EXHIBIT 10.1
SECURITIES PURCHASE AGREEMENT DATED AS OF APRIL 25, 2003 BY AND AMONG EMAGIN AND
THE INVESTORS IDENTIFIED ON THE SIGNATURE PAGES THERETO.
EMAGIN CORPORATION
EMAGIN CORPORATION
GLOBAL RESTRUCTURING AND SECURED NOTE PURCHASE AGREEMENT
THIS GLOBAL RESTRUCTURING AND SECURED NOTE PURCHASE AGREEMENT
(this "Agreement") is entered into as of April 25, 2003, by and among eMagin
Corporation, a Delaware corporation ("eMagin"), Virtual Vision, Inc., a Delaware
corporation and the wholly owned subsidiary of eMagin ("eMagin Sub", and
together with eMagin, the "Company"), Xx. Xxxxxxxx D.A. Sackler ("MDAS"), Xx.
Xxxx Xxxxxx ("JR"), Ginola Limited ("Ginola" together with MDAS and JR,
individually an "Original Secured Party" and collectively, the "Original Secured
Parties") and Stillwater LLC ("Stillwater") and the other purchasers of New
Notes (as defined below) listed on Schedule 1 attached hereto (unless identified
specifically by name, individually a "New Investor", and collectively, the "New
Investors").
W I T N E S S E T H :
WHEREAS, eMagin and the Original Secured Parties are each a
party to the Secured Note Purchase Agreement entered into as of November 27,
2001, as amended by the Omnibus Amendment, Waiver and Consent Agreement dated
January 14, 2002 (the "Original Secured Purchase Agreement") pursuant to which
five Secured Convertible Promissory Notes were issued in the aggregate principal
amount of $1,625,000 (collectively, the "Original Secured Notes");
WHEREAS, eMagin and the Original Secured Parties pursuant to
the Original Secured Purchase Agreement entered into a Security Agreement dated
November 20, 2001 (the "Original Security Agreement") and Registration Rights
Agreement dated November 27, 2001 (the "Original Registration Rights
Agreement");
WHEREAS, eMagin, eMagin Sub and MDAS are each a party to the
Secured Note Purchase Agreement entered into as of June 20, 2002 (the "Bridge
Financing Purchase Agreement") pursuant to which a Secured Promissory Note was
issued in the principal amount of $200,000 (the "Bridge Note");
WHEREAS, eMagin and MDAS pursuant to the Bridge Financing
Purchase Agreement entered into a Subordinated Security Agreement dated June 20,
2002 (the "Subordinated Security Agreement");
WHEREAS, eMagin Sub and MDAS pursuant to the Bridge Financing
Purchase Agreement entered into a Security Agreement dated June 20, 2002
("eMagin Sub Security Agreement", together with the Subordinated Security
Agreement, the "Bridge Security Agreements");
WHEREAS, the Company has requested funding for its continued
operations as a developer of virtual imaging technology;
WHEREAS, the New Investors have agreed to lend financing to
the Company (subject to the terms and conditions set forth in this Agreement) in
order for the Company to continue its operations as a developer of virtual
imaging technology;
WHEREAS, each of the Original Secured Parties have agreed to
amend its respective Original Secured Notes and Bridge Note and any warrants
("Original Warrants") issued to the Original Secured Parties that are listed on
Exhibit G attached hereto, and terminate the Original Security Agreement and
Bridge Security Agreements and simultaneously participate in this new round of
financing (subject to the terms and conditions set forth in this Agreement) and
allow the New Investors to enter into the New Security Agreement (as defined
below) with them on a pari passu basis in order for the Company to continue its
operations as a developer of virtual imaging technology;
WHEREAS, in order to induce the Original Secured Parties and
the New Investors to enter into this Agreement and to allow the New Investors to
share in the collateral previously granted to the Original Secured Parties, the
Company and the Original Secured Parties have agreed to terminate the Original
Security Agreement and Bridge Security Agreements in order to grant
simultaneously to all Original Secured Parties and New Investors a first
priority security interest in and to the Collateral (as such term is defined in
the "New Security Agreement" attached hereto as Exhibit A), which is
substantially the same as the collateral granted to the Original Secured Parties
under the Original Security Agreement and Bridge Security Agreements;
NOW, THEREFORE, in consideration of the mutual covenants set
forth herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, hereby agree as follows:
1. Amendment of Notes and Warrants. By executing this
Agreement the Company and each of the Original Secured Parties hereby agree,
acknowledge and consent that each of the outstanding Original Secured Notes and
Bridge Note issued to each Original Secured Party shall be amended and restated
such that each Original Secured Party shall receive an "Amended and Restated
Note", as may be further amended from time to time, in the form attached hereto
as Exhibit B, for each Original Secured Note and Bridge Note such Original
Secured Party owned with the same terms and conditions as the Original Secured
Notes and Bridge Note except for (a) the Bridge Note will now be convertible and
will have the same Conversion Price (as defined below) as the New Note (as
defined below), (b) the extension of the maturity date to November 1, 2005 (the
"Maturity Date") and clarification of interest payment terms, (c) revised
references to this Agreement and the New Security Agreement, (d) clarification
of when the Original Secured Party is not subject to a Mandatory
Conversion, (e) revising the final judgment amount to $50,000 in Section 8(h) in
the Amended and Restated Note, and (f) clarification of the permitted assigns
allowed under Section 13 in the Amended and Restated Note. In addition, the
Company and each of the Original Secured Parties hereby agree, acknowledge and
consent that each of the outstanding Original Warrants issued to each Original
Secured Party that is listed on Exhibit G shall be amended and restated such
that each Original Secured Party, if applicable, shall receive an "Amended and
Restated Warrant" in the form attached hereto as Exhibit H, for each Original
Warrant listed on Exhibit G with the same terms and conditions as the Original
Warrant except for the addition of a warrant exercise limitation.
2. Purchase and Sale of New Secured Notes; Issuance of
Warrants.
(a) The Company has duly authorized for sale, issuance and delivery new
secured convertible notes, as may be amended from time to time (the "New Notes",
and together with the Amended and Restated Notes, the "Notes") for a total
aggregate principal amount not to exceed $9,000,000 (the "Maximum Note Amount").
All such New Notes shall be due and payable on the Maturity Date (unless prepaid
or converted prior to such date pursuant to the terms of such New Notes) and
shall otherwise be substantially in the form attached hereto as Exhibit C.
(b) The Company has duly authorized for sale, issuance and delivery the
three year warrants (the "Warrants", and together with the Notes and any Common
Stock (as defined below) issued thereunder, the "Securities") to purchase up to
11,624,903 shares, subject to adjustment (the "Maximum Warrant Amount") of the
Company's common stock, par value $.001 per share (the "Common Stock"), such
Warrants to be substantially in the form attached hereto as Exhibit D.
