MASTER AMENDMENT AGREEMENT
This Master Amendment Agreement (the "Amendment Agreement") is entered as
of February __, 2004 (the "Effective Date"), by and among eMagin Corporation, a
Delaware corporation ("eMagin"), Virtual Vision, Inc., a Delaware corporation
and the wholly owned subsidiary of eMagin ("eMagin Sub", and together with
eMagin, the "Company"), Stillwater LLC ("Stillwater"), Mr. Jack Rivkin ("JR"),
Ginola Limited ("Ginola" together with Stillwater and JR, individually an
"Original Secured Party" and collectively, the "Original Secured Parties") and
the purchasers of the April 2003 Notes (as defined below) listed on Schedule 1
attached hereto (unless identified specifically by name, individually an "April
Secured Party", and collectively, the "April Secured Parties").
W I T N E S S E T H :
WHEREAS, eMagin entered into a Secured Note Purchase Agreement dated
November 27, 2001, as amended by the Omnibus Amendment, Waiver and Consent
Agreement dated January 14, 2002 (the "Original Secured Purchase Agreement")
pursuant to which five Secured Convertible Promissory Notes were issued in the
aggregate principal amount of $1,625,000 and are currently held by the Original
Secured Parties (collectively, the "Original Secured Notes");
WHEREAS, eMagin, eMagin Sub entered into a Secured Note Purchase
Agreement dated June 20, 2002 (the "Bridge Financing Purchase Agreement")
pursuant to which a Secured Promissory Note was issued in the principal amount
of $200,000 and is currently held by Stillwater (the "Bridge Note");
WHEREAS, eMagin, eMagin Sub, the Original Secured Parties, and the
April Secured Parties are each a party to the Global Restructuring and Secured
Note Purchase Agreement entered into as of April 25, 2003 (the "April 2003
Purchase Agreement") pursuant to which the Original Secured Notes and Bridge
Note were amended and restated (the "Amended and Restated Notes") and $6,000,000
of new secured promissory notes were issued to the April Secured Parties (the
"April 2003 Notes");
WHEREAS, the Original Secured Parties and the April Secured Parties
(unless identified specifically by name, individually an "Investor", and
collectively, the "Investors") have agreed to convert the Amended and Restated
Notes and April 2003 Notes (Amended and Restated Notes and April 2003 Notes are
collectively referred to as the "Notes") in the amount of eMagin's common stock,
par value $.001 per share ("Common Stock"), that is set forth on Schedule 2
attached hereto (the "Conversion Shares");
WHEREAS, the Investors have agreed that upon such conversion and
issuance of the Conversion Shares, the Company will be free of any and all
covenants and obligations arising under or related to the Notes and related
agreements, and that any and all rights associated with the Notes shall
terminate, except for the rights, covenants and obligations set forth in the
Registration Rights Agreement between the Investors dated April 24, 2003 (the
"April Registration Rights Agreement"), this Amendment Agreement, the
Registration Rights Agreement (defined below) and any warrants issued to the
Investors;
WHEREAS, in order to induce the Investors to enter into this Amendment
Agreement, the Company has agreed to issue an aggregate of 2,500,000 Common
Stock purchase warrants ("Warrants"), as further described below,
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Conversion of the Notes. By executing this Amendment Agreement the
Investors hereby agree, acknowledge and consent that each of their respective
Notes will be converted into shares of Common Stock of eMagin at their
respective conversion prices in the amount set forth on Schedule 2 (the
Conversion Shares). In addition, the Investors release and discharge the
Company, its officers, directors, principals, control persons, past and present
employees, insurers, successors, and assigns ("Parties") from all actions, cause
of action, suits, debts, dues, sums of money, accounts, reckonings, bonds,
bills, specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims, and
demands whatsoever, in law or equity, which against the Parties ever had, now
have or hereafter can, shall or may, have for, upon, or by reason of any matter,
cause or thing whatsoever, whether or not known or unknown, from the beginning
of the world to the day of the Effective Date of this Amendment Agreement
arising under or related to the Notes. This Amendment Agreement shall in no way
discharge the Company's covenants and obligations or limit each Investor's
ability to exercise its rights under this Amendment Agreement, the April
Registration Rights Agreement, the Registration Rights Agreement or any warrants
issued to the Investors.
