REVISED TERMS OF PREFERRED STOCK
1. Designation, Amount and Par Value. The series of preferred stock
shall be designated as the Company's Series D Convertible Preferred Stock (the
"Preferred Stock"), and the number of shares so designated shall be 5,000. Each
share of Preferred Stock shall have a par value of $.01 per share and a stated
value initially equal to $1,000 as increased from time to time pursuant to
Section 4 below (the "Stated Value").
2. Definitions. In addition to the terms defined elsewhere in this
Certificate of Designations, (a) the terms set forth in Exhibit A hereto shall
have the meanings indicated therein, and (b) the following terms have the
meanings indicated:
"Company" means Universal Display Corporation, a Pennsylvania
corporation.
"Conversion Price" means $___[the average Closing Price for
the 36 Trading Days beginning on the 8th Trading Day prior to the
Conversion Shares Effective Date as contemplated by Section 2.3 of the
Purchase Agreement]*, as adjusted pursuant to Section 15 hereof.
"Equity Conditions" means, with respect to a specified
issuance of Common Stock, that each of the following conditions is
satisfied: (i) the number of authorized but unissued and otherwise
unreserved shares of Common Stock is sufficient for such issuance; (ii)
such shares of Common Stock are registered for resale by the Holders
pursuant to an effective Conversion Shares Registration Statement or
all such shares may be sold without volume restrictions pursuant to
Rule 144(k) under the Securities Act; (iii) the Common Stock is listed
or quoted (and is not suspended from trading) on an Eligible Market;
(iv) such issuance would be permitted in full without violating Section
16 hereof or the rules or regulations of any Trading Market; and (v)
the Company is not in default with respect to any material obligation
hereunder or under any other (A) any other agreement between the
Company and any Holder, dated as of August 22, 2001, as may hereafter
be amended; including, without limitation, the Purchase Agreement and
the Notes or (B) any instrument or security issued pursuant to any of
the agreements referred to in the preceding clause (A).
"Holder" means any holder of Preferred Stock.
"Junior Securities" means the Common Stock and all other
equity or equity equivalent securities of the Company other than those
securities that are outstanding on the Original Issue Date and are
explicitly senior in dividend rights or liquidation preference to the
Preferred Stock; except that any shares of Series C Convertible
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* to be completed
Preferred Stock issued pursuant to the provisions of the Purchase
Agreement shall not be Junior Securities but shall rank pari passu with
the Preferred Stock.
"Original Issue Date" means the date of the first issuance of
any shares of the Preferred Stock regardless of the number of transfers
of any particular shares of Preferred Stock and regardless of the
number of certificates that may be issued to evidence such Preferred
Stock.
"Purchase Agreement" means the Securities Purchase Agreement,
dated August 22, 2001, among the Company and the original purchasers of
the Preferred Stock.
3. Dividends.
(a) Holders shall not be entitled to receive dividends on the
Preferred Stock.
4. Stated Value. The "Stated Value" shall be increased by $4.16 on the
last day of each month beginning on ______ __, 200_ [the last day of the month
in which the Second Closing Date occurs unless the Second Closing Date occurs on
or after the 16th day of the month in which case it shall be the last day of the
month following the month in which the Second Closing Date occurs]*.
5. Liquidation. Upon any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary (a "Liquidation"), the Holders shall
be entitled to receive an amount equal to $1,000 for each share of Preferred
Stock, payable out of the assets of the Company, whether such assets are capital
or surplus, and before any distribution or payment may be made to the holders of
any Junior Securities. If the assets of the Company are insufficient to pay such
amounts in full, then the entire amount of assets to be distributed shall be
distributed among the Holders ratably in accordance with the amount each Holder
would have received if such assets were sufficient to pay all such amounts in
full. The Company shall provide notice of any Liquidation or Change of Control
to each record Holder on the earlier of the day on which the Company (a)
publicly announces such event or proposed action, or (b) notifies its
shareholders of such event or proposed action. At the request of any Holder,
which must be delivered prior to the effective date of a Change of Control (or,
if later, within five Trading Days after such Holder receives notice of such
Change of Control from the Company), such Change of Control will be treated as a
Liquidation with respect to such Holder.
