EXCHANGE AGREEMENT
THIS
EXCHANGE AGREEMENT (the “Agreement”), dated as
of December 22, 2008, is made by and between
eMagin Corporation, a Delaware corporation (“Company”), and each
of the holders named on Schedule A hereto
(each, including its successors and assigns, a “Holder” and
collectively the “Holders”).
WHEREAS, the Holders hold certain of
the Company’s 8% Senior Convertible Notes due December 22, 2008 set forth on
Schedule A
attached hereto (the “Notes”);
and
WHEREAS, the Company and the Holders
wish to provide for the terms and conditions pursuant to which the Holders shall
receive, in exchange for their Notes and unpaid interest thereon shares of the Company’s
Series B Convertible Preferred Stock, $0.001 par value (the “Series B Preferred”),
having the rights and preferences set forth on the Certificate of Designations
of Series B Convertible Preferred Stock as filed with the Secretary of State of
the State of Delaware in the form set forth on Exhibit A attached
hereto (the “Certificate of
Designations”); and
WHEREAS, capitalized terms not used
herein shall have the meanings ascribed to such terms in the Certificate of
Designations.
NOW,
THEREFORE, for good and valuable consideration, the receipt and
sufficiency
of which the parties hereby acknowledge, the parties agree as
follows:
1. Exchange. The
Company and the Holders hereby agree that the Notes and unpaid interest thereon
shall be exchanged for an amount of Series B Preferred equal to the amount of
the outstanding principal and unpaid interest due on the Notes being exchanged,
as indicated on Schedule A, divided
by $1,000 (i.e., the Stated Value).
2. Registration
Rights. The Series B Preferred and shares issuable upon
conversion of the Series B Preferred (collectively the “Securities”) shall be
registered pursuant to and subject to the terms of the Registration Rights
Agreement (as defined in the Securities Purchase Agreement). The
Holders and the Company agree that each Holder shall be deemed a party to the
Registration Rights Agreement and treated as a “Purchaser” and “Holder” in the
Registration Rights Agreement in all respects, as applicable. The
Company agrees to be bound in all respects to each Holder as if each Holders is
a “Purchaser” and “Holder” in the Registration Rights Agreement, as
applicable. Notwithstanding the foregoing, in the event of liquidated
damages to be paid to the “Purchasers” pursuant to Section 2(b) of the
Registration Rights Agreement, the Company shall pay to each Holder an amount in
cash, as partial liquidated damages and not as a penalty, equal to 2% of the
aggregate amount of Notes and unpaid interest thereon converted into Series B
Preferred pursuant to this Agreement for any Registrable Securities (as defined
in the Registration Rights Agreement) then held by such Holder; provided, however, the maximum
aggregate liquidated damages payable to a Holder under the Registration Rights
Agreement shall be 36% of the aggregate amount of Notes and unpaid interest
thereon converted into Series B Preferred pursuant to this
Agreement. Pursuant to the terms of the Registration Rights
Agreement, upon the Majority Holder’s prior written consent, in lieu of paying
partial liquidated damages to each Holder in cash, the Company may issue to each
Holder the amount of shares of restrictive Common Stock with piggyback
registration rights pursuant to Section 6(e) of the Registration Rights
Agreement equal to the amount of partial liquidated damages due to each Holder
divided by the Current Fair Market Value. Reference in the
Registration Rights Agreement to the Securities Purchase Agreement shall apply
to the Holders, as applicable.
3. Securities Purchase
Agreement. The defined term “Majority Holders” used in the
Securities Purchase Agreement shall apply to the Holders of outstanding Series B
Preferred, as applicable, and any rights or provisions granted to the “Majority
Holders” in the Securities Purchase Agreement shall be granted to each Holder as
if each Holder was a “Purchaser” in the Securities Purchase
Agreement.
