending or threatened against or affecting the Company, wherein an unfavorable decision, ruling or finding would have a material adverse effect on the Company or which would adversely affect the validity or enforceability of or the authority or ability of the Company to perform its obligations under the Transaction Agreements, or any of the other documents, agreements, certificates or instruments contemplated thereby. (5) To the best of our knowledge, the Company is not in violation of any term of the Articles of Incorporation or Bylaws. The execution, delivery and performance of and compliance with the terms of the Transaction Agreements and the issuance of the Securities, do not violate any provision of the Articles of Incorporation or Bylaws, or any provision of any applicable federal or state law, rule or regulation. To the best of our knowledge, the execution, delivery and performance of and compliance with the Transaction Agreements and the issuance of the Securities have not resulted in and will not result in any violation of, or constitute default under (or an event which with the passage of time or the giving of notice or both would constitute a default under), or result in the creation of any lien, security interest or encumbrance on the assets or properties of the Company pursuant to any contract, agreement, instrument, judgment or decree binding upon the Company which, individually or in the aggregate, would have a material adverse effect on the Company. (6) The Company is not an "investment company" as defined in the Investment Company Act of 1940, as amended. The Company is not a "holding company", or a "subsidiary company" of a "holding company", or an "affiliate" of a "holding company", within the meaning of the Public Utility Holding Company Act of 1935, as amended. (7) The Security Agreement creates in favor of the Investors a valid security interest in the Collateral (as such term is defined in the Security Agreement) to the extent Article 9 of the New York Uniform Commercial Code (the "NY-UCC") is applicable thereto. The Financing Statements described in Exhibit A are in appropriate form for filing pursuant to the NY-UCC and upon the proper filing in the filing offices listed in Schedule 1 to Exhibit A such security interest will be perfected to the extent that a security interest may be perfected by the filing of a financing statement in the State of New York under the provisions of the NY-UCC. (8) Each of the Security Agreement, Patent Security Agreement, Trademark Security Agreement and Copyright Security Agreement creates in favor of the Investors' collateral agent, valid security interest in all right, title and interest in the Collateral. The security interests of the Investor's collateral agent in all right, title and interest of the Company in the Collateral created by the Security Agreement, Patent Security Agreement, Trademark Security Agreement and Copyright Security Agreement constitute perfected security interests under the NY-UCC, the United States Copyright Act ("CA"), the United States Patent Act ("PA") and the United States Trademark Act ("TA"), to the extent that a security interest therein may be perfected under the NY-UCC, the CA, the PA or the TA. The foregoing opinions expressed herein is subject to certain limitations and exceptions as set forth below: (A) In connection with our opinion with respect to any pending action, suit, claim, formal investigation or formal proceeding pending or, threatened, against or involving the Company or any of its respective properties or assets, we have not undertaken to search the docket of any court or to conduct any other judgment, lien, litigation or similar search. (b) We are counsel admitted to practice in the State of New York and we do not express any opinion with respect to the effect or applicability of the laws of any jurisdiction, other than the laws of the State of New York, the Delaware General Corporation Law and the federal laws of the United States of America. This opinion is furnished pursuant to the request of the Investors and is rendered by us solely for the benefit of the Investors in connection with the Transaction Agreements. We are not hereby assuming any professional responsibilities to any other person whatsoever. This opinion may be relied upon only in connection with the Transaction Agreements. This opinion may not be used, disseminated, circulated, quoted referred to or relied upon by any other person or for any other purpose without our prior written consent. This opinion is rendered as of the date set forth above, and we express no opinion as to circumstances or events that may occur subsequent to such date. We assume no duty to update or supplement this opinion to reflect any fact or circumstances that may hereafter come to our attention or reflect any changes in any law that may hereafter occur or become effective. Very truly yours, Exhibit G - Warrants of the Original Secured Parties to be Amended None. Exhibit H - Form of Amended and Restated Warrant None. EX-10 6 april2003-8kex102.txt EXHIBIT 10.2 SECURITY AGREEMENT DATED AS OF APRIL 25, 2003 BY AND AMONG EMAGIN AND CERTAIN INITIAL INVESTORS IDENTIFIED ON THE SIGNATURE PAGES THERETO. SECURITY AGREEMENT among EMAGIN CORPORATION and VIRTUAL VISION, INC., as Assignors the SECURED CREDITORS, set out herein and ALLIGATOR HOLDINGS, INC., as Collateral Agent -------------------------------- Dated as of April 25, 2003 -------------------------------- SECURITY AGREEMENT SECURITY AGREEMENT, dated as of April 25, 2003, made by and among the undersigned assignors (eMagin Corporation and Virtual Vision, Inc., together the "Assignors") in favor of 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 Creditors (the "Secured Creditors") and such Secured Creditors as may become a party to this Agreement from time to time. 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 Assignors propose to enter into a Global Restructuring and Secured Note Purchase Agreement, dated as of April 25, 2003, together with each of the Original Secured Parties and New Investors a party thereto (and each such Original Secured Party and New Investor a "Secured Creditor" under this Agreement), providing for the issuance or exchange of secured convertible notes (the "Notes") by the Assignors as contemplated therein (the "Note Purchase Agreement"); WHEREAS, the Original Secured Parties and eMagin entered into the Original Security Agreement dated as of November 20, 2001; WHEREAS, MDAS and eMagin entered into the Subordinated Security Agreement dated June 20, 2002; WHEREAS, MDAS and eMagin Sub entered into the eMagin Sub Security Agreement dated as of June 20, 2002; WHEREAS, in connection with the Note Purchase Agreement and the issuance of the Notes, the Collateral Agent, the Assignors and each of the Original Secured Parties have agreed to terminate the Original Security Agreement, the Subordinated Security Agreement and the eMagin Sub Security Agreement, and enter into this Agreement with the New Investors; WHEREAS, the objective of this financing is to allow the New Investors to provide the Company with capital to fund its accelerating operations, increase marketing and sales, improve manufacturing capability, and resolve its remaining outstanding prior obligations after restructuring of most of its total debt and payables; WHEREAS, the obligations accruing under the Notes to the Assignors shall be secured by the Collateral upon the terms and conditions set forth in this Agreement; WHEREAS, it is a condition precedent to execution on delivery of the Note Purchase Agreement that the Assignors shall have executed and delivered to the Collateral Agent this Agreement; WHEREAS, it is a condition precedent to the delivery of this Agreement that the Assignors provide to the Collateral Agent completed copies of form UCC-1 documentation suitable for filing and applicable federal assignment forms required to perfect the security interests granted by the Assignors; and NOW, THEREFORE, in consideration of the benefits accruing to the Assignors, the receipt and sufficiency of which are hereby acknowledged, the Assignors hereby make the following representations and warranties to the Collateral Agent for the benefit of the Secured Creditors and hereby covenant and agree with the Collateral Agent for the benefit of the Secured Creditors as follows: ARTICLE I SECURITY INTERESTS 1.1 Grant of Security Interests. (a) Subject to 1.1(c) and Section 1.1(d), 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 Creditors to enter into the Note Purchase Agreement the Assignors do hereby assign and transfer unto the Collateral Agent, and do hereby pledge and grant to the Collateral Agent, for the benefit of the Secured Creditors, a continuing security interest in all of the right, title and interest of each 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 (other than Accounts pledged by each Assignor to any Person advancing funds under a bona fide receivables-based, purchase order-based, or inventory-based line offered under its factoring arrangement or similar financing scheme (each a "Collateralized Line of Credit")); (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 Assignors and all intellectual property rights therein and all other proprietary information of the Assignors, 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 (other than Contracts or Contract Rights pledged to any Person advancing funds under a Collateralized Line of Credit); (vi) all Copyrights; 2 (vii) all Equipment, except for such Equipment as listed in Schedule I; (viii) all Documents (other than Documents pledged to any Person advancing funds under a Collateralized Line of Credit); (ix) all Equipment in the name of any subsidiary of Assignors not otherwise already pledged; (x) all General Intangibles; (xi) all Goods; (xii) all Instruments not otherwise pledged pursuant to the Collateralized Line of Credit (other than Instruments pledged to any Person advancing funds under a Collateralized Line of Credit); (xiii) all Inventory created after the date hereof and pledged to any Person advancing funds under a Collateralized Line of Credit; (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 Assignors symbolized by the Marks; (xvi) all Patents except for sublicenses or licenses; (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; (xix) all Supporting Obligations; (xx) all manuals, training material, diagrams, know how and other necessary or useful materials to utilize Assignors' trade secrets and other business intangibles; and (xxi) all Proceeds and products of any and all of the foregoing (all of the above, the "Collateral"), except as noted below. (b) The security interest of the Collateral Agent under this Agreement extends to all Collateral which the Assignors may acquire, or with respect to which the Assignors may obtain rights, at any time during the term of this Agreement except as described below. (c) Notwithstanding anything to the contrary set forth herein, the Collateral shall not include any interest in the assets set forth on Schedule 1.1(c). 3 (d) The Assignors will be allowed to enter into a Collateralized Line of Credit and to grant first-priority security interests in their accounts receivable purchase orders and inventory created after the date hereof to secure such Collateralized Line of Credit, provided that (i) at least fifty percent (50%) (in dollar terms of the principal amount) of the holders of Notes approve such Collateralized Line of Credit in writing, and (ii) the advance rate of such Collateralized Line of Credit shall be at least sixty percent (60%) of the value of the Collateral so pledged. Any assets so pledged shall not constitute Collateral if and to the extent so pledged. 1.2 Power of Attorney. The Assignors hereby constitute and appoint 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 Assignors 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 Assignors under or arising out of the 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 Creditors, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS. The Assignors represent, warrant and covenant, 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 Assignors to the Collateral Agent hereby in respect of the Collateral have been accomplished and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the 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 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 Interest in the respective form attached as Annex I hereto in the United States Patent and Trademark Office or in the United States Copyright Office. 2.2 No Liens. The Assignors are, and as to all Collateral acquired by them from time to time after the date hereof the Assignors will be, the owner of all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens), and the Assignors shall defend the Collateral against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 4 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 Collateral (other than financing statements filed in respect of Permitted Liens), and so long as the Termination Date has not occurred, the Assignors 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 Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by the Assignors or in connection with Permitted Liens. 