-----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, Agix5A1+u3s2Va+JlgBJfPbB2g0DdbL9wZ5A68aQ9+Qwo9HosNEfOS2oRU/3Qg4Z ouANiACcz7Mkxmym+s/MqQ== 0000927016-97-003110.txt : 19971117 0000927016-97-003110.hdr.sgml : 19971117 ACCESSION NUMBER: 0000927016-97-003110 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PIXTECH INC /DE/ CENTRAL INDEX KEY: 0000946144 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 043214691 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-26380 FILM NUMBER: 97717741 BUSINESS ADDRESS: STREET 1: AVENUE VICTOIRE 13790 CITY: ROUSSET FRANCE STATE: I0 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number 0-26380 ---------------------------------- PIXTECH, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 04-3214691 - -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) Avenue Olivier Perroy, 13790 Rousset, France - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) 011-33-4-42-29-10-00 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- The number of shares outstanding of each of the issuer's classes of common stock as of Class Outstanding at September 30, 1997 Common Stock, $.01 par value 13,763,654 PIXTECH, INC. TABLE OF CONTENTS
PAGE NO. PART I FINANCIAL INFORMATION ITEM 1 Financial Statements Balance Sheets as of September 30, 1997 and December 31, 1996........................................ 3 Statements of Operations for the Three Months and Nine Months Ended September 30, 1997 and 1996, and the period from June 18, 1992 through September 30, 1997..................... 4 Statements of Cash Flows for the Nine Months ended September 30, 1997 and 1996, and the period from June 18, 1992 through September 30, 1997........................................... 5 Statement of Stockholders' Equity............................ 6 - 7 Notes to Financial Statements................................ 8 - 9 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 10 - 13 PART II OTHER INFORMATION ITEM 1 Legal Proceedings............................................ 14 ITEM 2 Changes in Securities........................................ 14 ITEM 3 Default upon Senior Securities............................... 14 ITEM 4 Submission of Matters to a Vote of Security Holders.......... 14 ITEM 5 Other Information............................................ 14 ITEM 6 Exhibits and Reports on Form 8-K............................. 14 Signature..................................................................... 15 Exhibit Index................................................................. 16
PixTech, Inc. (a development stage company) CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts)
September 30, December 31, 1997 1996 -------------- ------------ ASSETS (unaudited) Current assets: Cash and cash equivalents.......................................... $ 6,089 $ 4,266 Short term investments 840 -- Accounts receivable: Trade............................................................ 634 1,655 Other............................................................ 20 198 Inventory.......................................................... 612 770 Other.............................................................. 2,236 2,975 ---------- ---------- Total current assets 10,431 9,864 Investments - long term.............................................. 9,240 -- Property, plant and equipment, net................................... 9,650 13,409 Goodwill, net........................................................ 254 298 Deferred tax assets.................................................. 4,524 5,167 Other assets - long term............................................. 244 342 Deferred offering costs.............................................. -- 485 ---------- ---------- Total assets.................................................... $ 34,343 $ 29,565 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long term debt.................................. $ 883 $ 990 Current portion of capital lease obligations....................... 609 921 Current portion of long term liabilities........................... -- 1,890 Accounts payable................................................... 3,362 5,132 Accrued expenses................................................... 1,096 1,773 Other.............................................................. 136 17 ---------- ---------- Total current liabilities....................................... 6,086 10,723 Deferred revenue..................................................... 2,570 3,226 Long term debt, less current portion................................. 1,766 2,146 Capital lease obligation, less current portion....................... 581 833 Other long term liabilities, less current portion.................... 493 538 ---------- ---------- Total liabilities............................................... 11,496 17,466 ========== ========== Stockholders' equity Common stock...................................................... 137 81 Other stockholders' equity........................................ 55,168 33,647 Deficit accumulated during development stage...................... (32,458) (21,629) Total stockholders' equity...................................... 22,847 12,099 ---------- ---------- Total liabilities and stockholders' equity...................... $ 34,343 $ 29,565 ========== ==========
PixTech, Inc. (a development stage company) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (unaudited)
Period from June 18, 1992 (date of Three Months Ended Nine Months Ended inception) September 30, September 30, through --------------------------------------------- September 30, 1997 1996 1997 1996 1997 ------------ ------------ ------------ ------------ ------------ Revenues: Cooperation & license revenues....... $ -- $ 707 $ 1,718 $ 5,233 $ 24,996 Product sales........................ 152 67 580 428 2,216 Other revenues....................... 284 11 1,004 992 3,800 ------------ ------------ ------------ ------------ ------------ 436 785 3,302 6,653 31,012 ------------ ------------ ------------ ------------ ------------ Cost of revenues License fees and royalties.......... -- -- (61) -- (1,420) ------------ ------------ ------------ ------------ ------------ Gross margin.......................... 436 785 3,241 6,653 29,592 ------------ ------------ ------------ ------------ ------------ Operating expenses: Research and development: Acquisition of intellectual property rights................. -- -- -- -- (4,765) Other............................. (3,227) (4,269) (11,305) (11,491) (49,047) ------------ ------------ ------------ ------------ ------------ (3,227) (4,269) (11,305) (11,491) (53,812) Sales and marketing................. (369) (309) (1,151) (755) (4,829) General and administrative.......... (611) (630) (1,899) (2,105) (9,781) ------------ ------------ ------------ ------------ ------------ Total operating expenses......... (4,207) (5,208) (14,355) (14,351) (68,422) ------------ ------------ ------------ ------------ ------------ Loss from operations.................. (3,771) (4,423) (11,114) (7,698) (38,830) Other income/(expense) Interest income/(expense)........... 82 3 424 91 763 Foreign exchange gains/(losses)..... 32 (137) (149) 205 461 ------------ ------------ ------------ ------------ ------------ 114 (134) 285 296 1,224 Loss before income tax benefit........ (3,657) (4,557) (10,829) (7,402) (37,606) Income tax benefit.................... -- -- -- -- 5,148 ------------ ------------ ------------ ------------ ------------ Net loss.............................. $ (3,657) $ (4,557) $ (10,829) $ (7,402) (32,458) ============ ============ ============ ============ ============ Net loss per share: $(.27) $(.56) $(.84) $(.91) ============ ============ ============ ============ Shares used in computing net loss per share............................... 13,763 8,141 12,924 8,133 ============ ============ ============ ============
PixTech, Inc. (a development stage company) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands, except per share amounts) (unaudited)
Period from June 18, 1992 (date of inception) Nine Months Ended through September 30, September 30, ------------------------------------------- ------------------- 1997 1996 1997 -------------------- ------------------ ------------------ Net loss................................................... $ (10,829) $ (7,402) $ (32,458) Total adjustments to net loss.............................. 4,009 5,037 12,347 ----------------- --------------- --------------- Net cash used in operating activities...................... (6,820) (2,365) (20,111) ----------------- --------------- --------------- Investing activities Additions to property plant and equipment.................. (511) (4,560) (16,806) Additions to intangible assets............................. -- (130) (130) Reclassification of cash equivalents as investments........ (10,080) -- (10,080) ----------------- --------------- --------------- Net cash used in investing activities...................... (10,591) (4,690) (27,016) Financing activities Stock issued............................................... 21,641 5 55,564 Proceeds from long-term borrowings......................... -- -- 6,287 Proceeds from sale leaseback transactions.................. -- -- 2,731 Payments for equipment purchases financed by accounts payable................................................... -- -- (3,706) Repayment of long term borrowing and capital lease obligations............................................... (1,049) (1,773) (5,069) ----------------- --------------- --------------- Net cash (used in) / provided by financing activities...... 20,592 (1,768) 55,807 ----------------- --------------- --------------- Effect of exchange rates on cash........................... (1,358) (349) (2,591) ----------------- --------------- --------------- Net (decrease) / increase in cash and cash equivalents..... 1,823 (9,172) 6,089 Cash and cash equivalents beginning of period.............. 4,266 17,563 -- ----------------- --------------- --------------- Cash and cash equivalents end of period.................... $ 6,089 $ 8,391 $ 6,089 ================= =============== ===============
PixTech, Inc. (a development stage company) Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share amounts)
Convertible Preferred Stock Series A Series B Shares Shares issued Amount issued Amount Balance at June 18, 1992 Issuance of convertible preferred stock, net of issuance costs ..... 534,587 $ 706 123,005 $ 159 Issuance of Common stock in June ................................... Translation adjustment ............................................. Net loss from June 18, 1992 (date of inception) through December 31, 1992 .................................................. Balance at December 31, 1992 534,587 706 123,005 159 Issuance of convertible preferred stock, net of issuance costs ..... 1,022,416 1,662 240,442 430 Issuance of Common stock in January ................................ Translation adjustment ............................................. Net loss--Year ended December 31, 1993 ............................. Balance at December 31, 1993 1,557,003 2,368 363,447 589 Issuance of Common stock under stock option plan in April .......... Purchase of 28,761 shares of Common stock--Treasury stock in April .................................................... Issuance of convertible preferred stock, net of issuance costs...... Translation adjustment ............................................. Net loss--Year ended December 31, 1994 ............................. Balance at December 31, 1994 1,557,003 2,368 363,447 589 Reissuance of 28,761 shares of Common stock held in treasury in January ............................................... Issuance of Common stock under stock option plan ................... Common stock issued in initial public offering, net of issuance costs -- $1,080 .......................................... Conversion of preferred stock ...................................... (1,557,003) (2,368) (363,447) (589) Translation adjustment ............................................. Net loss--Year ended December 31, 1995 ............................. Balance at December 31, 1995 Issuance of Common stock under stock option plan ................... Issuance of warrants in connection with acquisition of the assets of Panocorp ................................................ Translation adjustment ............................................. Net loss--Year ended December 31, 1996 ............................ Balance at December 31, 1996 Common stock issued in public offering and private placements, net of issuance costs -- $ 796 (unaudited) ............ Issuance of Common stock under stock option plan (unaudited) ....................................................... Translation adjustment (unaudited) ................................. Net loss--Nine months ended September 30, 1997 (unaudited) ....................................................... Balance at September 30, 1997 -- -- -- -- Convertible Preferred Stock Series C Series D Shares Shares issued Amount issued Amount Balance at June 18, 1992 Issuance of convertible preferred stock, net of issuance costs .. Issuance of Common stock in June ................................ Translation adjustment .......................................... Net loss from June 18, 1992 (date of inception) through December 31, 1992................................................ Balance at December 31, 1992 ..................................... Issuance of convertible preferred stock, net of issuance costs... 1,999,011 $ 5,686 430,208 $ 1,224 Issuance of Common stock in January.............................. Translation adjustment........................................... Net loss--Year ended December 31, 1993........................... Balance at December 31, 1993 ..................................... 1,999,011 5,686 430,208 1,224 Issuance of Common stock under stock option plan in April........ Purchase of 28,761 shares of Common stock--Treasury stock in April.................................................. Issuance of convertible preferred stock, net of issuance costs... 1,045,835 2,929 Translation adjustment........................................... Net loss--Year ended December 31, 1994........................... Balance at December 31, 1994 ..................................... 3,044,846 8,615 430,208 1,224 Reissuance of 28,761 shares of Common stock held in treasury in January............................................. Issuance of Common stock under stock option plan................. Common stock issued in initial public offering, net of issuance costs -- $1,080........................................ Conversion of preferred stock ................................... (3,044,846) (8,615) (430,208) (1,224) Translation adjustment........................................... Net loss--Year ended December 31, 1995........................... Balance at December 31, 1995 Issuance of Common stock under stock option plan................. Issuance of warrants in connection with acquisition of the assets of Panocorp.............................................. Translation adjustment........................................... Net loss--Year ended December 31, 1996.......................... Balance at December 31, 1996 Common stock issued in public offering and private placements, net of issuance costs -- $ 796 (unaudited).......... Issuance of Common stock under stock option plan (unaudited)..................................................... Translation adjustment (unaudited)............................... Net loss--Nine months ended September 30, 1997 (unaudited)..................................................... Balance at September 30, 1997 -- -- -- --
See accompanying notes PixTech, Inc. (a development stage company) Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share amounts)
Common Stock Additional Cumulative Shares Paid-in translation issued Amount Capital adjustment Balance at June 18, 1992 Issuance of convertible preferred stock, net of issuance costs........ Issuance of Common stock in June...................................... 115,045 $ 1 $ 75 Translation adjustment................................................ $ 1 Net loss from June 18, 1992 (date of inception) through December 31, 1992.................................................... Balance at December 31, 1992 115,045 1 75 1 Issuance of convertible preferred stock, net of issuance costs........ Issuance of Common stock in January................................... 17,256 21 Translation adjustment................................................ (50) Net loss--Year ended December 31, 1993................................ Balance at December 31, 1993 132,301 1 96 (49) Issuance of Common stock under stock option plan in April............. 77,356 1 28 Purchase of 28,761 shares of Common stock--Treasury stock in April....................................................... $(11) (11) Issuance of convertible preferred stock, net of issuance costs........ Translation adjustment................................................ 230 Net loss--Year ended December 31, 1994................................ Balance at December 31, 1994 209,657 2 123 181 Reissuance of 28,761 shares of Common stock held in treasury in January ................................................. 3 Issuance of Common stock under stock option plan...................... 6,902 0 3 Common stock issued in initial public offering, net of issuance costs -- $1,080............................................. 2,500,000 25 20,973 Conversion of preferred stock......................................... 5,395,504 54 12,742 Translation adjustment ............................................... Net loss--Year ended December 31, 1995 ............................... Balance at December 31, 1995 8,112,063 81 33,844 515 Issuance of Common stock under stock option plan...................... 29,083 0 11 Issuance of warrants in connection with acquisition of the assets of Panocorp................................................... 230 Translation adjustment................................................ (953) Net loss--Year ended December 31, 1996 .............................. Balance at December 31, 1996 8,141,146 81 34,085 (438) Common stock issued in public offering and private placements, net of issuance costs -- $ 796 (unaudited) .............. 5,570,819 56 22,958 Issuance of Common stock under stock option plan (unaudited)........................................................... 51,689 0 25 Translation adjustment (unaudited)..................................... (1,462) Net loss--Nine months ended September 30, 1997 (unaudited)........................................................... Balance at September 30, 1997 13,763,654 $137 $57,068 $(1,900) Deficit accumulated during development Treasury stage stock Total Balance at June 18, 1992 Issuance of convertible preferred stock, net of issuance costs........ $ 865 Issuance of Common stock in June...................................... 76 Translation adjustment................................................ 1 Net loss from June 18, 1992 (date of inception) through December 31, 1992... ................................................ $ (506) (506) Balance at December 31, 1992 (506) 436 Issuance of convertible preferred stock, net of issuance costs........ 9,002 Issuance of Common stock in January................................... 21 Translation adjustment................................................ (50) Net loss--Year ended December 31, 1993................................ (120) (120) Balance at December 31, 1993 (626) 9,289 Issuance of Common stock under stock option plan in April............. 29 Purchase of 28,761 shares of Common stock--Treasury stock in April....................................................... (11) (11) Issuance of convertible preferred stock, net of issuance costs........ 2,929 Translation adjustment................................................ 230 Net loss--Year ended December 31, 1994................................ (2,979) (2,979) Balance at December 31, 1994 (3,605) (11) 9,487 Reissuance of 28,761 shares of Common stock held in treasury in January ................................................. 11 14 Issuance of Common stock under stock option plan...................... 3 Common stock issued in initial public offering, net of issuance costs -- $1,080............................................. 20,998 Conversion of preferred stock......................................... Translation adjustment ............................................... 334 Net loss--Year ended December 31, 1995 ............................... (6,305) (6,305) Balance at December 31, 1995 (9,910) 24,530 Issuance of Common stock under stock option plan...................... 11 Issuance of warrants in connection with acquisition of the assets of Panocorp................................................... 230 Translation adjustment................................................ (953) Net loss--Year ended December 31, 1996 ............................... (11,719) (11,719) Balance at December 31, 1996 (21,629) 12,099 Common stock issued in public offering and private placements, net of issuance costs -- $ 796 (unaudited) .............. 23,014 Issuance of Common stock under stock option plan (unaudited)........................................................... 25 Translation adjustment (unaudited)..................................... (1,462) Net loss--Nine months ended September 30, 1997 (unaudited)........................................................... (10,829) (10,829) Balance at September 30, 1997 $(32,458) $22,847