(c) Subject to the terms of this Agreement, the Original Secured Parties
and the New Investors agree to exchange and/or purchase, as the case may be, and
the Company agrees to issue to each Original Secured Party and New Investor, the
Notes and Warrants for an exchange/purchase price and amount on or before the
certain dates set forth on Schedule 2 attached hereto. The New Investors'
obligation to pay and the Company's obligation to deliver the Notes and Warrants
committed to by the New Investors at the Initial Closing (as defined below) to
be paid for and delivered on or before the dates specified in Schedule 0 (xxx
"Xxxxxxx Xxxxxxx Xxxxxxxx," and each additional closing is a "Tranche Closing"),
is subject to certain conditions set forth in Section 7 being true and correct
prior to each Tranche Closing. Notwithstanding the foregoing, any and all such
Tranche Closings shall take place no later than five (5) days after the
effectiveness of the registration statement that is required to be filed
pursuant to the Registration Rights Agreement (as defined below in Section
6(j)). The New Notes issued pursuant to this Section 2(c) shall have a
Conversion Price (as such term is defined in Section 5 of the New Notes) equal
to 105% of the volume weighted average closing price of the Common Stock on the
American Stock Exchange ("AMEX") (or the over-the-counter market) for the five
(5) trading days immediately preceding the date of this Agreement as reported by
the Wall Street Journal, New York City edition.
(d) The initial exchange/purchase and sale of the Notes and Warrants shall
take place concurrently with the execution of this Agreement (the "Initial
Closing", together with the Tranche Closing and any Additional Closing (as
defined below), the "Closings"). At each Closing the Company shall deliver to
each New Investor, and at the Initial Closing the Company shall deliver to each
Original Secured Party, (i) an executed counterpart to this Agreement and
(ii) a Note in the respective principal amount set forth on Schedule 2, in all
cases against delivery to the Company by each New Investor of (x) an executed
counterpart to this Agreement and (y) the respective purchase price of each such
Note and the Warrants in the amount described in the preceding clause (ii) by
bank wire transfer of immediately available funds to an account designated in
writing by the Company; and by each of Original Secured Party of (I) an executed
counterpart to this Agreement and (II) delivery to the Company or its legal
counsel for cancellation the Original Secured Notes and the Bridge Note
certificates owned by such Original Secured Party. Immediately upon receipt of
such Original Secured Notes and Bridge Note from the Original Secured Parties
pursuant to this section, the Company shall cancel such instruments (which shall
be void and of no further force and effect) and issue in substitution therefor
to such Original Secured Party an Amended and Restated Note as set forth above.
(e) At each Closing, the Company will promptly issue to each New Investor a
Warrant to purchase such number of shares, subject to adjustment, as specified
opposite each party's name under the heading "Warrant Amount" for such Closing
on Schedule 2A attached hereto, each such Warrant to have an exercise price per
share equal to 110% of the volume weighted average closing price of the Common
Stock on the AMEX (or the over-the-counter market) for the five (5) trading days
immediately preceding the date of this Agreement as reported by the Wall Street
Journal, New York City edition. The Warrants shall be substantially in the form
attached to this Agreement as Exhibit D.
(f) Subsequent to the Initial Closing and prior to the filing of the
registration statement with the U.S. Securities and Exchange Commission (the
"SEC") that is required to be filed pursuant to the Registration Rights
Agreement, provided that the respective Maximum Note Amount and Maximum Warrant
Amount have not been issued by the Company and subject to Section 2(g), the
Company may, at its sole discretion, agree to permit additional investors to
subscribe for additional New Notes (provided each such additional New Note shall
have a principal amount of not less than $25,000) and related Warrants, on
similar terms as Sections 2(d) and 2(e) (and provided that each such additional
New Note and Warrant, as the case may be, shall be issued on the same terms,
including conversion price for the New Notes and Warrant exercise price (but not
recipient, date and amount) as the New Notes and Warrants issued by the Company
at the Initial Closing) until the Maximum Note Amount and the Maximum Warrant
Amount have been issued by the Company; provided further, that no additional New
Notes or Warrants shall be issued under this Section 2(f) unless each transferee
thereof shall have concurrently with the entering into of this Agreement,
entered into the New Security Agreement (as defined below in Section 5(a)). The
closing of each additional subscription of New Notes and Warrants (the
"Additional Closings") pursuant to this Section 2(f) shall occur at such place
and time as may be agreed upon by such additional investors and the Company
(provided, however, that any and all such Additional Closings shall take place
no later than 5 days after the effectiveness of the registration statement that
is required to be filed pursuant to the Registration Rights Agreement), and such
additional investor shall be added to Schedule 1 and be deemed a New Investor.
(g) Any additional New Notes or Warrants issued up to the Maximum Note
Amount or the Maximum Warrant Amount, as the case may be, under Section 2(f)
shall be restricted to issuances to such persons approved by 50% or more of the
holder of Notes (in terms of the aggregate dollar value of the principal of the
Notes then issued under this Agreement). In addition, after the Initial Closing,
if the Company allows a third party or any New Investor to purchase any New
Notes pursuant to Section 2(f) or make any other type of financing investment in
the Company ("New Investment"), then Stillwater's obligation and right to
acquire New Notes pursuant to the Tranche Closings set forth on the Tranche
Closing Schedule shall automatically terminate and expire in an amount equal to
the New Investment. The Tranche Closing Schedule shall be revised to reflect
such reduction by decreasing the remaining unpaid New Note amounts by the New
Investment, starting in the last period first (i.e. October 15, 2003); provided,
however, that any and all such Tranche Closings shall take place no later than 5
days after the effectiveness of the registration statement that is required to
be filed pursuant to the Registration Rights Agreement. The Company shall give
each New Investor at least 15 days written notice (unless waived in writing)
prior to closing a New Investment. Notwithstanding the foregoing, each New
Investor shall have the right to purchase additional New Notes and/or
participate in any financing offered to any third party on the same terms and
conditions as those offered to such third parties.
3. Representations and Warranties of each Original Secured
Party and New Investor. As of the date of the Initial Closing, each Tranche
Closing and any Additional Closing, as the case may be, each Original Secured
Party and New Investor (together, the "Investors" and individually, an
"Investor") severally as to itself and not jointly hereby, represents and
warrants to the Company as follows:
(a) Such Investor is acquiring its respective Note and will acquire its
respective Warrants for the Investor's own account, not as nominee or agent, for
investment and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933, as amended (the "Securities Act"). By executing this Agreement, such
Investor further represents that the Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to any such person or to any third person, with respect to the
Securities.
(b) Such Investor understands that (i) the Securities have not been
registered under either the Securities Act or the securities laws of any state
of the United States by reason of specific exemptions therefrom, (ii) the
Securities must be held by the Investor indefinitely, and therefore, such
Investor must bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act and the
securities laws of any applicable state or is exempt from such registrations,
(iii) each certificate that represents the Securities will be endorsed with
legends as required by applicable securities laws, and (iv) the Company will
instruct any transfer agent not to register the transfer of any of the
Securities unless the conditions specified in the foregoing legend are
satisfied. For greater certainty, the restrictive legend referred to in clause
(iii) shall be substantially in the following form:
THIS SECURITY (A) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND IS BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS, AND (B)
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER THAT SUCH
REGISTRATION IS NOT REQUIRED.
(c) Such Investor has been furnished with such materials and has been given
access to such information relating to the Company as the Investor has
requested. Investor has been afforded the opportunity to ask questions regarding
the Company and the Securities as the Investor has found necessary to make an
informed investment decision. Such Investor has been solely responsible for its
own due diligence investigation of the Company and its business, for its own
analysis of the merits and risks of its investment made pursuant to this
Agreement and for its own analysis of the terms of its investment.
(d) Such Investor is an "accredited investor" within the meaning of Rule
501 of the Securities Act. The Investor is in a financial position to hold the
Securities and is able to bear the economic risk and withstand a complete loss
of the Investor's investment in the Securities. The Investor recognizes that the
Securities involve a high degree of risk. The Investor is a sophisticated
investor, is able to fend for itself in the transaction contemplated by this
Agreement, and has such knowledge and experience in financial and business
matters that the Investor is capable of evaluating the merits and risks of the
prospective investment in the Securities.