2.4 Chief Executive Office, Record Locations. The chief executive offices of the Assignors are, on the date of this Agreement, located at the addresses indicated on Annex A hereto for the Assignors. During the period of the four calendar months preceding the date of this Agreement, the chief executive offices of the Assignors have 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 Assignors. 2.5 Location of Inventory and Equipment. All Inventory and Equipment held on the date hereof, or held at any time during the four (4) calendar months prior to the date hereof, by the Assignors is located at one of the locations shown on Annex B hereto for the Assignors. 2.6 Legal Names; Type of Organization; Jurisdiction of Organization; Location; Organizational Identification Numbers; Changes Thereto, Etc. The exact legal name of the Assignors, the type of organization of the Assignors, the jurisdiction of organization of the Assignors, and the Assignors' Location, is listed on Annex C hereto for each Assignor. Each 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 each 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. Each 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 fifteen (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 Assignors, 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 Collateral intended to be granted hereby at all times fully perfected and in full force and effect. In addition, to the extent that any Assignor does not have an organizational identification number on the date hereof and later obtains one, such 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 Collateral intended to be granted hereby fully perfected and in full force and effect. 2.7 Trade Names, Etc. Each Assignor has not nor operates in any jurisdiction under, or in the preceding five (5) years has had or has operated 5 in any jurisdiction under, any trade names, fictitious names or other names except its legal name as specified in Annex C hereto and such other trade or fictitious names as are listed on Annex D hereto for each Assignor. Each 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 fifteen (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 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 any Assignor, and no Person shall have liquidated into, or transferred all or substantially all of its assets to, any Assignor. With respect to any transactions so described in Annex E hereto, the Assignors 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 such Assignor, or was liquidated into or transferred all or substantially all of its assets to such 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 any 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 Assignors and pursuant to and upon all the warranties, representations, covenants and agreements on the part of the Assignors contained herein and otherwise in writing in connection herewith. ARTICLE III SPECIAL PROVISIONS CONCERNING ACCOUNTS, CONTRACT RIGHTS, INSTRUMENTS, AND CERTAIN OTHER COLLATERAL 3.1 Additional Representations and Warranties. As of the time when each of its Accounts constituting Collateral arises, each 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 knowledge of each 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 each 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. 6 3.2 Maintenance of Records. Each Assignor will keep and maintain at its own cost and expense accurate records of its Accounts and Contracts constituting Collateral, including, but not limited to, originals of all documentation (including each such Contract) with respect thereto, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and each 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 such Assignor. Upon the occurrence and during the continuance of an Event of Default and at the request of the Collateral Agent, each Assignor shall, at its own cost and expense, deliver all tangible evidence of its Accounts and Contract Rights constituting Collateral (including, without limitation, all documents evidencing such 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 such Assignor). Upon the occurrence and during the continuance of an Event of Default and if the Collateral Agent so directs, each Assignor shall legend, in form and manner satisfactory to the Collateral Agent, the Accounts and the Contracts constituting Collateral, as well as books, records and documents (if any) of such 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 Assignors, the Assignors agree (x) to cause all payments on account of the Accounts and Contracts constituting Collateral 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 constituting Collateral and/or under any Contracts constituting Collateral 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 Assignors. Without notice to or assent by the Assignors, 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 the Assignors or the Collateral Agent, shall be borne by the Assignors. The Collateral Agent shall deliver a copy of each notice referred to in the preceding clause (y) to the Assignors, provided that the failure by the Collateral Agent to so notify the Assignors shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.3. 3.4 Modification of Terms, Etc. Except in accordance with each Assignor's ordinary course of business and consistent with reasonable business judgment, each Assignor shall not rescind nor cancel any indebtedness evidenced by any Account constituting Collateral or under any Contract constituting Collateral, 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 7 or Contract, or interest therein, without the prior written consent of the Collateral Agent. Each Assignor will not do anything to impair the rights of the Collateral Agent in the Accounts or Contracts constituting Collateral. 3.5 Collection. Each Assignor shall endeavor in accordance with reasonable business practices to cause to be collected from the account debtor named in each of its Accounts constituting Collateral or obligor under any Contract constituting Collateral, 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 constituting Collateral, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Account constituting Collateral or under such Contract constituting Collateral. Except as otherwise directed by the Collateral Agent after the occurrence and during the continuation of an Event of Default, each Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Accounts and Contracts constituting Collateral (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such 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 such 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 the Assignors or the Collateral Agent, shall be borne by the Assignors. 3.6 Instruments. If any Assignor owns or acquires any Instrument in excess of $100,000 constituting Collateral (other than checks and other payment instruments received and collected in the ordinary course of business), the Assignors will within ten (10) Business Days notify the Collateral Agent thereof. 3.7 Assignors Remain Liable Under Accounts. Anything herein to the contrary notwithstanding, each Assignor shall remain liable under each of the Accounts constituting Collateral 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 any other Secured Creditor shall have any obligation or liability under any Account constituting Collateral (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Creditor of any payment relating to such Account pursuant hereto, nor shall the Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Assignor under or pursuant to any Account constituting Collateral (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 them 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. 3.8 Assignors Remains Liable Under Contracts Constituting Collateral. Anything herein to the contrary notwithstanding, each Assignor shall remain liable under each of the Contracts constituting Collateral 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 8 each Contract constituting Collateral. Neither the Collateral Agent nor any other 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 any other Secured Creditor of any payment relating to such Contract pursuant hereto, nor shall the Collateral Agent or any other Secured Creditor be obligated in any manner to perform any of the obligations of any Assignor under or pursuant to any such Contract, to make any payment, to make any inquiry as to the nature or the sufficiency of any performance by any party under any such 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. Each 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 Accounts, 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. Each Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use the registered Marks listed on Annex F hereto for such 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 such Assignor owns or uses in connection with its business as of the date hereof and that such Assignor has not granted security interest in the listed Marks to any other Person. Each Assignor represents and warrants that it owns, is licensed to use or otherwise has the right to use, all Marks that it uses. Each Assignor further warrants that it has no knowledge of any third party claim received by it that any aspect of such 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. Each 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 on Annex F hereto and that said registrations are valid, subsisting, have not been canceled and that such 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. Each 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. 9 4.2 Licenses and Assignments. Each Assignor hereby agrees not to divest itself of any right under any material Mark absent prior written approval of the Collateral Agent. 4.3 Infringements. Each 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 such Assignor believes is infringing or diluting or otherwise violating any of such 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 such Assignor's use of any Mark material to the Assignor's business violates in any material respect any property right of that party. Each Assignor further agrees to take appropriate action in accordance with reasonable business practices against any Person infringing any Mark in any manner that could reasonably be expected to have a Material Adverse Effect. 4.4 Preservation of Marks. Each Assignor agrees to use its Marks which are material to such 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 reasonably useful in its business or operations). 4.5 Maintenance of Registration. Each 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 Assignors to be no longer prudent to pursue). 4.6 Future Registered Marks. If any Mark registration is issued hereafter to any Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within thirty (30) days of receipt of such certificate, such 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 such 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 Assignors, take any or all of the following actions: (i) declare the entire right, title and interest of the Assignors 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 10 of the Secured Creditors, in which event such rights, title and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, 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 each Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of such Assignor in connection with which the Marks have been used; and (iii) direct the Assignors to refrain, in which event the Assignors shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and the Assignors 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. Each 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 such Assignor (the "Trade Secret Rights"), (ii) the Patents listed on Annex G hereto for each Assignor and that said Patents include all the United States patents and applications for United States patents that each Assignor owns as of the date hereof, and (iii) the Copyrights listed on Annex H hereto for each 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 each 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. Each 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 that such 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. Each 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. Each 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. Each Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to such 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 11 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. Each 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 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, each 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, each Assignor shall diligently prosecute all material applications for (i) United States Patents listed on Annex G hereto and (ii) Copyrights listed on Annex H hereto, in each case such Assignor shall not abandon any such application prior to exhaustion of all administrative and judicial remedies (other than applications deemed by such Assignor to be no longer prudent to pursue), absent written consent of the Collateral Agent. 