See accompanying notes PixTech. Inc. (a development stage company) Notes to Condensed Consolidated Financial Statements (all amounts in thousands except share amounts) (unaudited) Note A -- Basis of presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results of the three-month or nine-month periods ending September 30, 1997 are not necessarily indicative of the results that may be expected for the year ending December 31, 1997. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended December 31, 1996 (the "1996 Financial Statements"), included in the Company's Annual Report on Form 10-K for the year ended December 31, 1996. Note B -- Inventories Inventory consists of raw material and spare parts. Note C -- Public offering On February 7, 1997, the Company sold 3,333,000 shares of Common Stock in a public offering in Europe at a price of $4.50 per share, resulting in net proceeds of $13,949 before expenses payable by the Company, which amounted to $796. The Company granted the Underwriters a 30-day option to purchase up to 663,000 shares, and the Underwriters exercised such option and purchased such shares on February 12, 1997. Including the sale of such shares, the total price to the public, underwriting discount, and proceeds to the Company before expenses were $17,982, $1,259, and $16,723, respectively. Note D -- Private placements In February 1997, the Company sold 463,708 shares of the Company's Common Stock to Motorola, Inc., in a private placement at a price of $4.50 per share, resulting in net proceeds of $2,086. As consideration for this stock purchase, an amount of $686 was received in cash and the remaining $1,400 was in the form of forgiveness of $1,400 of obligations from PixTech S.A. to Motorola, Inc. ("Motorola"). In connection with such private placement, Motorola received warrants to purchase an additional 463,708 shares of the Common Stock of the Company at a price of $5.50 per share, which warrants expire on December 31, 1998. As of September 30, 1997, these warrants have not been exercised. In February 1997, the Company sold 1,111,111 shares of the Company's Common Stock to United Microelectronics Corporation, the parent company of Unipac Optoelectronics Corporation ("Unipac"), in a private placement at a price of $4.50 per share resulting in net cash proceeds of $5,000. Note E -- Net loss Per Share In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings par Share", which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effects of stock options and warrants will be excluded. PixTech. Inc. (a development stage company) There is no impact of Statement 128 on the calculation of earnings per share for the three-month periods ended September 30, 1996 and 1997. As net losses have been reported in these quarters, the dilutive effects of stock options and warrants have been excluded from the calculation of net loss per share under the current method of calculating net loss per share. Note F -- Insurance refund In September 1997, the Company collected an amount of $620 in payment under its business insurance policy to cover losses incurred after certain physical damages suffered in the Company's pilot manufacturing facility in April 1997. An amount of $328 representing reimbursement of direct costs was recorded as reduction in research and development expenses. The remaining amount of $292 covering consequential losses was reflected as other revenues in the three-month period ended September 30, 1997. Note G -- Bank guaranty In August 1997, the Company provided Unipac, its Asian manufacturing partner, with a written bank guaranty in an amount of $10.0 million pursuant to the Foundry Agreement between Unipac and the Company. The Company granted the issuing banks a security interest on its cash and cash equivalents for the same amount. The pledged cash and cash equivalents have been recorded as short-term and long-term investments in the balance sheet. Under certain conditions of the Foundry Agreement, Unipac can sell to PixTech certain equipment and payment will be secured through exercise by Unipac of the bank guaranty. Both the amount of the guaranty to Unipac and the amount of the security interest to the banks will be reduced by 1/24th of the initial amount at the end of each quarter, starting June 1998. Note H -- Subsequent events On November 7, 1997, Sumitomo Corporation ("Sumitomo") granted PixTech a $10.0 million loan repayable over a period of three years, pursuant to a credit agreement and following a distribution and financing agreement each dated as of July 21, 1997 between the Company and Sumitomo (the "Sumitomo Agreement"). Of this $10.0 million amount, $5.0 million represent a straight loan repayable in four equal installments every 6 months starting 18 months after funding, bearing interest at prime rate plus 0.75% per annum. The remaining amount of $5.0 million represent a convertible loan repayable in November 2000, bearing interest at prime rate plus 0.75% per annum, and partially or totally convertible, at Sumitomo's option, into shares of Common Stock of the Company at a conversion price equal to 80% of the market price. This option can be exercised after April 7, 1999. As part of the Sumitomo Agreement, the loan is partially secured as follows: . the Company gave a deed of mortgage on PixTech S.A. land and constructions located in Rousset. At September 30, 1997, the net book value of this building and land was $1.1 million. . the French atomic energy agency ("CEA") undertakes certain contingent payment obligations towards Sumitomo in case of default by PixTech. Note I -- Commitments On October 22 1997, an amendment to the LETI License Agreement was signed between the CEA and the Company for a period of three years, in return for CEA guarantying certain contingent payment obligations towards Sumitomo. As discussed in Note H, the royalty rates and minimum payments from the Company to CEA are increased. The Company will give a security interest to CEA on all its patents during the term of the amendment. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of operations Cooperation and License Revenues. The Company did not recognize any cooperation and license revenue under the Field Emission Display ("FED") Alliance agreements in the three-month period ended September 30, 1997, as compared to $707,000 in the three-month period ended September 30, 1996. The Company recognized cooperation and license revenues under the FED Alliance agreements of $1.7 million in the nine-month period ended September 30, 1997, as compared to $5.2 million in the nine-month period ended September 30, 1996. These revenues represented the achievement by the Company of contractual milestones with FED Alliance members. The Company has now recorded most of the expected revenues associated with the achievement of contractual milestones with existing FED Alliance members and future FED Alliance milestone revenues are mostly subject to expansion of the FED Alliance. Product sales. The Company recognized product sales of $580,000 in the nine- month period ended September 30, 1997, as compared to $428,000 in the nine-month period ended September 30, 1996. These product sales represented the shipment of FED displays and FED cathodes in limited quantities to members of the FED Alliance and the shipment of FED displays for evaluation by original equipment manufacturer ("OEM") customers. Other revenues. The Company recognized other revenues of $284,000 in the three- month period ended September 30, 1997, as compared to $11,000 in the three-month period ended September 30, 1996. The revenues recorded in the three-month period ended September 30, 1997 included primarily an insurance refund covering consequential losses incurred after certain physical damages suffered in the Company's pilot manufacturing facility in April 1997. Other revenues amounted to $1.0 million in the nine-month period ended September 30, 1997, as compared to $992,000 during the same period in 1996. In the nine-month periods ended September 30, 1997 and 1996, other revenues were derived principally from government funded development contracts: respectively $663,000 and $800,000 were related to a development contract from the French Ministry of Industry to support manufacturing of FEDs. Research and Development Expenses. The Company expensed $3.2 million for research and development costs during the three-month period ended September 30, 1997, as compared to $4.3 million in the three-month period ended September 30, 1996. These expenses included obligations to the French atomic energy agency ("CEA") under the "LETI" Research Agreement (Laboratoire d'Electronique, de Technologie et d'Instrumentation), contract consulting fees, salaries and associated operating expenses for in-house research and development activities and the cost of staffing and operating the Company's pilot manufacturing facility. This decrease reflected the reversal of a provision in the amount of $329,000, following cancellation of potential liabilities to a third party, and the increase of the parity of the U.S. dollar versus the French Franc in the three- month period ended September 30, 1997 versus the three-month period ended September 30, 1996, as most of the Company's research and development costs is incurred in French Francs. After excluding the effects of currency fluctuation and reversal of provision, research and development expenses remained stable in the three-month period ended September 30, 1997 as compared to the three-month period ended September 30, 1996. Research and development expenses amounted to $11.3 million for the nine-month period ended September 30, 1997 as compared to $11.5 million during the nine- month period ended September 30, 1996. Sales and Marketing Expenses. The Company expensed $369,000 for sales and marketing during the three-month period ended September 30, 1997, as compared to $309,000 during the three-month period ended September 30, 1996. This increase reflected the expansion of the Company's sales and marketing organization both in the United States and in Europe, and the increasing support of marketing efforts through trade show attendance and advertising. The Company believes sales and marketing expenses may increase in the future, as potential customers and anticipated shipments of FED displays develop. Sales and marketing expenses amounted to $1.1 million for the nine-month period ended September 30, 1997 as compared to $755,000 during the nine-month period ended September 30, 1996. General and Administrative Expenses. General and administrative expenses amounted to $611,000 in the three-month period ended September 30, 1997, a decrease of 3% over general and administrative expenses incurred in the three- month period ended September 30, 1996, which amounted to $630,000, reflecting the effects of currency fluctuation. General and administrative expenses amounted to $1.9 million for the nine-month period ended September 30, 1997 as compared to $2.1 million during the nine-month period ended September 30, 1996. Strategic issues and risks The Company is focused on the continued development of the FED technology, the strengthening and expansion of the FED Alliance, the improvement of manufacturing yields, the successful implementation of contract manufacturing of FEDs with its Asian partner, Unipac, and the reliability testing of new products which the Company expects will lead to the shipment of commercial products in the near future. In evaluating this outlook, the following risks and issues, among others, which are common with development stage companies, should be considered. Risks Associated with Contract Manufacturing of FEDs. The Company believes that its ability to commercialize medium to large volumes of FEDs is highly dependent on its ability to have FEDs manufactured by a major manufacturer in the AMLCD industry. On May 22, 1997, the Company signed a display foundry agreement (the "Foundry Agreement") with Unipac Optoelectronics Corp. ("Unipac"), an AMLCD manufacturer based in Taiwan. Under the agreement, Unipac will install volume production equipment to produce FEDs at its manufacturing line, and will begin production for exclusive delivery of FED displays to PixTech. Expectations about the timing of this manufacturing plan with Unipac are forward-looking statements that involve risks and uncertainties, including the ease or difficulty of the transfer of the FED technology to Unipac. If such contract manufacturing agreement is not implemented on a timely basis, the Company will not be able to ship medium to large volumes of FED products, or to obtain a commercially acceptable cost for its FED displays. If the Company is unable to have its FED manufactured in a cost effective manner, the Company would be materially adversely affected. Significant capital expenditure will be required in order to install, at the contract manufacturers' facility, equipment that is not common to the AMLCD manufacturing process. A minimum of $15 million of capital expenditures will be required. Pursuant to the Foundry Agreement, Unipac will purchase and fund equipment within a $15 million limit. The amount actually expended on capital expenditures could vary significantly depending upon numerous factors, including the inherent unpredictability of the total amount of a large scale capital expenditure program. Should the Company be successful in implementing this contract manufacturing relationship, the Company's reliance on a single contract manufacturer will involve several risks, including a potential inability to obtain an adequate supply of required products, and reduced control over the price, timeliness of delivery, reliability and quality of finished products. Any inability to manage this contract manufacturing relationship or any circumstance that would cause the Company to delay the shipment of its products would have an adverse effect on the Company. Revenues from FED Alliance members. To date, the Company has recorded most of the expected revenues associated with the achievement of contractual milestones under existing FED Alliance agreements, and most future FED Alliance milestone revenues are subject to expansion of the Alliance or to renewal of cooperation periods with existing members at their respective expiration dates. Expansion of the FED Alliance and renewal of cooperation periods by existing FED Alliance members are subject, in part, to matters beyond the Company's control. Failure to expand the FED Alliance or to obtain renewals of the cooperation periods could adversely affect the Company. Products and Manufacturing Processes under Development, Need to increase Yields, Costs of Products. The Company's products and its manufacturing processes are in the development stage. The Company has to date encountered a number of delays in the development of its products and manufacturing processes. No assurance can be given that further delays will not occur. The Company does not plan to increase production from its pilot facility beyond low volume levels. The Company believes that contract manufacturing with its Asian partner (see "Risks Associated with Contract Manufacturing of FEDs") will make it possible to manufacture volume quantities of FEDs at commercially acceptable costs. However, moving from pilot production to volume production involves a number of steps and challenges. In particular, in order to demonstrate the low cost potential of its FED technology, the Company will need to improve its manufacturing yields. There can be no assurance that the Company will be able to implement processes for the manufacture of volume quantities of FED products at commercially viable cost levels or on a timely basis. If such processes are not successfully implemented, the Company would be adversely affected. Display Performance Enhancement. Key elements of display performance are brightness, and the display's stability over time (display reliability), as well as power efficiency. PixTech is seeking to balance luminous efficiency with power efficiency to produce bright and low power-consumption displays. Display reliability is heavily dependent upon the manufacturing process used in assembling the displays as well as upon the characteristics of the phosphors used on the anode. In order to produce color displays that will provide the product life necessary for most applications, the Company believes it will need to make further advances in phosphors and related manufacturing technologies. Competition and Competing Technologies. The market for flat panel display products is intensely competitive and is expected to remain so. The market is currently dominated by products utilizing liquid crystal display ("LCD") technology. LCD technology has continued to improve, and there can be no assurance that advances in LCD technology will not overcome its current limitations. In addition, as some of the basic FED technology is in the public domain, the Company has a number of potential direct competitors developing FED displays. In the event that efforts by the Company's competitors result in the development of products that offer significant advantages over the Company's products, the Company could be adversely affected. No Assurance of Market Acceptance. The potential size and timing of market opportunities targeted by the Company and the members of the FED Alliance are uncertain. The Company anticipates marketing its displays to OEMs, and its success will depend on whether OEMs select the Company's products for incorporation into their products and upon their successful introduction of such products, as well as the successful commercialization of products developed by members of the FED Alliance. Patents and Protection of Proprietary Technology. The Company's ability to compete effectively with other companies will depend, in part, on the ability of the Company to maintain the proprietary nature of its technology. Although the Company has been granted, has filed applications for and has been licensed under a number of patents in the United States and other countries, there can be no assurance as to the degree of protection offered by these patents, as to the likelihood that pending patents will be issued or as to the validity or enforceability of any issued patents. Foreign exchange. A large percentage of the Company's net assets and of the Company's costs is expressed in French Francs. Fluctuations of the parity of the U.S. dollar versus the French Franc may cause significant foreign exchange gains or losses. Financial Condition Cash used in operations was $6.8 million for the nine-month period ended September 30, 1997, as compared to cash used in operations of $2.4 million for the nine-month period ended September 30, 1996. The Company has used $20.1 million in cash to fund its operating activities from inception through September 30, 1997 and has incurred $27.0 million in capital expenditures and investments. Cash flows generated from financing activities were $20.6 million in the nine- month period ended September 30, 1997, as compared to $1.8 million used in financing activities in the nine-month period ended September 30, 1996. These financings consisted primarily of sales of shares of Common Stock in a public offering in Europe and in private placements, resulting in net proceeds to the Company of $15.9 million (net of issuance costs) and $5.7 million, respectively, while long term liabilities decreased by $1.0 million. Cash flow generated from financing activities exclude non-cash transactions related to the sale of 463,708 shares of the Company's Common Stock to Motorola, Inc (See "Notes to Condensed Consolidated Financial Statements - Note D -- Private placements"). As consideration for this stock purchase, an amount of $686,000 has been received in cash and the remaining $1.4 million was in the form of forgiveness of $1.4 million of obligations due from PixTech S.A. to Motorola. Since its inception, the Company has funded its operations and capital expenditures primarily from the proceeds of equity financing aggregating $55.5 million and from proceeds aggregating $9.0 million from borrowings and sale- leaseback transactions. Capital expenditures were $511,000 during the nine-month period ended September 30, 1997 as compared to $4.7 million during the same period of 1996. In 1997, capital expenditures were primarily related to the purchase of miscellaneous tooling for the Company's pilot production line. Investments amounted to $10.1 million at September 30, 1997 and are related to the security interest granted by the Company to Unipac (see "Note G - Bank Guaranty"). The nine-month period ended September 30, 1997 generated positive cash flows of $1.8 million as compared to negative cash flows of $9.2 million for the nine- month period ended September 30, 1996. On November 7, 1997, the Company was granted by the Japanese firm Sumitomo a $10.0 million loan (see "Note H - Subsequent Events"). Cash available at September 30, 1997 amounted to $6.1 million as compared to $4.3 million at December 31, 1996. The Company expects that cash available at September 30, 1997 together with the proceeds of the loan granted by Sumitomo will be sufficient to meet its cash requirements for at least 12 months. The Company's expectations regarding the sufficiency of its sources of cash over a future period is a forward-looking statement. The rate of expenditures by the Company will be affected by numerous factors including the rate of development of the Company's products and manufacturing capabilities, as well as market demand for such products. In the future, the Company will require substantial funds to conduct research, development and testing, to develop and expand commercial-scale manufacturing systems and to market any resulting products. Changes in technology or a growth of sales beyond currently anticipated levels will also require further investments. There can be no assurance that funds for these purposes, whether from equity or debt financing, or other sources, will be available when needed or on terms acceptable to the Company. PIXTECH, INC. September 30, 1997 PART II Other Information ITEM 1 Legal Proceedings: Not applicable. ITEM 2 Changes in Securities: (a) Not applicable (b) Not applicable (c) Not applicable ITEM 3 Defaults upon Senior Securities: Not applicable. ITEM 4 Submission of Matters to a Vote of Security Holders: None ITEM 5 Other Information: None. ITEM 6 Exhibits and reports on Form 8-K: (a) Exhibits : 4.1 Convertible Note issued by PixTech, Inc. to Sumitomo Corporation, dated October 27, 1997. 10.1 ++ Distribution and Financing Agreement between Sumitomo Corporation, PixTech Inc. and PixTech S.A. dated as of July 21, 1997. 10.2 ++ Credit Agreement between Sumitomo Corporation and PixTech, Inc. dated as of July 21, 1997. 10.3 ++ Cross-Licensing Period Extension between Raytheon Company and Pixel International, S.A. (now PixTech S.A.) dated as of September 4, 1997. 10.4 ++ Amendment No. 4 to the License Agreement on theMicrotips Display between PixTech the Commissariate A L'Energie Atomique. 27 Financial Data Schedule. ++ Confidential treatment has been requested for certain portions of these Exhibits pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended. PIXTECH, INC. September 30, 1997 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PIXTECH, INC. Date: November 14, 1997 BY:/s/ Yves Morel Yves Morel Chief Financial Officer PIXTECH, INC. September 30, 1997 EXHIBIT INDEX Exhibit No. - ----------- 4.1 Convertible Note issued by PixTech, Inc. to Sumitomo Corporation, dated October 27, 1997. 10.1++ Distribution and Financing Agreement between Sumitomo Corporation, PixTech Inc. and PixTech S.A. dated as of July 21, 1997. 10.2++ Credit Agreement between Sumitomo Corporation and PixTech, Inc. dated as of July 21, 1997. 10.3++ Cross-Licensing Period Extension between Raytheon Company and Pixel International, S.A. (now PixTech S.A.) dated as of September 4, 1997. 10.4++ Amendment No. 4 to the License Agreement on theMicrotips Display between PixTech the Commissariate A L'Energie Atomique. 27 Financial Data Schedule. ++ Confidential treatment has been requested for certain portions of these Exhibits pursuant to rule 24b-2 of the Securities Exchange Act of 1934, as amended. EX-4.1 2 CONVERTIBLE NOTE EXHIBIT 4.1 THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR ITS SUCCESSOR RULE UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. CONVERTIBLE NOTE ---------------- 27.10, 1997 FOR VALUE RECEIVED, the undersigned, PIXTECH, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the order of SUMITOMO CORPORATION, a -------- Japanese corporation (the "Lender"), the unpaid principal amount of the ------ Convertible Loan outstanding from time to time (the original principal amount being Five Million United States Dollars (US $5,000,000)), and interest accrued thereon, at the times and in the amounts set forth in the Credit Agreement dated as of July 21, 1997, by and between the Borrower and the Lender, (the "Credit ------ Agreement"). Capitalized terms used herein without definition have the - --------- respective meanings set forth in the Credit Agreement. This Note is the "Convertible Note" referred to in, and is entitled to the benefits of, the Credit Agreement. Reference is hereby made to the Loan Documents for the rights and obligations of payment and prepayment, collateral security, Events of Default and the rights of acceleration of the maturity hereof upon the occurrence of an Event of Default. 