2. Issuance of the Warrants. In consideration of the foregoing, eMagin
will issue an aggregate of 2,500,000 common stock purchase warrants to the
Investors to be distributed on a pro-rata basis as set forth in Schedule 3
attached hereto (the "Warrants"). The Warrants shall have an exercise price
equal to $__ per share of Common Stock, which is 105% of the closing price of
eMagin's Common Stock on the day immediately preceding the Effective Date of
this Amendment Agreement. 1,500,000 of the Warrants will expire on the later of
(i) six months from the effective date of the Registration Statement (as defined
below in Section 3); and (ii) December 31, 2004 and 1,000,000 of the Warrants
shall expire thirty six months after the effective date of the Registration
Statement, subject to adjustment as set forth in each warrant agreement. The
Warrants shall be substantially in the form attached to this Amendment Agreement
as Exhibit __.
3. Registration Rights. Contemporaneously with the execution and
delivery of this Amendment Agreement, the parties hereto agree to execute and
deliver a Registration Rights Agreement, in the form attached to this Amendment
Agreement as Exhibit __ (the "Registration Rights Agreement"), pursuant to which
eMagin has agreed to file with the Securities and Exchange Commission ("SEC") a
registration statement, not later than sixty (60) days after the effective date
of eMagin's registration statement filed with the SEC on February 6, 2004, in
order to register the shares of Common Stock underlying the Warrants
("Registration Statement").
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4. Representations. In connection with the receipt of the Warrants,
each Investor severally, but not jointly, hereby represents and warrants: (a) No
Registration. Each Investor understand that the Warrants have not been and will
not be (except as contemplated by the Registration Rights Agreement), registered
under the Securities Act of 1933, as amended (the "Securities Act") and shall be
issued by reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of each Investor's
representations as expressed herein or otherwise made pursuant hereto.
(b) Investment Intent. Each Investor is acquiring the Warrants
for investment for its own account, not as a nominee or agent, and not with the
view to, or for resale in connection with, any distribution thereof, and that
each Investor has no present intention of selling, granting any participation
in, or otherwise distributing the same. Each Investor further represents that it
does not have any contract, undertaking, agreement or arrangement with any
person or entity to sell, transfer or grant participation to such person or
entity or to any third person or entity with respect to any of the Warrants.
(c) Investment Experience. Each Investor has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company and acknowledge that they can
protect its own interests. Each Investor has such knowledge and experience in
financial and business matters so that such Investor is capable of evaluating
the merits and risks of its investment in the Company. (d) Speculative Nature of
Investment. Each Investor understands and acknowledges that the Company has
limited financing and working capital and that an investment in the Company is
highly speculative and involves substantial risks. Each Investor can bear the
economic risk of acquiring and holding the Warrants and is able, without
impairing its financial condition, to hold the Warrants for an indefinite period
of time and to suffer a complete loss on such Warrants. (e) Accredited Investor.
Each Investor is an "accredited investor" within the meaning of Regulation D,
Rule 501(a), promulgated by the Securities and Exchange Commission under the
Securities Act and shall submit to the Company such further assurances of such
status as may be reasonably requested by the Company. (f) Residency. The
residency of each Investor (or, in the case of a partnership or corporation,
such entity's principal place of business) is correctly set forth on the
signature page hereto.
(g) Legends. Each Investor understands and agrees that the
certificates evidencing the Warrants, or any other securities issued in respect
of the Warrants upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall bear the following legend (in addition to
any legend required under applicable state securities laws):
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"THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED
UNLESS AND UNTIL REGISTERED UNDER SUCH ACT AND/OR APPLICABLE STATE SECURITIES
LAWS, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL OR OTHER
EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED."
(h) AMEX. Each Investor understands that this transaction is
conditional upon approval from the American Stock Exchange.
5. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Investors, as of the date of this Agreement, as
set forth below, which disclosures are supplemented by, and subject to the
Company's filings under the Securities Exchange Act of 1934 and Securities Act
of 1933.