(e) (i) Such Investor has the requisite corporate power and corporate
authority or such similar authority to enter into and perform its obligations
under this Agreement, (ii) the execution and delivery of this Agreement by the
Investor and the consummation by it of the transactions contemplated hereby have
been duly authorized by all necessary corporate action and no further consent or
authorization of the Investor, or its Board of Directors or stockholders, as the
case may be, is required, and (iii) this Agreement has been duly executed and
delivered by such Investor and constitutes a valid and binding obligation of the
Investor, enforceable against the Investor in accordance with its terms, except,
in each case, as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation, conservatorship,
receivership or similar laws relating to, or affecting generally the enforcement
of, creditors' rights and remedies or by other equitable principles of general
application.
4. Representations and Warranties of the Company. As of the
date of the Initial Closing, each Tranche Closing and any Additional Closing, as
the case may be, the Company represents and warrants to each Investor as
follows:
(a) Organization, Good Standing and Power. eMagin and eMagin Sub are
corporations duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and have all requisite corporate authority to own,
lease and operate their respective properties and assets and to carry on their
respective businesses as now being conducted. Each of eMagin and eMagin Sub is
duly qualified to do business and is in good standing as a foreign corporation
in every jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, other than those in which the
failure to so qualify would not have a Material Adverse Effect. As used
in this Agreement, a "Material Adverse Effect" shall mean any adverse effect on
the business, operations, properties, or financial condition of the Company that
is material and adverse to the Company taken as a whole, and/or any condition,
circumstance or situation that would prohibit or otherwise materially interfere
with the ability of the Company to perform any of its material obligations under
this Agreement or the Securities.
(b) Authorization; Enforcement. (i) The Company has the requisite corporate
power and corporate authority to enter into and perform their respective
obligations under this Agreement and the Securities, pursuant to their
respective terms, (ii) the execution and delivery of this Agreement and the
Securities by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate actions, and no further consent or authorization of the Company or its
Board of Directors or stockholders is required, and (iii) each of this
Agreement, the Notes and the Warrants when executed and delivered by the Company
will constitute a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except, in each case, as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation, conservatorship, receivership or
similar laws relating to, or affecting generally the enforcement of, creditors'
rights and remedies or by other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, of which 30,854,980 shares are issued and
outstanding and 10,000,000 shares are preferred stock, par value $.001 per
share, of which no shares are issued and outstanding. All of the outstanding
shares of the Company's Common Stock have been duly authorized and validly
issued and are fully paid and non-assessable and were issued in accordance with
the registration or qualification provisions of the Securities Act and any
relevant state securities laws or pursuant to valid exemptions therefrom. Except
as set forth in this Agreement and as set forth in the SEC Documents (as defined
below in Section 4(f)) and Schedule 4(c) attached hereto, no shares of Common
Stock are entitled to preemptive rights or registration rights and there are no
outstanding options, warrant, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company. Furthermore,
except as set forth in this Agreement and as set forth in the SEC Documents and
Schedule 4(c) attached hereto, there are no contracts, commitments,
understandings or arrangements by which the Company is or may become bound to
issue additional shares of the capital stock of the Company or options,
securities or rights convertible into shares of capital stock of the Company.
The Company is not a party to, and it has no knowledge of, any agreement
restricting the voting or transfer of any shares of the capital stock of the
Company. Except as set forth in the SEC Documents, the offer and sale of all
capital stock, convertible securities, rights, warrants or options of the
Company issued prior to the Initial Closing complied with all applicable federal
and state securities laws, and no stockholder has a right of rescission or
damages with respect thereto which would have a Material Adverse Effect. The
Company has filed as exhibits to the SEC Documents true and correct copies of
the Company's articles or certificate of incorporation as in effect on the date
hereof (the "Charter"), and the Company's bylaws as in effect on the date hereof
(the "Bylaws"). eMagin has not received any notice from the AMEX questioning or
threatening the continued inclusion of the Common Stock on such market, except
for a letter to eMagin requesting that eMagin hold an annual meeting prior to
June 30, 2003.
(d) Issuance of Securities. The Notes and Warrants (and the shares of
Common Stock underlying such Warrants) to be issued under this Agreement have
been duly authorized by all necessary corporate actions and, when paid for and
issued in accordance with the terms of the Notes and Warrants, the Common Stock
issued on exercise of the Warrants and the conversion of the Notes shall be
validly issued and outstanding, fully paid and non-assessable.
(e) No Conflicts. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated herein do not and will not (i) violate any provision of the
Company's Charter or Bylaws, (ii) conflict with, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond,
license, lease agreement, instrument or obligation to which the Company is a
party, (iii) create or impose a lien, charge or encumbrance on any property of
the Company under any agreement or any commitment to which the Company is a
party or by which the Company is bound or by which any of its respective
properties or assets are bound, or (iv) result in a violation of any federal,
state, or local statute, rule, regulation, order, judgment or decree (including
any federal or state securities laws and regulations) applicable to the Company
or any of its subsidiaries or by which any property or asset of the Company or
any of its subsidiaries are bound or affected. To the knowledge of the Company,
the business of the Company and its subsidiaries is not being conducted in
violation of any laws, ordinances or regulations of any governmental entity,
except for possible violations which singularly or in the aggregate do not and
will not have a Material Adverse Effect. The Company is not required under any
federal, state or local law, rule or regulation to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under this Agreement, or issue and sell the Securities in accordance
with the terms hereof (other than any filings which may be required to be made
by the Company with the SEC or state securities administrators subsequent to the
Initial Closing and any registration statement which may be filed pursuant
hereto); provided that, for purpose of the representation made in this sentence,
the Company is assuming and relying upon the accuracy of the relevant
representations and agreements of each Investor named herein.
(f) SEC Documents; Financial Statements. The Common Stock is registered
pursuant to Section 12 of the Securities Exchange Act of 1934 (the "Exchange
Act"), and, except as disclosed in the SEC Documents, the Company has timely
filed all reports, schedules, forms, statements and other documents required to
be filed by it with the SEC pursuant to the reporting requirements of the
Exchange Act, including material filed pursuant to Section 13(a) or 15(d) of the
Exchange Act (all of the foregoing including filings incorporated by reference
therein being referred to herein as the "SEC Documents"). The Company has
directed the Investor to accurate and readily accessible sources of true and
correct copies of the SEC Documents. As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of
the Exchange Act or the Securities Act, as applicable, and the rules and
regulations of the SEC promulgated thereunder applicable to such documents, and,
as of their respective filing dates, none of the SEC Documents contained any
untrue statements of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as disclosed therein, the financial statements of the Company
included in the SEC Documents comply as to form in all material respects with
applicable accounting requirements under the United States Generally Accepted
Accounting Principles, as those conventions, rules and procedures are determined
by the Financial Accounting Standards Board ("GAAP"), and the published rules
and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except (i) as
may be otherwise indicated in such financial statements or the notes thereto or
(ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements), and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
(g) Disclosure. The Company has provided each Investor with all the
information reasonably available to it without undue expense that such Investor
has requested in order to decide whether to purchase the Notes and Warrants. To
the best of the Company's knowledge, none of this Agreement, other agreements,
written statements or certificates made or delivered in connection herewith and
the SEC Documents, when taken in the aggregate, as of the date of the Initial
Closing contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements herein or therein not misleading.
