SERIES F COMMON STOCK PURCHASE WARRANT
To Purchase __________ Shares of Common Stock of
eMAGIN CORPORATION
THIS SERIES F COMMON STOCK PURCHASE WARRANT (the "Warrant") CERTIFIES
that, for value received, _____________ (the "Holder"), is entitled, upon the
terms and subject to the limitations on exercise and the conditions hereinafter
set forth, at any time and from time to time, in whole or in part, on or after
April __, 2005 (the "Initial Exercise Date") and on or prior to the close of
business on April __, 2010 (the "Termination Date") but not thereafter, to
subscribe for and purchase from eMagin Corporation, a corporation incorporated
in Delaware (the "Company"), up to ____________ shares (the "Warrant Shares") of
common stock, par value $0.0001 per share, of the Company (the "Common Stock").
The purchase price of one share of Common Stock (the "Exercise Price") under
this Warrant shall be $1.21, subject to adjustment hereunder. The Exercise Price
and the number of Warrant Shares for which the Warrant is exercisable shall be
subject to adjustment as provided herein. Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in that certain
Securities Purchase Agreement (the "Purchase Agreement"), dated October 21,
2004, between the Company and each purchaser signatory thereto.
1. Title to Warrant. Prior to the Termination Date and subject to
compliance with applicable laws and Section 7 of this Warrant, this Warrant and
all rights hereunder are transferable, in whole or in part, at the office or
agency of the Company by the Holder in person or by duly authorized attorney,
upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed. The transferee shall sign an investment letter in form and
substance reasonably satisfactory to the Company.
2. Authorization of Warrant Shares. The Company represents and
warrants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges in respect of
the issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).
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3. Exercise of Warrant.
(a) Exercise of the purchase rights represented by this Warrant
may be made at any time or times on or after the Initial Exercise Date
and on or before the Termination Date by the surrender of this Warrant
and the Notice of Exercise Form annexed hereto duly executed, at the
office of the Company (or such other office or agency of the Company
as it may designate by notice in writing to the registered Holder at
the address of such Holder appearing on the books of the Company) and
(i) upon payment of the Exercise Price of the shares thereby purchased
by wire transfer or cashier's check drawn on a United States bank (a
"Cash Exercise") or (ii) by means of a cashless exercise pursuant to
Section 3(d) (a "Cashless Exercise"), the Holder shall be entitled to
receive a certificate for the number of Warrant Shares so purchased.
Certificates for shares purchased hereunder shall be delivered to the
Holder on or before the third (3rd) Business Day following the date on
which this Warrant shall have been exercised as aforesaid (such third
Business Day being referred to herein as a "Delivery Date"). As long
as the Company's transfer agent ("Transfer Agent") participates in the
Depository Trust Company ("DTC") Fast Automated Securities Transfer
program ("FAST"), and except as otherwise provided in the immediately
following sentence, the Company shall effect delivery of Warrant
Shares to the Holder by crediting the account of the Holder or its
nominee at DTC (as specified in the applicable Exercise Notice) with
the number of Warrant Shares required to be delivered, no later than
the close of business on such Delivery Date. In the event that the
Transfer Agent is not a participant in FAST, or if the Warrant Shares
are not otherwise eligible for delivery through FAST, or if the Holder
so specifies in an Exercise Notice or otherwise in writing on or
before the Exercise Date, the Company shall effect delivery of Warrant
Shares by delivering to the Holder or its nominee physical
certificates representing such Warrant Shares, no later than the close
of business on such Delivery Date. This Warrant shall be deemed to
have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder
of record of such shares for all purposes, as of the date on which (x)
in the case of a Cash Exercise, the Holder has delivered a Notice of
Exercise Form and payment to the Company of the Exercise Price or (y)
in the case of a Cashless Exercise, the Holder has delivered a Notice
of Exercise Form to the Company, and, in the event certificates for
Warrant Shares are to be issued in a name other than the name of the
Holder, all taxes required to be paid by the Holder, if any, pursuant
to Section 5 prior to the issuance of such shares, have been paid. If
the Company fails to deliver to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this Section
3(a) by the applicable Delivery Date, then the Holder will have the
right to rescind such exercise. In addition to any other rights
available to the Holder, if the Company fails to deliver to the Holder
a certificate or certificates representing the Warrant Shares pursuant
to an exercise by the applicable Delivery Date and the Holder has not
rescinded such exercise pursuant to this Section 3(a), and if after
such applicable Delivery Date the Holder is required by its broker to
purchase (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such
exercise (a "Buy-In"), then the Company shall (1) pay in cash to the
Holder the amount by which (x) the Holder's total purchase price
(including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (y) the amount obtained by multiplying (A)
the number of Warrant Shares that the Company was required to deliver
to the Holder in connection with the exercise at issue times (B) the
