SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT, dated as of September 18, 2001
(this "Agreement"), by and between eMagin Corporation, a Delaware corporation
with principal executive offices located at ▇▇▇▇ ▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ (the "Company"), and SK Corporation, a corporation organized under the
laws of the Republic of Korea with principal executive offices located at ▇▇
▇▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇-▇▇, ▇▇▇▇▇ ▇▇▇-▇▇▇, ▇▇▇▇▇ ("Buyer").
WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this Agreement, (i) the Company's 4% Convertible Debentures in the aggregate
principal amount of $3,000,000, in the form attached hereto as Exhibit A (the
"Debentures") and (ii) Common Stock Purchase Warrants in the form attached
hereto as Exhibit B to purchase 205,479 shares of Common Stock (as defined
below) (collectively, the "Warrants");
WHEREAS, upon the terms and subject to the conditions set forth in the
Debentures, the Debentures are convertible into shares of the Company's common
stock, par value $.001 per share (the "Common Stock"); and
WHEREAS, the Warrants, upon the terms and subject to the conditions
specified in the Warrants, will be exercisable for a period of three (3) years;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. Purchase and Sale of the Debentures and Warrants
A. Transaction. Buyer hereby agrees to purchase from the Company, and
the Company has offered and hereby agrees to issue and sell to Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the Debentures
and the Warrants.
B. Purchase Price; Form of Payment. The purchase and sale of the
Debentures and Warrants shall take place at the offices of SK Corporation, ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 a.m., on September 18, 2001, or
at such other time and place as the Company and the Buyer mutually agree upon,
orally or in writing (which time and place are designated as the "Closing
Date"). On the Closing Date, the Company shall deliver to the Buyer a
certificate(s) representing (i) Three Million Dollars ($3,000,000) face amount
of the Debentures (the "Debentures") and (ii) the Warrants, such certificate(s)
entitling the Buyer to all rights and privileges assigned to such Debentures and
Warrants under this Agreement, in consideration for
the payment on the Closing Date by the Buyer to the Company of Three Million
Dollars ($3,000,000) (the "Purchase Price") by wire transfer to an account
designated by the Company.
Concurrently with the execution of this Agreement, the parties hereto
shall have entered into the Registration Rights Agreement substantially in the
form of Exhibit C attached hereto (the "Registration Rights Agreement").
II. Buyer's Representations and Warranties
Buyer represents and warrants to and covenants and agrees with the
Company as follows:
A. Buyer is purchasing the Debentures, the Warrants, the Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares"), the Common Stock,
if any, issuable in payment of interest on the Debentures (the "Interest
Shares"), and the Common Stock issuable upon conversion of the Debentures (the
"Conversion Shares" and, collectively with the Debentures, the Warrants, the
Warrant Shares and the Interest Shares, the "Securities") for its own account,
for investment purposes only and not with a view towards or in connection with
the public sale or distribution thereof in violation of the Securities Act.
B. Buyer (i) is an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act, (ii) is experienced in making
investments of the kind contemplated by this Agreement, (iii) has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Securities,
(iv) is capable, by reason of its business and financial experience, of
evaluating the relative merits and risks of an investment in the Securities, and
(v) is able to afford the loss of its investment in the Securities. Buyer
understands that its investment in the Securities involves a high degree of
risk.
C. Buyer understands that the Securities are being offered and sold by
the Company in reliance on an exemption from the registration requirements of
the Securities Act and equivalent state securities and "blue sky" laws, and that
the Company is relying upon the accuracy of, and Buyer's compliance with,
Buyer's representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or any
state securities commission.
E. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally
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and except as rights to indemnity and contribution may be limited by federal or
state securities laws or the public policy underlying such laws.
F. Neither Buyer nor its affiliates nor any person acting on its or
their behalf has the intention of entering, or will enter into any put option,
short position or other similar instrument or position with respect to the
Common Stock, and neither Buyer nor any of its affiliates nor any person acting
on its or their behalf will use at any time shares of Common Stock acquired
pursuant to this Agreement to settle any put option, short position or other
similar instrument or position that may have been entered into prior to the
execution of this Agreement.
G. Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by Buyer. Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company.
H. Buyer understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities or the fairness or suitability
of the investment in the Securities nor have such authorities passed upon or
endorsed the merits of the offering of the Securities.
I. Buyer understands that except as provided in the Registration
Rights Agreement: (i) the Securities have not been and are not being registered
under the 1933 Act or any state securities laws, and may not be offered for
sale, sold, assigned or transferred unless (A) subsequently registered
thereunder, (B) Buyer shall have delivered to the Company an opinion of counsel,
in form and substance reasonably acceptable to the Company to the effect that
such Securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, or (C) Buyer
provides the Company with an assurance (which assurance shall be acceptable to
the Company in its reasonable discretion and shall include, without limitation,
an opinion of counsel in form and substance reasonably acceptable to the
Company) that such Securities could then be sold, assigned or transferred
pursuant to Rule 144 promulgated under the 1933 Act, as amended (or a successor
rule thereto) ("Rule 144"); (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the ▇▇▇▇ ▇▇▇) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
J. Buyer understands that as of the date of this Agreement, the
Securities are subject to a one-year holding period during which time the
Securities may not be sold, transferred or otherwise disposed without the
written consent of the Company.
K. (a) To Buyer's knowledge, the execution, delivery and performance
by the Buyer of this Agreement and each of the other documents to which it is a
party contemplated
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hereby and the consummation of the transactions contemplated hereby and thereby
do not and will not contravene (x) any United States federal, state or local
law, statute, rule, regulation, order, writ, decree or permit of any
governmental authority and (y) any rule or listing requirement of The American
Stock Exchange, Inc. (collectively "Applicable Law"). To the Buyer's knowledge
the execution, delivery and performance by the Buyer of each of this Agreement
and each of the other documents to which it is a party contemplated hereby and
the consummation of the transactions contemplated hereby and thereby (i) will
not violate, result in a breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under any contract to which the Buyer is party or
by which the Buyer is bound or to which any of its assets is subject, except for
any such violations, breaches or defaults that would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of the Buyer to perform its obligations under this Agreement or the
other documents contemplated hereby, and (ii) will not conflict with or violate
any provision of the certificate of formation or operating agreement or other
governing documents of the Buyer.