4. Closing. On
or before December 22, 2008 (the “Closing Date”), the
Holders shall deliver, or have delivered, to the Company the duly executed
Agreement. On or before the Closing Date, the Company shall deliver,
or have delivered, to the Holders (i) the duly executed Agreement, (ii) the duly
executed Registration Rights Agreement, (iii) the duly executed Securities
Purchase Agreement, (iv) evidence reasonably satisfactory to the Holders of the
filling of the Certificate of Designations with the Secretary of State of the
State of Delaware, and (v) a copy of the signed stock certificate for the number
of Series B Preferred as specified next to each Holder’s name on Schedule A hereto
under the heading “Number of shares of Series B Preferred upon conversion”,
registered in the name of such Holder; provided that the
Company will deliver the original certificate representing the Series B
Preferred to such Holder pursuant to Section 5.
5. Notes. The
Company and the Holders agree that as of the Closing Date, the Notes converted
into Series B Preferred pursuant to this Agreement shall be cancelled and have
no value. Each Holder agrees to send to the Company as promptly as
possible following the Closing Date its original Note or a certificate of
destruction reasonably acceptable to the Company. The Holder
acknowledges and agrees that the Company will not send the original certificate
representing the Series B Preferred to such Holder until the Company receives
the original Note or certificate of destruction reasonably acceptable to the
Company from such Holder; provided that the
Company will deliver by overnight mail within two Business Days of receiving the
original Note or certificate of destruction reasonably acceptable to the Company
the original certificate representing the Series B Preferred to such
Holder.
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6. Further
Assurances. In connection with the exchange of the Notes and
unpaid interest thereon, the Holder, by entering into this Agreement, agrees to
execute all agreements and other documents as reasonably requested by the
Company.
7. Company Representations and
Warranties and Covenants. The Company represents, warrants and
covenants to the Holder as follows:
a. Organization. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of Delaware and has all requisite corporate power and authority
to own its properties and carry on its business as now being
conducted.
b. Authority;
Enforceability. The Company has the requisite corporate power
and authority to execute and deliver this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of
this Agreement, the Registration Rights Agreement, the Securities Purchase
Agreement and Certificate of Designations, and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement, the Registration Rights Agreement, the Securities Purchase Agreement
or Certificate of Designations, or to consummate the transactions so
contemplated. Each of the Agreement, the Registration Rights
Agreement, the Securities Purchase Agreement and Certificate of Designations has
been (or upon delivery will have been) duly executed by the Company, and when
delivered in accordance with the terms hereof will constitute the valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, except (i) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws of general application affecting enforcement of creditors’ rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
c. Common
Stock. All shares of the Company’s Common Stock issued upon
conversion of the Series B Preferred pursuant to the Certificate of Designations
will be, when issued, free from liens, duly authorized, validly issued, fully
paid and non-assessable.
d. No Other Representations or
Warranties. Except as set forth above in this Section 7, no
other representations or warranties, express or implied, are made in this
Agreement by the Company to the Holder.
8. Holder Representations and
Warranties and Covenants. Each Holder hereby, for itself and
for no other Holder, represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows:
a. Organization;
Authority. Such Holder is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization with full right, corporate or partnership power and authority to
enter into and to consummate the transactions contemplated by this Agreement and
the Registration Rights Agreement and otherwise to carry out its obligations
hereunder and thereunder. The execution, delivery and performance by
such Holder of the transactions contemplated by this Agreement and the
performance by such Holders of the transactions contemplated by the Registration
Rights Agreement have been duly authorized by all necessary corporate or similar
action on the part of such Holder. The Agreement has been (or upon
delivery will have been) duly executed by such Holder, and when delivered by
such Holder in accordance with the terms hereof, will constitute the valid and
legally binding obligation of such Holder, enforceable against it in accordance
with its terms, except (i) as such enforceability may be limited by general
equitable principles and applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation and other similar laws of general application affecting
enforcement of creditors’ rights generally, (ii) as limited by laws relating to
the availability of specific performance, injunctive relief or other equitable
remedies and (iii) insofar as indemnification and contribution provisions
may be limited by applicable law.