price at which the sell order giving rise to such purchase obligation
was executed, and (2) at the option of the Holder, either reinstate
the portion of the Warrant and equivalent number of Warrant Shares for
which such exercise was not honored or deliver to the Holder the
number of shares of Common Stock that would have been issued had the
Company timely complied with its exercise and delivery obligations
hereunder. For example, if the Holder purchases Common Stock having a
total purchase price of $11,000 to cover a Buy-In with respect to an
attempted exercise of this Warrant and sale of the Warrant Shares
issuable upon such exercise at an aggregate sale price of $10,000,
under clause (1) of the immediately preceding sentence the Company
shall be required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to the
Holder in respect of the Buy-In, together with applicable
confirmations and other evidence reasonably requested by the Company,
and the Company shall pay such amounts on or before the second (2nd)
Business Day following receipt of such evidence. Nothing herein shall
limit a Holder's right to pursue any other remedies available to it
hereunder, at law or in equity including, without limitation, a decree
of specific performance and/or injunctive relief with respect to the
Company's failure to timely deliver certificates representing shares
of Common Stock upon exercise of the Warrant as required pursuant to
the terms hereof.
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(b) If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or
certificates representing Warrant Shares, deliver to the Holder a new
Warrant evidencing the rights of the Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical to this Warrant. The
failure of the Company to deliver such new Warrant to the Holder shall
not affect the Holder's right to exercise such new Warrant at any time
following the exercise of the original Warrant.
(c) The Company shall not effect any exercise of this Warrant,
and the Holder shall not have the right to exercise any portion of
this Warrant, pursuant to Section 3(a) or otherwise, to the extent
that after giving effect to such exercise, the Holder (together with
the Holder's Affiliates), as set forth on the applicable Notice of
Exercise, would beneficially own in excess of 4.99% of the number of
shares of the Common Stock outstanding immediately after giving effect
to such issuance. For purposes of the foregoing sentence, the number
of shares of Common Stock beneficially owned by the Holder and its
Affiliates shall include the number of shares of Common Stock issuable
upon exercise of this Warrant with respect to which the determination
of such sentence is being made, but shall exclude the number of shares
of Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by
the Holder or any of its Affiliates and (B) exercise or conversion of
the unexercised or nonconverted portion of any other securities of the
Company (including, without limitation, any other Warrants) subject to
a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its
Affiliates. Except as set forth in the preceding sentence, for
purposes of this Section 3(c), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Exchange Act. To
the extent that the limitation contained in this Section 3(c) applies,
the determination of whether this Warrant is exercisable (in relation
to other securities owned by the Holder) and of which portion of this
Warrant is exercisable shall be the sole responsibility of such
Holder, and the submission of a Notice of Exercise shall be deemed to
be such Holder's determination of whether this Warrant is exercisable
(in relation to other securities owned by such Holder) and of which
portion of this Warrant is exercisable, in each case subject to such
aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.
For purposes of this Section 3(c), in determining the number of
outstanding shares of Common Stock, the Holder may rely on the number
of outstanding shares of Common Stock as reflected in (x) the
Company's most recent Form 10-Q or Form 10-K, as the case may be, (y)
a more recent public announcement by the Company or (z) any other
notice by the Company or the Company's Transfer Agent setting forth
the number of shares of Common Stock outstanding. Upon the written or
oral request of the Holder, the Company shall within two Business Days
confirm orally and in writing to the Holder the number of shares of
Common Stock then outstanding. In any case, the number of outstanding
shares of Common Stock shall be determined after giving effect to any
issuance of Common Stock by the Company pursuant to the conversion or
exercise of securities of the Company, including this Warrant, by the
Holder or its Affiliates since the date as of which such number of
outstanding shares of Common Stock was reported. The provisions of
this Section 3(c) may be waived (as to all or a portion of the Warrant
Shares) by the Holder upon, at the election of the Holder, not less
than 61 days' prior notice to the Company, and the provisions of this
Section 3(c) shall continue to apply until such 61st day (or such
later date, as determined by the Holder, as may be specified in such
notice of waiver); provided, however, that any such waiver delivered
prior to or at the Closing Date will take effect as of the Closing
Date. Any such waiver will apply only to such Holder and not to any
other Holder. Notwithstanding the foregoing, a Holder may elect to
have the limitations of this Section 3 in their entirety not apply to
such Holder and its subsequent transferees at any and all times by
delivering, or causing to be delivered, a written notice to such
effect to the Company at or prior to the Closing Date.