(a) Organization and Qualification. Each of eMagin and eMagin Sub
is an entity duly incorporated or otherwise organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization (as applicable), with the requisite power and authority to own and
use its properties and assets and to carry on its business as currently
conducted. Neither eMagin nor eMagin Sub is in violation of any of the
provisions of its respective certificate or articles of incorporation, bylaws or
other organizational or charter documents. Each of eMagin and eMagin Sub is duly
qualified to do business and is in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not,
individually or in the aggregate: (i) adversely affect the legality, validity or
enforceability of any Transaction Document (as defined below in Section 7(b),
(ii) have or result in or be reasonably likely to have or result in a material
adverse effect on the results of operations, assets, prospects, business or
condition (financial or otherwise) of eMagin and eMagin Sub, taken as a whole,
or (iii) adversely impair the Company's ability to perform fully on a timely
basis its obligations under any of the Transaction Documents (any of (i), (ii)
or (iii), a "Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations hereunder or thereunder. The execution and delivery of each of the
Transaction Documents by the Company and the consummation by it of the
transactions contemplated hereby or thereby have been duly authorized by all
necessary action on the part of the Company and no further consent or action is
required by the Company other than Required Approvals. Each of the Transaction
Documents has been (or upon delivery will be) duly executed by the Company and,
when delivered in accordance with the terms hereof, will constitute the valid
and binding obligation of the Company enforceable against the Company in
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accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and general principles of equity.
Neither eMagin nor eMagin Sub is in violation of any of the provisions of its
respective certificate or articles of incorporation, bylaws or other
organizational or charter documents.
(c) No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not: (i) conflict with or
violate any provision of eMagin or eMagin Sub's certificate or articles of
incorporation, bylaws or other organizational or charter documents, or (ii)
subject to obtaining the Required Approvals, conflict with, or constitute a
default (or an event that with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both) of,
any agreement, credit facility, debt or other instrument (evidencing a Company
debt or otherwise) or other understanding to which the Company is a party or by
which any property or asset of the Company is bound or affected, or (iii)
result, in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or governmental authority
to which the Company is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company is bound or
affected; except in the case of each of clauses (ii) and (iii), such as could
not, individually or in the aggregate, have or result in a Material Adverse
Effect.
(d) Filings, Consents and Approvals. The Company is not required
to obtain any consent, waiver, authorization or order of, give any notice to, or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other person in connection with the
execution, delivery and performance by the Company of the Transaction Documents,
other than the filing with (i) the SEC of the Registration Statement, (ii) the
filing of Form D with the SEC and such filings as are required to be made under
applicable state securities laws.
(e) Issuance of the Securities. The Common Stock and Warrants are
duly authorized and, when issued and paid for in accordance with the Transaction
Documents, will be duly and validly issued, fully paid and nonassessable, free
and clear of all liens imposed by the Company other than restrictions on
transfer provided for in the Transaction Documents. The Warrant Shares, when
issued in accordance with the terms of the Transaction Documents, will be
validly issued, fully paid and nonassessable, free and clear of all liens
imposed by the Company. The Company has reserved from its duly authorized
capital stock the maximum number of shares of Common Stock issuable pursuant to
this Amendment Agreement and the Warrants.
(f) Capitalization. The capitalization of the Company is as
described in the Company's most recent report filed with the SEC. The Company
has not issued any capital stock since such filing other than pursuant to the
exercise of employee stock options under the Company's stock option plans, the
issuance of shares of Common Stock to employees pursuant to the Company's
employee stock purchase plan and pursuant to the conversion or exercise of
outstanding Common Stock equivalents. The issuance of the Warrants will not
obligate the Company to issue shares of Common Stock or other securities to any
person (other than the Investors) and will not result in a right of any holder
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of Company securities to adjust the exercise, conversion, exchange or reset
price under such securities.
(g) SEC Reports; Financial Statements. The Company has filed all
reports which it is required to file under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials being collectively referred
to herein as the "SEC Reports") on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Reports prior to the
expiration of any such extension. As of their respective dates, the SEC Reports
complied in all material respects with the requirements of the Securities Act
and the Exchange Act and the rules and regulations of the SEC promulgated
thereunder, and none of the SEC Reports, when filed, contained 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 misleading. The financial
statements of the Company included in the SEC Reports comply in all material
respects with applicable accounting requirements and the rules and regulations
of the SEC with respect thereto as in effect at the time of filing. Such
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
("GAAP"), except as may be otherwise specified in such financial statements or
the notes thereto, and fairly present in all material respects the financial
position of the Company and its consolidated subsidiaries as of and for the
dates thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, immaterial,
year-end audit adjustments.