6. No Payments on Junior Securities. So long as any Preferred Stock is
outstanding, (i) neither the Company nor any Subsidiary shall, directly or
indirectly, redeem, purchase or otherwise acquire any Junior Securities or set
aside any monies for such a redemption, purchase or other acquisition, and (ii)
the Company shall not pay or declare any dividend or make any distribution on
any Junior Securities, except stock dividends on the Common Stock payable in
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* to be completed
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additional shares of Common Stock and dividends due and paid in the ordinary
course on preferred stock of the Company at such times as the Company is in
compliance with its payment and other obligations hereunder.
7. Registration of Preferred Stock. The Company shall register shares
of the Preferred Stock, upon records to be maintained by the Company for that
purpose (the "Preferred Stock Register"), in the name of the record Holders
thereof from time to time. The Company may deem and treat the registered Holder
of shares of Preferred Stock as the absolute owner thereof for the purpose of
any conversion hereof or any distribution to such Holder, and for all other
purposes, absent actual notice to the contrary.
8. Registration of Transfers. The Company shall register the transfer
of any shares of Preferred Stock in the Preferred Stock Register, upon surrender
of certificates evidencing such shares to the Company at its address specified
herein. Upon any such registration or transfer, a new certificate evidencing the
shares of Preferred Stock so transferred shall be issued to the transferee and a
new certificate evidencing the remaining portion of the shares not so
transferred, if any, shall be issued to the transferring Holder.
9. Conversion.
(a) Conversion at Option of Holder. At the option of any Holder, any
Preferred Stock held by such Holder may be converted into Common Stock based on
the then-applicable Conversion Price. A Holder may convert Preferred Stock into
Common Stock pursuant to this paragraph at any time and from time to time after
the Original Issue Date and prior to August 22, 2004, by delivering to the
Company a conversion notice, in the form attached hereto as Exhibit B (a
"Conversion Notice"), appropriately completed and duly signed, and the date any
such Conversion Notice is delivered to the Company (as determined in accordance
with the notice provisions hereof) is a "Conversion Date." A Holder shall
simultaneously deliver a copy of the Conversion Notice to the Transfer Agent;
provided, however, a Holder's failure to deliver such a copy shall not render
such Conversion Notice invalid or ineffective.
(b) Conversion at Option of Company. If, at any time after the
Effective Date, the Closing Price for twenty (20) consecutive Trading Days
exceeds 135% of the Conversion Price (the "Threshold Price"), the Company may
require the Holders to convert all of the Preferred Stock into Common Stock
based on the then-applicable Conversion Price. The Company may require a
conversion pursuant to this paragraph by delivering irrevocable written notice
of such election to the Holders, and the thirtieth Trading Day after the date
any such notice is delivered to the Holders (as determined in accordance with
the notice provisions hereof) will be the "Conversion Date" for such required
conversion. Notwithstanding the foregoing, the Company may not require any
conversion under this paragraph (and any notice thereof will be void), unless
from the beginning of the period of twenty consecutive Trading Days through the
Conversion Date, the Equity Conditions (except for the condition set forth in
Section 16(a), which need not be satisfied for this purpose) are satisfied with
respect to all of the Underlying Shares then issuable upon conversion in full of
all outstanding Preferred Stock.
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(c) Automatic Conversion. Notwithstanding Section 16(a) hereof or
any other provision to the contrary contained herein, but subject to the
satisfaction of the Equity Conditions and the provisions of Section 16(b)
hereof, on the third anniversary of the Original Issue Date, all the shares of
Preferred Stock shall be converted as if the Holder had delivered a Conversion
Notice with respect to such shares on such day. In the event the Equity
Conditions (other than the requirements set forth in Sections 16(a) and 16(b),
which need not be satisfied for this purpose) are not satisfied on such date,
the Holder, at its option, may require the Company to repurchase the Preferred
Stock for an amount equal to the Stated Value of the Preferred Stock on such
date. The Holder shall exercise this option by delivering to the Company written
notice to that effect and the Company shall repurchase the Preferred Stock on
the fifth Business Day following the receipt of such notice against delivery of
the Preferred Stock.