5.6 Other Patents and Copyrights. Within thirty (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, each 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 such 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 Assignors, take any or all of the following actions: (i) declare the entire right, title, and interest of the Assignors in each of the Patents and Copyrights vested in the Collateral Agent for the benefit of the Secured Creditors, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, 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 each Assignor to refrain, in which event the Assignor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and each 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 Creditors. 12 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1 Protection of Collateral Agent's Security. The Assignors will do nothing to impair the rights of the Collateral Agent in the Collateral. The Assignors will at all times maintain insurance, at the Assignors' 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 Assignors, the Collateral Agent shall, at the time any proceeds of such insurance are distributed to the Secured Creditors, apply such proceeds in accordance with Section 7.4 hereof. The Assignors assume all liability and responsibility in connection with the Collateral acquired by it and the liability of the Assignors to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to the Assignors. 6.2 Warehouse Receipts Non-negotiable. To the extent practicable, each 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, such 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. Each Assignor will, at its own expense, from time to time upon the reasonable request of the Collateral Agent, promptly (and in any event within ten (10) days after its receipt of the respective request) furnish to the Collateral Agent such information with respect to the Collateral (including the identity of the Collateral or such components thereof as may have been requested by the Collateral Agent, the value and location of such Collateral, etc.) as may be requested by the Collateral Agent. Without limiting the foregoing, each Assignor agrees that it shall promptly (and in any event within ten (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. Each 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 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 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 Collateral. 6.5 Financing Statements. Each Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in a 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 13 security interest in the Collateral as provided herein and the other rights and security contemplated hereby. Each Assignor will pay any applicable filing fees, recordation taxes and related expenses relating to its Collateral. Each Assignor hereby authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor where permitted by law (and such authorization includes describing the Collateral as "all assets" of such Assignor). ARTICLE VII REMEDIES UPON OCCURRENCE OF AN EVENT OF DEFAULT 7.1 Remedies; Obtaining the Collateral Upon Default. The Assignors agree 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 Collateral or any part thereof, from the Assignors 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 Assignors' premises where any of the 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 Assignors; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Accounts and the Contracts) constituting the 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 any Assignor in respect of such 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 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 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 Collateral or any part thereof, by directing the Assignors 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 Assignors shall at their 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 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 14 (z) while the 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; (vi) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the 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 Collateral or proceeds thereof in accordance with the provisions of Section 7.4; and (viii) take any other action as specified in clauses (i) through (v) in this Section 7.1, inclusive, of Section 9-607 of the UCC; it being understood that each Assignor's obligation so to deliver the 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 any such Assignor of said obligation. By accepting the benefits of this Agreement, the Secured Creditors expressly acknowledge and agree that this Agreement may be enforced only by the action of the Collateral Agent acting upon the written instructions of Secured Creditors holding at least fifty percent (50%) (in dollar terms of the principal amount) of the Notes, and that no Secured Creditor shall have any right individually to seek to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Collateral Agent for the benefit of the Secured Creditors upon the terms of this Agreement. 7.2 Remedies; Disposition of the Collateral. If any Event of Default shall have occurred and be continuing, then any Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and any other 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 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 Assignors 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 15 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 Collateral Agent 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 Collateral or any item thereof, offered for disposition in accordance with this Section 7.2 without accountability to the Assignors. If, under applicable law, the Collateral Agent shall be permitted to make disposition of the Collateral within a period of time which does not permit the giving of notice to the Assignors as herein above specified, the Collateral Agent need give the Assignors only such notice of disposition as shall be required by such applicable law. The Assignors agree 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 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 Assignors' expense. 7.3 Waiver of Claims. EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT, EACH 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 COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES, AND EACH 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 Collateral or any portion thereof, and the Assignors, for themselves and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waive the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the Assignors therein and thereto, and shall be a perpetual bar both at law and in equity against the Assignors and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under the Assignors. 16 7.4 Application of Proceeds. (a) All monies collected by the Collateral Agent upon any sale or other disposition of the Collateral, together with all other monies received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all amounts owing to 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 Creditors, with each Secured Creditor receiving an amount equal to its outstanding Obligations or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share of the amount remaining to be distributed; 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 Assignors or to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Obligations and the denominator of which is the then outstanding amount of all Obligations. (c) This Agreement is made with full recourse to the Assignors (including, without limitation, with full recourse to all assets of the Assignors) and pursuant to and upon all warranties, representations, covenants and agreements on the part of the Assignors 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 Assignors 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. 17 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 Assignors, 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 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 PARTY. 8.1 Indemnity by Assignors. (a) The Assignors agree to indemnify, reimburse and hold the Collateral Agent, each 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 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 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 Assignors agree 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 Assignors shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the Assignors of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a) hereof, the Assignors agree 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 Collateral, including, without limitation, all fees and taxes 18 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 Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the 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 Collateral. (c) If and to the extent that the obligations of the Assignors under this Section 8.1 are unenforceable for any reason, the Assignors hereby agree 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 Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of the Assignors contained in Sections 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 all the Notes issued under the Note Purchase Agreement. 8.3 Appointment and Authorization of Collateral Agent. Each of the Secured Creditors hereby irrevocably (subject to Section 8.10) appoints, designates and authorizes the Collateral Agent to take such action on its behalf under the provisions of this Agreement and the Notes and to exercise such powers and perform such duties as are expressly delegated to it by the terms of this Agreement or the Notes, together with such powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or the Notes, the Collateral Agent shall not have any duties or responsibilities 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 Notes 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 Notes 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 Notes or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any of the Secured Creditors for any recital, statement, representation or warranty made by the Assignors or any subsidiary or affiliate of the Assignors, or any officer thereof, contained in this Agreement or in the Notes, 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 Notes, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or the Notes, or for any failure of the Assignors or any other party to this Agreement or the Notes to perform 19 its obligations hereunder or thereunder. The Collateral Agent shall not be under any obligation to any 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 Notes, or to inspect the properties, books or records of the Assignors or any of the Assignors' subsidiaries or affiliates. (b) The Secured Creditors hereby agree 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 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; 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 Assignors), 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 Notes unless it shall first receive such advice or concurrence of the Secured Creditors as it deems appropriate and, if it so requests, confirmation from the Secured Creditors of their 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 Notes in accordance with a request or consent of the Secured Creditors and such request and any action taken or failure to act pursuant thereto shall be binding upon all of the Secured Creditors. 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 a Secured Creditor or the Assignors referring to this Agreement, describing such Default and stating that such notice is a "notice of default." The Collateral Agent will notify the Secured 20 Creditors 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 Creditors pursuant to Section 7.1 hereof; 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 Creditors. 8.8 Credit Decision. Each 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 Assignors, shall be deemed to constitute any representation or warranty by the Collateral Agent to any Secured Creditor. Each Secured Creditor represents to the Collateral Agent that it has, independently and without reliance upon the Collateral Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the Assignors, and made its own decision to enter into this Agreement and the Notes and to complete the transactions contemplated hereunder and thereunder. Each Secured Creditor also represents that it will, independently and without reliance upon the Collateral Agent and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis, appraisals and decisions in taking or not taking action under this Agreement, the Notes and the transactions contemplated thereby, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the Assignors. The Collateral Agent shall not have any duty or responsibility to provide any Secured Creditor with any credit or other information concerning the business, prospects, operations, property, financial or other condition or creditworthiness of the Assignors which may come into the possession of the Collateral Agent. 