b. Own
Account. Such Holder understands that the Securities are
restricted securities and have not been registered under the Securities Act or
any applicable state securities law and is acquiring the Securities as principal
for its own account and not with a view to or for distributing or reselling such
Securities or any part thereof in violation of the 1933 Act or any applicable
state securities law, has no present intention of distributing any of such
Securities in violation of the 1933 Act or any applicable state securities law
and has no arrangement or understanding with any other persons regarding the
distribution of such Securities in violation of the 1933 Act or any applicable
state securities law. Such Holder is acquiring the Securities
hereunder in the ordinary course of its business. Such Holder does
not have any agreement or understanding, directly or indirectly, with any person
or entity to distribute any of the Securities.
x. Xxxxxx
Status. At the time such Holder was offered the Securities, it
was, and at the date hereof it is, and on each date on which it converts the
Series B Preferred, it will be either: (i) an “accredited investor” as defined
in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act or
(ii) a “qualified institutional buyer” as defined in Rule 144A(a) under the 1933
Act. Such Holder is not required to be registered as a broker-dealer
under Section 15 of the Exchange Act.
2
d. Experience of
Holders. Such Holders, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Such Holder is able to bear the
economic risk of an investment in the Securities and, at the present time, is
able to afford a complete loss of such investment.
e. General
Solicitation. Such Holder is not acquiring the Securities as a
result of any advertisement, article, notice or other communication regarding
the Securities published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
f. Access to
Information. Such Holder acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has deemed necessary
of, and to receive answers from, representatives of the Company concerning the
terms and conditions of the offering of the Securities and the merits and risks
of investing in the Securities; (ii) access to information about the Company and
its financial condition, results of operations, business, properties, management
and prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information that the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment.
g. Certain Trading
Activities. Such Holder has not directly or indirectly, nor
has any person or entity acting on behalf of or pursuant to any understanding
with such Holder, engaged in any transactions in the securities of the Company
(including, without limitations, any Short Sales (as defined below) involving
the Company’s securities) since it was contacted by the Company on December 8,
2008 regarding this transaction. Such Holder covenants that neither it nor
any person or entity acting on its behalf or pursuant to any understanding with
it will engage in any transactions in the securities of the Company (including
Short Sales) prior to the time that the transactions contemplated by this
Agreement are publicly disclosed by the Company. Such Holder has
maintained, and covenants that until such time as the transactions contemplated
by this Agreement are publicly disclosed by the Company such Holder will
maintain, the confidentiality of all disclosures made to it in connection with
this transaction (including the existence and terms of this
transaction). Notwithstanding the foregoing, in the case of a Holder
that is a multi-managed investment vehicle whereby separate portfolio managers
manage separate portions of such Holder’s assets and the portfolio managers have
no direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Holder’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other parties to this
Agreement, such Holder has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction). As used herein, “Short Shares” shall
include, without limitation, all “short sales” as defined in Rule 200
promulgated under Regulation SHO under the Exchange Act and all types of direct
and indirect stock pledges, forward sale contracts, options, puts, calls, swaps
and similar arrangements (including on a total return basis), and sales and
other transactions through non-US broker dealers or foreign regulated
brokers.
h. Independent Investment
Decision. Such Holder has independently evaluated the merits
of its decision to exchange such Holder’s Notes for Series B Preferred pursuant
to this Agreement, and such Holder confirms that it has not relied on the advice
of any other Holder’s business and/or legal counsel in making such
decision.
The
Company acknowledges and agrees that each Holder does not make or has not made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 8.
9. Miscellaneous.
a. Survival of Representations,
Warranties and Agreements. The representations, warranties, covenants and
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Closing Date and shall not be limited or affected by
any investigation by or on behalf of any party hereto.
b. Further
Assurances. Each of the Company and Holder will use its, as
the case may be, best reasonable efforts to take all action and to do all things
necessary, proper or advisable on order to consummate and make effective the
transactions contemplated by this Agreement.
c. Entire Agreement; No Third
Party Beneficiaries. This Agreement (including the documents,
exhibits and instruments referred to herein, including, without limitation, the
Registration Rights Agreement, Securities Purchase Agreement and Certificate of
Designations) (a) constitutes the entire agreement and supersedes all prior
agreements, and understandings and communications, both written and oral, among
the parties with respect to the subject matter hereof, and (b) is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder.
d. Governing
Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York without regard to any
applicable principles of conflicts of law.