(b) No consent, authorization or order of, or filing or registration
with, any governmental authority or other person or entity is required to be
obtained or made by the Buyer for the execution, delivery and performance of any
of this Agreement and each of the other documents to which it is a party
contemplated hereby and the consummation of the transactions contemplated hereby
and thereby, except where the failure to obtain such consents, authorizations or
orders, or make such filings or registrations, would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of the Buyer to perform its obligations under this Agreement and each of
the other documents to which it is a party contemplated hereby and to consummate
the transactions contemplated hereby and thereby.
L. Buyer is not itself, and no part of the assets used or to be used
by it to purchase and/or hold the Securities, or any interest therein,
constitute assets of an employee benefit plan which is subject to Title I of the
Employee Retirement Income Security Act of 1974, as amended, or a plan which is
subject to Section 4975 of the Internal Revenue Code of 1986, as amended, or an
entity whose underlying assets include "plan assets" by reason of any such
employee benefit plan's or plan's investment in such entity.
M. Buyer, and each subsequent holder of the Securities, covenants that
it will not transfer or dispose of the Securities to be purchased by it or any
interest therein to any Person unless such Person shall (a) make all warranties
and representations of Buyer contained in Section II hereof and (b) assume all
covenants of Buyer contained in this Section II.M. in a written instrument
delivered to and reasonably satisfactory to the Company, provided however that
the restrictions of this Section II.M. shall not apply to any public sale or
other transfer made through a national securities exchange, including without
limitation, the American Stock Exchange.
III. The Company's Representations
The Company represents and warrants to Buyer that:
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A. Capitalization.
1. The authorized capital stock of the Company consists solely of: (x)
100,000,000 shares of Common Stock, of which 25,085,145 shares are issued and
outstanding on the date hereof; and (y) 10,000,000 shares of preferred stock,
none of which are issued and outstanding. As of the date hereof, the Company has
outstanding stock options to purchase 3,524,018 shares of Common Stock at an
average priced of $2.73, and warrants outstanding to purchase 749,896 shares of
Common Stock at an average priced of $3.35. All of the outstanding shares of
Common Stock have been duly authorized, fully paid and are nonassessable and
issued in compliance with all applicable federal securities laws.
2. The Conversion Shares, the Interest Shares and the Warrant Shares
have been duly and validly authorized and reserved for issuance by the Company,
and] when issued by the Company upon conversion of, or in lieu of cash interest
on, the Debentures and on exercise of the Warrants will be duly and validly
issued, fully paid and nonassessable and will not subject the holder thereof to
personal liability by reason of being such holder.
3. Except as disclosed in the reports, registration statements and
other filings, and all supplements and amendments thereto made by the Company
with the SEC under the 1933 Act or the Securities Exchange Act of 1934, as
amended (the "1934 Act") (the "SEC Filings") or on Schedule III.A.3. hereto,
there are no preemptive, subscription, "call," right of first refusal or other
similar rights to acquire any capital stock of the Company or any of its
Subsidiaries or other voting securities of the Company that have been issued or
granted to any person.
4. Schedule III.A.4. hereto or the SEC Filings list all the
subsidiaries of the Company (the "Subsidiaries"). Except as disclosed on
Schedule III.A.4. hereto, in the SEC Filings or as would not reasonably be
expected to have a Material Adverse Effect (as defined below), the Company does
not own or control any interest in any other corporation, partnership, limited
liability company, unincorporated business organization, association, trust or
other business entity.
B. Organization; Reporting Company Status.
1. Each of the Company and the Subsidiaries is a corporation duly
organized, and validly existing and in good standing under the laws of the state
or jurisdiction in which it is incorporated and is duly qualified as a foreign
corporation in all jurisdictions in which the failure so to qualify would
reasonably be expected to have a material adverse effect on the business,
results of operations or financial condition of the Company and the Subsidiaries
taken as a whole or on the consummation of the transactions contemplated by this
Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Common Stock is listed and traded on the American Stock Exchange ("Amex") and,
except as set forth on Schedule III.B.2 or the SEC Filings, the Company has not
received any notice regarding, and to
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its knowledge there is no threat of, the termination or discontinuance of the
eligibility of the Common Stock for such listing.
C. Authorization. The Company (i) has duly and validly authorized and
reserved for issuance 100,000,000 shares of Common Stock, which is a number
sufficient for the issuance of the Conversion Shares, Interest Shares and
Warrant Shares in full, and (ii) at all times from and after the date hereof
shall have a sufficient number of shares of Common Stock duly and validly
authorized and reserved for issuance of the Conversion Shares, Interest Shares
and Warrant in full. Schedule III.C. hereto and the SEC Filings set forth (i)
all issuances and sales by the Company since December 31, 2000 of its capital
stock, and other securities convertible into or exercisable or exchangeable for
capital stock of the Company, (ii) the amount of such securities sold, including
the amount of any underlying shares of capital stock, (iii) the purchaser
thereof, and (iv) the amount paid therefor.
D. Authority; Validity and Enforceability. The Company has the
requisite corporate power and authority to perform its obligations under the
Debentures and the Warrants and to enter into the Documents (as hereinafter
defined) and to perform all of its obligations hereunder and thereunder
(including the issuance, sale and delivery to Buyer of the Securities). The
execution, delivery and performance by the Company of the Documents and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary corporate action on the
part of the Company. Each of the Documents has been duly and validly executed
and delivered by the Company and each Document constitutes a valid and binding
obligation of the Company enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying such
laws. The Securities have been duly and validly authorized for issuance by the
Company and, when executed and delivered by the Company, will be valid and
binding obligations of the Company enforceable against it in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally. For purposes of this Agreement, the term
"Documents" means (i) this Agreement; (ii) the Registration Rights Agreement;
(iii) the Debentures; and (iv) the Warrants.