1. Conversion of the Note. ---------------------- 1.1. Voluntary Conversion. Subject to the terms and conditions of -------------------- this Note and the Credit Agreement, from time to time after the 18-month anniversary of the date of execution of this Note, the Lender may elect to convert all or any portion of the outstanding principal balance of this Note (in each case, the "Conversion Amount"), into Common Stock of the Borrower. The ----------------- number of shares of Common Stock issuable upon conversion of the Conversion Amount (the "Conversion Shares") shall be equal to (a) the Conversion Amount ----------------- divided by (b) an amount equal to eighty percent (80%) of the average Closing - ---------- Price over the twenty (20) consecutive Trading Days immediately prior to the date of the Conversion Notice (as defined below) (subject to appropriate adjustments in the event of any subdivision, reclassification, consolidation or the like). For the purpose hereof, (i) "Closing Price" means the closing price ------------- for shares of Common Stock on the NASDAQ national market system, and (ii) "Trading Day" means any day on which trading of the Common Stock is conducted on - ------------ the NASDAQ national market system. 1.2 Conversion Procedure. The conversion of the Conversion Amount into -------------------- Conversion Shares shall be made upon written notice by the Lender to the Borrower (the "Conversion Notice"), given on or before the third Business Day ----------------- prior to the proposed date of conversion (the "Conversion Date") and delivered --------------- to the Borrower at the address set forth in the Credit Agreement. The Conversion Notice shall set forth the name of the Person in whose name the stock certificate for the Conversion Shares is to be issued, the number of Conversion Shares into which the Conversion Amount is to be converted and the Conversion Date. The Borrower shall deliver or cause to be delivered at its address set forth in the Credit Agreement a stock certificate representing the Conversion Shares, which shares shall be fully paid and nonassessable. The Borrower shall record the Lender as the owner of the Convertible Shares on the records of the Borrower. 1.3. Obligations Under Note. This Note shall cease to be an ---------------------- obligation of the Borrower as of the date upon which all of the outstanding principal balance of this Note shall have been converted into Conversion Shares and all interest accrued thereon shall have been paid. 1.4. Principal Upon Conversion. Upon conversion, the Conversion ------------------------- Amount shall be deemed to be repaid in full by the Borrower to the Lender. 1.5. Taxes on Conversion. The Borrower shall pay any documentary, ------------------- stamp or similar issue or transfer tax due on the issuance of Conversion Shares. 2. No Shareholder Rights. The Lender shall not be entitled to any rights --------------------- as a shareholder in the Borrower until the Lender has converted this Note or any portion of the amount owing hereunder. 3. Reservation of Stock. The Borrower covenants that during the period -------------------- in which this Note is convertible, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the conversion of this Note. The Borrower agrees that its execution of this Note shall constitute a grant of full authority to its officers charged with the duty of executing stock certificates to execute and issue the necessary certificates for Conversion Shares upon the conversion of this Note. 4. Loss, Theft, Destruction or Mutilation of Note. Upon receipt by the ---------------------------------------------- Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft, destruction or mutilation of this Note, and of indemnity or security reasonably satisfactory to the Borrower, and upon reimbursement to the Borrower of all reasonable expenses incidental thereto, and upon surrender and cancellation of this Note, if mutilated, the Borrower will make and deliver a new Note in the same form as this Note, in lieu of this Note. 5. Governing Law. This Note shall be governed by, and construed and ------------- enforced in accordance with, the laws of the State of California. -2- IN WITNESS WHEREOF, the Borrower has caused this Note to be executed as of the day and year first above written. PIXTECH INC. /s/ Yves Morel By: Yves Morel Title: Chief Financial Officer -3- EX-10.1 3 DISTRIBUTION AND FINANCING AGREEMENT EXHIBIT 10.1 DISTRIBUTION AND FINANCING AGREEMENT This Distribution and Financing Agreement is entered into as of July 21, 1997 (the "Effective Date") by and between Sumitomo Corporation ("Sumitomo"), a Japanese corporation, PixTech, Inc., a Delaware corporation, and PixTech SA, a French Corporation. RECITALS WHEREAS, Sumitomo is a major international trading company and Sumitomo has established business relationships with a number of companies based in Japan; WHEREAS PixTech SA has licensed and developed a technology for production of field emission displays ("FEDs") and plans to develop a range of standard monochrome and color products based on this technology and its evolution, WHEREAS PixTech SA has established bilateral Cooperation and License Agreements with Futaba Corporation, a Japanese corporation, Raytheon corporation, a Delaware corporation, and Motorola, Inc., a Delaware corporation, and is seeking to sign additional contracts of the same nature with companies located in Asia or elsewhere, WHEREAS PixTech SA has established a pilot line in Montpellier for FED technology and product development as well as for limited production, WHEREAS PixTech SA has entered into a Display Foundry Agreement (the "Foundry Agreement"), with Unipac Optoelectronics Corporation, ("Unipac"), a Taiwanese corporation that currently manufactures Liquid Crystal Displays, whereby Unipac will contract manufacture FEDs for sale by PixTech SA, WHEREAS PixTech SA is currently transferring its manufacturing process to Unipac to prepare large volume production under the Foundry Agreement, WHEREAS Sumitomo desires to obtain distribution rights for PixTech SA's FED Products in Asia, WHEREAS PixTech SA desires to find support from Sumitomo for the distribution of its FED products in Asia, WHEREAS PixTech, Inc. desires to obtain a loan to allow acquisition of a limited set of equipment to prepare volume production of Field Emission Displays ("FEDs"), WHEREAS Sumitomo desires to grant such loan to PixTech, Inc., NOW THEREFORE, in consideration of the premises and mutual covenants contained herein, Sumitomo, PixTech, Inc. and PixTech SA agree to the following terms and conditions hereto (hereinafter referred to collectively as the "Agreement"): 1. DEFINITIONS. 1.1 "Asia" shall mean all Asian countries, including but not limited to China, Korea, Taiwan, Mongolia, Philippines, Indonesia, Vietnam, Laos, Singapore, Malaysia, Brunei, Thailand, Burma (Myanmar), Bangladesh, Sri Lanka, India, Pakistan, except for countries from the former Soviet Union. 1.2 "Affiliate" of a party shall mean a Person that directly, or indirectly through one or more intermediaries, is controlled by such Party. "Control" shall mean the possession of the power to direct or cause direction of the management and policies of such Party, whether through the ownership of voting stock, by contract or otherwise. In the case of a corporation, "control" shall mean, among other things, the direct or indirect ownership of more than fifty percent (50%) of its outstanding stock. 1.3 "Borrowing" shall mean the borrowing of a loan by PixTech, Inc. from Sumitomo pursuant to the Credit Agreement made and dated as of July 21, 1997, by and between PixTech, Inc. and Sumitomo. 1.4 "Commercial Partnership Period" shall mean the period during which distribution rights are granted by PixTech to Sumitomo, as defined in paragraph 2 and 3 below. 1.5 "Confidential Information" shall mean the confidential information of either Party designed as such by the disclosing Party as set forth more particularly in Paragraph 10 of this Agreement entitled "Non- Disclosure and Confidentiality" 1.6 "Effective Date" shall mean the date first written above 1.7 "FED" shall mean Field Emission Display, i.e. a flat panel display based on a technology that involves a matrix addressed cathode plate attached to phosphor bearing anode plate with an hermetic seal, allowing after forming a vacuum between the two plates to generate a picture on the anode plate by control of electron emission by the cathode and acceleration of the electrons onto the anode plate. 1.8 "FED related Invention" shall mean any idea, design, concept, technique, process, invention, discovery or improvement, whether or not patentable, made by employees of one or more Parties in the field of FED. 1.9 "Industrial Partner" or "IP" shall mean any Person with which PixTech SA or PixTech, Inc. has a Cooperation and License Agreement. A Cooperation and License agreement involves a worldwide non exclusive license on FED patents and know-how from PixTech to the Industrial Partners with no right to sublicense, and a worldwide, non exclusive license on certain Industrial Partner's FED technology to PixTech, with a right to sublicense, under certain conditions. 1.10 "Japanese Company" shall mean any Japanese Person or any Japanese Transplant. 1.11 "Japanese Person" shall mean any Person with its main offices located in Japan. 1.12 "Japanese Transplant" shall mean a Person located in Asia which is either (i) an Affiliate of a Japanese Person or (ii) a Person which main activity is to manufacture products under a technology licensed by a Japanese Company 1.13 "Market Area" shall mean the geographical area within which Sumitomo shall have exclusive and non exclusive rights to sell PixTech FED Products. 1.14 "Person" shall mean any individual, partnership, corporation, firm, association, unincorporated organization, joint venture, trust or other entity. 1.15 "PixTech SA" shall mean PixTech SA and its Affiliates. 1.16 "PixTech, Inc." shall mean PixTech Inc. and its affiliates. 1.17 "PixTech" shall mean PixTech SA, and / or PixTech, Inc. 1.18 "PixTech's FED products" shall mean any product manufactured by PixTech or any product manufactured by a Person under a contract manufacturing arrangement with PixTech, which incorporates PixTech's FED Technology. 1.19 "PixTech's FED Technology" shall mean any technology relating to or useful in the design and manufacturing of FEDs, including without any limitation any patent, know-how, trade secret, which is owned by or licensed to PixTech. 1.20 "Term" shall have the meaning set forth in Paragraph 12 hereof. 2. PURPOSE 2.1 Distribution rights. PixTech SA and PixTech, Inc. grant Sumitomo exclusive -------------------- rights to sell PixTech's FED Products during the Commercial Partnership Period, within the Market Area defined in paragraph 3 below. 2.2 Loan. Sumitomo grants PixTech, Inc. a loan according to the terms defined ----- in paragraph 6.1 below. 2.3 Reasonable efforts by PixTech. PixTech agrees to use reasonable efforts to ------------------------------ develop and improve the PixTech Technology, and to make commercial quantities of PixTech FED Products available. 2.4 Best efforts by Sumitomo. Sumitomo agrees to use best efforts to promote ------------------------- and sell PixTech FED Products in the Market Area. 3. DISTRIBUTION RIGHTS 3.1 Grant and Market Area. Subject to Sumitomo's payment to PixTech, Inc. of ---------------------- the principal of the Borrowing, and subject to the limitations described in Section 11.6 hereof, PixTech SA and PixTech, Inc. hereby grant Sumitomo: (a) an exclusive right to sell PixTech FED Products to any Person located in Japan and any Japanese Transplant located in Asia; (b) a non exclusive right to sell PixTech FED Products to any Person located in Asia. 3.2 Extension of rights outside Asia for Japanese Transplants. On a case by ---------------------------------------------------------- case basis, PixTech may grant Sumitomo a right to sell PixTech FED Products to Japanese Transplants outside Asia. 3.3 PixTech to [ ]* to [ ]*, PixTech [ ]* on [ ]* to any --------------------- [ ]*. 3.4 PixTech to consult with Sumitomo prior to establishing production facility -------------------------------------------------------------------------- in the Market Area. PixTech shall involve Sumitomo in any project to ------------------- establish manufacturing capabilities in the Market Area, whether on its own or by way of a joint-venture with a Japanese Company, and shall submit a reasonable proposal for Sumitomo to participate in such manufacturing arrangement. Such proposal shall be negotiated in good faith between the parties involved. In case a reasonable proposal is waived by Sumitomo, Sumitomo's rights under this Agreement, including exclusive rights to any Products manufactured by PixTech's affiliates, shall not be impaired despite establishment of such manufacturing capabilities. 3.5 Term of Commercial Partnership Period. The Commercial Partnership Period -------------------------------------- shall commence upon the Effective Date hereof and continue for a period of seven (7) years. It shall be subject to automatic extension for additional one (1) year periods unless either party, with or without cause, shall give written notice of termination to the other not less than ninety (90) days prior to the end of the initial term of Commercial Partnership Period or any extension hereof. * Confidential Treatment Requested 4. OBLIGATIONS OF THE PARTIES DURING THE COMMERCIAL PARTNERSHIP PERIOD 4.1 Coordination for Expansion of Activity. In order to facilitate expansion of --------------------------------------- sales activity under this Agreement, the Parties shall meet on a regular basis to define and agree on a marketing and sales plan and review business progress under this Agreement. The parties shall also discuss market conditions and trends and product definitions. 4.2 Technical Training by PixTech. PixTech will use reasonable efforts to ------------------------------ ensure adequate technical training to Sumitomo's representatives. Such technical training will cover any area needed in order to facilitate sales of PixTech FED Products. 4.3 PixTech to Notify Sumitomo of Sales of PixTech FED Products to New ------------------------------------------------------------------ Customers in Asia. PixTech shall notify Sumitomo of the occurrence or ------------------ anticipated occurrence of any first sale of PixTech FED Product to a Person located in Asia (outside Japan) made by PixTech or any distributor of PixTech's FED products. Sumitomo shall promptly indicate whether Sumitomo considers that such Person is a Japanese Transplant, and shall describe the reasons supporting such consideration. Any commercial relationship initiated between PixTech and a Japanese Transplant located in Asia shall immediately be transferred to Sumitomo. 4.4 PixTech to Enforce Sumitomo's Exclusivity to Sell PixTech FED Products to ------------------------------------------------------------------------- Japanese Persons and Japanese Transplants. PixTech and any distributor of ------------------------------------------ PixTech FED products shall not sell any PixTech FED products to Japanese Persons and Japanese Transplants during the Term of this Agreement. PixTech shall ensure that any distributor of PixTech FED products shall comply with that obligation. PixTech shall forward to Sumitomo any request for product or sales information from Japanese Companies. 4.5 Product Exclusivity. Sumitomo confirms that within the Market Area where -------------------- PixTech grants Sumitomo exclusive rights to sell its FED Products, the Electronics and Aerospace Division of Sumitomo, or any successor thereof, shall not distribute FED products manufactured by or purchased from any Person other than PixTech, including PixTech IPs. 5. COMMERCIAL CONDITIONS FOR DISTRIBUTION 5.1 Sales of Products. All sales of PixTech FED products hereunder shall be ----------------- made by PixTech to Sumitomo for Sumitomo's resale to its customers. Sumitomo shall be free to resell PixTech FED products purchased from PixTech to customers within the Market Area at whatever prices and on whatever terms and conditions Sumitomo shall best promote the purpose of this Agreement. All sales of PixTech FED products to Sumitomo shall be subject to the conclusion of an individual sales contract (each hereinafter an "Individual Sales Contract") and also to the following terms: (a) PixTech FED products shall be delivered to Sumitomo on [ ]*. (b) Payments shall be made in the lawful currency of Japanese Yen within forty five (45) days after PixTech's presentation of invoice and relevant shipping documents. The Parties hereto may, in an Individual Sales Contract, agree on terms and conditions different from those of this Agreement, and, in such event, such terms and conditions in the Individual Sales Contract (excluding the printed terms and conditions) shall supersede the conflicting terms and conditions of this Agreement. 5.2 Discount to Sumitomo. PixTech shall sell its FED Products to Sumitomo at a -------------------- price based upon PixTech's international price list, less a discount. This percentage will be [ ]* for an initial period of three years starting from the Effective Date. After this initial period, this discount may be adjusted upon mutual agreement between the Parties, depending on sales volume. 5.3 Costs. Each party will bear its own costs associated with the execution of ------ this Agreement, including training of support personnel, advertising, organization and participation to trade shows, administration and sales costs. 5.4 Customer Selection. Within the Market Area and within the limitations set ------------------- forth in Section 11.6 hereof, Sumitomo will have full discretion to select or reject a customer for PixTech FED products. * Confidential Treatment Requested 6. LOAN TO PIXTECH 6.1 Grant of Loan. In order to facilitate production of volume quantities of -------------- PixTech FED products, Sumitomo will grant PixTech a loan according to the terms and conditions described in the Credit Agreement by and between PixTech, Inc. and Sumitomo, as attach hereto as Appendix 1. 7. REPORTS 7.1 Monthly Sales Activity Report. Commencing with the month in which sales of ------------------------------ PixTech FED Products by Sumitomo first occur, thirty days after the end of each month while the Agreement is in effect, Sumitomo shall deliver to PixTech full, true and accurate reports of its sales of PixTech FED products during that month. These reports shall include the following, but shall not include unit price and total price: (a) Name, address and activity of customer (b) For each PixTech FED Product, number of products sold or returned, (c) Any adjustment to prior periods. 7.2 Quarterly Sales Activity Report. Commencing with the quarter in which sales -------------------------------- of PixTech FED Products by Sumitomo first occur, thirty days after the end of each quarter while the Agreement is in effect, Sumitomo shall deliver to PixTech full, true and accurate reports of its aggregate sales of PixTech FED products during that quarter. These reports shall include the following: (a) For each PixTech FED Product, Aggregate amounts of sales, using actual prices applicable to Sumitomo's customers (b) Any adjustment to prior periods. 7.3 SEC Filings to Sumitomo. During the Term of this Agreement, PixTech will ------------------------ make available to Sumitomo any filings, including all periodical financial statements and press releases, made by PixTech to the Securities and Exchange Commissions or any other Market Authority. 8. INDEMNIFICATION 8.1 PixTech shall indemnify and hold harmless Sumitomo from and against all actions, proceedings, claims, damages, costs and demands, except for damages, claims, costs and demands arising out of Sumitomo negligence or misconduct, including any misrepresentation to third parties, which may arise out of or in connection with any sales, distribution, marketing or use of PixTech's FED products sold, distributed or marketed by Sumitomo directly or indirectly in the Market Area limited to any claims of infringement of patent, trademark, or other intellectual property right and any product liability claims, and claims resulting from short shipment by PixTech or failure to meet the warranty by PixTech, provided, however, that Sumitomo shall in every instance refrain from making any admission of liability, shall give either PixTech, Inc. or PixTech, SA. a notice of any claim made, shall assist in the defense of such claim, and shall refrain from settling such claim without written consent of either PixTech, Inc. or PixTech, SA. 8.2 For any single claim or for any single 12 month period under paragraph 8.1, PixTech shall not be liable to more than five (5) million US dollars. 9. INTELLECTUAL PROPERTY 9.1 Ownership of Inventions PixTech shall own all right, title and interest in ----------------------- and to any FED Related Inventions made during the Term resulting from the interaction of PixTech personnel and Sumitomo and its customers. 9.2 No license under PixTech Technology to Sumitomo. No licenses are granted ------------------------------------------------- under this Agreement, by implication, estoppel or otherwise. Nothing in this agreement shall be construed as conferring Sumitomo any license, right to use or other right with respect to any intellectual property of PixTech. 9.3 Infringement by Others; Prosecution by PixTech. Sumitomo shall notify ----------------------------------------------- PixTech in writing as soon as possible after becoming aware of any potential patent, copyright, or other potential infringement by a third party of the PixTech Technology. 10. NON-DISCLOSURE AND CONFIDENTIALITY 10.1 Confidential Information. "Confidential Information" shall mean all ------------------------- confidential, proprietary or secret information, including, but not limited to, PixTech's FED Technology, all related technology, know-how, process, equipment and patents developed by PixTech production facilities and industrial plans, production data, relative to process, quality or yield, design, drive techniques and packaging of PixTech's displays, design and specification of mask tooling, display test results and performance data, commercial and financial information that is owned possessed or used by either Sumitomo and PixTech during the term of this Agreement. During the term of this Agreement, each of the parties hereto shall not disclose to any third party any Confidential Information which is conspicuously marked or identified by the disclosing party as "Confidential". 10.2 Use of Confidential Information. The Parties shall use Confidential -------------------------------- Information solely for the purposes contemplated by this Agreement and will limit access to Confidential Information to those employees, consultants, and advisors who have a need to know. 10.3 Disclosure of PixTech's Confidential Information by Sumitomo to Potential ------------------------------------------------------------------------- Customers. Sumitomo shall have the right to disclose Confidential ---------- Information to potential customers provided that a non-disclosure agreement, in a form agreed by the Parties, is entered into between Sumitomo and its potential customer, and provided that, within ten (10) days after such disclosure, Sumitomo delivers to PixTech an executed copy of such non-disclosure agreement. 