(h) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports: (i) there has been no event, occurrence or
development that has had or that could result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the SEC, (iii) the Company has not altered its
method of accounting or changed (or replaced) its auditors, (iv) the Company has
not declared or made any dividend or distribution of cash or other property to
its stockholders or purchased, redeemed or made any agreements to purchase or
redeem any shares of its capital stock, and (v) the Company has not issued any
equity securities to any officer, director or Affiliate, except pursuant to
existing Company stock option or similar plans.
(i) Litigation. Except as described in the Company's SEC reports,
there is no action, suit, inquiry, notice of violation, proceeding or
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which:
(i) adversely affects or challenges the legality, validity or enforceability of
any of the Transaction Documents or the Securities or (ii) could, if there were
an unfavorable decision, individually or in the aggregate, have or reasonably be
expected to result in a Material Adverse Effect. Neither the Company nor any
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Subsidiary, nor any director or officer thereof, is or has been the subject of
any Action involving a claim of violation of or liability under federal or state
securities laws or a claim of breach of fiduciary duty. The Company does not
have pending before the SEC any request for confidential treatment of
information. There has not been, and to the knowledge of the Company, there is
not pending or contemplated, any investigation by the SEC involving the Company
or any current or former director or officer of the Company. The SEC has not
issued any stop order or other order suspending the effectiveness of any
registration statement filed by the Company under the Exchange Act or the
Securities Act.
(j) Labor Relations. No material labor dispute exists or, to the
knowledge of the Company, is imminent with respect to any of the employees of
the Company which could reasonably be expected to result in a Material Adverse
Effect.
(k) Compliance. Neither eMagin nor eMagin Sub: (i) is in default
under or in violation of (and no event has occurred that has not been waived
that, with notice or lapse of time or both, would result in a default by the
Company), nor has the Company received notice of a claim that it is in default
under or that it is in violation of, any indenture, loan or credit agreement or
any other agreement or instrument to which it is a party or by which it or any
of its properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, except in each case as could not,
individually or in the aggregate, have or result in a Material Adverse Effect.
(l) Regulatory Permits. The Company possesses all certificates,
authorizations and permits issued by the appropriate federal, state, local or
foreign regulatory authorities necessary to conduct its business as described in
the SEC Reports, except where the failure to possess such permits could not,
individually or in the aggregate, have or reasonably be expected to result in a
Material Adverse Effect ("Material Permits"), and neither eMagin nor eMagin Sub
has received any notice of proceedings relating to the revocation or
modification of any Material Permit.
(m) Title to Assets. The Company has good and marketable title in
fee simple to all real property owned by them that is material to the business
of the Company and good and marketable title in all personal property owned by
it that is material to the business of the Company, in each case free and clear
of all Liens, except for Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and Liens for the payment of federal, state
or other taxes, the payment of which is neither delinquent nor subject to
penalties. Any real property and facilities held under lease by the Company are
held by them under valid, subsisting and enforceable leases of which the Company
is in compliance, except where the failure to be in compliance would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect.
(n) Patents and Trademarks. The Company has, or has rights to
use, all patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and other similar rights
necessary or material for use in connection with its business as described in
the SEC Reports and which the failure to so have could have a Material Adverse
7
Effect (collectively, the "Intellectual Property Rights"). The Company has not
received a written notice that the Intellectual Property Rights used by the
Company violates or infringes upon the rights of any person. To the knowledge of
the Company, all such Intellectual Property Rights are enforceable and there is
no existing infringement by another person of any of the Intellectual Property
Rights.
(o) Insurance. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which the Company is engaged. To
the best of Company's knowledge, such insurance contracts and policies are
accurate and complete. The Company has no reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost.
(p) Transactions With Affiliates and Employees. Except as
required to be set forth in the SEC Reports, none of the officers or directors
of the Company and, to the knowledge of the Company, none of the employees of
the Company is presently a party to any transaction with the Company (other than
for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $60,000 other than (i) for payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) for other employee benefits,
including stock option agreements under any stock option plan of the Company.