8.9 Reimbursement. To the extent the Assignors do not reimburse the Collateral Agent within 60 days of billing, each Secured Creditor shall reimburse the Collateral Agent upon demand for its ratable share of 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 Assignors; provided that the Collateral Agent will use its reasonable efforts to obtain the approval of the Secured Creditors before incurring any material reimbursable costs or expenses. The undertaking in this Section shall survive the cancellation and/or conversion of the Notes, any foreclosure under, or modification, release or discharge of, any or all of the documents contemplated by the Notes, 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 Creditors who in aggregate hold at least fifty percent (50%) (in dollar terms of the principal amount) of the Notes, upon thirty (30) days' notice to the Assignors and the Secured Creditors. If the Collateral Agent resigns under this Agreement, the Secured Creditors who in aggregate hold at least fifty 21 percent (50%) (in dollar terms of the principal amount) of the Notes shall, by the effective date of the resignation notice, appoint a new Collateral Agent. If such Secured Creditors fail to elect a new collateral agent by the requisite majority by the effective date of the resignation notice, then the Secured Party beneficially holding the largest proportion of the outstanding Note balances shall appoint the Collateral Agent. 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 thirty (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 Creditors shall perform all of the duties of the Collateral Agent hereunder until such time, if any, as the Secured Creditors shall appoint a successor agent as provided for above. 8.11 Collateral Matters. The Secured Creditors irrevocably authorize 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 Notes and payment in full of all obligations of the Assignors 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 Notes, or (c) if approved, authorized or ratified in writing by the Secured Creditors holding at least fifty percent (50%) (in dollar terms of the principal amount) of the Notes. Upon request by the Collateral Agent at any time, the Secured Creditors will confirm in writing the Collateral Agent's authority to release, or subordinate its interest in, particular types or items of collateral pursuant to this Section 8.11. 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 22 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 Amended and Restated Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignors" shall have the meaning provided in the first paragraph of this Agreement. "Business Day" shall mean any day other than Saturday, Sunday or any legal holiday observed in the State of New York. "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 Creditors. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of the Assignors 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 any 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 any 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 any 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 Assignors 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. 23 "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 each 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 each Assignor's property. "Location" of the Assignors, shall mean each 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 Assignors, 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 any 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 each 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 Assignors to the Investors, whether now existing or hereafter incurred under, arising out of, or in connection with the Note Purchase Agreement and the Notes issued thereunder and the due performance and compliance by the Assignors with all of the terms, conditions and agreements contained in the Note Purchase Agreement and the Notes issued thereunder; (ii) any and all sums advanced by the Assignee in order to preserve the Collateral or preserve its security interest in the Collateral; (iii) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of the Assignors after an Event of 25 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 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 any 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 Assignors. "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 Assignors 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 carrier's, 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 Assignors' or their subsidiary's property or assets or materially impair the use thereof in the operation of the business of such 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 Assignors or any of their subsidiaries and non-assignable, non-exclusive licenses and sub-licenses to third parties; (iv) Liens upon assets of the Assignors or any of their 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 the Assignors or any subsidiary of the Assignors; 26 (v) Liens placed upon equipment or machinery and used in the ordinary course of business of the Assignors or any of their subsidiaries and placed at the time of the acquisition thereof by the Assignors 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 Assignors or any of their 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 Assignors or any of their 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 Assignors or any of their 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 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 Assignors or any of their 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 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 $50,000. "Person" shall mean any individual, partnership, joint venture, trust, corporation, limited liability entity, unincorporated organization or other entity (including a governmental entity). 27 "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this 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 Assignors from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to the Assignors from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the 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 Collateral. "Secured Creditors" shall have the meaning provided in the first paragraph 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. "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 Assignors, or in which any Assignor has any rights, and, in any event, shall include, but shall not be limited to all of the Assignors' 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. 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 sent by overnight courier, as the case may be, except that notices and communications to the Collateral Agent or the Assignors shall not be effective until received by the Collateral Agent or the Assignors, as the case may be. All notices and other communications shall be in writing and addressed as follows: 27 (a) if to the Assignors: eMagin Corporation 2070 Route 52 Hopewell Junction, NY 12533 Attention: Chief Financial Officer Telephone No.: (845) 892-1900 Telecopier No.: (845) 892-1901 Virtual Vision, Inc. c/o 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: 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 any Secured Creditor, at such address as such 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 Assignors and the Collateral Agent (with the written consent of the Secured Creditors holding at least fifty percent (50%) (in dollar terms of the principal amount) of the Notes. 10.3 Obligations Absolute. The Obligations of the Assignors 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 Assignors; (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 Assignors shall have notice or knowledge of any of the foregoing. 29 10.4 Unequal Payment. Each Secured Creditor agrees that if it shall, through the exercise of any right granted to the Secured Creditors under this Agreement, under the Note Purchase Agreement, the Notes or by applicable law, including, but not limited to any right of set-off, any secured claim under Section 506 of the Bankruptcy Code or any other security or interest arising from, or in lieu of such secured claim, and received by such Secured Creditor under any applicable bankruptcy, insolvency, or other similar law, or otherwise, obtain payment in respect of its Note as a result of which the unpaid portion of its Note is proportionately less than the unpaid portion of the Notes of the other Secured Creditors, then (a) it shall promptly purchase at par (and shall be deemed to have thereupon purchased) from such other Secured Creditors a participation in the Notes of each such other Secured Creditor, so that the amount of such Secured Creditor's Note in the total participation in the Notes of the other Secured Creditors shall be in the same proportion to all Notes then outstanding as the amount of its Note prior to the obtaining of such payment was to the amount all Notes outstanding prior to the obtaining such payment and (b) such other adjustments shall be made from time to time as shall be equitable to ensure that Secured Creditors share the benefits of such payment pro rata. The term "Note" as used in this paragraph shall include accrued interest thereon. 10.5 Successors and Assigns. This Agreement shall be binding upon the Assignors and their successors and assigns and shall inure to the benefit of the Collateral Agent and the other Secured Creditors and their respective successors and assigns; provided, however, that the Assignors shall not assign their rights or obligations hereunder without the prior written consent of the Collateral Agent. All agreements, statements, representations and warranties made by the Assignors herein or in any certificate or other instrument delivered by the Assignors or on their behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement regardless of any investigation made by the Secured Creditors or on their 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. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAWS 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, EACH ASSIGNOR HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS. EACH ASSIGNOR HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURT LACKS JURISDICTION OVER SUCH 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 SUCH ASSIGNOR. EACH ASSIGNOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF 29 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 ASSIGNORS AT THEIR ADDRESS FOR NOTICES AS PROVIDED IN SECTION 10.1 ABOVE, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS AFTER SUCH MAILING. EACH 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 ANY SECURED CREDITOR, TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE ASSIGNORS IN ANY OTHER JURISDICTION. (a) EACH 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. (b) 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 Assignors' Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any 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 Assignors under or with respect to any 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 Assignors, will promptly execute and deliver to the Assignors 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 Assignors (without recourse and without any representation or warranty) such of the 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, 30 "Termination Date" shall mean the date upon which no Note issued under the Note Purchase Agreement is outstanding (including the cancellation of such Notes by way of the conversion of the Notes to common shares pursuant to the terms of such Notes) and all Obligations then due and payable have been paid in full. (b) At any time that the Assignors desire that the Collateral Agent take any action to acknowledge or give effect to any release of Collateral pursuant to the foregoing Section 10.9(a), the Assignors shall deliver to the Collateral Agent a certificate signed by a senior officer of the Assignor stating that the release of the respective 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 Assignors and the Collateral Agent. 