10. Mechanics of Conversion.
(a) The number of Underlying Shares issuable upon any conversion of
a share of Preferred Stock hereunder shall equal the Stated Value on the
Conversion Date of such share of Preferred Stock to be converted, divided by the
Conversion Price in effect on the Conversion Date.
(b) Upon conversion of any Preferred Stock, the Company shall
promptly (but in no event later than four Trading Days after the Conversion
Date) issue or cause to be issued and cause to be delivered to or upon the
written order of the Holder and in such name or names as the Holder may
designate (i) a certificate for the Underlying Shares issuable upon such
conversion, free of restrictive legends unless a registration statement covering
the resale of the Underlying Shares and naming the Holder as a selling
stockholder thereunder is not then effective and such Underlying Shares are not
then freely transferable without volume restrictions pursuant to Rule 144 under
the Securities Act, and (ii) a bank check in the amount of all accrued and
unpaid dividends on the Preferred Stock so converted (if the Company has elected
or is required to pay such accrued dividends in cash). Within three Trading Days
after receipt thereof, the Holder will deliver the original certificate(s)
evidencing the Preferred Stock so converted to the Company, unless the Holder is
awaiting receipt of a new certificate evidencing such shares from the Company
pursuant to another provision hereof. The Holder, or any Person so designated by
the Holder to receive Underlying Shares, shall be deemed to have become holder
of record of such Underlying Shares as of the Conversion Date. The Company
shall, upon request of the Holder, use its best efforts to deliver Underlying
Shares hereunder electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions.
(c) If a Holder is converting less than all shares of Preferred
Stock represented by the certificate or certificates delivered by such Holder to
the Company in connection with such conversion, or if such conversion cannot be
effected in full for any reason, the Company shall promptly deliver to such
Holder a new certificate representing the number of shares of Preferred Stock
not converted.
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(d) The Company's obligations to issue and deliver Underlying
Shares upon conversion of Preferred Stock in accordance with the terms hereof
are absolute and unconditional, irrespective of any action or inaction by any
Holder to enforce the same, any waiver or consent with respect to any provision
hereof, the recovery of any judgment against any Person or any action to enforce
the same, or any setoff, counterclaim, recoupment, limitation or termination, or
any breach or alleged breach by any Holder or any other Person of any obligation
to the Company or any violation or alleged violation of law by any Holder or any
other Person, and irrespective of any other circumstance which might otherwise
limit such obligation of the Company to any Holder in connection with the
issuance of such Underlying Shares.
11. Voting Rights. Except as otherwise provided herein or as required
by applicable law, the Holders shall not be entitled to vote on any matters. So
long as any shares of Preferred Stock are outstanding, the Company shall not,
without the affirmative vote of the Holders of two-thirds (2/3) of the shares of
Preferred Stock then outstanding, (a) alter or change adversely the powers,
preferences or rights given to the Preferred Stock or alter or amend this
Certificate of Designation, (b) authorize or create any class of stock ranking
as to dividends or distribution of assets upon a Liquidation senior to or
otherwise pari passu with the Preferred Stock, (c) amend its certificate or
articles of incorporation or other charter documents so as to affect adversely
any rights of the Holders, or (d) increase the authorized number of shares of
Preferred Stock.
12. Charges, Taxes and Expenses. Except as otherwise provided in this
Section 12, issuance of certificates for shares of Preferred Stock and for
Underlying Shares issued on conversion of (or otherwise in respect of) the
Preferred Stock shall be made without charge to the Holders for any issue or
transfer tax, withholding tax, transfer agent fee or other incidental tax or
expense in respect of the issuance of such certificates, all of which taxes and
expenses shall be paid by the Company; provided, however, that the Company shall
be entitled to withhold any applicable taxes with respect to the actual or
deemed payment of any dividends on the Preferred Stock (whether in cash or
shares of stock) and with respect to the payment of any cash in lieu of the
issuance of fractional shares) pursuant to Section 17 hereof; and further
provided, however, that the Company shall not be required to pay any tax that
may be payable in respect of any transfer involved in the registration of any
certificates for Common Stock or Preferred Stock in a name other than that of
the Holder. The Holder shall be responsible for all other tax liability that may
arise as a result of holding or transferring the Preferred Stock or receiving
Underlying Shares in respect of the Preferred Stock.