(q) Sarbanes-Oxley; Internal Accounting Controls. The Company is
in material compliance with all provisions of the Sarbanes-Oxley Act of 2002
which are applicable to it as of the Closing Date. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. The Company has established disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
Company and designed such disclosures controls and procedures to ensure that
material information relating to the Company, including its subsidiaries, is
made known to the certifying officers by others within those entities,
particularly during the period in which the Company's most recently filed period
report under the Exchange Act, as the case may be, is being prepared. The
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Company's certifying officers have evaluated the effectiveness of the Company's
controls and procedures as of the date prior to the filing date of the most
recently filed period report under the Exchange Act (such date, the "Evaluation
Date"). The Company presented in its most recently filed period report under the
Exchange Act the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no significant
changes in the Company's internal controls (as such term is defined in Item
307(b) of Regulation S-K under the Exchange Act) or, the Company's knowledge, in
other factors that could significantly affect the Company's internal controls.
(r) Certain Fees. No brokerage or finder's fees or commissions
are or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other person
with respect to the transactions contemplated by this Amendment Agreement, and
the Company has not taken any action that would cause any Investor to be liable
for any such fees or commissions. The Company agrees that the Investors shall
have no obligation with respect to any fees or with respect to any claims made
by or on behalf of any person for fees of the type contemplated by this Section
with the transactions contemplated by this Amendment Agreement.
(s) Private Placement. Assuming the accuracy of the Investors
representations and warranties set forth in Section 4, no registration under the
Securities Act is required for the offer and sale of the Securities by the
Company to the Investors as contemplated hereby in accordance with the terms of
the Transaction Documents. The issuance and sale of the Warrants hereunder does
not contravene the rules and regulations of the American Stock Exchange.
(t) Registration Rights. No person has any right to cause the
Company to effect the registration under the Securities Act of any securities of
the Company that have not been satisfied.
(u) Listing and Maintenance Requirements. The Company has not, in
the 12 months preceding the date hereof, received notice from the American Stock
Exchange to the effect that the Company is not in compliance with the listing or
maintenance requirements of the American Stock Exchange. The Company is, and has
no reason to believe that it will not in the foreseeable future continue to be,
in compliance with all such listing and maintenance requirements.
(v) Tax Status. The Company has made or filed all federal, state
and foreign income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the extent that
the Company has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim. The Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign, federal,
statue or local tax. None of the Company's tax returns is presently being
audited by any taxing authority.
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(w) Disclosure. The Company confirms that, neither the Company
nor any other person acting on its behalf has provided any of the Investors or
their agents or counsel with any information that constitutes or might
constitute material, non-public information. The Company understands and
confirms that the Investors will rely on the foregoing representations and
covenants in effecting transactions in securities of the Company. All disclosure
provided to the Investors regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Amendment
Agreement, furnished by or on behalf of the Company with respect to the
representations and warranties made herein are true and correct with respect to
such representations and warranties and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The Company acknowledges and agrees that no Investor makes
or has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 4 hereof.
(x) No Integrated Offering. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 4, neither the
Company, nor any of its Affiliates, nor any person acting on its or their behalf
has, directly or indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under circumstances that would cause
this offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable shareholder
approval provisions, including, without limitation, under the rules and
regulations of any exchange or automated quotation system on which any of the
securities of the Company are listed or designated.
(y) Solvency. Based on the financial condition of the Company as
of the Effective Date after giving effect to the transactions hereunder, (i) the
Company's fair saleable value of its assets exceeds the amount that will be
required to be paid on or in respect of the Company's existing debts and other
liabilities (including known contingent liabilities) as they mature; (ii) the
Company's assets do not constitute unreasonably small capital to carry on its
business for the current fiscal year as now conducted and as proposed to be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were it to
liquidate all of its assets, after taking into account all anticipated uses of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
(z) Acknowledgment Regarding Investors' Purchase of Securities.
The Company acknowledges and agrees that the Investors are acting solely in the
capacity of arm's length Investors with respect to this Amendment Agreement and
the transactions contemplated hereby. The Company further acknowledges that no
Investor is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this Amendment Agreement. The Company further
represents to each Investor that the Company's decision to enter into this
Amendment Agreement has been based solely on the independent evaluation of the
Company and its representatives.
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(aa) No Disagreements with Accountants and Lawyers. There are no
disagreements of any kind presently existing, or reasonably anticipated by the
Company to arise, between the accountants and lawyers formerly or presently
employed by the Company and the Company is current with respect to any fees owed
to its accountants and lawyers.