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. The Collateral Agent will hold in accordance with this Agreement all items of the 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 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 Joinder by Additional Secured Creditors. Notwithstanding anything to the contrary in this Agreement, the parties hereto expressly agree that additional parties may join this Agreement as Secured Creditors, from time to time (and prior to June 30, 2003) and become a party hereto, provided that each such additional party shall agree to be bound by the terms and conditions of this Agreement and shall agree to assume the rights and obligations of a Secured Creditor hereunder as if such additional party was an original signatory hereto as of the date of this Agreement, and; provided, further, that such additional party shall be permitted under Section 2(f) of the Note Purchase Agreement to join the Note Purchase Agreement as an additional New Investor (as such term is defined in the Note Purchase Agreement). [Remainder of this page intentionally left blank; signature page follows] 31 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. ASSIGNORS: EMAGIN CORPORATION, as Assignor By/s/Gary W. Jones Name: Gary W. Jones Title: Chief Executive Officer VIRTUAL VISION, Inc., as Assignor By/s/Gary W. Jones Name: Gary W. Jones Title: Chief Executive Officer SECURED PARTIES: /s/Mortimer D.A. Sackler Mortimer D.A. Sackler /s/Jack Rivkin JACK RIVKIN GINOLA LIMITED By: /s/Jonathan White Name: Jonathan White Title: Director /s/GEORGE HAYWOOD GEORGE HAYWOOD EMERALD ADVANTAGE FUND LP By:/s/ Joseph E Besecker Name: Joseph E Besecker Title: Managing Member EMERALD ADVANTAGE OFFSHORE FUND LTD By: /s/ Joseph E Besecker Name: Joseph E Besecker Title: Managing Member EMERALD VENTURE CAPITAL I LP By: /s/ Joseph E Besecker Name: Joseph E. Besecker Title: President /s/Robert N. Verratti ROBERT N. VERRATTI STILLWATER LLC By: Mortimer D.A. Sackler, its sole member /s/Mortimer D.A. Sackler Mortimer D.A. Sackler Accepted and Agreed to: ALLIGATOR HOLDINGS, INC. as Collateral Agent By: /s/Steven W. Gold Name: Mr. Steven W. Gold Title: President EX-10 7 april2003-8kex103.txt EXHIBIT 10.3 REGISTRATION RIGHTS AGREEMENT DATED AS OF APRIL 25, 2003 BY AND AMONG EMAGIN AND CERTAIN INITIAL INVESTORS IDENTIFIED ON THE SIGNATURE PAGES THERETO. REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT, dated as of April 25, 2003 (this "Agreement"), by and among eMagin Corporation, a Delaware corporation, with principal executive offices located at 2070 Route 52, Hopewell Junction, NY 12533 (the "Company"), and each of the undersigned investors, from time to time, a signatory hereto pursuant to the terms of this Agreement (each an "Initial Investor" or collectively, the "Initial Investors"). WHEREAS, upon the terms and subject to the conditions of the Global Restructuring and Secured Note Purchase Agreement dated as of April 25, 2003, by and between the Initial Investors and the Company (the "Note Purchase Agreement"), the Company has agreed to issue to each Initial Investor (i) certain secured convertible Notes in the Company (the "Notes"), which, upon the terms and subject to the conditions thereof, are convertible into shares of the Company's common stock, par value $.001 per share (the "Common Stock"), and (ii) three year Warrants (the "Warrants") to purchase shares of Common Stock, in the amounts set forth in Schedule 2 of the Note Purchase Agreement; and WHEREAS, to induce each of the Initial Investors as of the date of this Agreement, and such additional Initial Investors as may become a party to this Agreement, from time to time, to execute and deliver the Note Purchase Agreement, the Company has agreed to provide with respect to the Common Stock issued or issuable in lieu of cash interest payments on the Notes, upon conversion of the Notes and/or exercise of the Warrants, certain registration rights under the Securities Act; NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Definitions (a) As used in this Agreement, the following terms shall have the meanings: (i) "Affiliate," of any specified Person means any other Person who directly, or indirectly through one or more intermediaries, is in control of, is controlled by, or is under common control with, such specified Person. For purposes of this definition, control of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether by contract, securities, ownership or otherwise; and the terms "controlling" and "controlled" have the respective meanings correlative to the foregoing. (ii) "Closing Date" means the date and time of the issuance and sale of the Notes and the Warrants. (iii) "Commission" means the Securities and Exchange Commission. (iv) "Current Market Price" on any date of determination means the closing price of a share of the Common Stock in the regular day session on such day as reported on the American Stock Exchange ("Amex"); provided, if such security is not listed or admitted to trading on the Amex, as reported on the principal national security exchange or quotation system on which such security is quoted or listed or admitted to trading, or, if not quoted or listed or admitted to trading on any national securities exchange or quotation system, the closing price of such security on the over-the-counter market in the regular day session on the day in question as reported by the Wall Street Journal, New York City edition, or a similar generally accepted reporting service, as the case may be. If such security has no quotes or listing as defined in this section 1 (iv), then the Current Market Price shall be the price per Common Share on any date of determination as determined by an independent third party appointed by mutual agreement of the Company and the Investor. (v) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, or any similar successor statute. (vi) "Investor" means each of the Initial Investors as of the date of this Agreement, and such additional Initial Investors as may become a party to this Agreement, from time to time, and any transferee or assignee of Registrable Securities which agrees to become bound by all of the terms and provisions of this Agreement in accordance with Section 9 hereof. (vii) "Person" means any individual, partnership, corporation, limited liability company, joint stock company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. (viii) "Prospectus" means the prospectus (including, without limitation, any preliminary prospectus and any final prospectus filed pursuant to Rule 424(b) under the Securities Act, including any prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance on Rule 430A under the Securities Act) included in the Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement and by all other amendments and supplements to such prospectus, including all material incorporated by reference in such prospectus and all documents filed after the date of such prospectus by the Company under the Exchange Act and incorporated by reference therein. (ix) "Public Offering" means an offer registered with the Commission and the appropriate state securities commissions by the Company of its Common Stock and made pursuant to the Securities Act. (x) "Registrable Securities" means the Common Stock issued or issuable (i) in lieu of cash interest payments on the Notes, (ii) upon conversion, redemption or prepayment of the Notes, and (iii) upon exercise of the Warrants and any other warrants issued by the Company and currently held by the Investors or their permitted assignees, until (x) the Registration Statement has been declared effective by the Commission and all such securities have been disposed of pursuant to the Registration Statement, (y) all such securities have been sold under circumstances under which all of the applicable conditions of Rule 144 (or any similar provision then in force) under the Securities Act ("Rule 144") are met, or (z) such time as, in the opinion of counsel to the Company reasonably satisfactory to the Investors and upon delivery to the Investors of such executed opinion, all such securities may be sold without any time, volume or manner limitations pursuant to Rule 144(k) (or any similar provision then in effect) under the Securities Act. In the event of any merger, reorganization, consolidation, recapitalization or other change in corporate structure affecting the Common Stock, such adjustment shall be deemed to be made in the definition of "Registrable Security" as is appropriate in order to prevent any dilution or enlargement of the rights granted pursuant to this Agreement. (xi) "Registration Statement" means a registration statement of the Company filed on Form S-2 and/or Form S-3, or if then unavailable, another appropriate form under the Securities Act providing for the registration of, and the resale on a continuous or delayed basis by the holders of, all of the Registrable Securities pursuant to Rule 415 under the Securities Act, including the Prospectus contained therein and forming a part thereof, any amendments to such registration statement and supplements to such Prospectus, and all exhibits to and other material incorporated by reference in such registration statement and Prospectus. (xii) "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, or any similar successor statute. (b) All capitalized terms used and not defined herein have the respective meaning assigned to them in the Note Purchase Agreement. 2. Registration (a) Filing and Effectiveness of Registration Statement. The Company shall use its reasonable best efforts to prepare and file with the Commission not later than 30 calendar days after the Closing Date, a Registration Statement relating to the offer and sale of the Registrable Securities and shall use its reasonable best efforts to cause the Commission to declare such Registration Statement effective under the Securities Act as promptly as practicable but in no event later than 90 calendar days (150 calendar days in the event of a "full review" by the Commission) after the Closing Date. The number of Shares designated in the Registration Statement to be registered shall include all the Registrable Securities and shall include appropriate language regarding reliance upon Rule 416 under the Securities Act to the extent permitted by the Commission. The Company shall promptly (and, in any event, no more than 48 hours after it receives comments from the Commission), notify each of the Investors when and if it receives any comments from the Commission on the Registration Statement and promptly forward a copy of such comments, if they are in writing, to the Investors. At such time after the filing of the Registration Statement pursuant to this Section 2(a) as the Commission indicates, either orally or in writing, that it has no further comments with respect to such Registration Statement or that it is willing to entertain appropriate requests for acceleration of effectiveness of such Registration Statement, the Company shall promptly, and in no event later than five (5) days after receipt of such indication from the Commission, request that the effectiveness of such Registration Statement be accelerated within 48 hours of the Commission's receipt of such request. The Company shall notify the Investors by written notice that such Registration Statement has been declared effective by the Commission within 24 hours of such declaration by the Commission. (b) Piggyback Rights. (i) Subject to Section 2(b)(ii), if the Company at any time proposes to file any other registration statement under the Securities Act with respect to an offering of securities for its own account or for the account of another person (other than a registration statement on Form S-4 or S-8 (or any substitute form that may be adopted by the Commission) or any registration statement associated with any equity line of credit and other than a registration pursuant to Section 2(a) hereunder), the Company shall give written notice of such proposed filing to each of the Investors at the address set forth in the register of the Company as soon as reasonably practicable (but in no event less than fourteen (14) days before the anticipated date on which such registration will be first filed with the Commission), undertaking to provide each Investor the opportunity to register on the same terms and conditions such number and type of Registrable Securities as such Investor may request (a "Piggyback Registration"). Such written notice shall be clearly marked and the Company shall take reasonable steps to confirm receipt thereof from each such Investor. Each Investor will have five (5) business days after receipt of any such notice to notify the Company as to whether it wishes to participate in a Piggyback Registration; provided that should an Investor fail to provide timely notice to the Company, such Investor will forfeit any rights to participate in the Piggyback Registration with respect to such proposed offering. In the event that the registration statement is filed on behalf of a person other than the Company, the Company will, subject to Section 2(b)(ii), use its best efforts to have the shares of Registrable Securities that the Investors wish to sell included in the Registration Statement. If the Company shall determine in its sole discretion not to register or to delay the proposed offering, the Company shall provide written notice of such determination to the Investors and (i) in the case of a determination not to effect the proposed offering, shall thereupon be relieved of the obligation to register