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(d) At any time during which a registration statement covering
the issuance and sale of all of the Warrant Shares issuable under this
Warrant (without giving effect to any restrictions on such exercise
contained herein) is not effective and available for such issuance and
sale, the Holder may effect a Cashless Exercise by surrendering this
Warrant to the Company and noting on the Notice of Exercise that the
Holder wishes to effect a Cashless Exercise, upon which the Company
shall issue to the Holder the number of Warrant Shares determined as
follows:
X = Y x (A-B)/A
where: X = the number of Warrant Shares to be issued to
the Holder;
Y = the number of Warrant Shares with respect to which
this Warrant is being exercised;
A = the closing price on the Trading Day immediately
preceding the date of such election; and
B = the Exercise Price.
For purposes of Rule 144, it is intended and acknowledged that the
Warrant Shares issued in a Cashless Exercise transaction shall be
deemed to have been acquired by the Holder, and the holding period for
the Warrant Shares required by Rule 144 shall be deemed to have been
commenced, on the Closing Date.
(e) Unless (i) Stockholder Approval (as defined below) has been
obtained, or (ii) the applicable listing requirements of the
applicable Trading Market are amended and the Holder has delivered to
the Company a legal opinion reasonably acceptable to the Company that
such approval is no longer required under the applicable listing
requirements of the applicable Trading Market, then the number of
Warrant Shares that such Holder would receive upon such exercise, when
added to the number of Warrant Shares previously received by such
Holder pursuant to this Warrant, may not exceed the product of (A) the
Cap Amount (as defined below) multiplied by (B) a fraction, the
numerator of which is the number of Warrant Shares originally issuable
under this Warrant and the denominator of which is the sum of (i) the
number of Warrant Shares originally issuable under this Warrant and
(ii) the number of Warrant Shares originally issuable under the other
Warrants issued under the Purchase Agreement (such product, the
"Allocation Amount"). Further, subject to the exception set forth in
the first sentence of this paragraph, the Company may not issue upon
exercise of this Warrant and the other Series F Warrants, in the
aggregate, shares of Common Stock in excess of the Cap Amount. In the
event that any Purchaser to which this Warrant was originally issued
shall sell or otherwise transfer any part of this Warrant, the
remaining Warrant Shares constituting such transferring Purchaser's
Allocation Amount shall be allocated between the transferring
Purchaser and the transferee in proportion to amount of this Warrant
being transferred; subsequent transfers by a transferee shall result
in a similar allocation. In the event that, at any time, the aggregate
number of Warrant Shares issuable under this Warrant (without regard
to any restrictions on such issuance), exceeds eighty percent (80%) of
the Holder's Allocation Amount, the Company shall, upon the written
request of the Holder, hold as promptly as reasonably practicable (but
in no event more than sixty (60) days following delivery of such
notice) a special meeting of its stockholders for the purpose of
obtaining, and use its best efforts to obtain, Stockholder Approval.
In connection therewith, the Company shall use its best efforts to
obtain the agreement of management and directors to vote all shares of
Common Stock owned by each of them in favor of approval of such
transactions, including, but not limited to, the issuance of Warrant
Shares in excess of the Cap Amount. In addition, in the event that the
stockholders of the Company do not approve such transactions at such
meeting, the Company shall continue to use its best efforts to seek
such approval as soon as practicable after such meeting, but no less
frequently than annually thereafter. "Cap Amount" means 19.99% of the
number of shares of Common Stock outstanding on the Trading Day
immediately preceding the Closing Date (subject to adjustment upon a
stock split, stock dividend or similar event). "Stockholder Approval"
means the affirmative vote of the holders of a majority of the votes
cast at a meeting of stockholders approving the issuance of shares of
Common Stock in excess of the Cap Amount.
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4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which Holder would otherwise be entitled
to purchase upon such exercise, the Company shall pay a cash adjustment in
respect of such final fraction in an amount equal to such fraction multiplied by
the Exercise Price.
5. Charges, Taxes and Expenses. Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, all
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; provided, however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.
6. Closing of Books. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this Warrant
pursuant to the terms hereof.