(h) No Liens. Other than in respect of leased tangible equipment used by
the Company in the ordinary course of business and the Original Security
Agreement and the Bridge Security Agreements that will be superceded on the
Initial Closing date, the Company is the owner of all Collateral (as such term
is defined in the New Security Agreement referred to in Section 5(a) of this
Agreement) free from any security interest, deed of trust, mortgage, pledge,
lien, claim, charge, encumbrance, title retention agreement, lessor's interest
in a financing lease or analogous instrument, in, of, or on the Company's
property (other than Permitted Liens, as such term is defined in the New
Security Agreement, and any liens created by the New Security Agreement) and the
Company has not issued or committed to issue any indebtedness ranking equal to
or higher in priority to the security interests to be granted in the Collateral
under the New Security Agreement to secure the obligations under the Notes.
(i) Creditor Actions. Except as set forth in Schedule 4(i), the Company has
not received any written notice of foreclosure, involuntary bankruptcy or other
material adverse creditor actions against the Company and has no actual
knowledge of potential foreclosure, involuntary bankruptcy or other material
adverse creditor actions affecting the Company.
(j) Patents. To the best of the Company's knowledge, (i) the Company has
not received any written notice of any claim from any third party (including,
without limitation, any governmental or regulatory entity) and no such third
party claims are pending challenging the right of the Company to use the patents
(collectively, the "Security Agreement Patents") listed on Annex G to the New
Security Agreement or alleging any violation or infringement by the
Company thereof, and (ii) each Security Agreement Patent shown as registered,
filed, issued or applied for, has been duly and validly registered in, filed in
or issued by, the official governmental registrars and/or issuers of patents and
trademarks and remain in full force and effect as of the date of the Initial
Closing without any material defect.
(k) Litigation. Except as set forth in Schedule 4(i), the Company is not
party to or aware of any actual or asserted litigation claims filed in any court
that in the aggregate could result in damages in excess of $25,000.
5. Miscellaneous.
(a) Security. The Notes shall be secured by a general security interest
under the New Security Agreement, dated as of April 25, 2003, by and among
eMagin and eMagin Sub, as assignors of the security interest, the Investors, and
Alligator Holdings Inc., as collateral agent for the Investors, with such
security granted for the ratable benefit of all of the Investors as holders of
the Notes. Reference is hereby made to the New Security Agreement for a
statement of the rights and obligations of the Investors, and the nature and
extent of the security for the Notes.
(b) Fees and Expenses. Each party shall pay all of its own fees and
expenses related to the transactions contemplated by this Agreement.
(c) Survival. The representations, warranties, covenants and agreements
made herein shall survive the date of the Initial Closing or the date of any
Tranche Closing, as the case may be.
(d) Entire Agreement; Amendment. This Agreement, including, but not limited
to, the form of New Security Agreement (attached hereto as Exhibit A), the form
of Amended and Restated Note (attached hereto as Exhibit B), the form of New
Note (attached hereto as Exhibit C), the form of Warrant (attached hereto as
Exhibit D), the form of Registration Rights Agreement (attached hereto as
Exhibit E) and other schedules and exhibits attached hereto, all of which form a
part of this Agreement, contain the entire understanding of the parties with
respect to the matters covered hereby and, except as specifically set forth
herein, neither the Company nor any Investor make any representations, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by a written instrument signed by
75% or more of such Notes (in terms of the aggregate dollar value of the
principal of the Notes then issued under this Agreement).
(e) Notices. Any notice, demand, request, waiver or other communication
required or permitted to be given hereunder shall be in writing and shall be
effective (i) upon hand delivery, overnight mail or courier service at the
address or number designated on the signature pages hereof (if delivered on a
business day during normal business hours where such notice is to be received),
or the first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (ii) on the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon actual
receipt of such mailing, whichever shall first occur. The addresses for such
communications shall be as set forth on the signature pages hereof. Any party
hereto may from time to time change its address for notices by giving written
notice of such changed address to the other parties hereto in accordance
herewith.
(f) Waivers. No waiver by any party of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed to be a
continuing waiver in the future or a waiver of any other provisions, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
(g) Headings. The article, section and subsection headings in this
Agreement are for convenience only and shall not constitute a part of this
Agreement for any other purpose and shall not be deemed to limit or affect any
of the provisions hereof.
(h) No Third Party Beneficiaries; Assignment. This Agreement is intended
for the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person. Each Investor may assign any of its rights under
this Agreement to any permitted assignee of the Securities. The Company may not
assign any of its rights or obligations under this Agreement without the written
consent of each Investor.
(i) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York, without giving
effect to the choice of law provisions thereof. The Company and each Investor
waives any right to a jury trial with respect to any dispute arising out of this
Agreement.
(j) Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and shall become effective when counterparts have been signed by each
party and delivered to the other parties hereto, it being understood that all
parties need not sign the same counterpart. Execution of counterparts may be by
facsimile.
(k) Publicity. The Company and the Investors may agree upon a press release
to be issued by the Company immediately upon execution of this Agreement
describing this Agreement and the transactions contemplated hereby. Thereafter,
any party may make a public statement or announcement with respect to this
Agreement or the transactions contemplated hereby or the existence of this
Agreement; provided, however, that prior to issuing any such press release or
making any such public statement or announcement, such party must obtain a prior
consent of each other party, which consent shall not be unreasonably withheld or
delayed.
(l) Severability. The provisions of this Agreement are severable and, in
the event that any court shall determine that any one or more of the provisions
or part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible, so long as such
construction does not materially adversely effect the economic rights of either
party hereto.
(m) Further Assurances. From and after the date of this Agreement, upon the
request of the Investors or the Company, each of the Company and the Investors
shall execute and deliver such instruments, documents and other writings as may
be reasonably necessary or desirable to confirm and carry out and to effectuate
fully the intent and purposes of this Agreement.
6. Conditions to Initial Closing. It shall be a condition to
the consummation of the transactions contemplated by this Agreement at the
Initial Closing that the Company shall have, concurrently with the execution of
this Agreement by the Investors, executed and delivered:
(a) a copy of an agreement between The Travelers Insurance Company
("Travelers") and the Company that requires Travelers to convert its Convertible
Promissory Note, dated August 21, 2001, into Common Stock upon the Company
entering into this Agreement;
(b) a copy of an agreement between SK Corporation ("SK") and the Company
that requires SK to convert its Series A Convertible Debentures, dated September
18, 2001, into Common Stock upon the Company entering into this Agreement;
(c) a copy of a settlement agreement between Finova Group Inc. and the
Company that contains terms satisfactory to the Investors;
(d) a detailed plan regarding the restructuring of the Company's payables
and outstanding debt, and copies of agreements between the Company and each of
its creditors that requires each creditor to settle its claim with the Company
upon the Company entering into this Agreement;
(e) a detailed chart of the Company's financial targets for the covenants
in the New Notes, as set forth in Schedule 6(e) attached hereto;
(f) to the Collateral Agent (as defined in the New Security Agreement), the
New Security Agreement and two completed originals of a UCC Form 1 suitable for
filing and the applicable federal assignment forms executed by the Company
sufficient for the Collateral Agent to perfect the security interests created
therein with the United States Patent and Trademark Office;
(g) the Amended and Restated Notes, each such Amended and Restated Note to
be in the amount required to be issued to each Original Secured Party on the
date of the Initial Closing pursuant to Section 1(a);
(h) the New Notes, each such New Note to be in the amount required to be
issued to each New Investor on the date of the Initial Closing pursuant to
Section 2(d);
(i) the Warrants, each such Warrant to be in the amount required to be
issued to each Investor on the date of each Tranche Closing pursuant to Section
2(e);
(j) the Registration Rights Agreement, dated as of April 25, 2003, by and
among the Company and the Investors (the "Registration Rights Agreement");
(k) to the Investors a legal opinion from the Company's outside legal
counsel, dated as of April 25, 2003, in the form attached to this Agreement as
Exhibit F;
(l) to the Collateral Agent in immediately available funds the amount of
$7,500 as payment of the Collateral Agent's fee and for legal fees incurred by
the Collateral Agent in connection with the negotiation of this Agreement and
the New Security Agreement;
(m) to Xxxxxxxxxx & Xxxxx LLP in immediately available funds the amount of
$105,000, constituting as of the date of this Agreement $15,000 in reimbursable
fees and expenses regarding filings with the Patent and Trademark Office and UCC
filings under the Original Secured Note Purchase Agreement, Bridge Financing
Agreement, Original Security Agreement, Bridge Security Agreements and New
Security Agreement and $90,000 in legal fees and expenses pursuant the this
Agreement and the related transactions; and
(n) a certificate to the Investors signed by the Company's Chief Executive
Officer, certifying that (i) each of the representations and warranties in
Section 4 are true and correct on and as of the Initial Closing date, and (ii)
eMagin's and Virtual Vision's board of directors have approved this Agreement
and the related transactions.