such Registrable Securities in connection therewith, and (ii) in the case of a determination to delay a proposed offering, shall thereupon be permitted to delay registering such Registrable Securities for the same period as the delay in respect of the proposed offering. (ii) If a registration pursuant to this Section 2(b) involves an underwritten offering, and the managing underwriter shall advise the Company in writing, that, in its opinion, the number of securities requested and otherwise proposed to be included in such registration exceeds the number which can be sold in such offering within a price range acceptable to the Company, or that the kind of securities requested or otherwise proposed to be included in such registration statement would materially and adversely effect the success of such offering, the Company will include in such registration, to the extent of the number which the Company is so advised can be sold in such offering, (A) if the registration is a primary registration on behalf of the Company, (x) first, the securities proposed to be registered by the Company, (y) second, the securities and Registrable Securities which have been requested to be included in such registration by the Investors and any other persons having the right to include securities in such registration statement pro rata in accordance with the aggregate number of securities requested to be included by the Investors and such other persons; and (z) third, securities of other persons, if any, requested to be included in such registration pro rata in accordance with the number of other securities proposed to be registered by such other persons, and (B) if the registration is a secondary registration on behalf of other persons, (x) first, the securities proposed to be registered by such other persons, (y) second, the securities and Registrable Securities which have been requested to be included in such registration by the Investors and any other persons having the right to include securities in such registration statement pro rata in accordance with the aggregate number of securities requested to be included by the Investors and such other persons; and (z) third, securities which have been requested to be included in such registration by the Company and by other persons, if any, pro rata in accordance with the aggregate number of other securities proposed to be registered by the Company and such other persons. In the event a contemplated distribution does not involve an underwritten public offering, the determinations contemplated by this Section 2(b)(ii) shall be made by the Company's Board of Directors. 3. Obligations of the Company In connection with the registration of the Registrable Securities, the Company shall, subject to the Investors assistance and cooperation, as reasonably requested: (a) (i) Prepare and file with the Commission such amendments (including post-effective amendments) to the Registration Statement and supplements to the Prospectus as may be necessary to keep the Registration Statement continuously effective and in compliance with the provisions of the Securities Act applicable thereto so as to permit the Prospectus forming part thereof to be current and useable by Investors for resales of the Registrable Securities for a period of three (3) years from the date on which the Registration Statement is first declared effective by the Commission (the "Effective Time") or such shorter period that will terminate upon the earlier of there ceasing to be any Registrable Securities outstanding or when all the Registrable Securities covered by the Registration Statement have been sold pursuant thereto in accordance with the plan of distribution provided in the Prospectus, transferred pursuant to Rule 144 under the Securities Act or otherwise transferred in a manner that results in the delivery of new securities not subject to transfer restrictions under the Securities Act (the "Registration Period") and (ii) take all lawful action such that each of (A) the Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, not misleading and (B) the Prospectus forming part of the Registration Statement, and any amendment or supplement thereto, does not at any time during the Registration Period include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (b) During the Registration Period, use its reasonable best efforts to comply with the provisions of the Securities Act with respect to the Registrable Securities of the Company covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the Investors as set forth in the Prospectus forming part of the Registration Statement; (c) (i) Prior to the filing with the Commission of any Registration Statement (including any amendments thereto) and the distribution or delivery of any Prospectus (including any supplements thereto), provide (A) draft copies thereof to the Investors and give reasonable consideration to all such comments as the Investors (and their counsel) reasonably may propose and (B) to the Investors a copy of the accountant's consent letter to be included in the filing and (ii) furnish to each Investor whose Registrable Securities are included in the Registration Statement and its legal counsel identified to the Company, (A) promptly after the same is prepared and publicly distributed, filed with the Commission, or received by the Company, one copy of the Registration Statement, each Prospectus, and each amendment or supplement thereto, and (B) such number of copies of the Prospectus and all amendments and supplements thereto and such other documents, as such Investor may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Investor; (d) (i) Use its reasonable best efforts to register or qualify the Registrable Securities covered by the Registration Statement under such securities or "blue sky" laws of such jurisdictions as the Investors reasonably request, (ii) prepare and file in such jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof at all times during the Registration Period, (iii) take all such other lawful actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all such other lawful actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (A) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (B) subject itself to general taxation in any such jurisdiction or (C) file a general consent to service of process in any such jurisdiction; (e) As promptly as practicable after becoming aware of such event, notify each Investor of the occurrence of any event, as a result of which the Prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and promptly prepare an amendment to the Registration Statement and supplement to the Prospectus to correct such untrue statement or omission, and deliver a number of copies of such supplement and amendment to each Investor as such Investor may reasonably request; (f) As promptly as practicable after becoming aware of such event, notify each Investor who holds Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance by the Commission of any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time and take all lawful action to effect the withdrawal, recession or removal of such stop order or other suspension; (g) Use its reasonable best efforts to cause all the Registrable Securities covered by the Registration Statement to be listed on the principal national securities exchange, and included in an inter-dealer quotation system of a registered national securities association, on or in which securities of the same class or series issued by the Company are then listed or included; (h) Use its reasonable best efforts to maintain a transfer agent and registrar, which may be a single entity, for the Registrable Securities not later than the effective date of the Registration Statement and to cause such transfer agent to remove restrictive legends on the Registered Securities, as may be appropriate and in compliance with the Securities Act; (i) Use its reasonable best efforts to take all such other lawful actions reasonably necessary to expedite and facilitate the disposition by the Investors of their Registrable Securities in accordance with the intended methods therefor provided in the Prospectus which are customary under the circumstances; (j) Make generally available to its security holders as soon as practicable, but in any event not later than three (3) months after (i) the effective date (as defined in Rule 158(c) under the Securities Act) of the Registration Statement, and (ii) the effective date of each post-effective amendment to the Registration Statement, as the case may be, an earnings statement of the Company and its subsidiaries complying with Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder (including, at the option of the Company, Rule 158 under the Securities Act); and (k) (i) Make reasonably available for inspection by Investors, and any attorney, accountant or other agent retained by such Investors all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and (ii) use reasonable best efforts to cause the Company's officers, directors and employees to supply all information reasonably requested by such Investors or any such attorney, accountant or agent in connection with the Registration Statement, in each case, as is customary for similar due diligence examinations; provided, however, that all records, information and documents that are designated in writing by the Company, in good faith, as confidential, proprietary or containing any material nonpublic information shall be kept confidential by such Investors and any such attorney, accountant or agent (pursuant to an appropriate confidentiality agreement in the case of any such holder or agent), unless such disclosure is made pursuant to judicial process in a court proceeding (after first giving the Company an opportunity promptly to seek a protective order or otherwise limit the scope of the information sought to be disclosed) or is required by law, or such records, information or documents become available to the public generally or through a third party not in violation of an accompanying obligation of confidentiality; and provided, further, that, if the foregoing inspection and information gathering would otherwise disrupt the Company's conduct of its business, such inspection and information gathering shall, to the maximum extent possible, be coordinated on behalf of the Investors and the other parties entitled thereto by one firm of counsel designed by and on behalf of the majority in interest of Investors and other parties. 4. Obligations of the Investors In connection with the registration of the Registrable Securities, the Investors shall have the following obligations: (a) As long as the Company complies with the notice procedures herein, it shall be a condition precedent to the obligations of the Company to complete the registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request. Unless otherwise required by the Commission or any applicable law, nothing in this Agreement shall obligate any Investor to consent to be named as an underwriter in any Registration Statement pertaining to the Registrable Securities. At least twenty-one (21) days prior to the first anticipated filing date of the Registration Statement, the Company shall notify each Investor of the information the Company reasonably requires from each such Investor (the "Requested Information") if such Investor elects to have any of its Registrable Securities included in the Registration Statement. Such notice shall be clearly marked (on the envelope containing such notice, upon the facsimile cover sheet, or as may otherwise be required) as follows: "URGENT ATTENTION REQUIRED". If at least two (2) business days prior to the anticipated filing date the Company has not received the Requested Information from an Investor (a "Non-Responsive Investor"), then the Company may file the Registration Statement without including Registrable Securities of such Non-Responsive Investor and have no further obligations to the Non-Responsive Investor; (b) Each Investor by its acceptance of the Registrable Securities agrees to use its reasonable best efforts to cooperate with the Company in connection with the preparation and filing of the Registration Statement hereunder, unless such Investor has notified the Company in writing of its election to exclude all of its Registrable Securities from the Registration Statement; and (c) Each Investor agrees that, upon receipt of any notice from the Company of the occurrence of any event of the kind described in Section 3(e) or 3(f), it shall immediately discontinue its disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Investor's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(e) and, if so directed by the Company, such Investor shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in such Investor's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. 