E. Validity of Issuance of the Securities. The Debentures and Warrants
as of the Closing Date, and the Conversion Shares, the Interest Shares and the
Warrant Shares upon their issuance in accordance with the Debentures and the
Warrants, respectively, will be validly issued and outstanding, fully paid and
nonassessable, and, except as otherwise disclosed in the SEC Filings, not
subject to any preemptive rights, rights of first refusal, tag-along rights,
drag-along rights or other similar rights.
F. Non-contravention. Except as set forth on Schedule III.F., the SEC
Filings or as would not reasonably be expected to have a Material Adverse
Effect, the execution and delivery by the Company of the Documents, the issuance
of the Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby do
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not, and compliance with the provisions of this Agreement and other Documents
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation, or result in the
creation of any Lien (as defined in Section III.T.) upon any of the material
properties or assets of the Company or any of its Subsidiaries under, or result
in the termination of, or require that any consent be obtained or any notice be
given with respect to, (i) the Certificate of Incorporation or By-Laws of the
Company or the comparable charter or organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, or other agreement,
instrument or permit applicable to the Company or any of its Subsidiaries or
their respective properties or assets, or (iii) any Applicable Law (as defined
in Section II.J.) applicable to, or any judgment, decree or order of any court
or government body having jurisdiction over, the Company or any of its
Subsidiaries or their respective properties or assets.
G. Approvals. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the issuance and sale of the Debentures or the Warrants (or the Conversion
Shares, the Interest Shares or Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents as have been
obtained by the Company prior to the date hereof.
H. Commission Filings. The Company has properly and timely filed with
the Commission all reports, proxy statements, forms and other documents required
to be filed with the Commission under the Securities Act and the Exchange Act
since July 1, 1998 (the "Commission Filings"). As of their respective dates, (i)
the Commission Filings complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules and
regulations of the Commission promulgated thereunder applicable to such
Commission Filings, and (ii) none of the Commission Filings contained at the
time of its filing any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not materially misleading. The financial statements of the Company included in
the Commission Filings, as of the dates of such documents, were true and
complete in all material respects and complied with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto, were prepared in accordance with generally accepted accounting
principles in the United States ("GAAP") (except in the case of unaudited
statements permitted by Form 10-Q under the Exchange Act) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented the consolidated financial position of the
Company and its Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments that
in the aggregate are not material and to any other adjustment described
therein).
I. Absence of Litigation. Except as set forth on Schedule III.I. or as
would not reasonably be expected to have a Material Adverse Effect, there are
(i) no suits, actions or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, and (ii) no
judgments, decrees, injunctions or orders of any court or other governmental
entity or arbitrator outstanding against the Company or any Subsidiary.
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J. Absence of Events of Default. Except as set forth in Schedule
III.J. or as would not reasonably be expected to have a Material Adverse Effect,
no "Event of Default" (as defined in any agreement or instrument to which the
Company is a party) and no event which, with notice, lapse of time or both,
would constitute an Event of Default (as so defined), has occurred and is
continuing.
K. Financial Statements. Each of the Financial Statements is complete
and correct in all material respects, has been prepared in accordance with GAAP
(subject, in the case of the interim Financial Statements, to normal year end
adjustments and the absence of footnotes), and fairly presents the financial
position, results of operations and cash flows of the Company as at the dates
and for the periods indicated. For purposes hereof, December 31, 2000 is
hereinafter referred to as the "Balance Sheet Date". For the purposes of this
Section III.K., the term "Financial Statements" means (i) audited balance sheet
of the Company and the Subsidiaries as at December 31, 2000, 1999, and 1998,
respectively, and the related audited statements of income, changes in
stockholders' equity and cash flows for the three fiscal years ended December
31, 2000, 1999, and 1998 including the related notes and schedules thereto and
(ii) unaudited balance sheets of the Company and the Subsidiaries and the
statements of income, changes in stockholders' equity and cash flows as at the
end of and for each fiscal quarter ended since December 31, 2000 including the
related notes and schedules thereto and all management letters, if any, from the
Company's independent auditors relating to the dates and periods covered by the
Financial Statements.
L. Compliance with Laws; Permits. Except as would not reasonably be
expected to have a Material Adverse Effect, each of the Company and its
Subsidiaries is in compliance with all laws, regulations, codes and statutes
(collectively, "Laws") applicable to it or to the conduct of its business. The
Company possesses all material permits, approvals, authorizations, licenses,
certificates and consents from all public and governmental authorities which are
necessary to conduct its business.
M. Related Party Transactions. Except as set forth on Schedule III.M.
hereto or in the Commission Filings, neither the Company nor any of its
officers, directors or "Affiliates" (as such term is defined in Rule 12b-2 under
the Exchange Act) nor any family member of any officer, director or Affiliate of
the Company has borrowed any moneys from or has outstanding any indebtedness or
other similar obligations to the Company or any of the Subsidiaries. Except as
set forth on Schedule III.M. hereto or in the Commission Filings, neither the
Company nor any of its officers, directors or Affiliates nor any family member
of any officer, director or Affiliate of the Company (i) owns any direct or
indirect interest constituting more than a 1% equity (or similar profit
participation) interest in, or controls or is a director, officer, partner,
member or employee of, or consultant or lender to or borrower from, or has the
right to participate in the profits of, any person or entity which is (x) a
competitor, supplier, customer, landlord, tenant, creditor or debtor of the
Company or any Subsidiary, (y) engaged in a business related to the business of
the Company or any Subsidiary, or (z) a participant in any transaction to which
the Company or any Subsidiary is a party or (ii) is a party to any contract,
agreement, commitment or other arrangement with the Company or any Subsidiary.
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N. Insurance. Each of the Company and the Subsidiaries maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance that is adequate
and consistent with industry standards and the Company's historical claims
experience. None of the Company or the Subsidiaries has received notice from,
and none of them has knowledge of any claim by, any insurer (that has issued any
insurance policy to the Company or any Subsidiary) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
O. Securities Law Matters. Assuming the accuracy of the
representations and warranties of Buyer set forth in Article II hereof, the
offer and sale by the Company of the Securities is exempt from the registration
and prospectus delivery requirements of the Securities Act and the rules and
regulations of the Commission thereunder. No form of general solicitation or
advertising has been used or authorized by the Company or any of its officers,
directors or Affiliates in connection with the offer or sale of the Debentures
and the Warrants (and the Conversion Shares, the Interest Shares and the Warrant
Shares) as contemplated by this Agreement or any other agreement to which the
Company is a party.