10.4 Exclusions from Confidential Information. Notwithstanding the provisions of ----------------------------------------- subsection 10.1 above, Confidential Information shall not include any information to the extent it (i) is or becomes a part of the public domain through no act or omission on the part of the receiving Party, (ii) is disclosed to third parties by the disclosing party without restriction on such third parties, (iii) is lawfully in the receiving party's possession at or prior to the time of disclosure under this Agreement; (iv) is disclosed to the receiving party by a third party having the legal right to do so, and who at the time of such disclosure has no obligation of confidentiality to a Party; (v) is independently developed by the receiving party without reference to the disclosing party's proprietary information; or (vi) is released from confidential treatment by written consent of the disclosing party. 10.5 Obligations of Parties. Each of PixTech and Sumitomo shall hold in ----------------------- confidence and not disclose (except on a confidential basis to employees who need to know) all Confidential Information received from the other Party in the same manner and to the same extent as it holds in confidence its own Confidential Information of a similar nature and value. 10.6 Permitted Disclosures of Confidential Information. Each Party may disclose ------------------------------------------------- any Confidential Information under, and to the extent required to comply with a court or administrative subpoena or order or other applicable governmental regulation or statutory requirement which appears to be lawful on its face, provided that the disclosing Party promptly notifies the other Party. 10.7 Compliance of Employees of Parties. Each of PixTech and Sumitomo shall take ---------------------------------- appropriate action by instruction or agreement with its employees to satisfy its obligations under paragraph 10 of the Agreement. 11. REPRESENTATIONS AND WARRANTIES 11.1 Warranties of All Parties. Each Party represents and warrants that: (i) it -------------------------- has the full authority to enter into this Agreement; (ii) there are no liens or encumbrances of any kind against any obligation under this Agreement or any outstanding agreements, assignments, or encumbrances inconsistent with the provisions of this Agreement; and (iii) each Party has or will obtain any necessary rights from its Affiliates to make the representations and to grant the rights specified herein on their behalf. 11.2 Representations and Warranties of PixTech. PixTech represents and warrants ------------------------------------------ to Sumitomo as follows: (a) PixTech's execution of this Agreement will not constitute a breach of, or default under, any Agreement to which PixTech is a party. (b) Prior to the Effective Date, only Raytheon Company, Futaba Corporation, and Motorola, Inc. have a valid license on PixTech's technology. This license include a right to manufacture and sell products incorporating the PixTech's FED technology without any limitation. (c) PixTech represents that under the Display Agreement between PixTech SA and Unipac, PixTech has granted Unipac a license to manufacture and to sell to PixTech only, and, under certain conditions, to its industrial Partners, FED products incorporating PixTech's FED technology (d) PixTech will not grant any license to its technology to more than three (3) additional Industrial Partners prior to June 28, 1998. (e) Amendment 1 dated February 6, 1997 of the Cooperation and License Agreement between PixTech and Motorola dated June 13, 1995 limits the number of sublicenses which the Company can grant relating to any Technology owned by Motorola. (f) PixTech represents that, as of the Effective Date, it is not aware of any patent or other intellectual property rights of third parties that would be infringed by PixTech's FED products. (g) PixTech represents that it has obtained any necessary rights or license from Industrial Partners to make the representations and to grant to Sumitomo the right to distribute PixTech FED products within the Market Area. 11.3 No Warranty with Respect to Availability, Performance or Cost ------------------------------------------------------------- Competitiveness of PixTech's FED products. PixTech does not warrant the ------------------------------------------ availability, the timing of such availability, the performance or the competitiveness of the PixTech FED Products. 11.4 NO WARRANTY OF PERFORMANCE. NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT --------------------------- TO THE RESULTS TO BE OBTAINED BY THE OTHER PARTY UNDER THIS AGREEMENT. EXCEPT AS OTHERWISE PROVIDED HEREIN, NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY PIXTECH HEREUNDER. 11.5 NO CONSEQUENTIAL DAMAGES. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ------------------------- ANY LOST REVENUE, LOST PROFITS OR OTHER INCIDENTAL, CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES BY REASON OF ANY PERFORMANCE OR NON-PERFORMANCE UNDER THIS AGREEMENT. 11.6 [ ]* not Included in Market Area. PixTech represents that ------------------------------------------------ under a valid cooperation agreement with a major [ ]*, PixTech has waived all rights to market its products, directly or indirectly, to any competing [ ]* or to any Person that intends to sell PixTech's FED products to any [ ]*. 12. TERM AND TERMINATION 12.1 Term. This Agreement shall commence upon the Effective Date hereof and ---- shall continue in full force and effect until the expiration of the Commercial Partnership Period, as defined under Section 3.5 hereof. 12.2 Either of PixTech and Sumitomo may terminate this Agreement by giving a written notice of termination to the other party: (a) if the other party breaches any of the provisions of this Agreement or any Individual Sales Contract and does not remedy within one hundred and eighty (180) days after a written notice is given requesting such party to remedy the breach; (b) if the other party becomes insolvent, or any voluntary or involuntary petition in bankruptcy or for corporate reorganization is filed by or against the other party, or a receiver is appointed with respect to any of the assets of the other party, or a liquidation proceeding is commenced by or against the other party; (c) if the whole or any substantial portion of the other party is transferred to a third party by agreement, order of court, or otherwise, the result of which, in the reasonable judgment of Sumitomo, would materially affect Sumitomo's rights and position under this Agreement ; or (d) if the whole or any substantial part of the ownership, control or management of the other party is changed, the result of which, in the reasonable judgment of Sumitomo, would materially affect Sumitomo's rights and position under this Agreement ; or (e) if any merger or consolidation will occur, the result of which would in the reasonable judgment of Sumitomo materially affect the ability of PixTech to fulfill its obligation under this agreement. * Confidential Treatment Requested Nothing in this Section 12.2 shall affect, be construed, or operate as a waiver of any right of the party aggrieved by any breach of this Agreement to recover any loss or damage incurred as a result of such breach, either before or after the termination hereof. 12.3 Force Majeure. "Force Majeure" shall mean an event beyond the control of -------------- the parties (including but not limited to fire, flood, tornado, earthquake, war, riot, strike, lockout or any act of government or governmental authority) which results in impossibility of performance of a Party's duties and obligations under this Agreement. Any party that asserts the occurrence of Force Majeure shall give immediate notice thereof to the other Party. During the existence of such event, the duties and obligations of the Parties under this Agreement shall be suspended and the Parties shall take all reasonable action to assure resumption of normal performance under this Agreement as soon as possible. If such impossibility of performance continues for more than ninety (90) days after the occurrence of Force Majeure, such other party shall have the right to terminate this Agreement. 12.4 Effect of Expiration or Termination. Upon expiration of this Agreement or ----------------------------------- termination hereof for any reason, nothing herein shall be construed to release either Party from any obligation that matured prior to the Effective date of such termination. In addition, upon termination of this Agreement before full repayment of the Borrowing described under Section 6.1, the outstanding principal balance of the Borrowing, interest accrued but unpaid thereon, and all other amounts payable thereunder shall become immediately due and payable, without demand upon or presentment to PixTech, Inc., which are expressly waived by PixTech, Inc. and Sumitomo may immediately exercise all rights, powers and remedies available to it at law, in equity or otherwise. 12.5 Survival. The rights and obligations of the following paragraphs and -------- sections of this Agreement shall, to the extent relevant, survive and continue after the expiration or termination hereof and shall bind the Parties and their legal representatives, successors, heirs and assigns; paragraph 8; paragraph 10; paragraph 13; Section 14.1, 14.2, and 14.3. 13. DISPUTE RESOLUTION 13.1 The parties hereby agree that they will attempt in good faith to resolve any controversy or claim arising out of or relating to this Agreement promptly by negotiations. If a controversy or claim should arise hereunder, either Party, or both parties, shall promptly prepare and exchange memoranda stating the issues in disputes and their positions, summarizing the negotiations which have taken place, and attaching relevant documents. The Senior Executives will meet for negotiations within thirty (30) days after the date of communication of such memoranda to the other Party, at a mutually agreed time and place. If the matter has not been resolved within thirty (30) days of the first meeting of the Senior Executives, subject to rights to injunctive relief and unless otherwise specifically provided for herein, any controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be finally settled in New York, New York under the Rules of the American Arbitration Association by one or more arbitrators appointed in accordance with such Rules. Any award resulting therefrom shall be final and binding on the parties hereto. 14. GENERAL 14.1 Expenses. Except as otherwise expressly provided herein, each Party hereto -------- shall be responsible for its own costs and expenses incurred in connection with the performance hereof, including, without limitation, legal fees, and expenses incurred in connection with the transactions contemplated hereunder. 14.2 Public disclosure. Each Party hereby acknowledges and agrees that it will ----------------- not disclose the terms of this Agreement or any information relating to its subject matter to any third party without the express written consent of the other Party, except to the extent required by law or government rule and regulation. The foregoing notwithstanding, the Parties intend that a joint press release will be issued on a mutually agreed date following the Effective Date, the text of which shall have been approved by all parties. 14.3 Notices. Any notice, claim, request or other communication required or ------- permitted under this Agreement shall be valid and effective only if given by written instrument, duly delivered, and addressed as follows: If to PixTech : PixTech SA or PixTech Inc (as applicable) Avenue Perroy Zone Industrielle de Rousset 13 790 ROUSSET FRANCE Attention: Francis Courreges Executive Vice President Fax: 33 4 42 29 05 09 Telephone : 33 4 42 29 10 00 or other individuals or addresses as shall hereafter be furnished by written notice to Sumitomo. If to Sumitomo : Mr. Yoshihiro Bito General Manger, Electronics Department Fax: 81 - 3 - 3230 79 36 Telephone: 81 - 3 - 3230 - 77 33 Sumitomo Corporation Electronics Department 1-2-2, Hitotsubashi, Chiyoda-ku Tokyo, 100 Japan or other individuals or addresses as shall hereafter be furnished by written notice to PixTech. 14.4 Independent contractors. For the purpose of this Agreement and all services ----------------------- provided hereunder, both Parties shall be, and shall be deemed to be, independent contractors and not agents or employees of the other. Neither Party shall have the authority to make statements, representation or commitments of any kind, or take any actions, that will be binding on the other Party. 14.5 Compliance with government regulations. Each party agrees to comply with -------------------------------------- all applicable laws, regulations and ordinances, insofar as such laws, regulations and ordinances related to any of the activities to be performed by either Party under this Agreement. 14.6 Assignment. Neither this Agreement nor any part hereof shall be assignable ---------- by either Party without the express consent of the other. 14.7 Governing Law. The validity and interpretation of this Agreement and the ------------- legal relations of the parties shall be governed by the laws of the New York State. 14.8 Entire Agreement. This instrument, including the Appendixes hereto, ---------------- contains the entire Agreement between the Parties. No verbal agreement, conversation or representation between any officers agent or employees of the Parties hereto either before or after execution of this Agreement shall affect or modify any of the terms or obligations herein contained. The Parties hereby expressly terminate the Memorandum of Understanding dated as of May 6, 1997. 14.9 Modifications in Writing. No change, modification, extension, termination ------------------------ or waiver of this Agreement, or any provisions herein contained, shall be valid unless made in writing and signed by a duly authorized representative of each Party. 14.10 Severability. If any one or more of the provisions of this Agreement shall ------------ be held invalid, illegal or unenforceable, the validity, legality, or enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the Parties shall promptly negotiate a substitute provision, in good faith, that achieves the original intent of the severed provision, consistent with applicable law. 14.11 Binding Effect. This Agreement shall be binding upon and shall inure to -------------- the benefit of the Parties hereto, their Affiliates, and their respective successors and permitted assigns. 14.12 Headings. Headings used in this Agreement are for reference purposes only -------- and are not intended to be part of or to affect the meaning or interpretation of this Agreement.
Sumitomo Corporation PixTech Inc. PixTech S.A. By: /s/ Akio Yamane By: /s/ Jean-Luc Grand-Clement By: /s/ Francis Courreges ---------------- ---------------------------- ----------------------- Mr. Akio Yamane Assistant General Manager Mr. Jean-Luc Grand-Clement Mr. Francis Courreges Electronics Department Chief Executive Officer Executive V.P.
EX-10.2 4 CREDIT AGREEMENT BETWEEN SUMITOMO CORP. EXHIBIT 10.2 CREDIT AGREEMENT ---------------- This CREDIT AGREEMENT (this "Agreement") is made and dated as of July 21, --------- 1997, by and between SUMITOMO CORPORATION, a Japanese corporation (the "Lender"), and PIXTECH, INC., a Delaware corporation (the "Borrower"). ------ -------- RECITALS -------- A. The Borrower has requested the Lender to extend credit to the Borrower, and the Lender has agreed to do so. B. The Borrower and the Lender desire to set forth herein the mutually agreed upon terms and conditions of such credit extension. NOW, THEREFORE, in consideration of the above Recitals and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows: AGREEMENT --------- 1. Definitions ----------- 1.1 Specific Definitions: For purposes of this Agreement, the terms set -------------------- forth below shall have the following meanings: "Affiliate" means with respect to any Person (the "Specified Person"), (a) --------- ---------------- any Person other than the Specified Person directly or indirectly controlling, controlled by or under direct or indirect common control with, the Specified Person, or (b) any Person who is a commissioner, director or executive officer (i) of the Specified Person, (ii) of any Subsidiary of such Specified Person or (iii) of any Person described in clause (a) above. For purposes of this definition, the term "control" when used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "Business Day" shall mean any day other than a Saturday, a Sunday or a day ------------ on which banks in San Francisco, California, New York, New York , London, the United Kingdom, or Tokyo, Japan are authorized or obligated to close their regular banking business. "CEA Letter" shall have the meaning given such term in Section 4.1 (g). ---------- --------------- "CEA License Agreement" shall have the meaning given such term in Section --------------------- ------- 4.1 (g). - ------- "Code" shall mean the Internal Revenue Code of 1986, as amended, and the ---- rules and regulations issued thereunder as from time to time in effect. "Collateral" shall have the meaning given such term in Section 2.10. ---------- ------------ "Common Stock" shall mean the common stock, par value $0.01 per share, of ------------ the Borrower. "Contractual Obligation" shall mean as to any Person any provision of any ---------------------- security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of its property is bound. "Conversion" or "Conversion Rights" shall mean the exchange of, or the --------------------------------- rights to exchange, the principal amount of the Convertible Loan, or any part thereof, for the Borrower's fully paid and nonassessable Common Stock on the terms and conditions set forth in the Convertible Note. "Conversion Shares" shall mean the shares of Common Stock issued upon ----------------- Conversion of the Convertible Note. "Convertible Loan" shall have the meaning given such term in Section 2.2. ---------------- ----------- "Convertible Note" shall have the meaning given such term in Section 2.6. ---------------- ----------- "Deed of Guaranty" has the meaning given such term in Section 2.10. ---------------- ------------ "Deed of Mortgage" has the meaning given such term in Section 4.1 (f) ---------------- --------------- "Default" shall mean an event which but for the lapse of time or the giving ------- of notice, or both, would constitute an Event of Default. "Default Rate" shall have the meaning given such term in Section 2.4. ------------ ----------- "Dollar" and "$" each mean the lawful currency of the United States of ------ - America. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as ----- amended, and the rules and regulations issued thereunder as from time to time in effect. "ERISA Affiliate" shall mean each trade or business, including the --------------- Borrower, whether or not incorporated, which together with the Borrower would be treated as a single employer under Section 4001 of ERISA. "Event of Default" shall have the meaning given such term in Section 9 ---------------- --------- below. "Existing Licensing Agreements" shall mean the agreements identified on ----------------------------- Exhibit A. - --------- "Funding Date" shall mean the date the conditions precedent set forth in ------------ Section 4 below have been satisfied and the Loans are funded. - ---------- "GAAP" shall mean general accepted accounting principles in the United ---- States of America in effect from time to time, consistently applied. "Governmental Authority" shall mean any nation or government, any state or ---------------------- other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Indebtedness" of any Person shall mean all items of indebtedness which, in ------------ accordance with GAAP and industry practices, would be included in determining liabilities as shown on the liability side of a balance sheet of such Person as of the date as of which indebtedness is to be determined, including, without limitation, all obligations for money borrowed and capitalized lease obligations, and shall also include all indebtedness and liabilities of any other Person assumed or guaranteed by such Person or in respect of which such Person is secondarily or contingently liable (other than by endorsement of instruments in the course of collection) whether by reason of any agreement to acquire such indebtedness or to supply or advance sums or otherwise. "Indemnified Parties" shall have the meaning given such term in Section 7.9 ------------------- ----------- below. "Intercompany Agreement" shall have the meaning given such term in Section ---------------------- ------- 2.10. - ---- "Interest Period" shall mean (a) initially, the period beginning on the --------------- Funding Date and ending on the three (3)-month anniversary of the Funding Date and (b) thereafter, the period beginning on the last day of the previous Interest Period and ending on the three (3) month anniversary thereof; provided, -------- however, that (i) any Interest Period that begins on a day for which there is no - ------- numerically corresponding day in the calendar month during which such Interest Period is to end shall end on the last day of such calendar month, and (ii) no Interest Period shall extend beyond the Maturity Date. "Lien" shall mean any security interest, mortgage, pledge, privilege, lien, ---- claim on property, charge or encumbrance (including any conditional sale or other title retention agreement), any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code or comparable law of any jurisdiction. "Lien Certificate" shall have the meaning specified in Section 4.1 (c). ---------------- --------------- "Loan Documents" shall mean this Agreement, the Notes, the Security -------------- Documents, and each other document, instrument or agreement executed by the Borrower or any guarantor in connection herewith or therewith, as any of the same may be amended, extended or replaced from time to time. "Loans" shall mean the Straight Loan and Convertible Loan. ----- "Material Adverse Effect" shall mean (a) a material adverse change in, or a ----------------------- material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Borrower and PixTech S.A. taken as a whole which, in the good faith judgment of the Lender, is reasonably likely to impair the ability of the Borrower to make payments hereunder; (b) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of the Borrower or PixTech S.A. which, in the good faith judgment of the Lender, is reasonably likely to impair the ability of the Borrower or PixTech S.A. to perform any of their respective obligations under the Loan Documents (other than the Borrower's payment obligations hereunder) and to avoid any Event of Default; (c) a material adverse event caused by the actions or failure to act on the part of the Borrower or PixTech S.A. which affects the legality, validity, binding effect or enforceability against the Borrower or PixTech S.A. of any Loan Document which, in the good faith judgment of the Lender, is reasonably likely to impair the ability of the Lender to enforce the Notes or the other Credit Documents; or (d) a material adverse effect on the value or marketability of the Collateral caused by an action taken or a failure to act on the part of the Borrower or PixTech S.A. which, in the good faith judgment of the Lender, is reasonably likely to impair the ability of the Lender to realize sufficient value in any orderly liquidation of the Collateral. "Maturity Date" shall mean the earliest of: (a) the thirty-six (36)-month ------------- anniversary of the Funding Date, (b) the date the Loans, all interest thereon and all other amounts payable hereunder have been paid in full, and ( c) the date the Loans