7. Transfer, Division and Combination.
(a) Subject to compliance with any applicable securities laws and
the conditions set forth in Sections 1 and 7(e) hereof and to the
provisions of Section 4.1 of the Purchase Agreement, the Holder may
sell, transfer, assign, pledge or otherwise dispose of this Warrant,
in whole or in part. In order to transfer ownership of this Warrant,
the Holder shall surrender this Warrant at the principal office of the
Company, together with a written assignment of this Warrant
substantially in the form attached hereto duly executed by the Holder
or its agent or attorney and funds sufficient to pay any transfer
taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and
in the denomination or denominations specified in such instrument of
assignment (without any restrictive or other legend thereon), and
shall issue to the assignor a new Warrant evidencing the portion of
this Warrant not so assigned, and this Warrant shall promptly be
cancelled. A Warrant, if properly assigned, may be exercised by a new
holder for the purchase of Warrant Shares without having a new Warrant
issued.
(b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company,
together with a written notice specifying the names and denominations
in which new Warrants are to be issued, signed by the Holder or its
agent or attorney. Subject to compliance with Section 7(a), as to any
transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
(c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under
this Section 7.
(d) The Company agrees to maintain, at its aforesaid office,
books for the registration and the registration of transfer of the
Warrants.
(e) Notwithstanding anything herein to the contrary, in the event
that this Warrant is transferred to a Person other than an Affiliate
of the Holder, such transfer shall not, without the prior written
consent of the Company, include the rights of the Holder under Section
11(c) below.
8. No Rights as Shareholder until Exercise. This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price (or by means of a cashless exercise),
the Warrant Shares so purchased shall be and be deemed to be issued to such
Holder as the record owner of such shares as of the close of business on the
later of the date of such surrender or payment.
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9. Loss, Theft, Destruction or Mutilation of Warrant. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.
10. Business Day. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall be other
than a Business Day, then such action may be taken or such right may be
exercised on the next succeeding Business Day.
11. Anti-Dilution Adjustments; Distributions; Other Events. The
Exercise Price and the number of Warrant Shares issuable hereunder shall be
subject to adjustment from time to time as provided in this Section 11. In the
event that any adjustment of the Exercise Price required herein results in a
fraction of a cent, the Exercise Price shall be rounded up or down to the
nearest one hundredth of a cent.
(a) Subdivision or Combination of Common Stock. If the Company,
at any time after the Closing Date, subdivides (by any stock split,
stock dividend, recapitalization, reorganization, reclassification or
otherwise) the outstanding shares of Common Stock into a greater
number of shares, then effective upon the close of business on the
record date for effecting such subdivision, the Exercise Price in
effect immediately prior to such subdivision will be proportionately
reduced. If the Company, at any time after the Closing Date, combines
(by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the outstanding shares of Common Stock
into a smaller number of shares, then, effective upon the close of
business on the record date for effecting such combination, the
Exercise Price in effect immediately prior to such combination will be
proportionally increased.
(b) Distributions. If the Company shall declare or make any
distribution of cash or any other assets (or rights to acquire such
assets) to holders of Common Stock, as a partial liquidating dividend
or otherwise, including without limitation any dividend or
distribution to the Company's stockholders in shares (or rights to
acquire shares) of capital stock of a subsidiary) (a "Distribution"),
the Company shall deliver written notice of such Distribution (a
"Distribution Notice") to the Holder at least thirty (30) days prior
to the earlier to occur of (i) the record date for determining
stockholders entitled to such Distribution (the "Record Date") and
(ii) the date on which such Distribution is made (the "Distribution
Date"). In the Distribution Notice to a Holder, the Company must
indicate whether the Company has elected (A) to deliver to such Holder
the same amount and type of assets being distributed in such
Distribution as though the Holder were a holder on the applicable
Determination Date of a number of shares of Common Stock into which
the this Warrant is exercisable as of such Determination Date (such
number of shares to be determined at the Exercise Price then in effect
and without giving effect to any limitations on such exercise) or (B)
to reduce the Exercise Price as of such Determination Date by an
amount equal to the fair market value of the assets to be distributed
divided by the number of shares of Common Stock as to which such
Distribution is to be made. If the Company does not notify the Holders
of its election pursuant to the preceding sentence on or prior to the
Determination Date, the Company shall be deemed to have elected clause
(A) of the preceding sentence. For purposes of this Warrant, the "fair
market value" of any property means (i) in the case of cash, the face
amount thereof, (ii) in the case of publicly-traded securities, the
average closing price for such securities on the five (5) Trading Days
occurring immediately prior to the date of determination and (iii) in
the case of any other types of property, the fair market value thereof
as determined reasonably and in good faith by the independent members
of the Company's Board of Directors, using standard commercial
valuation methods appropriate for valuing such property.
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(c) Dilutive Issuances.