7. Conditions to each Tranche Closing. It shall be a condition
to the consummation of the transactions contemplated by this Agreement at each
Tranche Closing that the following conditions have taken place:
(a) the Company shall have, concurrently with the payment by the Investors
of the purchase price of each Note and the Warrants, executed and delivered the
New Notes and Warrants, each such New Note and Warrant to be in the amount
required to be issued to each New Investor on the date of the Tranche Closing
pursuant to Section 2(c);
(b) each of the representations and warranties in Section 4 will be true
and correct on and as of the Tranche Closing date with the same effect as though
all such representations and warranties had been made on and as of the Tranche
Closing date; and
(c) the Company shall not have commenced or consented to any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
moratorium or similar law or statute, no proceeding shall have commenced against
the Company under any bankruptcy, reorganization, arrangement, readjustment of
debt, moratorium or similar law or statute, and the Company has not consented to
or suffered the appointment of a guardian, receiver, trustee or custodian to any
substantial and material part of its assets.
7. Conditions to Additional Closings. It shall be a condition
to the consummation of the transactions contemplated by this Agreement at any
Additional Closing that the Company shall have, concurrently with the payment by
the Investors of the purchase price of each Note and the Warrants, executed and
delivered:
(a) a joinder agreement allowing the New Investor to become a party to the
New Security Agreement;
(b) the New Notes, each such New Note to be in the amount required to be
issued to each New Investor on the date of any Additional Closing pursuant to
Section 2(f);
(c) the Warrants, each such Warrant to be in the amount required to be
issued to each Investor on the date of any Additional Closing pursuant to
Section 2(f);
(d) a joinder agreement allowing the New Investor to become a party to the
Registration Rights Agreement; and
(e) a certificate stating that each of the representations and warranties
in Section 4 will be true and correct on and as of the Additional Closing date
with the same effect as though all such representations and warranties had been
made on and as of the Additional Closing date.
9. Additional Covenants of the Company. The Company covenants
and agrees with the Investors that the Company shall:
(a) not issue any secured debt (excluding tangible equipment leased in the
ordinary course of business and Permitted Liens, as defined in the New Security
Agreement) or any other security (excluding Permitted Liens, as defined in the
New Security Agreement) which in form or substance represent or are equal to or
senior to the secured interests granted under the New Security Agreement without
the approval of holders of such Notes who hold in the aggregate 75% or more of
such Notes (in terms of the aggregate dollar value of the principal of the Notes
then issued under this Agreement);
(b) deliver to each Investor a report detailing the Company's actual
Expenses, Direct Costs of Goods Sold, Revenues and Firm Purchase Orders for each
month, no later than ten (10) calendar days after such month has ended, and
Quarterly Revenue for each quarter, no later than twenty (20) calendar days
after such quarter has ended, for so long as such Investor has any Notes
outstanding. For purposes of this Section 9(b) and Section 8 of the New Notes,
Expenses, Direct Cost of Goods Sold, Revenue, Firm Purchase Orders and Quarterly
Revenue shall have the meanings set forth in Schedule 6(e) of this Agreement;
(c) reserve and the Company shall continue to reserve and keep available at
all times, free of preemptive rights, shares of Common Stock for the purpose of
enabling the Company to issue the Securities pursuant to this Agreement;
(d) use its commercially reasonable efforts to cause its Common Stock to
continue to be registered under Section 12(b) or (g) of the Exchange Act, to
comply in all respects with its reporting and filing obligations under the
Exchange Act, and will not take any action or file any document (whether or not
permitted by the Exchange Act or the rules thereunder) to terminate or suspend
such registration or to terminate or suspend its reporting and filing
obligations under said Exchange Act until the earlier of (i) that date that the
Investors have disposed of all of their Securities, or (ii) five (5) years from
the date hereof;
(e) not, and shall cause its subsidiaries not to, (i) declare or pay any
dividend or make any other distribution on any equity securities of the Company,
except dividends or distributions payable in equity securities of the Company,
or (ii) purchase, redeem or otherwise acquire or retire for value any equity
securities of the Company, except equity securities acquired upon conversion
thereof into other equity securities of the Company, without the prior written
consent of 50% or more of the holder of Notes (in terms of the aggregate dollar
value of the principal of the Notes then issued under this Agreement); and
(f) not enter into any transaction or agreement with any affiliate or
Related Party (as defined below) or with any person or entity which has an
affiliation with any Related Party or affiliate of the Company not on an
arms-length basis with terms and conditions no less favorable to the Company
than could be obtained from unrelated persons without the prior written consent
of 50% or more of the holder of Notes (in terms of the aggregate dollar value of
the principal of the Notes then issued under this Agreement); provided, however,
(i) the issuance of any Securities under this Agreement, (ii) payment of
salaries for services rendered, (iii) reimbursement for reasonable expenses
incurred on behalf of the Company, and (iv) other standard employee benefits
made generally available to all of the Company's employees, shall not be
prohibited. For purposes of this Agreement, a "Related Party" shall be any 10%
shareholder, director, officer or employee of the Company, or any "associate"
(as defined in the rules and regulations promulgated under the Securities Act)
of any such person.
10. Use of Proceeds. The Company shall use the net proceeds
from the Notes first for the payment of the outstanding amounts currently owed
IBM under the terms of eMagin's lease, and thereafter for working capital and
general corporate purposes. The Company hereby authorizes the Investors and
their designated representatives to conduct a review of the Company's books and
records sufficient to satisfy the Investors, in the exercise of reasonable
discretion, that the proceeds of the Notes were used for the purposes permitted
by the terms of this section and no other purpose or purposes.
(remainder of this page intentionally left blank)
This Agreement has been duly executed as of the date and year
first written above.
EMAGIN CORPORATION
By/s/Xxxx X. Xxxxx
-----------------------
Name: Xxxx X. Xxxxx
Title: Chief Executive Officer
VIRTUAL VISION, INC.