13. Replacement Certificates. If any certificate evidencing Preferred
Stock or Underlying Shares is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation hereof, or in lieu of and substitution for such certificate, a new
certificate, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. Applicants for a new certificate under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe.
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14. Reservation of Underlying Shares. The Company covenants that it
will at all times reserve and keep available out of the aggregate of its
authorized but unissued and otherwise unreserved Common Stock, solely for the
purpose of enabling it to issue Underlying Shares as required hereunder, the
number of Underlying Shares which are then issuable and deliverable upon the
conversion of (and otherwise in respect of) all outstanding Preferred Stock
(taking into account the adjustments of Section 15), free from preemptive rights
or any other contingent purchase rights of persons other than the Holder. The
Company covenants that all Underlying Shares so issuable and deliverable shall,
upon issuance in accordance with the terms hereof, be duly and validly
authorized, issued and fully paid and nonassessable.
15. Certain Adjustments. The Conversion Price is subject to adjustment
from time to time as set forth in this Section 15.
(a) Stock Dividends and Splits. If the Company, at any time while
Preferred Stock is outstanding, (i) pays a stock dividend on its Common Stock or
otherwise makes a distribution on any class of capital stock that is payable in
shares of Common Stock (other than regular dividends on the Preferred Stock),
(ii) subdivides outstanding shares of Common Stock into a larger number of
shares, (iii) combines outstanding shares of Common Stock into a smaller number
of shares, or (iv) issues by reclassification of shares of the Common Stock any
other shares of capital stock, then in each such case the Conversion Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding immediately
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event. Any adjustment made
pursuant to clause (i) of this paragraph shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution, and any adjustment pursuant to clauses (ii),
(iii) or (iv) of this paragraph shall become effective immediately after the
effective date of such subdivision, combination or reclassification. If any
event requiring an adjustment under this paragraph occurs during the period that
a Conversion Price is calculated hereunder, then the calculation of such
Conversion Price shall be adjusted appropriately to reflect such event.
(b) Pro Rata Distributions. If the Company, at any time while
Preferred Stock is outstanding, distributes to all holders of Common Stock (i)
evidences of its indebtedness, (ii) any security (other than a distribution of
Common Stock covered by the preceding paragraph), (iii) rights or warrants to
subscribe for or purchase any security, or (iv) any other asset (in each case,
"Distributed Property"), then, at the request of any Holder delivered before the
90th day after the record date fixed for determination of stockholders entitled
to receive such distribution, the Company will deliver to such Holder, within
five Trading Days after such request (or, if later, on the effective date of
such distribution), the Distributed Property that such Holder would have been
entitled to receive in respect of the Underlying Shares for which such Holder's
Preferred Stock could have been converted immediately prior to such record date.
If such Distributed Property is not delivered to a Holder pursuant to the
preceding sentence, then upon any conversion of Preferred Stock that occurs
after such record date, such Holder shall be entitled to receive, in addition to
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the Underlying Shares otherwise issuable upon such conversion, the Distributed
Property that such Holder would have been entitled to receive in respect of such
number of Underlying Shares had the Holder been the record holder of such
Underlying Shares immediately prior to such record date.
(c) Fundamental Transactions. If, at any time while Preferred Stock
is outstanding, (i) the Company effects any merger or consolidation of the
Company with or into another Person, (ii) the Company effects any sale of all or
substantially all of its assets in one or a series of related transactions,
(iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of Common Stock are permitted to
tender or exchange their shares for other securities, cash or property, or (iv)
the Company effects any reclassification of the Common Stock or any compulsory
share exchange pursuant to which the Common Stock is effectively converted into
or exchanged for other securities, cash or property (in any such case, a
"Fundamental Transaction"), then upon any subsequent conversion of Preferred
Stock, each Holder shall have the right to receive, for each Underlying Share
that would have been issuable upon such conversion absent such Fundamental
Transaction, the same kind and amount of securities, cash or property as it
would have been entitled to receive upon the occurrence of such Fundamental
Transaction if it had been, immediately prior to such Fundamental Transaction,
the holder of one share of Common Stock (the "Alternate Consideration"). For
purposes of any such conversion, the determination of the Variable Conversion
Price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect of one share
of Common Stock in such Fundamental Transaction, and the Company shall apportion
the Conversion Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
each Holder shall be given the same choice as to the Alternate Consideration it
receives upon any conversion of Preferred Stock following such Fundamental
Transaction. To the extent necessary to effectuate the foregoing provisions, any
successor to the Company or surviving entity in such Fundamental Transaction
shall issue to the Holder a new series of preferred stock consistent with the
foregoing provisions and evidencing the Holders' right to convert such preferred
stock into Alternate Consideration. The terms of any agreement pursuant to which
a Fundamental Transaction is effected shall include terms requiring any such
successor or surviving entity to comply with the provisions of this paragraph
(c) and insuring that the Preferred Stock (or any such replacement security)
will be similarly adjusted upon any subsequent transaction analogous to a
Fundamental Transaction.