(i) Adjustment Upon Dilutive Issuance. If, at any time after
the Closing Date, the Company issues or sells, or in
accordance with subparagraph (iii) of this paragraph (c), is
deemed to have issued or sold, any shares of Common Stock
for per share consideration less than the Exercise Price on
the date of such issuance or sale (a "Dilutive Issuance"),
then the Exercise Price shall be adjusted so as to equal an
amount determined by multiplying such Exercise Price by the
following fraction:
N0 + N1
-------
N0 + N2
where:
N0 = the number of shares of Common Stock outstanding
immediately prior to the issuance, sale or deemed issuance
or sale of such additional shares of Common Stock in such
Dilutive Issuance (without taking into account any shares of
Common Stock issuable upon conversion, exchange or exercise
of any securities or other instruments which are convertible
into or exercisable or exchangeable for Common Stock
("Convertible Securities") or options, warrants or other
rights to purchase or subscribe for Common Stock or
Convertible Securities ("Purchase Rights");
N1 = the number of shares of Common Stock which the
aggregate consideration, if any, received or receivable by
the Company for the total number of such additional shares
of Common Stock so issued, sold or deemed issued or sold in
such Dilutive Issuance (which, in the case of a deemed
issuance or sale, shall be calculated in accordance with
subparagraph (iii) below) would purchase at the Exercise
Price in effect immediately prior to such Dilutive Issuance;
and
N2 = the number of such additional shares of Common Stock so
issued, sold or deemed issued or sold in such Dilutive
Issuance.
Notwithstanding the foregoing, no adjustment shall be made pursuant hereto if
such adjustment would result in an increase in the Exercise Price.
(ii) Adjustment Upon Below Market Issuance. If, at any time
after the Closing Date, the Company issues or sells, or in
accordance with subparagraph (iii) of this paragraph (c), is
deemed to have issued or sold, any shares of Common Stock
for per share consideration less than the Market Price on
the date of such issuance or sale (or deemed issuance or
sale) (a "Below Market Issuance"), then the Exercise Price
shall be adjusted so as to equal an amount determined by
multiplying such Exercise Price by the following fraction:
N0 + N1
-------
N0 + N2
where:
N0 = the number of shares of Common Stock outstanding
immediately prior to the issuance, sale or deemed issuance
or sale of such additional shares of Common Stock in such
Below Market Issuance (without taking into account any
shares of Common Stock issuable upon conversion, exchange or
exercise of any Convertible Securities or Purchase Rights);
N1 = the number of shares of Common Stock which the
aggregate consideration, if any, received or receivable by
the Company for the total number of such additional shares
of Common Stock so issued, sold or deemed issued or sold in
such Below Market Issuance (which, in the case of a deemed
issuance or sale, shall be calculated in accordance with
subparagraph (iii) below) would purchase at the Market Price
in effect on the date of such Below Market Issuance; and
N2 = the number of such additional shares of Common Stock so
issued, sold or deemed issued or sold in such Below Market
Issuance.
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Notwithstanding the foregoing, no adjustment shall be made pursuant to this
paragraph (c)(ii) if such adjustment would result in an increase in the Exercise
Price. In the event that the Company issues or is deemed to issue Common Stock
in a transaction that is both a Dilutive Issuance and a Below Market Issuance,
the Exercise Price will be adjusted to the lower of the prices calculated
pursuant to subparagraphs (i) and (ii) of this paragraph (c). For purposes
hereof, "Market Price" as of a particular date means the average closing price
for the Common Stock on the five (5) Trading Days occurring immediately prior to
such date.