are accelerated pursuant to Section 9 below. --------- "1933 Act" shall mean the Securities Act of 1933, as amended. -------- "1934 Act" shall mean the Securities and Exchange Act of 1934, as amended. -------- "Notes" shall have the meaning given such term in Section 2.6 below. ----- ----------- "Obligations" shall mean any and all debts, obligations and liabilities of ----------- the Borrower to the Lender arising out of or related to the Loan Documents (whether principal, interest, fees or otherwise, now existing or hereafter arising, whether voluntary or involuntary, whether or not jointly owed with others, whether direct or indirect, absolute or contingent, contractual or tortious, liquidated or unliquidated, arising by operation of law or otherwise, whether or not from time to time decreased or extinguished and later increased, created or incurred, and whether or not extended, modified, rearranged, restructured, refinanced or replaced, including without limitation, modifications to interest rates or other payment terms of such debts, obligations or liabilities). "Person" shall mean any corporation, natural person, firm, joint venture, ------ partnership, trust, unincorporated organization, government or any department or agency of any government. "PixTech S.A." shall mean PixTech S.A., a French company having its ------------ registered office at Rousset (13790), Avenue Olivier Perroy. "Plan" shall mean any plan subject to Title IV of ERISA maintained for ---- employees of the Borrower or any ERISA Affiliate (and any such plan no longer maintained by the Borrower or any of its ERISA Affiliates to which the Borrower or any of its ERISA Affiliates has made or was required to make any contributions during the five years preceding the date on which such plan ceased to be maintained). "Principal Repayment Date" shall mean each of the eighteen (18)-month, ------------------------ twenty-four (24)-month, thirty (30)-month and the thirty-six (36)-month anniversary of the Funding Date. "Prime Rate" shall mean the prime rate publicly announced by The Chase ---------- Manhattan Bank, New York from time to time; provided, however, that if The Chase -------- ------- Manhattan Bank, New York shall for any period of time cease to announce publicly its prime rate, the Lender during such period shall determine the applicable rate based upon the prime commercial lending rate of other financial institutions selected by the Lender in its sole discretion. Each change in the Prime Rate shall be effective on the date such rate changes, as announced publicly by The Chase Manhattan Bank, New York or such other financial institution, without notice to the Borrower. "Requirements of Law" shall mean as to any Person the Certificate of ------------------- Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation, or a final and binding determination of an arbitrator or a determination of a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" shall mean the chief executive officer, the president ------------------- or an executive vice president of the Borrower and, as to financial matters, the chief financial officer of the Borrower. "Security Documents" shall mean the Lien Certificate, the Intercompany ------------------ Agreement, the Deed of Guaranty, the Deed of Mortgage, the CEA Letter, the minutes of the Board of Directors of PixTech S.A. referenced in Section 4.1 (k) --------------- and all additional documents, instruments and agreements delivered by the Borrower or any other Person pursuant to Section 3.1 below. ----------- "Straight Loan" shall have the meaning given such term in Section 2.1 ------------- ----------- "Straight Loan Note" shall have the meaning given such term in Section 2.6 ------------------ ----------- "Subsidiary" shall mean any Person with respect to which Borrower holds, ---------- directly or indirectly, more than fifty percent (50%) of the equity having ordinary voting power to elect the board of directors, managers or trustees of such Person (irrespective of whether or not at the time stock of any other class or classes of such Person shall have or might have voting power by reason of the happening of any contingency). 1.2 Other Interpretative Provisions. ------------------------------- (a) The meanings of defined terms are equally applicable to the singular and plural forms of the defined terms. The words "hereof," "herein," "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement; and Section, subsection, Schedule and Exhibit references are to this Agreement unless otherwise specified. (b) The term "including" is not limiting and means "including without limitation." In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including," the words "to" and "until" each mean "to but excluding," and the word "through" means "to and including." (c) Unless otherwise expressly provided herein, references to agreements (including this Agreement) and other contractual instruments shall be deemed to include all subsequent amendments, restatements and other modifications thereto, but only to the extent such amendments and other modifications are not prohibited by the terms of any Loan Document. (d) The captions and headings of this Agreement are for convenience of reference only and shall not affect the interpretation of this Agreement. (e) This Agreement and the other Loan Documents are the result of negotiations among and have been reviewed by counsel to the Lender and the Borrower and are the products of both parties. Accordingly, they shall not be construed against the Lender, merely because of the Lender's involvement in their preparation. 1.3 Accounting Principles. --------------------- Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. 2. Loan Facilities. --------------- 2.1 Straight Loan. On the terms and subject to the conditions set forth -------------- herein, the Lender agrees that on the Funding Date it shall make a term loan to the Borrower in the amount of $5,000,000.00 (the "Straight Loan"). Subject to ------------- the prepayment provisions of Section 2.8 and acceleration of the Straight Loan ------------ pursuant to Section 9 the Borrower shall repay to the Lender the principal ---------- amount of the Straight Loan in four (4) equal installments, each in the amount of $1,250,000.00, on each Principal Repayment Date. 2.2 Convertible Loan. On the terms and subject to the conditions set ---------------- forth herein, the Lender agrees that on the Funding Date it shall make a term loan to the Borrower in the amount of $5,000,000.00 (the "Convertible Loan"). ---------------- Subject to the prepayment provisions of Section 2.8, the conversion rights set ------------ forth in the Convertible Note, and the acceleration of the Convertible Loan pursuant to Section 9 the Borrower shall repay to the Lender the principal ---------- amount of the Convertible Loan in a single installment on the Maturity Date. 2.3 Interest. The Borrower shall pay interest on the outstanding -------- principal balance of each of the Loans from the Funding Date to but not including the date of payment at a rate per annum equal to the sum of: (i) the Prime Rate, plus (ii) three-quarters of one percent (0.75%). The Borrower shall ---- pay all interest accrued on the Loans for each Interest Period, in arrears, on the last day of each Interest Period; provided, however, that the Borrower shall -------- ------- pay all accrued interest on the Loans then outstanding on the Maturity Date. 2.4 Default Interest. Notwithstanding anything to the contrary contained ---------------- herein, on any date on which there shall have occurred and be continuing an Event of Default, any and all Obligations then due and payable shall bear interest at a per annum rate (the "Default Rate") equal to the sum of: (i) the Prime Rate, plus (ii) one and ------------ ---- three-quarters percent (1.75%). 2.5 Highest Lawful Rate of Interest. Anything herein to the contrary ------------------------------- notwithstanding, the obligations of the Borrower hereunder shall be subject to the limitation that payments of interest shall not be required, for any period for which interest is computed hereunder, to the extent (but only to the extent) that contracting for or receiving such payment by the Lender would be contrary to the provisions of any law applicable to the Lender limiting the highest rate of interest which may be lawfully contracted for, charged or received by the Lender, and in such event the Borrower shall pay the Lender interest at the highest rate permitted by applicable law. 2.6 Notes. The obligation of the Borrower to repay the Straight Loan ----- shall be evidenced by a note payable to the order of the Lender in the form of that attached hereto as Exhibit B (the "Straight Loan Note"), and the obligation --------- ------------------ of the Borrower to repay the Convertible Loan shall be evidenced by a note payable to the order of the Lender in the form of that attached hereto as Exhibit C (the "Convertible Note", and together with the Straight Loan Note, the - --------- ---------------- "Notes"). ----- 2.7 Computations. All computations of interest and fees payable hereunder ------------ shall be based upon a year of three hundred sixty (360) days for the actual number of days elapsed. 2.8 Prepayments. The Borrower may, upon at least ten Business Days' ----------- notice to the Lender, prepay the Straight Loan only, in whole or in part, in amounts of $500,000 or any multiple of $500,000 in excess thereof. Such notice of prepayment shall specify the date and amount of such prepayment and shall not thereafter be revocable by the Borrower. If such notice is given, the Borrower shall make such prepayment, and the payment amount specified in such notice shall be due and payable on the date specified therein, together with accrued interest to such date on the amount prepaid and any amounts required pursuant to Section 2.9 that have been properly notified to the Borrower at least three Business Days prior to such prepayment. Principal amounts prepaid shall be applied to reduce the remaining scheduled repayments of the Straight Loan in the inverse order of maturity (including the repayment to be made on the Maturity Date). 2.9 Funding Losses. The Borrower shall reimburse, without duplication -------------- with any other indemnity pursuant hereto, the Lender and hold the Lender harmless from any loss or expense which the Lender may reasonably sustain or incur as a consequence of: (a) the failure of the Borrower to make any payment of principal of the Convertible Loan or any payment or prepayment of principal of the Straight Loan when due (including payments made after any acceleration thereof); (b) the failure of the Borrower to make any prepayment after the Borrower has given a notice in accordance with Section 2.8 above; or (c) the prepayment of the Straight Loan on a day which is not the last day of the relevant Interest Period. 2.10 Use of Proceeds. --------------- (a) The entire proceeds of the Loan shall be lent by the Borrower to PixTech S.A.: (i) In accordance with a loan agreement which shall be executed prior to the availability of the proceeds of the Loan and according to which PixTech S.A. shall be liable vis-a-vis the Borrower under the same provisions as expressed herein (the "Intercompany Agreement"); and (ii) Subject to the execution by PixTech S.A. of a notarial deed to be executed in front of the notary as selected by the Lender, according to which PixTech S.A., with the prior written approval of its Board of Directors, shall be a joint guarantor of the Borrower vis-a-vis the Lender, with a waiver of any right to claim a prior prosecution of the Borrower by the Lender (the "Deed of Guaranty"); and (iii) Such guarantee being secured by a mortgage to be registered on the property owned by PixTech S.A. at Rousset as per a deed of acquisition dated June 27, 1996 (the "Land") and on the constructions built on this site in accordance with a construction permit no. PC 13 087 95 L0049 (the Constructions," collectively with the Land, the "Collateral") (b) PixTech S.A. shall deposit such proceeds in an account with the Worms Bank, to serve as security for a guarantee to be issued by Worms Bank for the benefit of Unipac Optoelectronics Corp. ("Unipac"), all as contemplated in the Display Foundry Agreement entered into between Unipac and PixTech S.A. (c) In reliance upon such guarantee, Unipac will obtain financing that will facilitate the installation at Unipac's manufacturing facility of volume production equipment for the manufacture of field emission displays incorporating proprietary technology of the Borrower and PixTech S.A. 2.11 Nature and Place of Payments. All payments made on account of the ---------------------------- Obligations arising hereunder: (a) shall be made by the Borrower, without setoff or counterclaim, in Dollars in immediately available funds, free and clear of, and without deduction, set-off or withholding for or on account of, present or future income or other taxes, levies, imposts, duties or charges of any nature imposed in the United States (all such taxes, levies, imposts, duties or charges, "Taxes"); and ----- if any Taxes are required to be withheld from any principal, interest, fees or other amounts payable to the Lender hereunder or under the other Loan Documents, the amounts so payable shall be increased to the extent necessary to yield to the Lender (after payment of all Taxes) the amount of such principal, interest, fees or other amounts intended to be paid hereunder at the rates or in the amounts specified in this Agreement and the other Loan Documents; provided, -------- however, that notwithstanding the foregoing, the Lender agrees to absorb Taxes - ------- required to be withheld by the Borrower from payments of interest made pursuant to Section 2.3 (and excluding interest payable under Section 2.4) provided that the rate at which such Taxes are required to be absorbed does not exceed ten percent (10%); (b) must be received by the Lender by 10:00 a.m. (Tokyo time) on the day of payment, it being expressly agreed and understood that if a payment is received after 10:00 a.m. (Tokyo time) by the Lender, such payment will be considered to have been made by the Borrower on the next succeeding Business Day and interest thereon shall be payable by the Borrower at the Default Rate during such extension; and (c) shall be made to the Lender at The Bank of Tokyo-Mitsubishi, Ltd., Head Office, account number 9015100 or to such office or accounts as the Lender may notify the Borrower in writing from time to time. 2.12 Payments on Business Days. If any payment required to be made by the ------------------------- Borrower hereunder becomes due and payable on a day other than a Business Day, the due date thereof shall be extended to the next succeeding Business Day and interest thereon shall be payable at the then applicable rate during such extension; provided that if such extension would cause such payment to be made -------- in the next succeeding calendar month, such payment shall be made on the next preceding Business Day. 2.13 Allocation of Payments Received. All amounts received by the Lender ------------------------------- on account of the Obligations hereunder shall be applied by the Lender as follows: (a) first, to the payment of expenses incurred by the Lender in the enforcement of its rights under the Loan Documents, including, without limitation, all costs and expenses of collection, attorneys' fees, court costs and foreclosure expenses; (b) then, to the Lender in payment of all other outstanding Obligations and interest accrued thereon until such amounts have been paid in full for application in such order as the Lender may elect; and (c) then, to such Persons as may be legally entitled thereto. 3. Collateral; Conversion of Convertible Loan. ------------------------------------------ 3.1 Collateral Security; Additional Documents. As collateral security for ----------------------------------------- the Obligations, the Borrower shall execute and deliver and shall cause PixTech S.A. to execute and deliver to the Lender each of the Security Documents to which such Person is a party. The Borrower further agrees to execute and deliver or to cause PixTech S.A. to execute and deliver to the Lender from time to time such confirmatory and supplemental security agreements, financing statements, consents of and notices to third parties and such documents, instruments and agreements, including, without limitation, relating to the creation or perfection of Liens under any relevant state or Federal law, or the law of any relevant foreign jurisdiction as the Lender may reasonably request which are in the Lender's judgment necessary or desirable to obtain for the Lender the benefit of the Security Documents and the Collateral. 3.2 Stock Conversion Rights. The Convertible Note shall be exchangeable ----------------------- for shares of the Borrower's common stock on such terms and in such amounts as shall be stated in the Convertible Note. The holders of the stock issued upon exercise of the right of conversion as provided in the Convertible Note shall be entitled to all of the rights of the Lender as stated in this Agreement or the other Loan Documents to the extent such rights are specifically stated to survive the conversion of the Convertible Note. 3.3 Registration Rights. The holders of shares of common stock of the ------------------- Borrower issued upon the conversion of the Convertible Note shall be entitled to the rights as provided in Section 10 of this Agreement. ----------- 4. Conditions to Making the Loans. ------------------------------ As conditions precedent to the obligations of the Lender to make the Loans: 4.1 Documentation. The Borrower shall have delivered or shall have caused ------------- to be delivered to the Lender each of the following (which, if not in the English language, shall be accompanied by an English translation thereof): (a) A duly executed counterpart of this Agreement; (b) A duly executed original of each of the Notes; (c) A certificate of the relevant local land registrar of a recent date showing the Collateral to be free of any and all Liens (the "Lien ---- Certificate"); - ----------- (d) A certified copy of the executed Intercompany Agreement; (e) A certified copy of the Deed of Guaranty; (f) A certified copy of a notarial deed of mortgage (the "Deed of ------- Mortgage") registered on the Land and the Constructions in form and substance - -------- satisfactory to Lender and its counsel (the "Deed of Mortgage"); ---------------- (g) An executed original letter to the Lender from the Commissariat a l'Energie Atomique ("CEA") or other appropriate documentation reflecting CEA's agreement to pay to the Lender, upon the occurrence of any Event of Default, [ ]* of any and all royalties received by CEA pursuant to the CEA License Agreement, in form and substance satisfactory to the Lender (the "CEA Letter"); ---------- (h) A duly executed original of each of the other Security Documents, each in form and substance satisfactory to Lender and its counsel; (i) Evidence that all documents (including, without limitation, Uniform Commercial Code or other financing statements) required or advisable to be obtained, filed, registered or recorded in order to create, in favor of the Lender, a perfected Lien with a priority acceptable to the Lender on the Collateral shall have been properly obtained, filed, registered or recorded in each office in each jurisdiction in which such filings, registrations and recordations are required; (j) Such credit applications, financial statements, authorizations and such information concerning the Borrower, PixTech S.A. and their respective businesses, operations and condition (financial and otherwise) as any Lender may reasonably request; (k) Certified copies of resolutions of the Boards of Directors of the Borrower and PixTech S.A. approving the execution, delivery and performance of the Loan Documents to which such Person is a party, including without limitation with respect to PixTech S.A., certified copies of minutes of the Board of Directors approving in advance the loan contemplated in the Intercompany Agreement, the mortgage by way of "caution hypothecaire" to be registered for an amount of FF 1OM on the Collateral contemplated in the Deed of Mortgage, and granting full authority to any person of Lender's choice, with the power of such person to substitute any third party at his or her option, to execute the Deed of Mortgage in favor of the Lender of the Collateral for an amount of FF 1OM (if the documents provided under this Section are not in the English language, the accompanying English translation shall be certified as to accuracy and completeness by counsel to the Borrower or PixTech S.A., as the case may be); (l) A certificate or certificates of the Secretary, Assistant Secretary or other appropriate officer of each of the Borrowers and PixTech S.A. certifying the names and true signatures of the officers of such Person authorized to sign the Loan Documents to which such Person is a party; (m) A copy of the Certificate of Incorporation or similar organizational document of the Borrower and PixTech S.A., certified by the Secretary of State or other official of the state or jurisdiction of incorporation of such Person as of a recent date; (n) A copy of the Articles of Incorporation and Bylaws or other similar organizational documents of the Borrower and PixTech S.A., certified by the Secretary, Assistant Secretary or other appropriate officer of such Person as of the Funding Date as being accurate and complete; (o) A certificate of authority and good standing as of a recent date for the Borrower from the Secretary of State of the State of Delaware and for PixTech S.A. from the appropriate official of its jurisdiction of incorporation; (p) Certificates of all insurance policies covering any tangible asset which may be included in the Collateral, including without limitation such policies as are required to * Confidential Treatment Requested be carried by the Borrower and PixTech S.A. pursuant to the terms of the Loan Documents, showing the Lender named as loss payee or named insured, as applicable, thereunder; and (q) Opinions of counsel for the Borrower and PixTech S.A. in form and substance satisfactory to the Lender and its counsel. 4.2 Amounts Payable. All amounts payable hereunder on or prior to the --------------- Funding Date shall have been paid. 4.3 Distribution and Financing Agreement. The Distribution and Financing ------------------------------------ Agreement dated July 21, 1997 between the Borrower and the Lender shall be in full force and effect. 4.4 Other Acts. All acts and conditions and things (including, without ---------- limitation, the obtaining of any necessary regulatory approvals and the making of any required filings, recordings or registrations) required to be done and performed and to have happened precedent to the execution, delivery and performance of the Loan Documents and to constitute the same legal, valid and binding obligations of the parties thereto, enforceable in accordance with their respective terms, shall have been done and performed and shall have happened in compliance with all applicable laws. 4.5 Other Documentation. All documentation, including, without ------------------- limitation, documentation for corporate and legal proceedings in connection with the transactions contemplated by the Loan Documents shall be in form and substance reasonably satisfactory to the Lender and its counsel, and the Lender and its counsel shall have received any and all further information and documents, which the Lender and its counsel may reasonably have requested in connection therewith, such documents where appropriate to be certified by proper authorities and the Borrower. 