P. Environmental Matters. Except as set forth on Schedule III.P.
hereto, the Company is not in violation in any material respect of any
applicable statute, law or regulation relating to the environment or
occupational health and safety and to the best of its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. The Company has not caused or contracted with any
party for, the generation, use, transportation, treatment, storage or disposal
of any Hazardous Substances (as defined below) in violation of any of the
material applicable Environmental Laws (as defined below) in connection with the
operation of its business or otherwise. For the purposes of this Agreement, the
term "Environmental Laws" shall mean any federal, state or local law or
ordinance or regulation pertaining to the protection of human health or the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et
seq. For purposes of this Agreement, the term "Hazardous Substances" shall
include oil and petroleum products, asbestos, polychlorinated biphenyls, urea
formaldehyde and any other materials classified as hazardous or toxic under the
Environmental Laws.
Q. Labor Matters. Except as reflected in the Commission Filings or
Schedule III.Q, neither the Company nor any of the Subsidiaries is party to any
labor or collective bargaining agreement, and there are no labor or collective
bargaining agreements which pertain to any employees of the Company or any
Subsidiary. Except as reflected in the Commission Filings no employees of the
Company or any of the Subsidiaries are represented by any labor organization and
none of such employees has made a pending demand for recognition, and there are
no representation proceedings or petitions seeking a representation proceeding
presently pending or, to the Company's knowledge, threatened to be brought or
filed, with the National Labor Relations Board or other labor relations
tribunal. Except as reflected in the Commission Filings, there are no (i)
strikes, work stoppages, lockouts or arbitrations or (ii) material
9
grievances or other material labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company or any of the Subsidiaries.
Except as reflected in the Commission Filings, there are no unfair labor
practice charges, grievances or complaints pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of the
Company or any of the Subsidiaries.
R. ERISA Matters. Except as reflected in the Commission Filings, all
Plans maintained by the Company or any of its Subsidiaries and ERISA Affiliates
are listed in Schedule III.R. and copies of all documentation relating to such
Plans (including, but not limited to, to the extent applicable, copies of
written Plans, summary plan descriptions, trust agreements, the three most
recent annual returns, and IRS determination letters) have been delivered to or
made available for review by the Buyer. Each Plan has at all times been
maintained and administered in all material respects in accordance with its
terms and the requirements of applicable law, including ERISA and the Code,
except for any failures to so maintain or administer a Plan that would not,
individually or in the Aggregate, reasonably be expected to result in a Material
Adverse Effect. Each Plan intended to qualify under section 401(a) of the Code
has received a favorable determination letter or opinion letter from the
Internal Revenue Service, or is within the remedial amendment period under
Section 401(b) of the Code for submitting an application for any such
determination letter, and nothing has occurred that would reasonably be expected
to adversely affect any such determination letter or opinion letter, since the
date thereof, or the refusal of the Internal Revenue Service to issue any such
determination letter. No Reportable Event has occurred, been waived or exists as
to which the Company or any of its Subsidiaries and ERISA Affiliates was
required to file a report with the PBGC that would reasonably be expected to
result in a Material Adverse Effect. The present value of all liabilities under
each Pension Plan (based on those assumptions used to fund such Plans) listed in
Schedule III.R. did not, as of the most recent annual valuation date applicable
thereto, exceed the value of the assets of such Pension Plan by an amount that
would reasonably be expected to result in a Material Adverse Effect. None of the
Company, its Subsidiaries and ERISA Affiliates has incurred, or reasonably
expects to incur, any Withdrawal Liability with respect to any Multi-employer
Plan that would reasonably be expected to result in a Material Adverse Effect.
None of the Company, its Subsidiaries and ERISA Affiliates has received any
notification that any Multi-employer Plan is in reorganization or has been
terminated within the meaning of Title IV of ERISA, and no Multi-employer Plan
is reasonably expected to be in reorganization or termination where such
reorganization or termination has resulted or would reasonably be expected to
result in increases to the contributions required to be made to such Plan by an
amount that would reasonably be expected to result in a Material Adverse Effect.
No direct, contingent or secondary liability has been incurred or is expected to
be incurred by the Company or any of its Subsidiaries under Title IV of ERISA to
any party with respect to any Plan, or with respect to any other Plan presently
or heretofore maintained or contributed to by any ERISA Affiliate. Neither the
Company nor any of its Subsidiaries and ERISA Affiliates has incurred any
liability for any tax imposed under sections 4971 through 4980B of the Code or
civil liability under section 502(i) or (l) of ERISA that would, individually or
in the aggregate reasonably be expected to result in a Material Adverse Effect.
No suit, action or other litigation or any other claim which would reasonably be
expected to result in a Material Adverse Effect (excluding claims for benefits
incurred in the ordinary course of plan activities) has been brought or, to the
10
knowledge of the Company, threatened against or with respect to any Plan and
there are no facts or circumstances known to the Company or any of its
Subsidiaries or ERISA Affiliates that could reasonably be expected to give rise
to any such suit, action or other litigation. All contributions to Plans that
were required to be made prior to the date hereof under such Plans have been
made, and all benefits accrued under any unfunded Plan have been paid, accrued
or otherwise adequately reserved in accordance with GAAP, all of which accruals
under unfunded Plans are as disclosed in Schedule III.R.
As used in this Agreement:
"Code" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the regulations thereunder, as the same may
be amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is a member of a group of which the Company is a member and
which is treated as a single employer under section 414 (a) and (b) of the Code.
"Multi-employer Plan" means a multi-employer plan as defined in
section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
section 414 of the Code) is making or accruing an obligation to make
contributions, or has within any of the preceding six plan years made or accrued
an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Pension Plan" means any pension plan (other than a Multi-employer
Plan) subject to the provisions of Title IV of ERISA or section 412 of the Code
that is maintained for employees of the Company or any of its Subsidiaries, or
any ERISA Affiliate.