5. Right to Suspend Registration Statement So long as the Company has maintained the initial registration for a minimum period of 90 days, the Company shall have the right at any time for up to 120 calendar days to suspend any Registration Statement in the event that the Company determines, in good faith, that it is in the best interests of the Company for the Company to proceed with its own offering of equity securities; provided, that, the Company shall use its commercially reasonable efforts to continue to proceed forward in good faith with such Registration Statement during the period of such suspension. The Company may so proceed by delivering written notice of such intention to the Investors. The Company may exercise the right to suspend a Registration Statement no more than twice in any 360-day period, provided that the aggregate period of such suspensions shall not exceed 120 days, in the aggregate, in any 360-day period. 6. Expenses of Registration All expenses, other than underwriting discounts and commissions or similar fees relating to the Registrable Securities, incurred in connection with registrations, filings or qualifications pursuant to Section 3, but including, without limitation, all registration, listing, and qualifications fees, printing and engraving fees, accounting fees, and the fees and disbursements of counsel for the Company (but not of the Investors) shall be borne by the Company. 7. Indemnification and Contribution (a) The Company shall indemnify and hold harmless each Investor and each of their respective officers and directors and each person who controls such Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each such person being sometimes hereinafter referred to as an "Indemnified Person") from and against any losses, claims, damages or liabilities, joint or several, to which such Indemnified Person may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or an omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, not misleading, or arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Prospectus or an omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company hereby agrees to reimburse such Indemnified Person for all reasonable legal and other expenses incurred by them in connection with investigating or defending any such action or claim as and when such expenses are incurred; provided, however, that the Company shall not be liable to any such Indemnified Person in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon (i) an untrue statement or alleged untrue statement made in, or an omission or alleged omission from, such Registration Statement or Prospectus in reliance upon and in conformity with written information furnished to the Company by such Indemnified Person expressly for use therein or (ii) in the case of the occurrence of an event of the type specified in Section 3(e), the use by the Indemnified Person of an outdated or defective Prospectus after the Company has provided to such Indemnified Person an updated Prospectus correcting the untrue statement or alleged untrue statement or omission or alleged omission giving rise to such loss, claim, damage or liability. (b) Indemnification by the Investors. Each Investor agrees, severally and not jointly, as a consequence of the inclusion of any of its Registrable Securities in a Registration Statement, to (i) indemnify and hold harmless the Company, its directors (including any person who, with his or her consent, is named in the Registration Statement as a director nominee of the Company), its officers who sign any Registration Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which the Company or such other persons may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in such Registration Statement or Prospectus or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in light of the circumstances under which they were made, in the case of the Prospectus), not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Investor expressly for use therein; provided, however, no Investor shall be liable under this Section 7(b) for any amount in excess of the net proceeds paid to such Investor in respect of shares sold by it. The indemnity provided for in this Section 7(b) shall not apply to amounts paid in settlement of any losses, claims, damages or liabilities if such settlement is effected without the consent of the Investors, which consent shall not be unreasonably withheld. (c) Notice of Claims, etc. Promptly after receipt by a party seeking indemnification pursuant to this Section 7 (an "Indemnified Party") of written notice of any investigation, claim, proceeding or other action in respect of which indemnification is being sought (each, a "Claim"), the Indemnified Party promptly shall notify the party against whom indemnification pursuant to this Section 7 is being sought (the "Indemnifying Party") of the commencement thereof; but the omission to so notify the Indemnifying Party shall not relieve it from any liability that it otherwise may have to the Indemnified Party, except to the extent that the Indemnifying Party is actually prejudiced by reason of such failure. In connection with any Claim as to which both the Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party shall be entitled to assume the defense thereof. Notwithstanding the assumption of the defense of any Claim by the Indemnifying Party, the Indemnified Party shall have the right to employ separate legal counsel and to participate in the defense of such Claim, and the Indemnifying Party shall bear the reasonable fees, out-of-pocket costs and expenses of one such separate legal counsel for all Indemnified Parties in connection with any one action or series of substantially related actions if (and only if): (x) the Indemnifying Party shall have agreed in writing to pay such fees, costs and expenses, (y) the named parties to any such action (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party and the Indemnified Party shall have been advised by such counsel in writing that there may be one or more legal defenses available to the Indemnifying party different from or in conflict with any legal defenses which may be available to the Indemnified Party (in which case the Indemnifying party shall not have the right to assume the defense of such action on behalf of the Indemnified party, or (z) the Indemnifying Party shall have failed to employ legal counsel reasonably satisfactory to the Indemnified Party within a reasonable period of time after notice of the commencement of such Claim. If the Indemnified Party employs separate legal counsel in circumstances other than as described in clauses (x), (y) or (z) above, the fees, costs and expenses of such legal counsel shall be borne exclusively by the Indemnified Party. Except as provided above, the Indemnifying Party shall not, in connection with any Claim in the same jurisdiction, be liable for the fees and expenses of more than one firm of counsel for the Indemnified Party (together with appropriate local counsel). The Indemnified Party shall not, without the prior written consent of the Indemnifying Party (which consent shall not unreasonably be withheld), settle or compromise any Claim or consent to the entry of any judgment that does not include an unconditional release of the Indemnifying Party from all liabilities with respect to such Claim or judgment. (d) Contribution. If the indemnification provided for in this Section 7 is unavailable to or insufficient to hold harmless an Indemnified Person under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and the Indemnified Party in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by such Indemnifying Party or by such Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 7(d) were determined by pro rata allocation (even if the Investors were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this Section 7(d). The amount paid or payable by an Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any such action or claim. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (e) Notwithstanding any other provision of this Section 7, in no event shall any Investor be required to undertake liability to any person under this Section 7 for any amounts in excess of the dollar amount of the proceeds to be received by such Investor from the sale of such Investor's Registrable Securities pursuant to any Registration Statement under which such Registrable Securities are to be registered under the Securities Act. (f) The obligations of the Company under this Section 7 shall be in addition to any liability which the Company may otherwise have to any Indemnified Person and the obligations of any Indemnified Person under this Section 7 shall be in addition to any liability which such Indemnified Person may otherwise have to the Company. The remedies provided in this Section 7 are not exclusive and shall not limit any rights or remedies which may otherwise be available to an indemnified party at law or in equity. 8. Rule 144 With a view to making available to the Investors the benefits of Rule 144 under the Securities Act or any other similar rule or regulation of the Commission that may at any time permit the Investors to sell securities of the Company to the public without registration ("Rule 144"), the Company agrees to use its reasonable best efforts to: (a) comply with the provisions of paragraph (c) (1) of Rule 144; (b) file with the Commission in a timely manner all reports and other documents required to be filed by the Company pursuant to Section 13 or 15(d) under the Exchange Act; and, if at any time it is not required to file such reports but in the past had been required to or did file such reports, it will, upon the request of any Investor, make available other information as required by, and so long as necessary to permit sales of, its Registrable Securities pursuant to Rule 144; and (c) provide within a reasonable period of time of a written request of the Investor and at the Company's expense, a legal opinion addressed to the Company's transfer agent verifying the transferability of the Shares in accordance with Rule 144. 9. Assignment The rights to have the Company register Registrable Securities pursuant to this Agreement shall be automatically assigned by the Investors to any permitted transferee of all or a portion (which portion shall exceed 10% of the Registrable Securities on an as-converted basis) of such Registrable Securities (or all or a portion (which portion shall exceed 10% of the Registrable Securities on an as-converted basis) of any Notes or Warrant of the Company which is convertible into such securities) only if: (a) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment, (b) the Company is, within ten (10) business days of such transfer or assignment, furnished with written notice of (i) the name and address of such transferee or assignee and (ii) the securities with respect to which such registration rights are being transferred or assigned, (c) immediately following such transfer or assignment, the securities so transferred or assigned to the transferee or assignee constitute Restricted Securities, and (d) at or before the time the Company receives the written notice contemplated by clause (b) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein. 10. Amendment and Waiver Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investors who hold at least a majority in interest of the Registrable Securities. Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company. 11. Changes in Common Stock If, and as often as, there are any changes in the Common Stock by way of stock split, stock dividend, reverse split, combination or reclassification, or through merger, consolidation, reorganization or recapitalization, or by any other means, appropriate adjustment shall be made in the provisions hereof, as may be required, so that the rights and privileges granted hereby shall continue with respect to the Common Stock as so changed. 12. Miscellaneous (a) A person or entity shall be deemed to be a holder of Registrable Securities whenever such person or entity owns of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities. (b) If, after the date hereof and prior to the Commission declaring the Registration Statement to be filed pursuant to Section 2 effective under the Securities Act, the Company grants to any Person any registration rights with respect to any Company securities which are more favorable to such other Person than those provided in this Agreement, then the Company forthwith shall grant (by means of an amendment to this Agreement or otherwise) identical registration rights to all Investors hereunder. (c) Except as may be otherwise provided herein, any notice or other communication or delivery required or permitted hereunder shall be in writing and shall be delivered personally or sent by certified mail, postage prepaid, or by a nationally recognized overnight courier service, and shall be deemed given when so delivered personally or by overnight courier service, or, if mailed, three days after the date of deposit in the United States mails, as follows: (i) if to the Company, to: eMagin Corporation 2070 Route 52 Hopewell Junction, NY 12533 Attention: Gary W. Jones (845) 892-1900 (845) 892-1901 (Fax) (ii) if to an Initial Investor, to the address set out for such Initial Investor on the signature pages attached hereto; and (iii)if to any other Investor, at such address as such Investor shall have provided in writing to the Company. The Company, the Initial Investors or any Investor may change the foregoing address by notice given pursuant to this Section 12(c). (d) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof. (e) This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of New York or the state courts of the State of New York sitting in the City of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. (f) The remedies provided in this Agreement are cumulative and not exclusive of any remedies provided by law. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (g) The Company agrees with the Investors that irreparable damage would occur in the event that any of the material provisions of this Agreement were not performed in accordance with their terms or were otherwise materially breached by the Company. Accordingly, the Investors shall be entitled to an injunction or injunctions to prevent material breaches of this Agreement and to enforce specifically the material terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity and that the Company shall reimburse the Investors for all reasonable costs relating thereto. In addition to the injunctive relief provided pursuant to the immediately preceding sentence, if the Registration Statement relating to the offer and sale of the Registrable Securities shall not be declared effective by the Commission within 150 days of the Closing Date and the Company shall have been shown to have failed to use its reasonable best efforts to cause the Commission to declare such Registration Statement effective, the Company shall be entitled to liquidated damages at a rate of five percent (5%) per month (calculated to the nearest calendar day) of the value of the Registrable Securities not so declared effective until, and to the extent, such Registrable Securities shall be declared effective. The value of the Registrable Securities pursuant to the preceding sentence shall be determined by the average closing price of the Common Stock on its principal exchange (in terms of volume) at the time of determination for the twenty (20) consecutive trading days commencing on the first trading day occurring 150 days after the Closing Date. The liquidated damages may at the option of the Investor be paid in Common Stock of the Company which shall be subject to the same registration rights as the Registrable Securities. (h) The Company shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. (i) This Agreement, the Note Purchase Agreement and the Warrants constitute the entire agreement among the parties hereto with respect to the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement, the Note Purchase Agreement and the Warrants supersede all prior agreements and undertakings among the parties hereto with respect to the subject matter hereof. (j) Subject to the requirements of Section 9 hereof, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto. (k) All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require. (l) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof. (m) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. A facsimile transmission of this signed Agreement shall be legal and binding on all parties hereto. (remainder of this page intentionally left blank) In witness whereof, the parties have caused this Agreement to be duly executed and delivered as of the date first above written. EMAGIN CORPORATION By/s/Gary W. Jones Name: Gary W. Jones Title: Chief Executive Officer /s/Mortimer D.A. Sackler MORTIMER D. A. SACKLER Address: 15 East 62nd Street New York, NY 10021 with a copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Stuart D. Baker, Esq. Telecopy: (212) 541-5369 GINOLA LIMITED By: /s/Jonathan White Name: Jonathan White Title: Director /s/Jack Rivkin JACK RIVKIN Address: STILLWATER LLC By: Mortimer D.A. Sackler, its sole member /s/Mortimer D.A. Sackler MORTIMER D. A. SACKLER Address: 15 East 62nd Street New York, NY 10021 with a copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Stuart D. Baker, Esq. Telecopy: (212) 541-5369 /s/George Haywood GEORGE HAYWOOD Address: 642 Second Street Brooklyn, NY 11215 Exhibit B EMERALD ADVANTAGE FUND LP By:/s/ Joseph E Besecker Name: Joseph E Besecker Title: Managing Member Address: 500 North Gulph Road Suite 101 King of Prussia, Pa. 19406 EMERALD ADVANTAGE OFFSHORE FUND LTD By: /s/ Joseph E Besecker Name: Joseph E Besecker Title: Managing Member Address: 500 North Gulph Road Suite 101 King of Prussia, Pa. 19406 EMERALD VENTURE CAPITAL I LP By: /s/ Joseph E Besecker Name: Joseph E. Besecker Title: President Address: 1703 Oregon Pike Lancaster, PA. 17601 /s/Robert N. Verratti ROBERT N. VERRATTI Address: 13766 Sunset BLVD Pacific Palisades, CA. 90272 EX-99 9 april2003-8kex99.txt EXHIBIT 99.1 PRESS RELEASE OF THE COMPANY DATED APRIL 28, 2003, ANNOUNCING THE SUBSCRIPTION BY THE INVESTORS OF THE PURCHASED NOTES AND WARRANTS eMagin Announces New Financing for $6 Million and Agreements to Restructure over $12 Million in Debt and Other Payables Monday April 28, 7:31 am ET HOPEWELL JUNCTION, N.Y.--(BUSINESS WIRE)--April 28, 2003--eMagin Corporation (AMEX:EMA - News) today announced that a group of Investors has agreed to purchase $6 million of eMagin's Secured Convertible Notes from the company, which will be due on November 1, 2005. Under the agreement, the investors agreed to purchase $1.8 million of the Notes on the closing date, and will acquire the remaining Notes according to a predetermined schedule between now and October of this year. As part of the transaction, eMagin also entered into agreements with a number of creditors, lessors and vendors to extend, reduce or pay with the company's common stock and cash (approximately $0.7 of the new $6 million financing) over $12 million of payables, future expenses, lease obligations, and convertible debt. The conversion of most of the company's existing unsecured convertible debt and accrued interest amounting to approximately $5.2 million has taken place concurrently with the sale of the Notes or is expected to take place later this year as a result of this funding. Also, a significant restructuring of current payables and other amounts owed or accrued for is expected to occur over the next 3 months as a result of this financing. eMagin has also reached agreements to restructure its fixed costs by the end of this quarter. For example, where previously the company recorded approximately $315,000 per month in equipment lease payments, the same equipment lease agreements are restructured at approximately $75,000 per month until June 2004, after which these payments increase to $125,000 per month. The company has the right to buyout these leases for $950,000 any time between June 30, 2003 and July 1, 2004, which would then eliminate this potential lease expense. "This financing and the accompanying restructuring agreements have given us the opportunity to deliver on the potential that we have created for eMagin to be a leader in its field. We believe that the $6 million in committed funds gives the company the anticipated capital needed to reach our targeted goal of becoming EBITDA positive by the end of this year on a monthly basis. Not only will this allow us to bring up our rate of production, but it will also help assure our customers that we will be able to meet their production requirements," said Gary Jones, president and chief executive officer of eMagin. "It has been a great source of frustration that the challenging conditions in the financial markets and the company's lack of working capital have coincided with a time in which we have had significant successes as a business. This new financing and the related agreements will give us the needed liquidity to put those challenges behind us and enable us to focus on our customers and production. We believe that we have been fortunate to be able to do this in a manner that respects the contributions of investors, suppliers and debt holders. We are thankful to all of them, as well as to our staff and members of management, many of whom have deferred their compensation for many months." The following table summarizes the transactions (all numbers in $US millions): Reductions in Current Payables and Accrued Expenses (1) $ 1.8 Reclassification of Current Payables to Short and Long Term Debt (2) 1.8 Payables Repaid/to be paid with the Company's Stock (3) 1.6 Conversion of Convertible Notes and Short Term Debt into Common Stock (4) 5.2 Extended Maturity of Existing Secured Debt 2.0 ------ Total Debt and Payables Restructured $ 12.4 ------ Funds Raised from the Sale of the Secured Convertible Notes (5) $ 6.0 ------ Total of Debt and Payables Restructured and Funds Raised This Financing $ 18.4
o (1) These reductions in current payables or accrued expenses are to take effect between March 7 and June 30, 2003 pending completion of payments by the Company. o (2) The Company will reclassify approximately $294,000 in accounts payable to short term debt and approximately $1.5 million to long-term debt. The Company has also made provisions for potential favorable buyout options. This number does not include amounts to being paid in cash by the company as part of these settlement benefits. o (3) Payments for some of the obligations that the Company is paying in the common stock of the Company are due at various times between April 23 and June 30, 2003. As the amount of common stock in many cases is determined by the price of the Company's common stock at the time, or just previous to, the payment date, the actual number of shares to be issued may vary. o (4) Convertible Notes and related Accrued Interest shall convert to approximately 6.5 million shares at an average conversion price of approximately $0.77 per share. The above includes the conversion of approximately $260,000 of a subordinated convertible note that is expected to convert upon the completion of the Company's next registration statement. All others have elected to convert as of this date. o (5) The Company negotiated payments of $0.7 million of the new financing to debtors to procure the agreements listed above.
New York City-based Larkspur Capital Corporation assisted eMagin in structuring and negotiating the investment agreement. Additional details regarding the transaction are included in Form 8K filed with the Securities and Exchange Commission today, a copy of which will be posted on eMagin's website (www.emagin.com). About eMagin The world leader in organic light emitting diode (OLED)-on-silicon technology, eMagin combines integrated circuits, microdisplays, and optics to create a virtual image similar to the real image of a computer monitor or large screen TV. eMagin invented the award-winning SVGA+ and SVGA-3D OLED microdisplays, the world's first single-chip color video OLED microdisplay and embedded controller for advanced virtual imaging. eMagin's microdisplay systems are expected to enable new mass markets for wearable personal computers, wireless Internet appliances, portable DVD-viewers, digital cameras, and other emerging applications for consumer, industrial, and military applications. OLED microdisplays demonstrate performance characteristics important to military and other demanding commercial and industrial applications including low power consumption, high brightness and resolution, wide dimming range, wider temperature operating ranges, shock and vibration resistance, and insensitivity to high G-forces. eMagin's corporate headquarters and microdisplay operations are co-located with IBM on its campus in East Fishkill, N.Y. Optics and system design facilities are located at its wholly owned subsidiary, Virtual Vision, Inc., in Redmond, WA. Additional information is available at http://www.emagin.com or . Forward Looking Statements This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms, or other comparable terminology. These statements are only predictions. Actual events or results may differ materially from those in the forward-looking statements as a result of various important factors, including those described in the Company's most recent filings with the SEC. Although we believe that the expectations reflected in the forward-looking statements are reasonable, such statements should not be regarded as a representation by the Company, or any other person, that such forward-looking statements will be achieved. The business and operations of the Company are subject to substantial risks which increase the uncertainty inherent in forward-looking statements. We undertake no duty to update any of the forward-looking statements, whether as a result of new information, future events or otherwise. In light of the foregoing, readers are cautioned not to place undue reliance on such forward-looking statements. Contact: eMagin, Hopewell Junction Susan Jones, 845/892-1900 sjones@emagin.com -----END PRIVACY-ENHANCED MESSAGE-----