4.6 Representations and Warranties True. The representations and ----------------------------------- warranties of the Borrower and PixTech S.A. contained in the Loan Documents shall be true and correct. 4.7 No Default or Event of Default. There shall not have occurred a ------------------------------ Default or an Event of Default. 5. Representations and Warranties of the Borrower ---------------------------------------------- As an inducement to the Lender to enter into this Agreement and to make the Loans, the Borrower represents and warrants to the Lender, as of the date hereof and as of the Funding Date, that: 5.1 Financial Statements. Any and all financial information which has -------------------- been delivered to the Lender with respect to the Borrower or PixTech S.A. is accurate and complete in all respects and has been prepared in accordance with GAAP. 5.2 No Material Adverse Change. Since the date of the most recent -------------------------- financial information provided to the Lender, there has been no Material Adverse Effect. 5.3 Corporate Existence; Compliance with Law. Each of the Borrower and ---------------------------------------- PixTech S.A.: (1) is duly organized, validly existing and in good standing as a corporation under the laws of its jurisdiction of incorporation and is qualified to do business in each jurisdiction where its ownership of property or conduct of business requires such qualification and where failure to qualify could have a Material Adverse Effect, (2) has the corporate power and authority and the legal right to own and operate its property and to conduct business in the manner in which it does and proposes so to do, and (3) is in compliance with all Requirements of Law and Contractual Obligations, the failure to comply with which could have a Material Adverse Effect. 5.4 Corporate Power; Authorization; Enforceable Obligations. Each of the ------------------------------------------------------- Borrower and PixTech S.A. has the corporate power and authority and the legal right to execute, deliver and perform the Loan Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of such Loan Documents. The Loan Documents have been duly executed and delivered on behalf of the Borrower and PixTech S.A. and constitute legal, valid and binding obligations of such Persons enforceable against such Persons in accordance with their respective terms, subject to the effect of applicable bankruptcy and other similar laws affecting the rights of creditors generally and the effect of equitable principles whether applied in an action at law or a suit in equity. 5.5 No Legal Bar. The execution, delivery and performance of the Loan ------------ Documents, the borrowing hereunder and the use of the proceeds thereof, will not violate any Requirement of Law binding upon or any Contractual Obligation of the Borrower or PixTech S.A. or create or result in the creation of any Lien (except the Liens created by the Security Documents) on any assets of either of the Borrower or PixTech S.A. 5.6 No Material Litigation. No litigation, investigation or proceeding of ---------------------- or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against the Borrower or PixTech S.A. or against any of such Persons' properties or revenues which is likely to have a Material Adverse Effect. 5.7 Taxes. Each of the Borrower and PixTech S.A. has filed or caused to ----- be filed all tax returns that are required to be filed and have paid all taxes shown to be due and payable on said returns or on any assessments made against them or any of their property other than taxes which are being contested in good faith by appropriate proceedings and as to which the Borrower or PixTech S.A. has established adequate reserves in conformity with GAAP. 5.8 Investment Company Act. None of the Borrower, PixTech S.A. nor any ---------------------- Subsidiary of the Borrower is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 5.9 Subsidiaries. Attached hereto as Exhibit D is an accurate and ------------ --------- complete list of all Subsidiaries of the Borrower existing at the date hereof, their respective jurisdictions of incorporation and the percentage of their capital stock owned by the Borrower. All of the issued and outstanding shares of capital stock of such Subsidiaries have been duly authorized and issued and are fully paid and non-assessable. 5.10 Federal Reserve Board Regulations. Neither the Borrower nor PixTech --------------------------------- S.A. is engaged or will engage, principally or as one of its important activities, in the business of extending credit for the purpose of "purchasing" or "carrying" any "margin stock" within the respective meanings of such terms under Regulation U of the Board of Governors of the Federal Reserve System (as from time to time in effect and any successor to all or any portion thereof). No part of the proceeds of the Loans issued hereunder will be used for "purchasing" or "carrying" "margin stock" as so defined or for any purpose which violates, or which would be inconsistent with, the provisions of the Regulations of the Board of Governors of the Federal Reserve System. 5.11 Assets. Each of the Borrower and PixTech S.A. has good and ------ marketable title to all property and assets reflected in the financial statements referred to in Section 5.1 above, except property and assets sold or ------------ otherwise disposed of in the ordinary course of business subsequent to the respective dates thereof. 5.12 Securities Acts. Neither the Borrower nor PixTech S.A. has issued --------------- any unregistered securities in violation of the registration requirements of Section 5 of the 1933 Act, or any other law or is violating any rule, regulation or requirement under the 1933 Act, or the 1934 Act. Neither the Borrower nor PixTech S.A. is required to qualify an indenture under the Trust Indenture Act of 1939, as amended, in connection with its execution and delivery of the Notes. 5.13 Consents, etc. No consent, approval, authorization of, or -------------- registration, declaration or filing with any Person, including, without limitation, any Governmental Authority, is required on the part of the Borrower or PixTech S.A. in connection with the execution and delivery of the Loan Documents (other than filings to perfect the Liens granted by such Persons to the Lender under the Loan Documents) or the performance of or compliance with the terms, provisions and conditions or thereof. 5.14 Regulated Entities. Neither the Borrower nor PixTech S.A. is subject ------------------ to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Federal or state statute or regulation limiting its ability to incur Indebtedness. 5.15 Intellectual Property. Each of Borrower and PixTech S.A. has --------------------- sufficient title and ownership of, or rights with respect to, all patents, trademarks, service marks, trade names, copyrights, trade secrets, information, formulas, and processes (collectively, "Intellectual Property") necessary for --------------------- its business as now conducted and as proposed to be conducted, without any conflict with or infringement of the rights of others. Except for the Existing Licensing Agreements, there are no outstanding options, licenses, or agreements of any kind relating to the Borrower's and PixTech S.A.'s Intellectual Property, nor is the Borrower or PixTech S.A. bound by or a party to any options, licenses or agreements of any kind with respect to the Intellectual Property of any other Person except for the Licensing Agreement dated as of September 17, 1992 between Commissariat a l'Energie Atomique and PixTech S.A. (formerly known as Pixel International, S.A.) (the "CEA License Agreement"). Neither the Borrower nor PixTech S.A. have received any communications alleging that the Borrower or PixTech S.A. have violated or, by conducting its business as proposed, would violate any of the Intellectual Property rights of any other Person. To the Borrower's knowledge, none of its employees or the employees of PixTech S.A. is obligated under any contract (including licenses, covenants or commitments of any nature) or other agreement, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of his best efforts to promote the interests of the Borrower or PixTech S.A. or that would conflict with the Borrower's or PixTech S.A.'s business as proposed to be conducted. Neither the carrying on of the Borrower's or PixTech S.A.'s business by the employees of the Borrower and PixTech S.A., nor the conduct of the Borrower's or PixTech S.A.'s business as proposed will conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant or instrument under which the Borrower or PixTech S.A. or, to the Borrower's knowledge, any of its employees or the employees of PixTech S.A., is now obligated. 5.16 ERISA. There are no Plans for the Borrower or any of its ERISA ----- Affiliates. 5.17 Insurance. The properties of the Borrower and PixTech S.A. are --------- insured with financially sound and reputable insurance companies (not Affiliates) acceptable to the Lender, in such amounts, with such deductibles and covering such risks as are customarily carried by companies engaged in similar businesses and owning similar properties in localities where the Borrower and PixTech S.A. operate. 5.18 Capitalization and Voting Rights. The authorized capital stock of -------------------------------- the Borrower consists of (a) 30,000,000 shares of Common Stock, of which 13,747,303 shares are issued and outstanding, and (b) 1,000,000 shares of undesignated preferred stock, $0.01 par value per share, none of which are issued and outstanding. Except as set forth on Exhibit E, there are not --------- outstanding any options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition from the Borrower of any shares of its capital stock. The Borrower is not a party or subject to any agreement or understanding, and, to the Borrower's knowledge, there is no agreement or understanding between any Persons, which affects or relates to the voting or giving of written consents with respect to any security or by a director of the Borrower. 5.19 Valid Issuance of Shares. ------------------------ (a) The Conversion Shares, when issued, sold and delivered upon conversion of the Convertible Note, will be duly and validly issued, fully paid and nonassessable and, based in part upon the Borrower's representations herein, will be issued in compliance with all applicable securities laws. (b) The currently outstanding shares of capital stock of the Borrower are all duly and validly authorized and issued, fully paid and nonassessable, and were issued in compliance with all applicable securities laws. 5.20 Full Disclosure. None of the representations or warranties made by --------------- the Borrower or PixTech S.A. in the Loan Documents as of the date such representations and warranties are made or deemed made, and none of the statements contained in any exhibit, report, statement or certificate furnished by or on behalf of the Borrower or PixTech S.A. in connection with the Loan Documents contains or will contain any untrue statement of a material fact or omits or will omit any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they are made, not misleading as of the time when made or delivered. 6. Responsibilities and Warranties of the Lender. --------------------------------------------- The Lender hereby represents and warrants to the Borrower that, as of the date hereof and as of the Funding Date, that: 6.1 Authorization. This Agreement constitutes its valid and legally ------------- binding obligation, enforceable in accordance with its terms. 6.2 Purchase Entirely for Own Account. This Agreement is made with the --------------------------------- Lender in reliance upon the Lender's representations to the Borrower, which by the Lender's execution of this Agreement the Lender hereby confirms, that the Conversion Shares to be received by the Lender will be acquired for investment for the Lender's own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and that the Lender has no present intention of selling, granting any participation in, or otherwise distributing the same. By executing this Agreement, the Lender further represents that the Lender does not have any contract, undertaking, agreement or arrangement with any Person to sell, transfer or grant participations to such Person or to any third person, with respect to any of the Conversion Shares. The Lender represents that it has full power and authority to enter into this Agreement. 6.3 Investment Experience. The Lender acknowledges that it can bear the --------------------- economic risk of its investment and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Conversion Shares contemplated hereby. 6.4 Restricted Securities. The Lender understands that the Conversion --------------------- Shares are characterized as "restricted securities" under the U.S. federal securities laws inasmuch as they are being acquired from the Borrower in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the 1933 Act only in certain limited circumstances. In this connection, the Lender represents that it is familiar with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the 1933 Act. 6.5 Legends. It is understood that the certificates evidencing the ------- Conversion Shares may bear one or all of the following legends: (a) "These securities have not been registered under the Securities Act of 1933, as amended (the "Act") and may not be sold, transferred, assigned or hypothecated unless there is an effective registration statement under the Act covering such securities, the sale is made pursuant to Rule 144 or its successor rule under the Act or the Company receives an opinion of counsel satisfactory to the Company that an exemption from such registration is available." (b) Any legend required by applicable U.S. state law. 7. Affirmative Covenants --------------------- The Borrower hereby covenants and agrees with the Lender that, as long as any Obligations remain unpaid, the Borrower shall: 7.1 Reporting Requirements. Furnish or cause to be furnished to the ---------------------- Lender: (a) Within 120 days after the last day of each fiscal year of the Borrower, the consolidated and consolidating balance sheets of the Borrower as at the end of, and the related statements of income, shareholders' equity and cash flows for such year, and the comparative financial statements as at the end of, and for, the preceding fiscal year all prepared in accordance with GAAP accompanied by an opinion, which opinion shall be unqualified and otherwise satisfactory to the Lender, of Ernst & Young or any other internationally- recognized firm of independent certified public accountants. (b) Within forty-five (45) days after the last day of each fiscal quarter (other than the last fiscal quarter in the Borrower's fiscal year), (a) the consolidated and consolidating balance sheets of the Borrower as of the end of, and the related statements of income, shareholders' equity and cash flows for such fiscal quarter for the period from the beginning of the then current fiscal year to the end of such quarter, and (b) the comparative financial statements as at the end of, and for, the corresponding period in the preceding fiscal year, in each case, consistent with prior practice, together with a certificate of a Responsible Officer of the Borrower stating that such financial statements are presented fairly in accordance with GAAP subject only to year-end audit adjustments. (c) Promptly, such additional financial and other information, including, without limitation, financial statements of the Borrower or PixTech S.A., if available to the Borrower, as the Lender may from time to time reasonably request. 7.2 Payment of Indebtedness. And shall cause each of its Subsidiaries to ----------------------- pay, discharge or otherwise satisfy at or before maturity or before it becomes delinquent, defaulted or accelerated, as the case may be, all of such Person's Indebtedness (including taxes), except Indebtedness being contested in good faith and for which provision is made to the satisfaction of the Lender for the payment thereof in the event the Borrower or any Subsidiary is found to be obligated to pay such Indebtedness and which Indebtedness is thereupon promptly paid by the Borrower or such Subsidiary. 7.3 Maintenance of Existence and Properties. And shall cause each of its --------------------------------------- Subsidiaries to maintain its corporate existence and maintain all rights, privileges, licenses, approvals, franchises, properties and assets, necessary or desirable in the normal conduct of its business, as presently conducted and all other rights, privileges and franchises necessary in the normal conduct of its business, keep its properties useful or necessary in its business in good working order and condition, and from time to time make all needed repairs, renewals and replacements thereto. 7.4 Inspection of Property; Books and Records; Discussions. And shall ------------------------------------------------------ cause each of its Subsidiaries (1) to keep proper books of record and account on the same fiscal year basis as maintained on the date of this Agreement in which full, true and correct entries in conformity with GAAP and all Requirements of Law shall be made of all dealings and transactions in relation to its business and activities, and (2) permit representatives of the Lender (i) to visit, inspect and examine and make abstracts from and copies of any of its books and records relating to the Collateral at any reasonable time and as often as may reasonably be desired by the Lender, and (ii) with prior notice to the Borrower or any Subsidiary, to discuss the business, operations, properties and financial and other condition of the Borrower and any such Subsidiary with the officers and directors of such Person and with its independent certified public accountants. 7.5 Notices. Within ten (10) days after the occurrence of any such ------- event, give written notice to the Lender of: (a) the occurrence of any Default or Event of Default, the details of such Default or Event of Default and the action which the Borrower proposes to take with respect thereto; (b) any litigation or proceeding affecting the Borrower, PixTech or the Collateral which could have a Material Adverse Effect; and (c) any other event the Borrower believes could have a Material Adverse Effect. 7.6 Expenses. Immediately upon notice from the Lender, pay all -------- reasonable out-of-pocket expenses (including fees and disbursements of counsel) of the Lender incident to the enforcement of payment of the Obligations and any other rights of the Lender under the Loan Documents, whether by judicial proceedings or otherwise, including, without limitation, in connection with bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar proceedings involving the Borrower. The obligations of the Borrower under this Section 7.6 shall be effective and enforceable whether or not the Loans are made - ----------- hereunder and shall survive payment of all other Obligations and the conversion of the Convertible Note into common stock of the Borrower. 7.7 Loan Documents. Use the proceeds of the Loans as contemplated by -------------- Section 2.10 and comply with and observe all terms and conditions of the Loan - ------------- Documents. 7.8 Insurance. Maintain insurance with responsible and reputable --------- insurance companies or associations (which shall not be Affiliates of the Borrower) in such amounts and covering such risks as is customarily carried by companies engaged in the same or similar businesses and owning similar properties in the same general areas in which the Borrower operates; and, in any event, maintain the insurance required under the Loan Documents. 7.9 Indemnification. Indemnify and hold harmless the Lender and each of --------------- its Affiliates, directors, officers, employees, attorneys and agents (the "Indemnified Parties") from and against all damages and liabilities - -------------------- (collectively and severally, "Losses") assessed against any of them resulting ------ from the claims of any party relating to or arising out of the Loan Documents or the transactions contemplated thereby, except for Losses caused by the gross negligence or willful misconduct of such Indemnified Party, and reimburse the Lender and each other Indemnified Party for any expenses (including the fees and disbursements of legal counsel) reasonably incurred in connection with the investigation of, preparation for or defense of any actual or threatened claim, action or proceeding arising therefrom (including any such costs of responding to discovery request or subpoenas), regardless of whether the Lender or such other Indemnified Person is a party thereto. It is acknowledged and agreed by the Borrower that the indemnification rights of the Indemnified Parties hereunder are in addition to and cumulative with all other rights of the Indemnified Parties, including, without limitation, the right of the Lender to damages against the Borrower for breach of its obligations hereunder. With reference to the provisions set forth above in this Section 7.9 for payment by ----------- the Borrower of attorneys' fees incurred by the Indemnified Parties in any action or claim brought by a third party, the Borrower shall, if it admits liability hereunder to the Lender or any other such Indemnified Party, diligently defend the Lender and each other such Indemnified Party and diligently conduct the defense. If the Lender or any other such Indemnified Party desires to engage separate counsel, it may do so at its own expense; provided, however, that such limitation on the obligation of the Borrower to pay - -------- ------- the fees of separate counsel for the Lender or any other such Indemnified Party shall not apply if the Lender or any other such Indemnified Party, respectively, has retained said separate counsel because of a reasonable belief that the Borrower is not diligently defending it and/or not diligently conducting the defense and so notifies the Borrower. The obligations of the Borrower under this Section 7.9 shall survive payment in full of all ----------- other Obligations and conversion of the Convertible Note into common stock of the Borrower. 7.10 Compliance with Laws, Etc. Comply with all applicable laws, rules, ------------------------- regulations and orders with respect to which noncompliance could have a Material Adverse Effect. 7.11 Cooperation. Execute and deliver to the Lender any and all ----------- instruments, documents and agreements and do or cause to be done from time to time any and all other acts reasonably deemed necessary or desirable by the Lender to effect the provisions and purposes of the Loan Documents. 8. Negative Covenants ------------------ The Borrower hereby agrees that, as long as any Obligations remain unpaid, the Borrower shall not, directly or indirectly through any Subsidiary: 8.1 Indebtedness. Create, incur, assume or suffer to exist any ------------ Indebtedness, except: (a) Indebtedness under the Loan Documents; (b) Indebtedness reflected in the financial statements described in Section 5.1; and (c) Indebtedness incurred after the date hereof in the ordinary course of business. 8.2 Liens. Create, incur, assume or suffer to exist, any Lien upon any ----- of the Collateral, except Liens in favor of the Lender. 