By/s/Xxxx X. Xxxxx
-----------------------
Name: Xxxx X. Xxxxx
Title: Chief Executive Officer
ORIGINAL SECURED PARTIES:
/s/ Xxxxxxxx X.X. Xxxxxxx
---------------------------
XXXXXXXX X.X. XXXXXXX
Address: 00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
GINOLA LIMITED
By: /s/Xxxxxxxx Xxxxx
------------------------
Name: Xxxxxxxx Xxxxx
Title: Director
/s/XXXX XXXXXX
XXXX XXXXXX
Address:
NEW INVESTORS:
STILLWATER LLC
By: Xxxxxxxx X.X. Xxxxxxx,
its sole member
/s/Xxxxxxxx X.X. Xxxxxxx
---------------------------
XXXXXXXX X.X. XXXXXXX
Address: 00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
Telecopy: (000) 000-0000
GINOLA LIMITED
By: /s/Xxxxxxxx Xxxxx
------------------------
Name: Xxxxxxxx Xxxxx
Title: Director
/s/XXXX XXXXXX
XXXX XXXXXX
Address:
EMERALD ADVANTAGE FUND LP
By:/s/ Xxxxxx X Xxxxxxxx
------------------------
Name: Xxxxxx X Xxxxxxxx
Title: Managing Member
Address:
000 Xxxxx Xxxxx Xxxx
Xxxxx 000
Xxxx xx Xxxxxxx, Xx. 19406
EMERALD ADVANTAGE OFFSHORE FUND LTD
By: /s/ Xxxxxx X Xxxxxxxx
Name: Xxxxxx X Xxxxxxxx
Title: Managing Member
Address:
000 Xxxxx Xxxxx Xxxx
Xxxxx 000
Xxxx xx Xxxxxxx, Xx. 19406
EMERALD VENTURE CAPITAL I LP
By: /s/ Xxxxxx X Xxxxxxxx
Name: Xxxxxx X. Xxxxxxxx
Title: President
Address:
0000 Xxxxxx Xxxx
Xxxxxxxxx, XX. 00000
/s/XXXXXX X. XXXXXXXX
------------------------
XXXXXX X. XXXXXXXX
Address:
00000 Xxxxxx XXXX
Xxxxxxx Xxxxxxxxx, XX. 00000
/s/XXXXXX XXXXXXX
XXXXXX XXXXXXX
Address:
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Schedule 1 - New Investors
Stillwater LLC
Ginola Limited
Xxxx Xxxxxx
Xxxxxx Xxxxxxx
Emerald Advantage Fund LP
Emerald Advantage Offshore Fund LTD
Emerald Venture Capital I LP
Xxxxxx X. Xxxxxxxx
Schedule 2 - Investors
NEW INVESTORS
------------------------------ ------------------------------------- ------------------------- ------------------------
Notes to be Purchased on or Note Amount
Investor before the following Dates per Tranche Warrant Amount
------------------------------ ------------------------------------- ------------------------- ------------------------
Stillwater LLC Initial Closing Date (April 25) $800,000 3,358,300
=========
------------------------------ ------------------------------------- ------------------------- ------------------------
April 30* $225,000
------------------------------ ------------------------------------- ------------------------- ------------------------
May 15* $225,000
------------------------------ ------------------------------------- ------------------------- ------------------------
June 15* $225,000
------------------------------ ------------------------------------- ------------------------- ------------------------
June 25* $225,000
------------------------------ ------------------------------------- ------------------------- ------------------------
July 15* $225,000
------------------------------ ------------------------------------- ------------------------- ------------------------
August 15* $225,000
------------------------------ ------------------------------------- ------------------------- ------------------------
September 15* $225,000
------------------------------ ------------------------------------- ------------------------- ------------------------
October 15* $225,000
------------------------------ ------------------------------------- ------------------------- ------------------------
TOTAL $2,600,000
------------------------------ ------------------------------------- ------------------------- ------------------------
------------------------------ ------------------------------------- ------------------------- ------------------------
Ginola Limited Initial Closing Date (April 25) $200,000 1,291,651
=========
------------------------------ ------------------------------------- ------------------------- ------------------------
April 30* $100,000
------------------------------ ------------------------------------- ------------------------- ------------------------
May 15* $100,000
------------------------------ ------------------------------------- ------------------------- ------------------------
June 15* $100,000
------------------------------ ------------------------------------- ------------------------- ------------------------
June 25 $100,000
------------------------------ ------------------------------------- ------------------------- ------------------------
July 15* $100,000
------------------------------ ------------------------------------- ------------------------- ------------------------
August 15* $100,000
------------------------------ ------------------------------------- ------------------------- ------------------------
September 15* $100,000
------------------------------ ------------------------------------- ------------------------- ------------------------
October 15* $100,000
------------------------------ ------------------------------------- ------------------------- ------------------------
------------------------------ ------------------------------------- ------------------------- ------------------------
TOTAL $1,000,000
------------------------------ ------------------------------------- ------------------------- ------------------------
Xxxx Xxxxxx Initial Closing Date (April 25) $125,000 161,456
======== =======
------------------------------ ------------------------------------- ------------------------- ------------------------
------------------------------ ------------------------------------- ------------------------- ------------------------
Emerald Advantage Fund LP Initial Closing Date (April 25) $40,000 51,666
======= ======
------------------------------ ------------------------------------- ------------------------- ------------------------
Emerald Advantage Offshore Initial Closing Date (April 25) $40,000 51,666
======= ======
Fund LTD
------------------------------ ------------------------------------- ------------------------- ------------------------
------------------------------ ------------------------------------- ------------------------- ------------------------
Emerald Venture Capital I LP Initial Closing Date (April 25) $145,000 187,290
======== =======
------------------------------ ------------------------------------- ------------------------- ------------------------
------------------------------ ------------------------------------- ------------------------- ------------------------
Xxxxxx X. Xxxxxxxx Initial Closing Date (April 25) $50,000 64,582
======= ======
------------------------------ ------------------------------------- ------------------------- ------------------------
------------------------------ ------------------------------------- ------------------------- ------------------------
Xxxxxx Xxxxxxx Initial Closing Date (April 25) $400,000 2,583,310
=========
------------------------------ ------------------------------------- ------------------------- ------------------------
April 30* $200,000
------------------------------ ------------------------------------- ------------------------- ------------------------
May 15* $200,000
------------------------------ ------------------------------------- ------------------------- ------------------------
June 15* $200,000
------------------------------ ------------------------------------- ------------------------- ------------------------
June 25* $200,000
------------------------------ ------------------------------------- ------------------------- ------------------------
July 15* $200,000
------------------------------ ------------------------------------- ------------------------- ------------------------
August 15* $200,000
------------------------------ ------------------------------------- ------------------------- ------------------------
September 15* $200,000
------------------------------ ------------------------------------- ------------------------- ------------------------
October 15* $200,000
------------------------------ ------------------------------------- ------------------------- ------------------------
------------------------------ ------------------------------------- ------------------------- ------------------------
TOTAL $2,000,000
------------------------------ ------------------------------------- ------------------------- ------------------------
-----------------------------------------------------------------------------------------------------------------------
* The purchase of the Notes in each Tranche Closing pursuant to this Schedule 2
shall in no event take place later than 5 days after the effectiveness of the
registration statement that is required to be filed pursuant to the Registration
Rights Agreement (as defined in Section 6(j) of the Agreement). In addition, the
purchases of the Notes set forth in this Schedule 2 are subject to reduction
pursuant to Section 2(g) of the Agreement.