(d) Subsequent Equity Sales.
(i) If, at any time while Preferred Stock is outstanding, the
Company issues additional shares of Common Stock or rights, warrants,
options or other securities or debt convertible, exercisable or
exchangeable for shares of Common Stock or otherwise entitling any
Person to acquire shares of Common Stock (collectively, "Common Stock
Equivalents" and together with Common Stock sometimes hereinafter
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called "CS Securities") at an effective price per share of Common Stock
(the "Effective Price") less than the Conversion Price (as adjusted
hereunder to such date), then the Conversion Price shall be reduced to
equal the Effective Price. For purposes of the foregoing adjustment, in
connection with any issuance of any Common Stock Equivalents, (x) the
maximum number of shares of Common Stock potentially issuable at any
time upon conversion, exercise or exchange of such Common Stock
Equivalents (the "Deemed Number") shall be deemed to be outstanding
upon issuance of such Common Stock Equivalents, (y) the Effective Price
applicable to such Common Stock shall equal the minimum dollar value of
consideration payable to the Company to purchase such Common Stock
Equivalents and to convert, exercise or exchange them into Common
Stock, divided by the Deemed Number, and (z) no further adjustment
shall be made to the Conversion Price upon the actual issuance of
Common Stock upon conversion, exercise or exchange of such Common Stock
Equivalents.
(ii) If, at any time while Preferred Stock is outstanding, the
Company or any Subsidiary has outstanding any Common Stock Equivalents
with an Effective Price that floats or resets or otherwise varies or is
subject to adjustment based on market prices of the Common Stock (a
"Floating Price Security"), then for purposes of applying the preceding
paragraph in connection with any subsequent conversion, the Effective
Price will be determined separately on each Conversion Date and will be
deemed to equal the lowest Effective Price at which any holder of such
Floating Price Security is entitled to acquire shares of Common Stock
on such Conversion Date (regardless of whether any such holder actually
acquires any shares on such date).
(iii) Notwithstanding the foregoing, no adjustment will be
made under this Section 13(d) in respect of (a) any grant of options to
employees, officers, directors or consultants of the Company pursuant
to any stock option plan duly adopted by the Company's board of
directors (provided, that the number of shares of Common Stock which
are the subject of any such plan may not exceed 2,800,000, subject to
annual increases of up to 40% of the shares authorized under such plans
during the immediately preceding year), (b) the issuance of CS
Securities upon exercise of any such options, (c) the issuance of CS
Securities under the PPG Agreement or the Motorola Agreement (d) up to
1,000,000 of CS Securities issued in connection with any contractual
strategic alliances approved by the Company's Board of Directors; (e)
the issuance of any CS Securities representing or convertible into up
to 50,000 shares of Common Stock in any single transaction; provided
that this subsection (e) shall only apply to the first 50,000 shares in
the aggregate issued in any consecutive 12 month period and 150,000 in
the aggregate; (f) CS Securities issued or issuable pursuant to the
Notes, Preferred Stock, Warrants or any other Transaction Document or
pursuant to the anti-dilution provisions thereof; (g) any CS Securities
issuable upon the exercise of, or pursuant to the anti-dilution
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provisions contained within, any options, restricted stock awards,
preferred stock or warrants outstanding on the date hereof (but not to
the extent amended hereafter) all of which are set forth on Schedule
3.1(g) to the Purchase Agreement, a copy of which is on file at the
offices of the Company and which will be made available to any Holder
upon request; or (h) any Common Stock issued upon the conversion of
exercise of any Common Stock Equivalents outstanding as of the date
hereof (but not to the extent amended hereafter) all of which are set
forth on; Schedule 3.1(g) to the Purchase Agreement, a copy of which is
on file at the offices of the Company and which will be made available
to any Holder upon request;
(e) Calculations. All calculations under this Section 15 shall be
made to the nearest cent or the nearest 1/100th of a share, as applicable. The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company, and the disposition
of any such shares shall be considered an issue or sale of Common Stock.