"Plan" means any material bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, day or dependent
care, legal services, cafeteria, life, health, accident, disability, or other
insurance, severance, separation or other employee benefit plan, practice,
policy or arrangement or whether for the benefit of a single individual or more
than one individual including, but not limited to, any "employee benefit plan"
within the meaning of section 3(3) of ERISA, including any Pension Plan, but
excluding any Multi-employer Plan.
"Reportable Event" means any reportable event as defined in section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan.
11
"Withdrawal Liability" means liability to a Multi-employer Plan as a
result of a complete or partial withdrawal from such Multi-employer Plan, as
such terms are defined in Part 1 of Subtitle E of Title IV of ERISA.
S. Tax Matters.
1. The Company has filed all material Tax Returns which it is required
to file under applicable Laws; all such material Tax Returns are true and
accurate in all material respects and have been prepared in, in each case, in
all material respects, compliance with all applicable Laws; the Company has paid
all material Taxes due and owing by it (whether or not such Taxes are required
to be shown on a Tax Return) and has withheld and paid over to the appropriate
taxing authorities all material Taxes which it is required to withhold from
amounts paid or owing to any employee, stockholder, creditor or other third
parties; and since the Balance Sheet Date, the charges, accruals and reserves
for Taxes with respect to the Company (including any provisions for deferred
income taxes) reflected on the books of the Company are in the aggregate
adequate to cover any material Tax liabilities of the Company if its current tax
year were treated as ending on the date hereof.
2. No material written claim has been made by a taxing authority in a
jurisdiction where the Company does not file tax returns that the Company is or
may be subject to taxation by such jurisdiction with respect to a taxable year
that remains open. There are no foreign, federal, state or local tax audits or
administrative or judicial proceedings pending or being conducted with respect
to the Company. The Company (A) has not executed or entered into a closing
agreement pursuant to section 7121 of the Code or any predecessor provision
thereof or any similar provision of state, local or foreign law; and (B) has not
agreed to or is required to make any adjustments pursuant to section 481(a) of
the Code or any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by the Company or any of its subsidiaries
or has any knowledge that the IRS has proposed any such adjustment or change in
accounting method, or has any application pending with any taxing authority
requesting permission for any changes in accounting methods that relate to the
business or operations of the Company, in each case, with respect to a taxable
year or period for which any amount of taxes may remain due by the Company after
the Closing Date. The Company has not been a United States real property holding
corporation within the meaning of section 897(c)(2) of the Code during the
applicable period specified in section 897(c)(1)(A)(ii) of the Code.
3. The Company is not liable for the Taxes of another person that is
not a subsidiary of the Company under Treas. Reg. Section 1.1502-6 (or
comparable provisions of state, local or foreign law). The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
not obligated to make payments and is not a party to an agreement that could
obligate it to make any payments that would not be deductible under section 280G
of the Code.
As used in this Agreement:
"IRS" means the United States Internal Revenue Service.
12
"Tax" or "Taxes" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
T. Property. Except as set forth on Schedule III.T. or the Commission
Filings, or as would not reasonably be expected to have a Material Adverse
Effect, each of the Company and the Subsidiaries has good title to all of its
assets and properties material to the conduct of its business, free and clear of
any material liens, pledges, security interests, claims, encumbrances or other
restrictions (collectively, "Liens"). With respect to any assets or properties
it leases, each of the Company and its Subsidiaries holds a valid and subsisting
leasehold interest therein, free and clear of any Liens, is in compliance, in
all material respects, with the terms of the applicable lease, and enjoys
peaceful and undisturbed possession under such lease. All of the assets and
properties of the Company and its Subsidiaries that are material to the conduct
of business as presently conducted or as proposed to be conducted by it are in
good operating condition and repair.
U. Intellectual Property. Except as would not have a Material Adverse
Effect, the Company owns or possesses adequate and enforceable rights to use all
patents, patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, copyright applications, licenses, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures) and other similar rights and
proprietary knowledge (collectively, "Intangibles") necessary for the conduct of
its business as now being conducted. Except as set forth on Schedule III.U. or
as would not reasonably be expected to have a Material Adverse Effect (and other
than "shrink-wrap" or "click-wrap" license agreements or license agreements
relating to "off-the-shelf" software), the Company has right, title and interest
in all of the Intangibles, free and clear of Liens. To the best knowledge of the
Company, the Company is not infringing upon or in conflict with any right of any
other person with respect to any Intangibles. Except as disclosed on Schedule
III.U. hereto or as would not reasonably be expected to have a Material Adverse
Effect, (i) to the best knowledge of the Company no claims have been asserted by
any individual, partnership, corporation, unincorporated organization or
association, limited liability company, trust or other entity (collectively, a
"Person") contesting the validity, enforceability, use or ownership of any owned
Intangibles, and (ii) neither the Company nor the Subsidiaries has any knowledge
of infringement or misappropriation of the owned Intangibles by any third party.
The Company has, and will continue to maintain and protect, its rights under the
Intangibles necessary to create, use, or commercialize micro-display related
technology as long as it is in the business of creating, using or
commercializing micro-display related technology.
V. Contracts. All contracts, agreements, notes, instruments,
franchises, leases, licenses, commitments, arrangements or understandings,
written or oral (collectively,
13
"Contracts") which are material to the business and operations of the Company
and the Subsidiaries are in full force and effect and constitute legal, valid
and binding obligations of the Company and the Subsidiaries and, to the
knowledge of the Company, the other parties thereto; the Company and the
Subsidiaries and, to the knowledge of the Company, each other party thereto,
have performed in all material respects all obligations required to be performed
by them under the Contracts, and no material violation or default exists in
respect thereof, nor any event that with notice or lapse of time, or both, would
constitute a default thereof, on the part of the Company and the Subsidiaries
or, to the knowledge of the Company, any other party thereto; and the validity
and effectiveness of all Contracts will not be materially adversely affected by
the transactions contemplated by this Agreement.