(iii) Effect On Exercise Price Of Certain Events. For purposes of
determining the adjusted Exercise Price under subparagraph (i) or (ii) of this
paragraph (c), the following will be applicable:
(A) Issuance Of Purchase Rights. If the Company issues or sells
any Purchase Rights, whether or not immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise
of such Purchase Rights (and the price of any conversion of
Convertible Securities, if applicable) is less than the Market Price
or Exercise Price in effect on the date of the issuance or sale of
such Purchase Rights, then the maximum total number of shares of
Common Stock issuable upon the exercise of all such Purchase Rights
(assuming full conversion, exercise or exchange of Convertible
Securities, if applicable) shall, as of the date of the issuance or
sale of such Purchase Rights, be deemed to be outstanding and to have
been issued and sold by the Company for such price per share. For
purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon the exercise of such Purchase Rights"
shall be determined by dividing (x) the total amount, if any, received
or receivable by the Company as consideration for the issuance or sale
of all such Purchase Rights, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
exercise of all such Purchase Rights, plus, in the case of Convertible
Securities issuable upon the exercise of such Purchase Rights, the
minimum aggregate amount of additional consideration payable upon the
conversion, exercise or exchange thereof (determined in accordance
with the calculation method set forth in subparagraph (iii)(B) below)
at the time such Convertible Securities first become convertible,
exercisable or exchangeable, by (y) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Purchase Rights
(assuming full conversion, exercise or exchange of Convertible
Securities, if applicable). No further adjustment to the Exercise
Price shall be made upon the actual issuance of such Common Stock upon
the exercise of such Purchase Rights or upon the conversion, exercise
or exchange of Convertible Securities issuable upon exercise of such
Purchase Rights. To the extent that shares of Common Stock or
Convertible Securities are not delivered pursuant to such Purchase
Rights, upon the expiration or termination of such Purchase Rights,
the Exercise Price shall be readjusted to the Exercise Price that
would then be in effect had the adjustments made upon the issuance of
such Purchase Rights been made on the basis of delivery of only the
number of shares of Common Stock actually delivered.
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(B) Issuance Of Convertible Securities. If the Company issues or
sells any Convertible Securities, whether or not immediately
convertible, exercisable or exchangeable, and the price per share for
which Common Stock is issuable upon such conversion, exercise or
exchange is less than the Market Price or Exercise Price in effect on
the date of issuance or sale of such Convertible Securities, then the
maximum total number of shares of Common Stock issuable upon the
conversion, exercise or exchange of all such Convertible Securities
shall, as of the date of the issuance or sale of such Convertible
Securities, be deemed to be outstanding and to have been issued and
sold by the Company for such price per share. If the Convertible
Securities so issued or sold do not have a fluctuating conversion or
exercise price or exchange ratio, then for the purposes of the
immediately preceding sentence, the "price per share for which Common
Stock is issuable upon such conversion, exercise or exchange" shall be
determined by dividing (x) the total amount, if any, received or
receivable by the Company as consideration for the issuance or sale of
all such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion, exercise or exchange thereof (determined in accordance
with the calculation method set forth in this subparagraph (iii)(B)),
by (y) the maximum total number of shares of Common Stock issuable
upon the exercise, conversion or exchange of all such Convertible
Securities. If the Convertible Securities so issued or sold have a
fluctuating conversion or exercise price or exchange ratio (a
"Variable Rate Convertible Security") (provided, however, that if the
conversion or exercise price or exchange ratio of a Convertible
Security may fluctuate solely as a result of provisions designed to
protect against dilution, such Convertible Security shall not be
deemed to be a Variable Rate Convertible Security), then for purposes
of the first sentence of this subparagraph (B), the "price per share
for which Common Stock is issuable upon such conversion, exercise or
exchange" shall be deemed to be the lowest price per share which would
be applicable (assuming all holding period and other conditions to any
discounts contained in such Variable Rate Convertible Security have
been satisfied) if the conversion price of such Variable Rate
Convertible Security on the date of issuance or sale thereof were
seventy-five percent (75%) of the actual conversion price on such date
(the "Assumed Variable Market Price"), and, further, if the conversion
price of such Variable Rate Convertible Security at any time or times
thereafter is less than or equal to the Assumed Variable Market Price
last used for making any adjustment under this paragraph (c) with
respect to any Variable Rate Convertible Security, the Exercise Price
in effect at such time shall be readjusted to equal the Exercise Price
which would have resulted if the Assumed Variable Market Price at the
time of issuance of the Variable Rate Convertible Security had been
seventy-five percent (75%) of the actual conversion price of such
Variable Rate Convertible Security existing at the time of the
adjustment required by this sentence. No further adjustment to the
Exercise Price shall be made upon the actual issuance of such Common
Stock upon conversion, exercise or exchange of such Convertible
Securities. To the extent that shares of Common Stock are not
delivered pursuant to conversion of such Convertible Securities into
Common Stock, the Conversion Price shall be readjusted to the
Conversion Price that would then be in effect had the adjustments made
upon the issuance of such Convertible Securities been made on the
basis of delivery of only the number of shares of Common Stock
actually delivered.