6. Participation in Future Financing. From the Effective Date until 12
months after the Effective Date, the Company shall not effect a financing of its
Common Stock or Common Stock Equivalents (a "Subsequent Financing") unless (i)
the Company delivers to each Investor a written notice at least 5 business days
prior to the closing of such Subsequent Financing (the "Subsequent Financing
Notice") of its intention to effect such Subsequent Financing, which Subsequent
Financing Notice shall describe in reasonable detail the proposed terms of such
Subsequent Financing, the amount of proceeds intended to be raised thereunder,
the person with whom such Subsequent Financing is proposed to be effected, and
attached to which shall be a term sheet or similar document relating thereto and
(ii) such Purchaser shall not have notified the Company by 6:30 p.m. (New York
City time) on the fifth (5th) business day after its receipt of the Subsequent
Financing Notice of its willingness to provide (or to cause its designee to
provide), subject to completion of mutually acceptable documentation, all or
part of such financing to the Company on the same terms set forth in the
Subsequent Financing Notice. If one or more Purchasers shall fail to so notify
the Company of their willingness to participate in the Subsequent Financing, the
Company may effect the remaining portion of such Subsequent Financing on the
terms and to the persons set forth in the Subsequent Financing Notice; provided
that the Company must provide the Purchasers with a second Subsequent Financing
Notice, and the Purchasers will again have the right of first refusal set forth
above in this Section 6, if the Subsequent Financing subject to the initial
Subsequent Financing Notice is not consummated for any reason on the terms set
forth in such Subsequent Financing Notice within 60 business days after the date
of the initial Subsequent Financing Notice with the person identified in the
Subsequent Financing Notice. In the event the Company receives responses to
Subsequent Financing Notices from Purchasers seeking to purchase more than the
financing sought by the Company in the Subsequent Financing such Purchasers
shall have the right to purchase their Pro Rata Portion (as defined below) of
the Common Stock or Common Stock Equivalents to be issued in such Subsequent
Financing. "Pro Rata Portion" is the ratio of (x) such Investor's Common Stock
and Common Stock Equivalent and (y) the aggregate sum of all of the Company's
outstanding Common Stock on a fully diluted basis (provided, that such fully
diluted share number shall only include Common Stock Equivalent shares that at
the time of such determination are then "in-the-money"). Notwithstanding the
foregoing, this Section 6 shall not apply in respect of the issuance of (a)
shares of Common Stock or options to employees, key consultants, advisors,
officers or directors of the Company pursuant to any stock or option plan duly
adopted by a majority of the non-employee members of the Board of Directors of
the Company or a majority of the members of a committee of non-employee
directors established for such purpose, (b) securities upon the exercise of or
conversion of any convertible securities, options or warrants issued and
outstanding on the date of this Amendment Agreement, provided that such
securities have not been amended since the date of this Amendment Agreement, (c)
securities in connection with acquisitions or strategic investments (including,
without limitation, any licensing or distribution arrangements), the primary
purpose of which is not to raise capital, (d) securities to financial
institutions or lessors in connection with commercial credit arrangements,
equipment financings or similar transactions, where the principal consideration
for such transaction is not the issuance of such securities. For the purposes of
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this Amendment Agreement, "Common Stock Equivalents" means any securities of the
Company which would entitle the holder thereof to acquire at any time Common
Stock, including without limitation, any debt, preferred stock, rights, options,
warrants or other instrument that is at any time convertible into or
exchangeable for, or otherwise entitles the holder thereof to receive, Common
Stock.
Notwithstanding the foregoing, the Participation Rights granted to the
Investors hereby are, in all respects, subordinate to the participation rights
granted to the investors in the Company's January 2004 financing. Accordingly,
the Participation Rights granted hereby shall only be honored by the Company,
if, and to the extent, that the investors in the January 2004 financing do not
exercise their participation rights.
7. Miscellaneous
(a) Pro Rata Basis. For the purposes of this Amendment Agreement,
"Pro Rata Basis" shall be defined to mean the percentage equal to dividing the
total outstanding principal and accrued but unpaid interest under the Notes to
which a holder is a party, by the aggregate outstanding principal and accrued
but unpaid interest under all of Notes.