W. Investment Company Act. Neither the Company nor any of the
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), nor is the
Company nor any of the Subsidiaries directly or indirectly controlled by or
acting on behalf of any Person which is an "investment company" within the
meaning of the Investment Company Act.
IV. Certain Covenants and Acknowledgments
A. Restrictive Legend. Buyer acknowledges and agrees that, upon
issuance pursuant to this Agreement, the Securities (including any Interest
Shares, Conversion Shares or the Warrant Shares) shall have endorsed thereon a
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the Interest Shares, the Warrant Shares and the
Conversion Shares until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL,
IN FORM AND SUBSTANCE ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT
REQUIRED UNDER THE SECURITIES ACT OR APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AS SET FORTH IN THAT CERTAIN SECURITIES PURCHASE
AGREEMENT DATED SEPTEMBER __, 2001, BETWEEN THE ISSUER OF THE SECURITIES
AND THE STOCKHOLDER A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
ISSUER."
14
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of the Securities upon
which it is stamped, if, unless otherwise required by state securities laws, (i)
such Securities are registered for sale under the 1933 Act, (ii) in connection
with a sale transaction, such holder provides the Company with an opinion of
counsel, in form and substance reasonably acceptable to the Company, to the
effect that a public sale, assignment or transfer of the Securities may be made
without registration under the 1933 Act, or (iii) such holder provides the
Company with reasonable assurances (including, without limitation, an opinion of
counsel in form and substance reasonably acceptable to the Company) that the
Securities can be sold pursuant to Rule 144.
B. Filings. The Company shall make all necessary Commission Filings
and "blue sky" filings required to be made by the Company in connection with the
sale of the Securities to Buyer as required by all Applicable Law, and shall
provide a copy thereof to Buyer promptly after such filing.
C. Reporting Status. So long as Buyer beneficially owns any of the
Securities, the Company shall use its reasonable efforts to timely file all
reports required to be filed by it with the Commission pursuant to Section 13 or
15(d) of the Exchange Act.
D. Listing. Except to the extent the Company lists its Common Stock on
another public exchange, including, without limitation The New York Stock
Exchange or The Nasdaq Stock Market, the Company shall use its commercially
reasonable efforts to maintain its listing of the Common Stock on Amex. If the
Common Stock is delisted from Amex, the Company will use its reasonable best
efforts to list the Common Stock on the most liquid national securities exchange
or quotation system that the Common Stock is qualified to be listed on.
E. Reserved Conversion Shares. The Company at all times from and after
the date hereof shall have such number of shares of Common Stock duly and
validly authorized and reserved for issuance as shall be sufficient for the
conversion in full of, and the payment of interest on, the Debentures and the
exercise in full of the Warrants. The Company shall, not later than five (5)
Business Days after its receipt of the Conversion Notice (as defined in the
Debentures), issue and deliver the requisite shares of Common Stock Issued at
Conversion (as defined in the Debentures), according to the terms of the
Debentures.
F. Information. Each of the parties hereto acknowledges and agrees
that Buyer shall not be provided with, nor be given access to, any material
non-public information relating to the Company or any of the Subsidiaries.
G. Accounting and Reserves. The Company shall maintain a standard and
uniform system of accounting and shall keep proper books and records and
accounts in which full, true and correct entries shall be made of its
transactions, all in accordance with GAAP applied on a consistent basis through
all periods, and shall set aside on such books for each fiscal year all such
reserves for depreciation, obsolescence, amortization, bad debts and other
purposes in connection with its operations as are required by such principles so
applied.
15
H. Adjustment.
1. In the event that at any time on or prior to December 31, 2001, the
Company shall have entered into a binding agreement to issue and sell to an
Interested Third Party (as defined below) any debenture convertible into shares
of the Company's Common Stock or other securities convertible into shares of the
Company's Common Stock where (i) conversion price is lower than the Conversion
Price (as defined in the Debenture), (ii) interest rate is higher than 4%,
and/or (iii) the Interested Third Party receives terms and conditions equal to
or better than the Debenture, the Company shall inform Buyer of such terms and
shall offer to modify the Documents to provide the same terms to Buyer.
2. For the purposes of this IV.H, an "Interested Third Party" shall
mean any third party with which the Company concludes a technology transfer
agreement in conjunction with the binding agreement referred to above.
V. Delivery Instructions
A. On or prior to the Closing Date, the Company shall deposit the
Debentures, fully executed by the Company, to the depository account # 202755 of
Korea Securities Depository with the Bank of New York, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. On the Closing Date, the Company shall (i) provide
documentary evidence issued by the Bank of New York evidencing the receipt of
the Debentures and (ii) fully execute and deliver to Buyer the Warrants.
B. On or prior to the Closing Date, Buyer shall deposit an amount
equal to the Purchase Price to an account with SK Securities Co. Ltd., ▇▇-▇▇,
▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇-▇▇, ▇▇▇▇▇ ▇▇▇-▇▇▇, ▇▇▇▇▇ and instruct SK Securities Co.
Ltd. that such amount deposited by Buyer with SK Securities Co. Ltd. be
deposited to account number ▇▇▇-▇▇▇▇▇-▇ of the Company with HSBC Bank USA, ▇▇▇▇
▇▇▇▇▇ ▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ (ABA Routing Number ▇▇▇▇▇▇▇▇▇) upon
the closing of the transactions contemplated by this Agreement and the
satisfaction by the Company of the conditions set forth herein. Buyer shall
confirm such instruction in writing to the Company and to White & Case LLP or to
them by facsimile to the facsimile numbers shown in XVII A. On the Closing Date,
Buyer shall fully execute and deliver to the Company this Agreement and the
Registration Rights Agreement.
C. If for any reason the Company does not receive the Purchase Price
by the date set forth in VIII B., the Debentures shall be deemed nullified and
Buyer shall, upon the close of business in New York of such date, instruct the
Bank of New York to return the document evidencing the Debentures to the Company
within two days of such instruction.