(f) Notice of Adjustments. Upon the occurrence of each adjustment
pursuant to this Section 15, the Company at its expense will promptly compute
such adjustment in accordance with the terms hereof and prepare a certificate
describing in reasonable detail such adjustment and the transactions giving rise
thereto, including all facts upon which such adjustment is based. Upon written
request, the Company will promptly deliver a copy of each such certificate to
each Holder and to the ^ Transfer Agent.
(g) Notice of Corporate Events. If the Company (i) declares a
dividend or any other distribution of cash, securities or other property in
respect of its Common Stock, including without limitation any granting of rights
or warrants to subscribe for or purchase any capital stock of the Company or any
Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating
or solicits stockholder approval for any Fundamental Transaction or (iii)
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Company, then the Company shall deliver to each Holder a notice
describing the material terms and conditions of such transaction, on the earlier
of the day on which the Company (a) publicly announces such proposed action or
(b) notifies its Shareholders of such proposed action, and the Company will take
all steps reasonably necessary in order to insure that each Holder is given the
practical opportunity to convert its Preferred Stock prior to such time so as to
participate in or vote with respect to such transaction; provided, however, that
the failure to deliver such notice or any defect therein shall not affect the
validity of the corporate action required to be described in such notice.
16. Limitation on Conversion. (a) Notwithstanding anything to the
contrary contained herein, the number of shares of Common Stock that may be
acquired by any Holder upon any conversion of Preferred Stock (or otherwise in
respect of the Preferred Stock) shall be limited to the extent necessary to
insure that, following such conversion (or other issuance), the total number of
shares of Common Stock then beneficially owned by such Holder and its Affiliates
and any other Persons whose beneficial ownership of Common Stock would be
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aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act,
does not exceed 4.999% (the "Maximum Percentage") of the total number of issued
and outstanding shares of Common Stock (including for such purpose the shares of
Common Stock issuable upon such conversion). For such purposes, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and the rules and regulations promulgated thereunder. Each delivery of a
Conversion Notice by a Holder will constitute a representation by such Holder
that it has evaluated the limitation set forth in this paragraph and determined
that issuance of the full number of Underlying Shares requested in such
Conversion Notice is permitted under this paragraph. By written notice to the
Company, any Holder may waive the provisions of this Section or increase or
decrease the Maximum Percentage to any other percentage specified in such
notice, but (i) any such waiver or increase will not be effective until the 61st
day after such notice is delivered to the Company, and (ii) any such waiver or
increase or decrease will apply only to such Holder and not to any other Holder.
(b) Notwithstanding anything contained to the contrary herein, the
number of shares of Common Stock that may be acquired by any Holder upon any
conversion of Preferred Stock (or otherwise in respect of the Preferred Stock)
shall be limited to the extent such conversion would result in the Holder,
together with any affiliate thereof, beneficially owning (as determined in
accordance with Section 13(d) of the Exchange Act and the rules promulgated
thereunder) in excess of 9.999% of the then issued and outstanding shares of
Common Stock, including shares issuable upon conversion of this Note after
application of this Section. Since the Holder will not be obligated to report to
the Company the number of shares of Common Stock it may hold at the time of a
conversion hereunder, unless the conversion at issue would result in the
issuance of shares of Common Stock in excess of 9.999% of the then outstanding
shares of Common Stock without regard to any other shares which may be
beneficially owned by the Holder or an affiliate thereof, the Holder shall have
the authority and obligation to determine whether the restriction contained in
this Section 14(b) will limit any particular conversion hereunder and to the
extent that the Holder determines that the limitation contained in this Section
14(b) applies, the determination of the extent to which the Preferred Stock is
convertible shall be the responsibility and obligation of the Holder. If the
Holder has delivered a Conversion Notice or the Company is requiring conversion
pursuant to Section 9(b) in either case, that, without regard to any other
shares that the Holder or its affiliates may beneficially own, would result in
the issuance in excess of the permitted amount hereunder, the Company shall
notify the Holder of this fact and shall honor the conversion for the maximum
amount permitted to be converted on such Conversion Date.