(b) Transaction Documents. For the purposes of this Amendment
Agreement, "Transaction Documents" shall include this Amendment Agreement, the
Registration Rights Agreement and any Warrant issued pursuant to this Amendment
Agreement.
(c) Reservation of Common Stock. As of the Effective Date, the
Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, a sufficient number of shares
of Common Stock for the purpose of enabling the Company to issue Shares pursuant
to this Amendment Agreement and Warrant Shares pursuant to any exercise of the
Warrants.
(d) Listing of Common Stock. The Company hereby agrees to use
commercially reasonably efforts to maintain the listing of the Common Stock on
the American Stock Exchange. The Company will take all action reasonably
necessary to continue the listing and trading of its Common Stock on a
nationally recognized trading market and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the American Stock Exchange or such other nationally recognized trading market.
(e) Governing Law. This Amendment Agreement shall be governed in
all respects by the internal laws of the State of New York as applied to
agreements entered into among New York residents to be performed entirely within
New York, without regard to principles of conflicts of law.
(f) Expenses. The Company and the Investors shall each pay their
own expenses in connection with the transactions contemplated by this Amendment
Agreement.
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(g) Successors and Assigns. This Amendment Agreement, and any and
all rights, duties and obligations hereunder, shall not be assigned,
transferred, delegated or sublicensed by the Company. Each Investor under this
Amendment Agreement may assign any of its rights under this Amendment Agreement
to any permitted assignee of the Warrants. Subject to the foregoing and except
as otherwise provided herein, the provisions of this Amendment Agreement shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
(i) Counterparts. This Amendment Agreement may be executed in any
number of counterparts, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall constitute
one instrument.
* * * * *
13
[SIGNATURE PAGE TO THE MASTER AMENDMENT AGREEMENT]
IN WITNESS WHEREOF, the undersigned have executed this Master Amendment
Agreement as of the Effective Date.
eMAGIN CORPORATION
By /s/ Gary Jones
---------------------------------------------
Name:Gary Jones
Title:CEO
VIRTUAL VISION, INC.
By /s/ K.C. Park
---------------------------------------------
Name:K.C. Park
Title: President
ORIGINAL SECURED PARTIES:
STILLWATER LLC
/s/ Mortimer D.A. Sackler
----------------------------------------------
Mortimer D.A. Sackler
President
Address: 15 East 62nd Street
New York, NY 10021
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Stuart D. Baker, Esq.
Telecopy: (212) 541-5369
14
GINOLA LIMITED
By:/s/J.G. White
-----------------------------------------------
Name:J.G. White
Title:Director
/s/Jack Rivkin
-----------------------------------------------
Jack Rivkin
Address:
NEW INVESTORS:
STILLWATER LLC
/s/ Mortimer D.A. Sackler
----------------------------------------------
Mortimer D.A. Sackler
President
Address: 15 East 62nd Street
New York, NY 10021
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Stuart D. Baker, Esq.
---------
Telecopy: (212) 541-5369
--------
15
GINOLA LIMITED
By: /s/ J.G. White
-----------------------------------------------
Name: J.G. White
Title: Director
/s/ Jack Rivkin
-----------------------------------------------
JACK RIVKIN
Address:
16
EMERALD ADVANTAGE FUND LP
By: /s/Joseph E. Besecker
-----------------------------------------------
Name: Joseph E. Besecker
Title: Managing Member
Address:
500 North Gulph Road
Suite 101
King of Prussia, Pa. 19406
EMERALD ADVANTAGE OFFSHORE FUND LTD
By: /s/Joseph E. Besecker
-----------------------------------------------
Name: Joseph E. Besecker
Title: Managing Member
Address:
500 North Gulph Road
Suite 101
King of Prussia, Pa. 19406
17
EMERALD VENTURE CAPITAL I LP
By: /S/Joseph E. Besecker
-----------------------------------------------
Name: Joseph E. Besecker
Title: President
Address:
1703 Oregon Pike
Lancaster, PA. 17601
/s/ Robert N. Verratti
----------------------------------------------
Robert N. Verratti
Address:
13766 Sunset BLVD
Pacific Palisades, CA. 90272
/s/ George Haywood
----------------------------------------------
George Haywood
Address:
642 Second Street
Brooklyn, NY 11215
18