16
VI. Conditions to the Company's Obligations
Buyer understands that the Company's obligation to sell the Debentures
on the Closing Date to Buyer pursuant to this Agreement is (subject to the
Company's right to waive, in its sole discretion, any or all of the following
conditions) conditioned upon:
A. Delivery by Buyer to the Company of the Purchase Price;
B. Except as would not reasonably be expected to have a material
adverse effect on the consummation of the transactions contemplated by this
Agreement, the accuracy on the Closing Date of the representations and
warranties of Buyer contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their express terms, speak
as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by Buyer in all material
respects on or before the Closing Date of all covenants and agreements of Buyer
required to be performed by it pursuant to this Agreement on or before the
Closing Date, all of which shall be confirmed to the Company by delivery of the
certificate of an officer of the Buyer to that effect; and
C. There shall not be in effect any Applicable Law or order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement.
VII. Conditions to Buyer's Obligations
The Company understands that Buyer's obligation to purchase the
Debentures and the Warrants on the Closing Date pursuant to this Agreement is
(subject to the Buyer's right to waive, in its sole discretion, any or all of
the following conditions) conditioned upon:
A. Delivery by the Company to the Buyer of the Debentures and the
Warrant to be purchased by Buyer pursuant to this Agreement;
B. Except as would not reasonably be expected to have a Material
Adverse Effect, the accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the Closing
Date (except for representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by the Company in all
respects on or before the Closing Date of all covenants and agreements of the
Company required to be performed by it pursuant to this Agreement on or before
the Closing Date, all of which shall be confirmed to Buyer by delivery of the
certificate of the chief executive officer or chief financial officer of the
Company to that effect;
C. Delivery by the Company of irrevocable instructions to the
Company's transfer agent to reserve 2,549,229 shares of Common Stock for
issuance of the Conversion Shares and the Warrant Shares and delivery to Buyer
on the Closing Date of a copy of such instructions ;
D. There not having occurred since the date hereof any event or
development, and there being in existence no condition, having a Material
Adverse Effect;
17
E. There shall not be in effect any Applicable Law, order, ruling,
judgment or writ of any court or public or governmental authority restraining,
enjoining or otherwise prohibiting any of the transactions contemplated by this
Agreement; and
F. The Company shall have obtained all material consents, approvals or
waivers from governmental authorities and third persons necessary for the
execution, delivery and performance of the Documents and the transactions
contemplated thereby.
H. Transfer Restriction.
1. Until the first 1st anniversary of the Closing Date, the Buyer
agrees (i) not to directly or indirectly offer, sell, pledge, hypothecate or
purchase any right or option with respect to, or otherwise transfer any of the
Debentures, the Warrants or the Securities (collectively, the "Subject
Securities") or to enter into any transaction (including, without limitation,
any short sale or purchase or sale of any derivative security) which results in
the economic equivalent of a transfer of all or any part of the Subject
Securities (each a "Transfer"), and (ii) not to agree to Transfer any of the
Subject Securities. For the purposes of this Section V.H. of this Agreement, the
term "Subject Securities" shall be deemed to include all securities issued in
respect of the Subject Securities by way of dividend, merger, reclassification,
recapitalization, distribution or otherwise. Any attempted Transfer of any
Subject Securities in violation of this Section V.H. shall be null and void ab
initio and of no force and effect. The Buyer acknowledges that the Company may
refuse to Transfer any Subject Securities which are attempted to be Transferred
in violation of this Section V.H.
2. Notwithstanding anything to the contrary set forth herein, the
Buyer may always Transfer the Subject Securities to a wholly owned subsidiary of
Buyer which agrees in writing for the benefit of the Company to become bound by
the provisions of this Section V.H.
VIII. Termination
A. Termination by Mutual Written Consent. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned, for any
reason and at any time prior to the Closing Date, by the mutual written consent
of the Company and Buyer.
B. Termination by the Company or Buyer. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned by action
of the Company or Buyer if (i) the Closing shall not have occurred at or prior
to 5:00 p.m., New York City time, on September 30, 2001 (the "Latest Closing
Date"); provided, however, that the right to terminate this Agreement pursuant
to this Section VIII.B. shall not be available to any party whose failure to
fulfill any of its obligations under this Agreement has been the cause of or has
resulted in the failure of the Closing to occur at or before such time and date.
18
C. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply in any material
respect with any of its covenants or agreements contained in this Agreement,
(ii) there shall have been a material breach by the Company of any
representation or warranty made by it in this Agreement, (iii) there shall have
occurred any event or development, or there shall be in existence any condition,
having a Material Adverse Effect, (iv) the Company shall have failed to satisfy
the conditions provided in Article VII hereof or (v) the Company shall have made
a general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the Company seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation , winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any law
relating to bankruptcy, insolvency or reorganization.
D. Termination by the Company. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement or (ii) there shall have been a material breach by Buyer of any
representation or warranty made by it in this Agreement.
E. Effect of Termination. In the event of the termination of this
Agreement pursuant to this Article VIII, this Agreement shall thereafter become
void and have no effect, and no party hereto shall have any liability or
obligation to any other party hereto in respect of this Agreement, except that
the provisions of Articles [IX and] XVIII, and this Section VIII.E shall survive
any such termination; provided, however, that no party shall be released from
any liability hereunder if this Agreement is terminated and the transactions
contemplated hereby abandoned by reason of (i) willful failure of such party to
perform its obligations hereunder or (ii) any misrepresentation made by such
party of any matter set forth herein.