8.3 Consolidation and Merger. (a) Liquidate, wind up or dissolve itself ------------------------ (or suffer any liquidation or dissolution), or (b) convey, sell, lease, assign, transfer or otherwise dispose of, all or substantially all of its property, business or assets, or (c) enter into any merger, consolidation or amalgamation, unless the Borrower is the surviving entity. 8.4 Sale of Collateral. Sell, lease, assign, transfer or otherwise ------------------ dispose of any of the Collateral or any interest therein. 8.5 Conduct of Business, Etc. ------------------------ (a) Engage in any business activities substantially different from the Borrower's current business activities; or (b) change the accounting policies or principles on which its financial statements are prepared or presented. 8.6 Modifications to Contracts. Amend, modify or waive any of the -------------------------- provisions of the Contractual Obligations other than in the ordinary course of business. 8.7 Transactions with Affiliates. Purchase, acquire or lease any ---------------------------- property from, or sell, transfer or lease any property to, or lend or advance any money to, or borrow any money from, or guarantee any obligation of, or acquire any stock, obligations or securities of, or enter into any merger or consolidation agreement, or any management or similar fee agreement with any Affiliate, or enter into any other transaction or arrangement or make any payment to (including, without limitation, on account of any management fees, service fees, home office charges, consulting fees, technical services charges or tax sharing charges) or otherwise deal with, in the ordinary course of business or otherwise, any Affiliate on terms which are not arm's length. 8.8 ERISA. Neither the Borrower nor any ERISA Affiliate shall adopt, ----- establish, maintain, sponsor, administer, contribute to, participate in, or incur any material liability under or obligation to contribute to, any Plan or incur any material liability to provide post-retirement welfare benefits in violation of any Requirement of Law. 8.9 Assignment of Royalties. The Borrower agrees that immediately upon ----------------------- the occurrence of an Event of Default, it shall assign to the Lender [ ]* of all royalty payments pursuant to, and other amounts due and payable under, the agreements identified as items 1, 2, 3 and 6 on Exhibit A hereto. 9. Events of Default ----------------- Upon the occurrence of any of the following events (each an "Event of -------- Default"): - ------- 9.1 The Borrower shall fail to pay any principal or interest on the Loans or any other Obligation under the Loan Documents on the date when due; or 9.2 Any representation or warranty made by the Borrower or PixTech S.A. in any Loan Document or in connection with any Loan Document shall be materially inaccurate or incomplete in any respect on or as of the date made; or 9.3 The Borrower or PixTech S.A. shall fail to maintain its corporate existence; or 9.4 The Borrower shall default in any material respect in the observance or performance of any covenant or agreement contained in Section 2.10 and any ------------- such default continues for five (5) days after any Responsible Officer of the Borrower obtains knowledge of such default; or 9.5 The Borrower shall fail to observe or perform in any material respect any other term or provision contained in this Agreement or in the other Loan Documents and such failure shall continue for thirty (30) days after any Responsible Officer of the Borrower obtains knowledge thereof; or 9.6 The Borrower shall default in any payment of principal of or interest on any Indebtedness in excess of [ ]* (other than the Obligations or any Indebtedness to [ ]* not exceeding [ ]* or, any Indebtedness to [ ]* not exceeding [ ]* or any such Indebtedness shall be declared or otherwise become due prior to its stated maturity; or 9.7 (a) The Borrower or PixTech S.A. shall commence any case, proceeding or other action (i) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or the Borrower or PixTech S.A. shall make a general assignment for the benefit of its creditors; or (b) there shall be commenced against the Borrower or PixTech S.A. any case, proceeding or other action of a nature referred to in clause (a) above which (i) results in the entry of an order for relief or any such adjudication or appointment, or (ii) remains undismissed, undischarged or unbonded for a period of sixty (60) days; or (c) there shall be commenced against the Borrower or PixTech S.A. any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or substantially all of its assets which results in the entry of an order for any such relief which shall not have been vacated, discharged, stayed, satisfied or bonded or appealed against * Confidential Treatment Requested pending appeal within sixty (60) days from the entry thereof; or (d) the Borrower or PixTech S.A. shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in (other than in connection with a final settlement), any of the actions set forth in clause (a), (b) or (c) above; or (e) the Borrower or PixTech S.A. shall generally not, or shall be unable to, or shall admit in writing its inability to pay its debts as they become due; or 9.8 One or more judgments or decrees for an aggregate amount in excess of [ ]* shall be entered against the Borrower or PixTech S.A. and all such judgments or decrees shall not have been vacated, discharged, stayed, satisfied or bonded pending appeal within thirty (30) days from the entry thereof or in any event later than five days prior to the date of any proposed sale thereunder; or 9.9 Any Material Adverse Effect shall occur; or 9.10 The Lender shall fail to have an enforceable Lien (subject only to such prior Liens as the Lender shall have consented to in writing) on the Collateral; or 9.11 Any financial or other information delivered by the Borrower or PixTech S.A. to the Lender proves to be false or misleading in any material respect; or 9.12 PixTech S.A. shall fail to observe or comply with any material term or condition of any Loan Document to which it is a party, provided that the Lender shall determine what is a material term or condition thereof in its sole and reasonable discretion; or 9.13 The Distribution and Financing Agreement dated July 21, 1997 between the Lender and the Borrower shall terminate; or 9.14 The CEA Letter shall for any reason, cease to be in full force and effect. THEN: ---- (a) Automatically upon the occurrence of an Event of Default under Section 9.7 above; and - ------------ (b) In all other cases, at the option of the Lender and effective immediately upon notice to the Borrower that the Lender exercises such option (which right to exercise such option shall be irrespective of whether or not the Borrower shall have delivered a notice to the Lender pursuant to Section 7.5), the outstanding principal balance of the Loans, interest accrued but unpaid thereon and all other amounts payable hereunder shall become immediately due and payable, without demand upon or presentment to the Borrower, which are expressly waived by the Borrower, and the Lender may immediately exercise all rights, powers and remedies available to it at law, in equity or otherwise. 10. Registration Rights. ------------------- The Borrower covenants and agrees as follows: 10.1 Definitions. For purposes of this Section 10: ----------- (a) "Register," "Registered," and "Registration" refer to a -------- ---------- ------------ registration effected by preparing and filing a registration statement or similar document in compliance with the 1933 Act, and the declaration or ordering of effectiveness of such registration statement or document; (b) "Registrable Securities" means (1) the Conversion Shares and (2) ---------------------- any security of the Borrower issued as (or issuable upon the conversion or exercise of any warrant, * Confidential Treatment Requested right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the Conversion Shares; (c) The number of shares of "Registrable Securities then outstanding" --------------------------------------- shall be determined by the number of shares of Common Stock, and other securities, outstanding which are Registrable Securities but shall not include --- Registrable Securities once sold by the Holder pursuant to a registered sale following a registration effected hereunder. (d) "Holder" shall mean any person owning or having the right to ------ acquire Registrable Securities or any assignee thereof in accordance with Section 10.10; and (e) "Form S-3" shall mean such form under the 1933 Act as in effect -------- on the date hereof or any registration form under the 1933 Act subsequently adopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Borrower with the SEC. (f) "SEC" means the U.S. Securities and Exchange Commission. --- 10.2 Request for Registration. ------------------------ (a) Subject to the Holder's Conversion Rights and to the additional terms and conditions set forth below, within 60 days following receipt of a written request from the Holder requesting the Registration of no less than a majority of the Registrable Securities then outstanding, the Borrower shall file a registration statement under the 1933 Act covering the registration of such Registrable Securities. (b) If the Holder intends to distribute the Registrable Securities covered by its request by means of an underwriting, it shall so advise the Borrower as a part of its request made pursuant to this Section 10.2. The underwriter will be selected by the Holder and shall be reasonably acceptable to the Borrower. In such event, the right of the Holder to include Registrable Securities in such registration shall be conditioned upon the Holder's participation in such underwriting and the inclusion of the Holder's Registrable Securities in the underwriting to the extent provided herein. The Holder shall (together with the Borrower as provided in Section 10.4 (e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting as provided above. (c) Notwithstanding the foregoing, if the Borrower shall furnish to the Holder a certificate signed by the President of the Borrower stating that in the good faith judgment of the Board of Directors of the Borrower, it would be seriously detrimental to the Borrower and its shareholders for such registration statement to be filed and it is therefore essential to defer the filing of such registration statement, the Borrower shall have the right to defer such filing for a period of not more than 120 days after receipt of the request of the Holder; provided, however, that the Borrower may not utilize this right more than once in any twelve-month period. 10.3 Borrower Registration. If the Borrower proposes to register --------------------- (including for this purpose a registration effected by the Borrower for shareholders other than the Holder) any of its stock or other securities under the 1933 Act in connection with the public offering of such securities solely for cash (other than a registration relating either to the sale of securities to employees of the Borrower pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145 transaction or a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities), the Borrower shall, at such time, promptly give the Holder written notice of such registration. Upon the written request of the Holder given within 20 days after mailing of such notice by the Borrower in accordance with Section 11.8, the Borrower shall, subject to Section 10.7, and subject to the rights of those existing stockholders of the Borrower who have been granted registration rights previously, cause to be registered under the 1933 Act the Registrable Securities that the Holder has requested to be registered; provided that the Borrower shall have the right to postpone or withdraw any registration effected pursuant to this Section 10.3 without obligation to the Holder. 10.4 Obligations of the Borrower. Whenever required under this Section 10 --------------------------- to effect the registration of any Registrable Securities, the Borrower shall, as expeditiously as reasonably possible: (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holder, keep such registration statement effective for up to 120 days. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the 1933 Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holder such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the 1933 Act, and such other documents as it may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or U.S. state "Blue Sky" laws of such jurisdictions as shall be reasonably requested by the Holder, provided that the Borrower shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. The Holder shall also enter into and perform its obligations under such an agreement. (f) Notify the Holder at any time when a prospectus relating to a registration statement covering Registrable Securities is required to be delivered under the 1933 Act, of the happening of any event as a result of which the prospectus included in such 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 not misleading in the light of the circumstances then existing. (g) Furnish, at the request of the Holder, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 10 if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated such date, of counsel representing the Borrower for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holder and (ii) a letter dated such date, from the independent certified public accountants of the Borrower, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holder. 10.5 Expenses of Demand Registration. All expenses other than ------------------------------- underwriting discounts and commissions incurred in connection with registrations, filings and qualifications pursuant to Section 10.2, including (without limitation) all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Borrower, and the reasonable fees and disbursements of one counsel for the Holder, shall be borne by the Borrower; provided, however, that the Borrower shall not be required to -------- ------- pay for any expenses of any registration proceeding begun pursuant to Section 10.2 if the registration request is subsequently withdrawn at the request of the Holder (in which case the Holder shall bear such expenses); provided further, however, that if at the time of such withdrawal, the Holder has learned of a material adverse change in the condition, business, or prospects of the Borrower from that known to the Holder at the time of its request and has withdrawn the request with reasonable promptness following disclosure by the Borrower of such material adverse change, then the Holder shall not be required to pay any of such expenses and shall retain its rights pursuant to Section 10.2. 10.6 Expenses of Borrower Registration. The Borrower shall bear and pay --------------------------------- all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 10.3 for the Holder, including (without limitation) all registration, filing, and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Borrower, but excluding underwriting discounts and commissions relating to Registrable Securities and the fees of special counsel to the Holder, which shall be borne by the Holder. 10.7 Underwriting Requirements. In connection with any offering involving ------------------------- an underwriting of shares of the Borrower's capital stock, the Borrower shall not be required under Section 10.3 to include any of the Holder's securities in such underwriting unless it accepts the terms of the underwriting as agreed upon between the Borrower and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Borrower. If the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities sold other than by the Borrower that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Borrower shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders according to the total amount of securities entitled to be included therein owned by each selling shareholder or in such other proportions as shall mutually be agreed to by such selling shareholders), subject to the rights of those existing stockholders of the Borrower who have been granted registration rights previously. 10.8 Indemnification. In the event any Registrable Securities are --------------- included in a registration statement under this Section 10: (a) To the extent permitted by law, the Borrower will indemnify and hold harmless the Holder, any underwriter (as defined in the 1933 Act) for the Holder and each person, if any, who controls the Holder or underwriter within the meaning of the 1933 Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the 1933 Act, the 1934 Act and other U.S. federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (a "Violation"): (i) any untrue statement or alleged untrue --------- statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the 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 (iii) any violation or alleged violation by the Borrower of the 1933 Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or any state securities law; and the Borrower will pay to the Holder and each such underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 10.8(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Borrower (which consent shall not be unreasonably withheld), nor shall the Borrower be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by the Holder, or any such underwriter or controlling person. (b) To the extent permitted by law, the selling Holder will indemnify and hold harmless the Borrower, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Borrower within the meaning of the 1933 Act, any underwriter, any controlling person of any such underwriter, against any losses, claims, damages, for liabilities (joint or several) to which any of the foregoing persons may become subject, under the 1933 Act, the 1934 Act and other U.S. federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by the Holder expressly for use in connection with such registration; and the Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person to be indemnified pursuant to this Section 10.8(b) in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 10.8(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; and provided further, that in no event shall any indemnity under this Section 10.8(b) exceed the gross proceeds from the offering received by the Holder. (c) Promptly after receipt by an indemnified party under this Section 10.8 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 10.8 deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 10.8, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 10.8. (d) The obligations of the Borrower and the Holder under this Section 10.8 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 10, and otherwise. 10.9 Reports Under Securities 1934 Act. With a view to making available --------------------------------- to the Holder the benefits of Rule 144 promulgated under the 1933 Act and any other rule or regulation of the SEC that may at any time permit the Holder to sell securities of the Borrower to the public without registration or pursuant to a registration on Form S-3, the Borrower agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after 90 days after the effective date of the first registration statement filed by the Borrower for the offering of its securities to the general public; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holder to utilize Form S-3 for the sale of Registrable Securities; (c) file with the SEC in a timely manner all reports and other documents required of the Borrower under the 1933 Act and the 1934 Act; and (d) furnish to the Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Borrower that it has complied with the reporting requirements of SEC Rule 144, the 1933 Act and the 1934 Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of the Borrower and such other reports and documents so filed by the Borrower, and (iii) such other information as may be reasonably requested in availing the Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 10.10 No Right to Assign Registration Rights. The rights to cause the -------------------------------------- Borrower to register Registrable Securities pursuant to this Section 10 may not be assigned by the Holder without the prior written consent of the Borrower, which consent may be granted or denied in the sole discretion of the Borrower. 10.11 Limitations on Subsequent Registration Rights. From and after the --------------------------------------------- date of this Agreement and until the rights granted in this Section 10 terminate pursuant to Section 10.13 below, the Borrower shall not, without the prior written consent of the Holder, enter into any agreement with any holder or prospective holder of any securities of the Borrower which would allow such holder or prospective holder (a) to include such securities in any registration filed under Section 10.2 unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holder which is included, or (b) to make a demand for registration which could result in such registration statement being declared effective within 180 days after the effective date of any registration effected pursuant to Section 10.2 10.12 Amendment of Registration Rights. Any provision of this Section -------------------------------- 10 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 Borrower and Holder. Any amendment or waiver effected in accordance with this paragraph shall be binding upon the Holder and the Borrower. 10.13 Termination. The Holder's registration rights hereunder shall ----------- terminate as to any Registrable Securities upon the earlier of (i) six months after the issuance of the Conversion Shares, (ii) effectuation by the Company of two registrations pursuant to Section 10.2 which registrations have been declared or ordered effective and pursuant to which Registrable Securities have been sold or (iii) such time as the Borrower can sell all Registrable Securities without restriction under Rule 144. 11. Miscellaneous Provisions ------------------------ 11.1 No Assignment. The Borrower may not assign its rights or obligations ------------- under this Agreement without the prior written consent of the Lender. Subject to the foregoing, all provisions contained in this Agreement or any document or agreement referred to herein or relating hereto shall inure to the benefit of the Lender, its successors and assigns, and shall be binding upon the Borrower, its successors and assigns. 11.2 Amendments. This Agreement may not be amended or terms or provisions ---------- hereof waived unless such amendment or waiver is in writing and signed by the Lender and the Borrower. 11.3 Cumulative Rights; No Waiver. The rights, powers and remedies of the ---------------------------- Lender hereunder are cumulative and in addition to all rights, powers and remedies provided under any and all agreements between the Borrower and the Lender relating hereto, at law, in equity or otherwise. No delay or failure by the Lender to exercise any right, power or remedy shall constitute a waiver thereof, and no single or partial exercise by the Lender of any right, power or remedy shall preclude other or further exercise thereof or any exercise of any other rights, powers or remedies. 11.4 Entire Agreement. This Agreement and the documents and agreements ---------------- referred to herein embody the entire agreement and understanding between the parties hereto and supersede all prior agreements and understandings relating to the subject matter hereof and thereof. 