ORIGINAL SECURED PARTIES
-------------------------------------- ------------------------------------- ---------------------- -------------------
Notes to be Exchanged on the
Investor Initial Closing Date Date of Note Interest Rate
-------------------------------------- ------------------------------------- ---------------------- -------------------
Xxxxxxxx X.X. Xxxxxxx $200,000 11/27/01 9%
-------------------------------------- ------------------------------------- ---------------------- -------------------
$300,000 1/14/02 9%
-------------------------------------- ------------------------------------- ---------------------- -------------------
$700,000 1/14/02 9%
-------------------------------------- ------------------------------------- ---------------------- -------------------
$200,000 6/20/02 11%
-------------------------------------- ------------------------------------- ---------------------- -------------------
-------------------------------------- ------------------------------------- ---------------------- -------------------
Ginola Limited $300,000 11/27/01 9%
-------------------------------------- ------------------------------------- ---------------------- -------------------
-------------------------------------- ------------------------------------- ---------------------- -------------------
Xxxx Xxxxxx $125,000 11/27/01 9%
-------------------------------------- ------------------------------------- ---------------------- -------------------
Schedule 4(c) - Capitalization
eMagin Corporation
Capitalization Data
Estimated as at April 25th 2003
Capitalization Schedule
Face Amount Shares Wts and Options
------------------------------------------------------------
31,494,280 16,606,019
Payables and Accrued Written off 4,494,187 0 0
Payables Converted 1,612,765 2,080,075 0
ConvertibleNotes 4,964,239 6,470,153 0
Extended Maturity Old Senior Notes 2,045,450 3,885,733 777,147
------------------------------------------------------------
Total Before New Investors $ 13,116,641 43,930,241 17,383,166
------------------------------------------------------------
Other Stock/Wts Issued for Future Services,
Fees and Registration Penalties 245,000 332,290 387,511
-----------------------------------------------------------------------------------------------------------------------
Total Restructured Before New Investors $ 13,361,641 44,262,532 17,770,877
-----------------------------------------------------------------------------------------------------------------------
Payables/Debt Convertible
Owed and Debt
Converted/Paid Convertible Remaining and
in stock on Debt Converted New Stock For Warrants Total Fully
Investors Existing Shares Closing On Closing Services /Option Shares
------------------------------------------------------------------------------------------------------------------------------------
SK - 2,468,750 - 205,479 2,674,229
Original Secured Note Holders - - 3,885,733 - 3,885,733
Xxxxxxxx X. Xxxxxxx - - - 1,367,781 1,367,781
Rainbow Gate/Ginola 983,295 - - - 631,255 1,272,605
Citigroup Investments / Travelers 5,692,119 - 2,111,779 - 1,783,137 9,587,035
Farmers & Mid Century Note - - 1,352,363 - - 1,352,363
Finova/ASML/Other Payables (1) - 2,080,075 - 332,290 - 2,412,366
Other Shares To be issued for Fees
, Services and Penalti-s (1) - 537,261 - 387,511 924,772
------------------------------------------------------------------------------------------------
Subtotal 6,675,414 2,080,075 6,470,153 4,218,024 4,375,163 23,476,884
------------------------------------------------------------------------------------------------
Other Staff Options - - - - 10,942,681 10,942,681
All Others 24,818,866 - (2,252,129) - 2,452,833 27,613,644
------------------------------------------------------------------------------------------------
Total Before New Investors 31,494,280 2,080,075 6,470,153 4,218,024 17,770,877 62,033,209
------------------------------------------------------------------------------------------------
**All values are approximate range estimates
(1) Shares issued at future points and based at then current market prices are
calculated based on todays price (2) Staff options incude amounts authorized but
not yet awarded
Schedule 4(i) - Creditor Actions
International Business Machines Corporation v. eMagin Corporation, Justice
Court: Town of East Fishkill, County of Dutchess: State of New York.
On or about April 9, 2003, the Company's landlord, International Business
Machines Corporation ("IBM") caused a Lease Termination Notice to be served upon
the Company for non-payment of rent. Thereafter, on or about April 17, 2003, IBM
filed a Notice of Petition to evict the Company from its premises. Subsequently,
on or about April 22, 2003, the Company entered into a Stipulation with IBM
pursuant to which the Company and IBM agreed:
(i) that the Company would pay to IBM, within 24 hours of the Execution of
the Stipulation, the sum of Five Hundred Fifty Four Thousand Six Hundred Fifteen
and 83/100 ($554,615.83) Dollars, which sum includes (a) Five Hundred Four
Thousand Eighty Five and 74/100 ($504,085.74) Dollars as stated in the Lease
Termination Notice dated April 9, 2003 and (b) the additional sum of Fifty
Thousand Five Hundred Thirty and 09/100 ($50,530.09) Dollars which has been
billed by IBM and is due on April 20, 2003;
(ii) that the Lease, which had been terminated as of April 16, 2003, would
be reinstated, subject to the terms and conditions of the Stipulation, including
the acceleration of the rent payments for the remainder of the original lease
term (March 31, 2004) in the sum of Eight Hundred Thirteen Thousand Fifty Five
and 65/100 ($813,055.65) Dollars, which sum will then be due in accordance with
the terms of the Stipulation in equal monthly installments of Seventy Three
Thousand Nine Hundred Fourteen and 15/100 ($73,914.15) commencing on May 1, 2003
and on the first day of each month thereafter up to and including March 1, 2004;
and
(iii) that a Judgment be issued in favor of IBM (a) awarding them
possession of the premises, (b) providing for the issuance of a warrant to
remove eMagin from possession of the premises, and (c) further providing for a
monetary judgment for rent arrears in the sum of Eight Hundred Thirteen Thousand
Fifty Five and 65/100 ($813,055.65) Dollars, which Judgment will be held in
escrow by IBM's attorney and which warrant of eviction will be stayed, in
accordance with the terms and conditions of the Stipulation. In the event that
the Company fails to timely make any of the installment payments or in the
payment of any additional rent and/or other sums due under the Lease, IBM has
the right to enter the Judgment and shall have the right to execute upon the
warrant of eviction on five (5) days prior written notice to the Company of its
intent to file such Judgment and execute upon such warrant of eviction.
Schedule 6(e) - Financial targets for New Note Covenants
[*]
[*] - Confidential Information has been omitted and has been separately filed
with the Securities and Exchange Commission
Exhibit A - Form Of New Security Agreement
Filed as Exhibit 10.2 to this Form 8-K
Exhibit B - Form of Amended and Restated Secured Convertible Promissory Note
Filed as Exhibit 4.2 to this Form 8-K
Exhibit A
Page 2
Exhibit C - Form of New Note
Filed as Exhibit 4.1 to this Form 8-K
Exhibit D - Form of Warrant
Filed as Exhibit 4.3 to this Form 8-K
Exhibit E - Form of Registration Rights Agreement
Filed as Exhibit 10.3 to this Form 8-K
Exhibit F - Form of Legal Opinion
To: The Investors (as defined in the Agreement defined below)
Re: Emagin Corporation
Ladies and Gentlemen:
We have acted as special counsel to Emagin Corporation, a Delaware
corporation and Virtual Vision, Inc., a Delaware Corporation (collectively the
"Company"), in connection with a $_______ closing pursuant to the Global
Restructuring and Secured Note Purchase Agreement, dated as of April __, 2003,
between you and the Company (the "Agreement") and the transactions contemplated
therein. Capitalized terms used herein and not otherwise defined herein shall
have the respective meanings assigned to such terms in the Agreement. The
Agreement, the Registration Rights Agreement, the New Notes, the Amended and
Restated Notes, the Warrants, and the Security Agreement, are hereinafter
referred to as the "Transaction Agreements."