(C) Change In Option Price Or Conversion Rate. If, following an
adjustment to the Exercise Price upon the issuance of Purchase Rights
or Convertible Securities pursuant to a Below Market Issuance or a
Dilutive Issuance, there is a change at any time in (x) the amount of
additional consideration payable to the Company upon the exercise of
any Purchase Rights; (y) the amount of additional consideration, if
any, payable to the Company upon the conversion, exercise or exchange
of any Convertible Securities; or (z) the rate at which any
Convertible Securities are convertible into or exercisable or
exchangeable for Common Stock (in each such case, other than under or
by reason of provisions designed to protect against dilution), then in
any such case, the Exercise Price in effect at the time of such change
shall be readjusted to the Exercise Price which would have been in
effect at such time had such Purchase Rights or Convertible Securities
still outstanding provided for such changed additional consideration
or changed conversion, exercise or exchange rate, as the case may be,
at the time initially issued or sold.
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(D) Calculation Of Consideration Received. If any Common Stock,
Purchase Rights or Convertible Securities are issued or sold for cash,
the consideration received for such rights or securities will be the
amount actually received by the Company. In case any Common Stock,
Purchase Rights or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, including
in the case of a strategic or similar arrangement in which the other
entity will provide services to the Company, purchase services from
the Company or otherwise provide intangible consideration to the
Company, the amount of the consideration other than cash received by
the Company (including the net present value of the consideration
expected by the Company for the provided or purchased services) shall
be the fair market value of such consideration. In case any Common
Stock, Purchase Rights or Convertible Securities are issued in
connection with any merger or consolidation in which the Company is
the surviving corporation, the amount of consideration therefor will
be deemed to be the fair market value of such portion of the net
assets and business of the non-surviving corporation as is
attributable to such Common Stock, Purchase Rights or Convertible
Securities, as the case may be. Notwithstanding anything else herein
to the contrary, if Common Stock Purchase Rights or Convertible
Securities are issued or sold in conjunction with each other as part
of a single transaction or in a series of related transactions, the
Holder may elect to determine the amount of consideration deemed to be
received by the Company therefor by deducting the fair market value of
any type of securities (the "Disregarded Securities") issued or sold
in such transaction or series of transactions. If the Holder makes an
election pursuant to the immediately preceding sentence, no adjustment
to the Exercise Price shall be made pursuant to this paragraph (c) for
the issuance of the Disregarded Securities or upon any conversion,
exercise or exchange thereof.
(E) Issuances Without Consideration Pursuant to Existing
Securities. If the Company issues (or becomes obligated to issue)
shares of Common Stock pursuant to any anti-dilution or similar
adjustments (other than as a result of stock splits, stock dividends
and the like) contained in any Convertible Securities or Purchase
Rights outstanding as of the date hereof but not included in the
Disclosure Schedule to the Securities Purchase Agreement, whether as a
result of the issuance of the Warrants or otherwise, then all shares
of Common Stock so issued shall be deemed to have been issued for no
consideration. If the Company issues (or becomes obligated to issue)
shares of Common Stock pursuant to any anti-dilution or similar
adjustments contained in any Convertible Securities or Purchase Rights
disclosed in a schedule to the Securities Purchase Agreement as a
result of the issuance of the Warrants and the number of shares that
the Company issues (or is obligated to issue) as a result of such
initial issuance exceeds the amount specified in such schedule, such
excess shares shall be deemed to have been issued for no
consideration.
(iv) Exceptions To Adjustment Of Exercise Price. Notwithstanding the
foregoing, no adjustment to the Exercise Price shall be made pursuant to this
paragraph (c) upon the issuance of any Excluded Securities. For purposes hereof,
"Excluded Securities" means (I) securities purchased under the Purchase
Agreement; (II) securities issued upon exercise of the Warrants; (III)
securities issued upon the exercise of stock options and warrants outstanding as
of the date hereof, (IV) shares of Common Stock issuable or issued to (x)
employees or directors from time to time either directly or upon the exercise of
options, in such case granted or to be granted in the discretion of the Board of
Directors, as approved by the independent members of the Board, pursuant to one
or more stock option plans or restricted stock plans or stock purchase plans in
effect as of the Closing Date, or (y) consultants, either directly or pursuant
to warrants to purchase Common Stock that are outstanding on the date hereof or
issued hereafter, provided such issuances are approved by the independent
members of the Board of Directors or by the Company's shareholders; (V) shares
of Common Stock issued to a Person in connection with a joint venture, strategic
alliance or other commercial relationship with such Person relating to the
operation of the Company's business and not for the purpose of raising equity
capital, (VI) up to an additional $3 million of securities that may be directly
placed by the Company with its existing shareholders, within 45 days from the
date hereof, on the same terms and conditions as the sale of the Securities
pursuant to the Purchase Agreement, and (VII) the issuance of up to 100,000
shares to legal counsel for services rendered or to be rendered in connection
with the transactions contemplated by this Agreement.