IX. Survival; Indemnification
A. For a period of one year from the date hereof, the representations,
warranties and covenants made by each of the Company and Buyer in this
Agreement, the annexes, schedules and exhibits hereto and in each instrument,
agreement and certificate entered into and delivered by them pursuant to this
Agreement shall survive the Closing and the consummation of the transactions
contemplated hereby. In the event of a breach or violation of any of such
representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
B. The Company hereby agrees to indemnify and hold harmless Buyer, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Buyer Indemnitees") from and against any and all actual
losses, claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses") and agrees to reimburse Buyer Indemnitees
19
for all out of-pocket expenses (including the fees and expenses of legal
counsel), in each case promptly as incurred by Buyer Indemnitees and to the
extent arising out of or in connection with:
1. any material misrepresentation, breach of any of the Company's
representations or warranties contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or thereto; or
2. any failure by the Company to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or agreement
entered into or delivered by the Company pursuant to this Agreement or the other
Documents;
provided, however that the Buyer Indemnitees shall bear the first
$50,000 of any Loss actually incurred, and, provided further, that to the extent
the amount of any Loss exceeds such amount, the Buyer Indemnitees shall be
entitled to recover only the amount in excess of that amount, and provided
further, that the Company shall under no circumstances be liable for any amount
over the net proceeds actually received by it pursuant to this Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees") from and against any and all actual
Losses, and agrees to reimburse the Company Indemnitees for all out-of-pocket
expenses (including the fees and expenses of legal counsel) in each case
promptly as incurred by the Company Indemnitees and to the extent arising out of
or in connection with:
1. any material misrepresentation, omission of fact or breach of any
of Buyer's representations or warranties contained in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or delivered by Buyer pursuant
to this Agreement or the other Documents; or
2. any failure by Buyer to perform in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this Agreement
or the other Documents or any instrument, certificate or agreement entered into
or delivered by Buyer pursuant to this Agreement or the other Documents;
provided, however that the Company Indemnitees shall bear the first
$50,000 of any Loss actually incurred, and, provided further, that to the extent
the amount of any Loss exceeds such amount, the Company Indemnitees shall be
entitled to recover only the amount in excess of that amount.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Article IX (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Article IX is being sought (the "Indemnifying Party") of the commencement
20
thereof; but the omission so to notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights or defenses by reason of such failure. In connection with any
Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party,
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
X. Governing Law
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, without regard to the conflicts of law
principles of such state.
XI. Submission to Jurisdiction
Each of the parties hereto consents to the non-exclusive jurisdiction
of the federal courts whose districts encompass any part of the City of New York
or the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and the other
Documents. Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may effectively do so, any defense of an inconvenient
forum or improper venue to the maintenance of such action or proceeding in any
such court and any right of jurisdiction on account of its place of residence or
domicile. Each party hereto irrevocably and unconditionally consents to the
service of any and all process in any such action or proceeding in such courts
by the mailing of copies of such process by certified or registered airmail at
its address specified in Article XVII. Each party hereto agrees that a final
judgment in any such
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action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
The foregoing consents to jurisdiction and appointments of agents to receive
service of process shall not constitute general consents to service of process
in the State of New York for any purpose except as provided above and shall not
be deemed to confer rights on any person other than the respective parties to
this Agreement. The prevailing party or parties in any such litigation shall be
entitled to receive from the losing party or parties all costs and expenses,
including reasonable counsel fees, incurred by the prevailing party or parties.
XII. Waiver of Jury Trial
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
XIII. Counterparts; Execution
This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument. A facsimile transmission of
this signed Agreement shall be legal and binding on all parties hereto.
XIV. Headings
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
XV. Severability
In the event any one or more of the provisions contained in this
Agreement or in the other Documents should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein or therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good-faith
negotiations to
22
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
XVI. Entire Agreement; Remedies, Amendments and Waivers
This Agreement and the Documents constitute the entire agreement among
the parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by all parties. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
XVII. Notices
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
A. if to the Company, to:
eMagin Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (Fax)
with a copy to:
White & Case LLP
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (Fax)
B. if to Buyer, to:
SK Corporation
▇▇ ▇▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇-▇▇▇, ▇▇▇▇▇
Attention: Man ▇▇▇ ▇▇▇
(▇▇▇) ▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇▇-▇▇▇▇ (Fax)
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with a copy to:
SK Corporation
▇▇ ▇▇▇▇▇▇-▇▇▇▇, ▇▇▇▇▇▇-▇▇
▇▇▇▇▇, ▇▇▇-▇▇▇, ▇▇▇▇▇
Attention: General Counsel
(▇▇▇) ▇▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇▇-▇▇▇▇ (Fax)
The Company or Buyer may change the foregoing address by notice given
pursuant to this Article XVII.
XVIII. Confidentiality
Each of the Company and Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).
XIX. Assignment
This Agreement shall not be assignable by either of the parties hereto
prior to the Closing without the prior written consent of the other party, and
any attempted assignment contrary to the provisions hereby shall be null and
void.
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XX. Finder's Fees.
Buyer agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finders' or
broker's fee (and any asserted liability) for which Buyer or any of its
officers, partners, employees, or representatives is responsible. The Company
agrees to indemnify and hold harmless Buyer from any liability for any
commission or compensation in the nature of a finder's or broker's fee (and any
asserted liability) for which the Company or any of its officers, employees or
representatives is responsible
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first above written.
eMagin Corporation
By:
----------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chief Executive Officer
SK Corporation
By:
----------------------------------------------
Name:
Title:
25
EXHIBIT A
[See Attached Form of Debenture]
26
EXHIBIT B
[See attached Form of Stock Purchase Warrant]
27
EXHIBIT C
[See attached Registration Rights Agreement]
28
SCHEDULES
SCHEDULE III.A.3: Preemptive rights - None
SCHEDULE III.A.4: Subsidiaries - Virtual Vision, Inc. (Delaware).
SCHEDULE III.B.2: Listing Notices - None
SCHEDULE III.C: Issuances and sales of securities - In June 2001, the Company
issued 16,002 shares of common stock to Travelers Insurance Company upon
Travelers Insurance Company's exercise of warrants to purchase common shares.
The Company received gross proceeds of $27,523.44 to be used for general
operating capital.
SCHEDULE III.F: Contravention - None
SCHEDULE III.I: Litigation - None
SCHEDULE III.J: Events of Default - None
SCHEDULE III.M: Related Party Transactions: None
SCHEDULE III.P: Environmental Matters - None
SCHEDULE III.Q: Collective Bargaining Agreements: None
SCHEDULE III.R: Erisa Matters - No additional Plans
SCHEDULE III.T: Exceptions to Good Title to Property - None
SCHEDULE III.U: Exceptions to Good Title to Intellectual Property - None
30