11.5 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of California, without giving effect to choice of law rules. 11.6 Waiver of Jury Trial. THE BORROWER AND THE LENDER EACH HEREBY WAIVES -------------------- ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. INSTEAD, ANY DISPUTES RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. 11.7 Counterparts. This Agreement and the other Loan Documents may be ------------ executed in any number of counterparts, all of which together shall constitute one agreement. 11.8 Notices. All notices required or permitted under this Agreement will ------- be in writing in the English language, will reference this Agreement and will be deemed given: (a) when delivered personally; (b) when sent by confirmed facsimile; or (c) three Business Days after deposit with a commercial overnight carrier specifying next-day delivery, with written verification of receipt.. All communications will be sent to the addresses set forth below (or to such other address as may be designated by a party by giving written notice to the other party pursuant to this Section 11.8). ------------- The Lender Sumitomo Corporation 1-2-2, Hitotsubashi, Chiyoda-ku Tokyo, 100 Japan Attention: Mr. Yoshihiro Bito General Manager, Electronics Department Tel 81 3 3230 77 33 Fax 81 3 3230 79 36 The Borrower PixTech, Inc. Avenue Olivier Perroy Zone Industrielle de Rousset 13790 Rousset, France Attention: Yves Morel Chief Financial Offier Tel: 33 4 42 29 10 00 Fax 33 4 42 29 05 09 11.9 Successors and Assigns. This Agreement shall be binding upon and ---------------------- inure to the benefit of the parties and their respective successors and assigns. The Borrower may not assign or transfer any of its rights or obligations under this Agreement or any of the other Loan Documents and any such assignment or transfer in violation hereof shall be null and void. 11.10 Counterparts. This Agreement may be executed in any number of ------------ separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. 11.11 Severability. If any provision of this Agreement is declared invalid ------------ or unenforceable by any lawful tribunal, then it shall be adjusted to conform to legal requirements of that tribunal and that modification shall automatically become a part of this Agreement. If no adjustment can be made, the provision shall be deleted as though never included in this Agreement and the remaining provisions of this Agreement shall remain in full force and effect unless such invalidity or unenforceability causes substantial deviation from the underlying intent of the parties expressed in this Agreement, in which case the parties shall replace the invalid or unenforceable provision with a valid or enforceable provision which corresponds as far as possible to the spirit and purpose of the invalid or unenforceable provision. 11.12 English Language. All documents to be delivered under this Agreement ---------------- shall be in the English language. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written. PIXTECH, INC. By /s/ Jean-Luc Grand-Clement --------------------------- Name Mr. Jean-Luc Grand-Clement Title President and CEO SUMITOMO CORPORATION By /s/ Akio Yamane ---------------- Name Mr. Akio Yamane Title Assistant General Manager Electronics Department EX-10.3 5 CROSS LICENSING PERIOD EXHIBIT 10.3 (English Translation) AGREEMENT L 3387-4 CEA PixTech AMENDMENT no. 4 TO THE LICENSE AGREEMENT ON THE MICROTIPS DISPLAYS (LICENSE AGREEMENT) BETWEEN: The (( COMMISSARIAT A L'ENERGIE ATOMIQUE )), a scientific, technical and industrial Public Company (( CEA )), having their registered office in Paris 15e, 31-33, rue de la Federation, represented by Mr. Marc Leger, Director of the Legal and Commercial Operations, and: the company PixTech, S.A. , formerly named Pixel International S. A., with a registered capital of FF. 53,529,600, registration no. 387 823 990 00024, hereby designated as (( PixTech )), having their registered office in 13790 ROUSSET, avenue Perroy, Zone Industrielle de Rousset, represented by Mr. Jean-Luc Grand- Clement, President, IT HAS BEEN AGREED THE FOLLOWING: P R E A M B L E WHEREAS, on September 17, 1992, the CEA and PixTech have signed a license agreement in the field of microtips (the LICENSE AGREEMENT), WHEREAS, in order to develop a subcontracted volume production, PixTech needs important financial means, WHEREAS, in order to commercialize the presently contemplated volume production, PixTech is in discussion with the Japanese corporation SUMITOMO, WHEREAS, within a DISTRIBUTION AND FINANCING AGREEMENT and of a CREDIT AGREEMENT, signed on July 21st, 1997, between PixTech, PixTech, Inc. a 100 % shareholder of PixTech, and SUMITOMO, SUMITOMO grants to PixTech, Inc. and thus indirectly to PixTech a $10 million loan over a 3 year period, subject to such modifications of the LICENSE AGREEMENT allowing SUMITOMO to obtain a CONDITIONAL GUARANTEE from CEA, WHEREAS, according to the expected volume production and the commercialization by SUMITOMO of such production, yielding to licensing fees for CEA, CEA has agreed to support the implementation of the provisions of the DISTRIBUTION AND FINANCING CONTRACT, WHEREAS, the present financial and technical situation of PixTech makes uncertain CEA's expected benefits from THE DISTRIBUTION AND FINANCING CONTRACT, IT AS BEEN AGREED THE FOLLOWING: ARTICLE 1 - PURPOSE OF THE AMENDMENT ------------------------------------ The present amendment no. 4 is intended to temporarily amend the LICENSE AGREEMENT as to the license fees clauses, the commitment towards SUMITOMO and the pledge of PixTech's patents. ARTICLE 2 - TEMPORARY ADDITIONAL LICENSE FEES --------------------------------------------- 1. PixTech will pay for the use of the CEA KNOWLEDGE and PATENTS, as well as of the joint share of the patents held in co-ownership with PixTech, a [ ]* additional temporary licensing fee as to the license and under-licenses on the out of tax amount of their sales of displays (including their addressing electronics should it result from all or part of the KNOWLEDGE), ex works, packaging expenses, transportation and commissions excluded. PixTech will cease paying the temporary additional licensing fee as soon as the cumulated amounts effectively due to CEA as to this licensing fee, or the attached minima as per article 2 (2.) , will have reached an amount of [ ]*. 2. PixTech's commitments as to the cumulated minima of remuneration as per article 2 (1.) of the present amendment will be the following (in million of dollars):
Years Cumulated US$ (x000) ----- --------------------- [ ]* [ ]* [ ]* [ ]* [ ]* [ ]* [ ]* [ ]*
The parties hereby agree that at the signature date, an amount of [ ]*, corresponding to the minima forecaster for 1997, will be paid by PixTech to CEA. As for 1998, 1999 and 2000, the payments will occur respectively on October 23rd, 1998, October 23rd, 1999, October 23rd, 2000, i.e. at the anniversary dates of the present amendment, being specified that these amounts will be considered as an advanced payment to the amounts due * Confidential Treatment Requested for the addition temporarily license fee and payable the next following 31st of March of the corresponding year. ARTICLE 3 - COMMITMENT FROM CEA TOWARDS SUMITOMO ------------------------------------------------ After duly motivated notification sent by SUMITOMO corporation to CEA, informing CEA of PixTech's failure as part of the CREDIT AGREEMENT between SUMITOMO and Pixtech, Inc., (the NOTIFICATION), CEA will transfer to SUMITOMO [ ]* of the amounts which will have been paid directly to CEA by Motorola, Raytheon, Futaba or any other PixTech licensee, and not questioned by a third party at the date of the payment by CEA to SUMITOMO, should these amounts being due by PixTech's licensees at the time of the notification by SUMITOMO or should these amounts become due to PixTech or CEA after notification by SUMITOMO. This pay-back will be allocated by SUMITOMO to the repayment of the debts from PixTech, Inc. towards SUMITOMO. The obligation of CEA towards SUMITOMO will cease when PixTech, Inc.'s debts towards SUMITOMO as per the LOAN AGREEMENT will have reached [ ]*, being agreed that all the pay-backs made by CEA in favor of SUMITOMO will never exceed a cumulated amount of [ ]*. A NOTIFICATION by SUMITOMO will only be validly received by CEA if it is made within the validity period of the present agreement, i.e. during the three (3) year and eight (8) days period starting from the date when SUMITOMO has transferred the funds to PixTech, Inc. A NOTIFICATION issued after this date will free CEA from any obligation towards SUMITOMO. CEA's obligations towards SUMITOMO resulting from a valid NOTIFICATION might be extended beyond the validity period of the present amendment. ARTICLE 4 - PLEDGE OF PixTech's PATENTS --------------------------------------- PixTech will pledge in favor of CEA all of the patents they own of might acquire ownership during the validity period of the present amendment. The pledging instruments will be done jointly between PixTech and CEA, within all countries for which such acts or similar instruments are valid. Upon the signature of the amendment, and without delay, the Parties will proceed to the pledging formalities by the competent authorities. At the end of the validity period of the present amendment, CEA and PixTech will take any necessary steps to cancel the granted pledges. * Confidential Treatment Requested The registration costs by the competent authorities as well as the counsel fees will be at PixTech's expenses. ARTICLE 5 - TERM OF THE AGREEMENT --------------------------------- The provisions of the present amendment no. 4 will be effective as of the date of signature of such amendment and will remain into effect for a period of three (3) years and eight (8) days and only at the date when the funds will have been transferred by SUMITOMO, which transfer should occur on January 31st, 1998, at the latest. Should the transfer of the funds not have taken place on January 31st, 1998, the present amendment no. 4 would be null and void, being specified that the amounts already paid by PixTech under articles 2 (1.) and 2 (2.) of the present amendment would remain CEA's property. ARTICLE 6 - OTHER DISPOSITIONS ------------------------------ All of the dispositions of the LICENSE AGREEMENT and of its non modified amendments no. 1, no. 2 and no. 3 by the present amendment no. 4, remain unchanged and apply to the present amendment no. 4. Done in Paris, in two originals For CEA For PixTech Marc Leger Jean-Luc Grand-Clement EXHIBIT 10.3 (French Version) ACCORD L 3387-4 CEA PixTech AVENANT N 4 A L'ACCORD DE LICENCE DANS LE DOMAINE DES ECRANS PLATS A MICROPOINTES (ACCORD DE LICENCE) ENTRE : Le COMMISSARIAT A L'ENERGIE ATOMIQUE, Etablissement Public de caractere scientifique, technique et industriel, ci-apres denomme "CEA", dont le Siege est a Paris 15eme, 31-33 rue de la Federation, represente par Monsieur Marc Leger, Directeur Juridique et des Relations Commerciales, d'une part, Et La Societe PixTech, S.A., connue auparavant sous la raison sociale Pixel International S.A., au capital de 53 529 600 F, n 387 823 990 00024, ci-apres designee "PixTech", dont le Siege est Avenue Olivier Perroy, Zone Industrielle de Rousset, 13790 Rousset, representee par Monsieur Jean-Luc Grand-Clement, President Directeur General, d'autre part, IL EST EXPOSE CE QUI SUIT: P R E A M B U L E ATTENDU que, le 17 septembre 1992, le CEA et PixTech ont conclu un accord de licence dans le domaine des ecrans plats micropointes (L'ACCORD DE LICENCE), ATTENDU que, pour developper une production de volume en sous-traitance, PixTech fait face a des besoins de financement importants, ATTENDU que, pour commercialiser la production de volume actuellement envisagee, PixTech s'est rapprochee de la societe de negoce japonaise SUMITOMO, ATTENDU que, dans le cadre d'un CONTRAT DE FINANCEMENT ET DE DISTRIBUTION et d'un ACCORD DE PRET conclus le 21 juillet 1997 entre PixTech, PixTech, Inc., actionnaire a 100% de PixTech et SUMITOMO, SUMITOMO accorde a PixTech, Inc. et indirectement a PixTech un financement de 10 millions de dollars, pour une periode de 3 ans, sous reserve de modifications de l'ACCORD de LICENCE permettant a SUMITOMO d'obtenir une garantie conditionnelle de la part du CEA, ATTENDU que, compte tenu des perspectives de production de volume et de commercialisation par SUMITOMO de cette production, generatrices de redevances pour le CEA, le CEA souhaite favoriser la mise en oeuvre des dispositions du CONTRAT DE FINANCEMENT ET DE DISTRIBUTION, ATTENDU que, la situation financiere et technique de PixTech rendent incertains les benefices esperes par le CEA du CONTRAT DE FINANCEMENT ET DE DISTRIBUTION, IL A ETE CONVENU CE QUI SUIT: ARTICLE 1 - OBJET DE L'AVENANT - ------------------------------ Le present avenant n 4 a pour objet de modifier l'ACCORD DE LICENCE a titre temporaire sur les clauses en matiere de redevances, d'engagement vis-a-vis de SUMITOMO et de nantissement des brevets de PixTech. ARTICLE 2 - REDEVANCES ADDITIONNELLES TEMPORAIRES - ------------------------------------------------- 2.1 PixTech paiera pour l'usage des CONNAISSANCES et BREVETS du CEA, ainsi que de la quote-part indivise des BREVETS detenus en copropriete avec PixTech, une redevance temporaire additionnelle de [ ]* au titre de la licence et des sous-licences sur le montant hors taxe de ses ventes d'ECRANS (y compris leur electronique d'adressage si celle-ci ressort de tout ou partie des CONNAISSANCES) depart usine, frais d'emballage, de transport et de commission non compris. PixTech cessera de verser la redevance temporaire additionnelle lorsque les montants cumules effectivement dus au CEA au titre de cette redevance, ou des minima vises a l'article 2.2 qui y sont attaches, auront atteint un montant de [ ]*. 2.2 Les engagements, par PixTech, de minima cumules de remunerations prevues au 2.1 du present avenant au titre des redevances temporaires, seront les suivants (en milliers de US dollars) : Cumules KUSD [ ]* [ ]* [ ]* [ ]* [ ]* [ ]* [ ]* [ ]*
Les parties conviennent qu'a la date de signature, une somme de [ ]*, correspondant aux minima prevus pour l'annee 1997, sera versee par PixTech au CEA. Pour les annees 1998, 1999, 2000, les paiements interviendront respectivement le 23.10.1998, 23.10.1999, 23.10.2000, soit aux dates anniversaires du present avenant, etant precise que ces sommes serviront d'acompte aux sommes dues au titre des redevances additionnelles temporaires et payables le 31 mars suivant chaque annee correspondante. * Confidential Treatment Requested ARTICLE 3 - ENGAGEMENT DU CEA VIS-A-VIS DE SUMITOMO - --------------------------------------------------- Apres notification motivee adressee par la societe SUMITOMO au CEA, informant le CEA d'une defaillance de PixTech, Inc. dans le cadre de l'ACCORD DE PRET entre SUMITOMO et PixTech, Inc. (la NOTIFICATION), le CEA reversera a SUMITOMO [ ]* des sommes qui auront ete versees directement au CEA par Motorola, Raytheon, Futaba ou par tout autre licencie de PixTech, et non contestes par un tiers a la date du versement par le CEA a SUMITOMO, que ces sommes soient dues par les licencies de PixTech au jour de la notification par SUMITOMO ou que ces sommes deviennent dues a PixTech ou au CEA apres notification par SUMITOMO. Ce reversement sera affecte par SUMITOMO au remboursement des dettes de PixTech, Inc. envers SUMITOMO. L'obligation du CEA envers SUMITOMO cessera lorsque les dettes de PixTech, Inc. envers SUMITOMO au titre de l'ACCORD DE PRET atteindront [ ], * etant entendu que l'ensemble des reversements effectues par le CEA au profit de SUMITOMO ne peut en aucun cas depasser un montant cumule de [ ]*. Une NOTIFICATION par SUMITOMO ne sera validement recue par le CEA que si elle intervient au cours de la periode de validite du present avenant, c'est-a-dire pendant la periode de trois annees et 8 jours a compter de la mise a disposition des fonds par SUMITOMO a PixTech, Inc. Une NOTIFICATION emise apres cette periode n'entrainera aucune obligation du CEA envers SUMITOMO. Les obligations du CEA envers SUMITOMO decoulant d'une NOTIFICATION valide pourront s'etendre au-dela de la periode de validite du present avenant. ARTICLE 4 - NANTISSEMENT DES BREVETS DE PIXTECH - ----------------------------------------------- PixTech nantira au profit du CEA l'ensemble des brevets dont il a la propriete ou dont il acquerra la propriete pendant la periode de validite du present avenant. Les actes de nantissement seront effectues conjointement entre PixTech et le CEA, dans l'ensemble des pays pour lesquels de tels actes, ou des actes similaires, peuvent etre valides. Des la signature de l'avenant et dans les meilleurs delais, les Parties effectueront les formalites de nantissement aupres des organismes competents. Au terme de la periode de validite du present avenant, le CEA et PixTech prendront les dispositions necessaires pour annuler les nantissements ainsi accordes. L'ensemble des couts d'enregistrement aupres des organismes competents et les frais de conseils seront supportes par PixTech. * Confidential Treatment Requested ARTICLE 5 - DUREE DE L'AVENANT - ------------------------------ Les dispositions prevues par le present avenant n 4 prendront effet a compter de la date de signature et seront valables pour une periode de 3 annees et 8 jours seulement a compter de la date de mise a disposition des fonds par SUMITOMO, laquelle devra intervenir au plus tard le 31 janvier 1998. En l'absence de versement au 31 janvier 1998, le present avenant n 4 deviendrait nul et non avenu, etant precise que les sommes deja payees par PixTech au titre des articles 2.1 et 2.2 du present avenant resteraient acquises au CEA. ARTICLE 6 - AUTRES DISPOSITIONS - -------------------------------- Toutes les dispositions de l'ACCORD DE LICENCE et des avenants n 1, n 2 et n 3 non modifiees par le present avenant n 4 restent inchangees et s'appliquent au present avenant n 4. Fait a Paris, le 23 octobre 1997 en deux exemplaires Pour le CEA Pour PixTech /s/ Marc Leger /s/ Jean-Luc Grand- Clement Marc Leger Jean-Luc Grand-Clement EX-10.4 6 AMENDMENT NO. 4 TO THE LICENSE AGREEMENT Exhibit 10.4 4 September 1997 PixTech, S.A. Parc Industrial de la Pompignane Rue de la Vieille Poste 34055 Montpellier Cedex - France Attention: Jean-Luc Grand-Clement Subject: Cross-Licensing Period Extension and Other Matters Related to the Cooperation and License Agreement of 1 June 1994 between Raytheon Company and Pixel International, S.A. (now PixTech, S.A.) Gentlemen: This Letter Agreement is to confirm certain understandings and agreements between PixTech S.A. ("PixTech") and Raytheon Company ("Raytheon") related to the extended Cross-Licensing Period provided for under the above Agreement and also concerning certain other matters related to said Agreement as follows: 1. Raytheon and PixTech hereby agree to enter into the Extended Cross- Licensing Period provided for under section 3.3 of the above referenced Agreement with said Extended Cross-Licensing Period commencing as of 1 June 1997 and expiring on 1 June 1999. During this Extended Cross-Licensing Period, Raytheon and PixTech shall (a) exchange technology in the FED Field (as defined in said Agreement) and (b) cross-license such technology to each other, all as provided for by and in accordance with Section 3.3 of said Agreement. All other provisions of the Agreement of 1 June 1994 applicable to the Extended Cross- Licensing Period and exchanges thereunder shall continue to apply. 2. Raytheon may elect to pursue a refund claim for all or part of the [ ]* in withholding taxes which were paid to the United States Internal Revenue Service in connection with the payments made to PixTech or its predecessor company Pixel International, S.A. pursuant to Sections 5.1 and 5.2 of the above referenced Agreement. Any recovery pursuant to any such claim for refund will be for the benefit of Raytheon, and PixTech shall execute all documents necessary to insure that any refunds obtained are paid to and are for the benefit of Raytheon. Furthermore, PixTech shall grant Raytheon a Power of Attorney and shall execute such other documents as may be required to permit Raytheon to pursue the above mentioned refund claim. PixTech shall also assist Raytheon in preparing and documenting any such request for refund. Provided that PixTech complies with the requirements of this paragraph, Raytheon shall withdraw its Invoice No. 9999-399 to PixTech in the amount of [ ]* dated 13 March 1997. 3. During the Extended Cross-Licensing Period set forth in Section 1 above, PixTech agrees to supply cathodes to Raytheon as requested by Raytheon in connection with Raytheon's FED Program which is the subject of the above referenced Agreement. PixTech agrees to supply such cathodes under reasonable terms and conditions consistent with past practices between the parties. During the Extended Cross-Licensing Period set forth in Section 1 above, Raytheon agrees to purchase its cathode requirements for the aforementioned FED Program from PixTech subject, however, to mutual agreement as to price and terms and conditions of supply. In connection with the above, Raytheon shall provide PixTech with periodic estimates of Raytheon's cathode requirements in the form of a 12 month rolling forecast to be updated quarterly. * Confidential Treatment Requested 4. During the above referenced Extended Cross-Licensing Period, Raytheon shall endeavor to utilize PixTech as a subcontractor / vendor for goods and services which Raytheon requires from third parties in connection with any contracts which Raytheon may obtain for the supply of Royalty Bearing Products (as defined in the above referenced Agreement) provided that PixTech has the capability to supply such goods and services in accordance with Raytheon's and its customer's requirements and subject to (a) agreement on terms and conditions and pricing, (b) PixTech being competitive as to price and schedule with other potential suppliers, (c) applicable government regulations, and (d) customer approval where required. 5. Raytheon's presently intended development activities during the Extended Cross-Licensing Period, depending on whether or not DARPA funding is obtained, are summarized below.
Planned Raytheon Estimated Raytheon Effort with DARPA Effort without Funding DARPA Funding ----------------------- --------------------------- [ ]* [ ]* [ ]* [ ]* [ ]* [ ]* [ ]* [ ]* [ ]*
Raytheon presently anticipates that it may receive additional funding beyond that presently planned in which case the above described efforts may be expanded. PixTech understands that the efforts described in this Section 5 represent Raytheon's current plans and intent with regard to development efforts and that Raytheon may modify these plans at any time based on its own business requirements and budget constraints. Raytheon and PixTech have confirmed their agreement to the terms of this Letter Agreement as evidenced by the signatures of their respective duly authorized representatives as set forth below. This Letter Agreement has been executed in duplicate with one original copy for each party. Very truly yours, /s/ W.E. Graham - ---------------- Raytheon Company W.E. Graham Contracts Manager Agreed: PixTech, S.A. /s/ Jean-Luc Grand Clement - --------------------------- By: Jean-Luc Grand-Clement Title: President *Confidential Treatment Requested EX-27 7 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JUL-01-1997 SEP-30-1997 6,089 10,080 634 0 612 10,431 9,650 0 34,343 6,086 0 0 0 137 55,168 34,343 152 436 0 (4,207) 0 0 82 (3,657) 0 0 0 0 0 (3,657) (.27) 0
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