3
e. Counterparts. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original and all of which taken together shall constitute one and the
same document.
f. Amendment and
Modification. This Agreement may not be amended or modified
except by an instrument in writing signed by each of the parties
hereto.
g. Notices. All
communications, notices, instructions and consents provided for herein or in
connection herewith will be in writing and be sent to the address below and will
be (a) given in person, (b) sent by registered or certified mail, return receipt
requested, postage prepaid, (c) sent by means of telex, facsimile or other means
of wire transmission (with request for assurance of receipt in a manner typical
with respect to communications of that type), or (d) sent by a reputable
nationwide overnight courier service. Any such communication, notice,
instruction or consent will be deemed to have been delivered: (w) on receipt if
given in person; (x) three Business Days after it is sent by registered or
certified mail, return receipt requested, postage prepaid, (y) on the date of
transmission if sent by telex, facsimile or other means of wire transmission (if
such transmission is on a Business Day, otherwise on the next Business Day
following such transmission), or (z) one Business Day after it is sent via a
reputable nationwide overnight courier service. Notices will be
addressed as follows; provided, however, that if the
Company designates a different address by notice to the Holders or a Holder
designates a different address by notice to the Company, then to the last
address so designated:
To the
Company:
eMagin
Corporation
00000 XX
0xx Xxxxxx, Xxxxx 0000
Xxxxxxxx,
XX 00000
Attention: Chief
Financial Officer
with a
copy to:
Xxxxxxx
Xxxxxxxx, Esq.
Sichenzia
Xxxx Xxxxxxxx Xxxxxxx LLP
00
Xxxxxxxx
Xxx Xxxx,
Xxx Xxxx 00000
(000)
000-0000 telephone
(000)
000-0000 fax
To the
Holders: To the address listed on Schedule A
4
IN WITNESS
WHEREOF, the parties have caused this Agreement to be duly executed
by their respective officers thereunto duly authorized as of the day and year
first above written.
| EMAGIN CORPORATION | |||
|
|
By:
|
/s/ Xxxx Xxxxxxxx | |
|
Xxxx
Xxxxxxxx
|
|||
|
Interim
Chief Financial Officer
|
|||
5
[HOLDERS
SIGNATURE PAGE TO THE EXCHANGE AGREEMENT]
IN
WITNESS WHEREOF, they undersigned have caused this Exchange Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
| GINOLA LIMITED | |||
|
|
By:
|
/s/ Xxxxxxxx Xxxxx | |
| Xxxxxxxx Xxxxx | |||
| President | |||
|
Note
Amount Converted:
|
$ | 800,000 | ||
|
Unpaid
Interest Converted:
|
$ | 3,000 | ||
|
Series
B Preferred Shares:
|
803 | |||
|
Unpaid
Interest paid in Cash:
|
$ | 733.33 |
Address for Delivery of Series B Preferred Shares for Holder (if
not the same address listed on Schedule A):
Xxxxxxxx
Xxxxx
Xxxxxxxxxx
& Xxxxx LLP
00
Xxxxxxxxxxx Xxxxx
Xxx Xxxx,
XX 112
6
[HOLDERS
SIGNATURE PAGE TO THE EXCHANGE AGREEMENT]
IN