In so acting, we have examined (i) the Transaction Agreements, (ii) the
Company's Article's of Incorporation, as in effect on the date hereof (the
"Articles of Incorporation"), and (iii) the Company's Bylaws, as in effect on
the date hereof (the "Bylaws"), and we have examined and considered such
corporate records, certificates and matters of law as we have deemed appropriate
as a basis for our opinions set forth below. In rendering the opinions set forth
in this opinion letter, we assume the following:
a. the legal capacity of each natural person and the legal
existence of all parties (other than the Company) to the
transactions referred to in the Transaction Agreements;
b. the power and authority of each person other than the Company
or person(s) acting on behalf of the Company to execute,
deliver and perform each document executed and delivered and
to do each other act done or to be done by such person;
c. the legality, validity, binding effect and enforceability as
to each person other than the Company or person(s) acting on
behalf of the Company of each document executed and delivered
or to be executed or delivered and of each other act done or
to be done by such person;
d. the genuineness of all signatures and the completeness of each
document submitted to us;
e. that the Investors have acted in good faith, without notice of
adverse claims, and have complied with all laws applicable to
them that affect the transactions referred to in the
Transaction Agreements;
f. that no action, discretionary or otherwise, will be taken by
or on behalf of the Company in the future that might result in
a violation of law; and
g. that with respect to the Transaction Agreements and to the
transactions referred to therein, there has been no mutual
mistake of fact and there exists no fraud or duress.
As to certain questions of fact material to this opinion, we have
relied upon statements or certificates of public officials and officers of the
Company.
Based upon the foregoing and subject to the assumptions, limitations,
qualifications and exceptions stated herein, we are of the opinion that as of
the date hereof:
(1) The Company is a corporation duly authorized, validly existing, and
is in good standing in its state of incorporation. Based on the Company's
business description, as described in its Exchange Act of 1934 reports, the
Company is duly qualified to conduct its business in each other jurisdiction
where the failure to be so qualified would have a material adverse effect on the
Company. The Company has all requisite corporate power and authority to (i)
conduct its business; (ii) own and operate its property; and (iii) lease the
property its leases.
(2) The Company has the requisite corporate power and authority to
enter into and perform the Transaction Agreements, and to issue the New Notes,
the Amended and Restated Notes and the Warrants (collectively the "Securities")
in accordance with their terms. The execution and delivery of the Transaction
Agreements by the Company, the consummation by it of the transactions
contemplated thereby and the grant of security interests by it contemplated
therein have been duly authorized by the Company's Board of Directors and no
further consent or authorization of the Company, its Board or Directors, or its
stockholders is required. The Transaction Agreements have been duly executed and
delivered by the Company, and constitute valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement or creditors' rights and remedies or by
other equitable principles of general application and subject to the limitations
that the indemnification and contribution provisions of the Registration Rights
Agreement may be unenforceable as a matter of public policy.
(3) To the best of our knowledge, no authorization approval or consent
of any court, governmental body, regulatory agency, self-regulatory organization
or stock exchange or market, or the stockholders of the Company or, to our
knowledge, any third party is required to be obtained by the Company for the
issuance and sale of the Securities as contemplated by the Transaction
Agreements or the consummation of the other transactions contemplated thereby.
(4) To the best of our knowledge, other than as set forth in Schedule
__ to the Agreement, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body or any governmental
agency or self-regulatory organization pending or threatened against or
affecting the Company, wherein an unfavorable decision, ruling or finding would
have a material adverse effect on the Company or which would adversely affect
the validity or enforceability of or the authority or ability of the Company to
perform its obligations under the Transaction Agreements, or any of the other
documents, agreements, certificates or instruments contemplated thereby.
(5) To the best of our knowledge, the Company is not in violation of
any term of the Articles of Incorporation or Bylaws. The execution, delivery and
performance of and compliance with the terms of the Transaction Agreements and
the issuance of the Securities, do not violate any provision of the Articles of
Incorporation or Bylaws, or any provision of any applicable federal or state
law, rule or regulation. To the best of our knowledge, the execution, delivery
and performance of and compliance with the Transaction Agreements and the
issuance of the Securities have not resulted in and will not result in any
violation of, or constitute default under (or an event which with the passage of
time or the giving of notice or both would constitute a default under), or
result in the creation of any lien, security interest or encumbrance on the
assets or properties of the Company pursuant to any contract, agreement,
instrument, judgment or decree binding upon the Company which, individually or
in the aggregate, would have a material adverse effect on the Company.
(6) The Company is not an "investment company" as defined in the
Investment Company Act of 1940, as amended. The Company is not a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
(7) The Security Agreement creates in favor of the Investors a valid
security interest in the Collateral (as such term is defined in the Security
Agreement) to the extent Article 9 of the New York Uniform Commercial Code (the
"NY-UCC") is applicable thereto. The Financing Statements described in Exhibit A
are in appropriate form for filing pursuant to the NY-UCC and upon the proper
filing in the filing offices listed in Schedule 1 to Exhibit A such security
interest will be perfected to the extent that a security interest may be
perfected by the filing of a financing statement in the State of New York under
the provisions of the NY-UCC.
(8) Each of the Security Agreement, Patent Security Agreement,
Trademark Security Agreement and Copyright Security Agreement creates in favor
of the Investors' collateral agent, valid security interest in all right, title
and interest in the Collateral. The security interests of the Investor's
collateral agent in all right, title and interest of the Company in the
Collateral created by the Security Agreement, Patent Security Agreement,
Trademark Security Agreement and Copyright Security Agreement constitute
perfected security interests under the NY-UCC, the United States Copyright Act
("CA"), the United States Patent Act ("PA") and the United States Trademark Act
("TA"), to the extent that a security interest therein may be perfected under
the NY-UCC, the CA, the PA or the TA.
The foregoing opinions expressed herein is subject to certain
limitations and exceptions as set forth below:
(A) In connection with our opinion with respect to any pending action,
suit, claim, formal investigation or formal proceeding pending or, threatened,
against or involving the Company or any of its respective properties or assets,
we have not undertaken to search the docket of any court or to conduct any other
judgment, lien, litigation or similar search.
(b) We are counsel admitted to practice in the State of New York and we
do not express any opinion with respect to the effect or applicability of the
laws of any jurisdiction, other than the laws of the State of New York, the
Delaware General Corporation Law and the federal laws of the United States of
America.
This opinion is furnished pursuant to the request of the Investors and
is rendered by us solely for the benefit of the Investors in connection with the
Transaction Agreements. We are not hereby assuming any professional
responsibilities to any other person whatsoever. This opinion may be relied upon
only in connection with the Transaction Agreements. This opinion may not be
used, disseminated, circulated, quoted referred to or relied upon by any other
person or for any other purpose without our prior written consent. This opinion
is rendered as of the date set forth above, and we express no opinion as to
circumstances or events that may occur subsequent to such date. We assume no
duty to update or supplement this opinion to reflect any fact or circumstances
that may hereafter come to our attention or reflect any changes in any law that
may hereafter occur or become effective.
Very truly yours,
Exhibit G - Warrants of the Original Secured Parties to be Amended
None.
Exhibit H - Form of Amended and Restated Warrant
None.