17. Fractional Shares. The Company shall not be required to issue or
cause to be issued fractional Underlying Shares on conversion of Preferred
Stock. If any fraction of an Underlying Share would, except for the provisions
of this Section, be issuable upon conversion of Preferred Stock, the Company
shall pay an amount in cash equal to the average of the Closing Prices of the
Common Stock for the five Trading Days immediately prior to (but not including)
the Conversion Date multiplied by such fraction; provided that, unless a Holder
requests otherwise, no payment shall be required to be made to a Holder pursuant
to this sentence until the aggregate amount payable to such Holder in connection
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with such conversion (together with unpaid amounts from prior conversions)
exceeds $1,000, at which time all previously deferred payments shall be made.
18. Notices. Any and all notices or other communications or deliveries
hereunder (including without limitation any Conversion Notice) shall be in
writing and shall be deemed given and effective on the earliest of (i) the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day, or (iii) the
Trading Day following the date of mailing, if sent by nationally recognized
overnight courier service.. The addresses for such communications shall be: (i)
if to the Company, to 375 Phillips Boulevard, Ewing, New Jersey 08618,
facsimile: (609) 671-0995, Attention Sidney Rosenblatt, or (ii) if to a Holder,
to the address or facsimile number appearing on the Company's stockholder
records or such other address or facsimile number as such Holder may provide to
the Company in accordance with this Section.
19. Miscellaneous.
(a) The headings herein are for convenience only, do not constitute
a part of this Certificate of Designations and shall not be deemed to limit or
affect any of the provisions hereof.
(b) No waiver of any default with respect to any provision,
condition or requirement of this Certificate of Designations shall be deemed to
be a continuing waiver in the future or a waiver of any subsequent default or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right.
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EXHIBIT A
ADDITIONAL DEFINITIONS
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common control
with a Person, as such terms are used in and construed under Rule 144 under the
Securities Act. With respect to a Holder, any investment fund or managed account
that is managed on a discretionary basis by the same investment manager as such
Holder will be deemed to be an Affiliate of such Holder.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on which banking
institutions in the State of New York are authorized or required by law or other
government action to close.
"Change of Control" means the occurrence of any of (i) an acquisition
after the date hereof by an individual or legal entity or "group" (as described
in Rule 13d-5(b)(1) promulgated under the Exchange Act) of more than one-half of
the voting rights or equity interests in the Company, (ii) a replacement of more
than one-half of the members of the Company's board of directors that is not
approved by those individuals who are members of the board of directors on the
date hereof in one or a series of related transactions, (iii) a merger or
consolidation of the Company or any Subsidiary or a sale of all or substantially
all of the assets of the Company in one or a series of related transactions,
unless following such transaction or series of transactions, the holders of the
Company's securities prior to the first such transaction continue to hold at
least a majority of the voting rights and equity interests in of the surviving
entity or acquirer of such assets, or (iv) the execution by the Company of an
agreement to which the Company is a party or by which it is bound, providing for
any of the events set forth above in (i), (ii) or (iii).
"Closing Price" means, for any date the VWAP for such date (or the
nearest preceding date) all as reported by Bloomberg L.P. or any successor to
its function for reporting VWAP.
"Common Stock" means the common stock of the Company, par value $.01
per share.
"Conversion Shares Registration Statement" means a registration
statement covering the resale of the Underlying Shares by the Holders and any
additional registration statements with respect thereto, including (in each
case) the Prospectus included in such registration statement and in any
amendments and supplements to such registration statement or prospectus
including pre- and post-effective amendments, all exhibits thereto, and all
material incorporated by reference or deemed to be incorporated by reference in
such registration statement.