WITNESS WHEREOF, they undersigned have caused this Exchange Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
| RAINBOW GATE CORPORATION | |||
|
|
By:
|
/s/ Xxxxxxxx X.X. Xxxxxxx | |
| Xxxxxxxx X.X. Xxxxxxx | |||
| Investment Manager | |||
|
Note
Amount Converted:
|
$ | 700,000 | ||
|
Unpaid
Interest Converted:
|
$ | 3,000 | ||
|
Series
B Preferred Shares:
|
703 | |||
|
Unpaid
Interest paid in Cash:
|
$ | 266.67 |
Address for Delivery of Series B Preferred Shares for Holder (if
not the same address listed on Schedule A):
Xxxxxxxx
Xxxxx
Xxxxxxxxxx
& Xxxxx LLP
00
Xxxxxxxxxxx Xxxxx
Xxx Xxxx,
XX 112
7
[HOLDERS
SIGNATURE PAGE TO THE EXCHANGE AGREEMENT]
IN
WITNESS WHEREOF, they undersigned have caused this Exchange Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
| GINOLA LIMITED | |||
|
|
By:
|
/s/ Xxxxxxxx Xxxxx | |
| Xxxxxxxx Xxxxx | |||
| President | |||
|
Note
Amount Converted:
|
$ | 800,000 | ||
|
Unpaid
Interest Converted:
|
$ | 3,000 | ||
|
Series
B Preferred Shares:
|
803 | |||
|
Unpaid
Interest paid in Cash:
|
$ | 733.33 |
Address for Delivery of Series B Preferred Shares for Holder (if
not the same address listed on Schedule A):
Xxxxxxxx
Xxxxx
Xxxxxxxxxx
& Xxxxx LLP
00
Xxxxxxxxxxx Xxxxx
Xxx Xxxx,
XX 112
8
[HOLDERS
SIGNATURE PAGE TO THE EXCHANGE AGREEMENT]
IN
WITNESS WHEREOF, they undersigned have caused this Exchange Agreement to be duly
executed by their respective authorized signatories as of the date first
indicated above.
| Navacorp III LLC | |||
|
|
By:
|
/s/ Xxxx Xxxxxxx | |
| Name: Xxxx Xxxxxxx | |||
| Title: Managing Member | |||
|
Note
Amount Converted:
|
$ | 200,000 |
[Unpaid Interest:]
Series B Preferred Shares:
Address for Delivery of Series B Preferred Shares for
Holder (if not the same address listed on Schedule
A):
9
SCHEDULE
A
|
Name
and Address of Note Holder
|
Amount
of Note to be exchanged for Series B Preferred
|
Amount
of unpaid interest on Note to be exchanged for Series B
Preferred
|
Number
of shares of Series B Preferred upon conversion
|
Amount
of unpaid interest on Note paid in cash on Closing Date
|
|
Ginola
Limited
x/x
Xxxxx
Xxxxxxx
Xxxxxxxx
Xxx
Xxxxxx
St.
Helier, Jersey JE4 9WG
Channel
Islands
Attention: Xxxxxxxx
X. Xxxxx
with
a copy to:
Xxxxxxxxxx
& Xxxxx LLP
00
Xxxxxxxxxxx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx
X. Xxxxx, Esq.
Facsimile
No.: 000-000-0000
|
$800,000
|
$3,000
|
803
|
$733.33
|
|
Rainbow
Gate Corporation
c/o
The Acorn Foundation for the
Arts
and Sciences, Inc.
00
Xxxx 00xx Xxxxxx
Xxx
Xxxx, Xxx Xxxx, 00000
with
copies to:
Xxxxxxxxxx
& Xxxxx LLP
00
Xxxxxxxxxxx Xxxxx
Xxx
Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx
X. Xxxxx, Esq.
Facsimile
No.: 000-000-0000
Ogier
Xxxxxxx
Xxxxxxxx
Xxx
Xxxxxx
Xx.
Xxxxxx, Xxxxxx XX0 0XX
Channel
Islands
Attention: Xxxxxxxx
X. Xxxxx
|
$700,000
|
$3,000
|
703
|
$266.67
|
|
Navacorp
III LLC
|
$200,000
|
$0
|
200
|
$933.33
|
10
EXHIBIT
A
CERTIFICATE
OF DESIGNATIONS
11
EXHIBIT
B
REGISTRATION
RIGHTS AGREEMENT
9