"Effective Date" means the date that a Conversion Shares Registration
Statement is declared effective by the Commission.
12
"Eligible Market" means the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap Market.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Motorola Agreement" means collectively the License Agreement dated as
of September 29, 2000 between the Company and Motorola, Inc., the Stock Purchase
Warrant granted to Motorola, Inc. on September 29, 2000 and the Securities
Purchase Agreement, dated as of September 29, 2000 between the Company and
Motorola, Inc.
"Notes" means $15,000,000 in aggregate principal amount of Convertible
Promissory Notes due August 22, 2004 issued by the Company to the Holders.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof)
or other entity of any kind.
"PPG Agreement" means collectively, the Development and License
Agreement dated as of October 1, 2000 between the Company and PPG Industries,
Inc., as amended, and the Stock Purchase Warrant granted to PPG Industries, Inc.
on October 1, 2000.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means any subsidiary of the Company.
"Trading Day" means (a) any day on which the Common Stock is traded on
its primary Trading Market, or (b) if the Common Stock is not then listed or
quoted on any national securities exchange, market or trading or quotation
facility, then a day on which trading occurs on the New York Stock Exchange (or
any successor thereto).
"Trading Market" means the NASDAQ National Market System or any other
national securities exchange, market or trading or quotation facility on which
the Common Stock is then listed or quoted.
"Transfer Agent" means American Stock Transfer & Trust Company or such
other entity that the Company shall designate as its transfer agent from time to
time, provided that the Company has given notice to the Holder that it has
designated a new Transfer Agent.
"Underlying Shares" means the shares of Common Stock issuable upon
conversion of the Preferred Stock.
"VWAP" means Volume Weighted Average Price of a share of Common Stock.
13
EXHIBIT B
FORM OF CONVERSION NOTICE
(To be executed by the registered Holder in order to convert shares of Preferred
Stock)
The undersigned hereby elects to convert the number of shares of Series D
Convertible Preferred Stock indicated below into shares of common stock, par
value $.01 per share (the "Common Stock"), of Universal Display Corporation, a
Pennsylvania corporation (the "Company"), according to the conditions hereof, as
of the date written below.
-------------------------------------------------------------
Date to Effect Conversion
-------------------------------------------------------------
Number of shares of Preferred Stock owned prior to Conversion
-------------------------------------------------------------
Number of shares of Preferred Stock to be Converted
-------------------------------------------------------------
Stated Value of shares of Preferred Stock to be Converted
-------------------------------------------------------------
Number of shares of Common Stock to be Issued
-------------------------------------------------------------
Applicable Conversion Price
-------------------------------------------------------------
Number of shares of Preferred Stock subsequent to Conversion
The undersigned hereby covenants and agrees that the undersigned (i) will not
sell or otherwise dispose of the shares of Common Stock to be delivered pursuant
to this Conversion Notice (the "Shares") except pursuant to an effective
registration statement (the "Registration Statement") under the Securities Act
of 1933, as amended (the "Act"), (ii) will sell the Shares only in accordance
with the Plan of Distribution set forth in the prospectus forming a part of the
Registration Statement (the "Prospectus"), (iii) will comply with the
requirements of the Act when selling or otherwise disposing of the Shares,
including, but not limited to, the prospectus delivery requirements of the Act,
(iv) will not sell or otherwise dispose of, and will return immediately to the
Company for the purpose of placing a restrictive legend thereon, the Shares (and
any certificates representing the Shares, if applicable) upon notice from the
Company that the Prospectus may not be used for the sale of the Shares, and (v)
will indemnify and hold harmless the Company, its directors, officers, agents
and employees, each person who controls the Company (within the meaning of
Section 15 of the Act and Section 20 of the Securities Exchange Act of 1934, as
amended), and the directors, officers, agents or employees of such controlling
persons, to the fullest extent permitted by applicable law, from and against all
Losses (as defined in the Registration Rights Agreement dated August 22, 2001 by
and between the Company and the investors signatory thereto) arising out of or
based upon any breach by the undersigned of any of the covenants contained
herein.
-----------------------------------------
Name of Holder
By:
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Name:
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Title:
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15