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(d) Additional Securities or Assets. In the event that at any
time, as a result of an adjustment made pursuant to this Section 11,
the Holder of this Warrant shall, upon exercise of this Warrant,
become entitled to receive securities or assets (other than Common
Stock) then, wherever appropriate, all references herein to shares of
Common Stock shall be deemed to refer to and include such shares
and/or other securities or assets; and thereafter the number of such
shares and/or other securities or assets shall be subject to
adjustment from time to time in a manner and upon terms as nearly
equivalent as practicable to the provisions of this Section 11. Any
adjustment made herein that results in a decrease in the Exercise
Price shall also effect a proportional increase in the number of
shares of Common Stock into which this Warrant is exercisable.
12. Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("Other
Property"), are to be received by or distributed to the holders of Common Stock
of the Company, the Company shall give the Holder at least ten (10) Business
Days' prior written notice of such transaction, and the Holder shall have the
right thereafter (whether or not the Company delivers such notice) to receive,
at the option of the Holder following notice to the Company at any time, (a)
upon exercise of this Warrant, the number of shares of Common Stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a Holder of the number of shares of Common Stock for which this Warrant is
exercisable immediately prior to such event or (b) cash equal to the value of
this Warrant as determined in accordance with the Black-Scholes option pricing
formula. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring corporation
(if other than the Company) shall expressly assume the due and punctual
observance and performance of each and every covenant and condition of this
Warrant to be performed and observed by the Company and all the obligations and
liabilities hereunder, subject to such modifications as may be deemed
appropriate (as determined in good faith by resolution of the Board of Directors
of the Company) in order to provide for adjustments of Warrant Shares for which
this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section
12, "common stock of the successor or acquiring corporation" shall include stock
of such corporation of any class which is not preferred as to dividends or
assets over any other class of stock of such corporation and which is not
subject to redemption and shall also include any evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
for any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
13. Voluntary Adjustment by the Company. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.
14. Notice of Adjustment. Whenever the number of Warrant Shares or
number or kind of securities or other property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted, as herein provided, the Company
shall give written notice thereof to the Holder promptly following such
adjustment, which notice shall state the number of Warrant Shares (and other
securities or property) purchasable upon the exercise of this Warrant and the
Exercise Price of such Warrant Shares (and other securities or property) after
such adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
11
15. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences
of its indebtedness, any shares of stock of any class or any other
securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation,
or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to the Holder (i)
at least 10 days' prior written notice of the date on which a record date shall
be selected for such dividend, distribution or right or for determining rights
to vote in respect of any such reorganization, reclassification,
recapitalization, merger, consolidation, sale, transfer, disposition,
liquidation or winding up, and (ii) in the case of any such reorganization,
recapitalization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 10 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (i) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Stock shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(ii) the date on which any such reorganization, recapitalization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their Warrant Shares for securities or other property
deliverable upon such disposition, dissolution, liquidation or winding up. Each
such written notice shall be sufficiently given if addressed to the Holder at
the last address of the Holder appearing on the books of the Company and
delivered in accordance with Section 17(c).
16. Authorized Shares; Certain Actions.
(a) Reservation of Shares. The Company covenants that during the
period the Warrant is outstanding, it will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for
the issuance of the Warrant Shares upon the exercise of any purchase
rights under this Warrant. The Company further covenants that its
issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for the Warrant Shares
upon the exercise of the purchase rights under this Warrant. The
Company will take all such reasonable action as may be necessary,
including without limitation obtaining such consents and
authorizations, to ensure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or regulation,
or of any requirements of the Trading Market upon which the Common
Stock may be listed.
(b) No Adverse Action. Except and to the extent as waived or
consented to by the Holder, the Company shall not by any action,
including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times
in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to
protect the rights of the Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value of any Warrant Shares
above the amount payable therefor upon such exercise immediately prior
to such increase in par value, (b) take all such action as may be
necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant, and (c) use commercially reasonable efforts
to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary
to enable the Company to perform its obligations under this Warrant.
12
17. Miscellaneous.
(a) Jurisdiction. This Warrant shall be deemed to constitute a
contract made and to be performed entirely within the State of New
York and shall be governed by and construed in accordance with the
laws of New York, without regard to its conflict of law, principles or
rules.
(b) Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Holder
shall operate as a waiver of such right or otherwise prejudice
Holder's rights, powers or remedies, notwithstanding all rights
hereunder terminate on the Termination Date. If the Company willfully
and knowingly fails to comply with any provision of this Warrant which
results in any material damages to the Holder, the Company shall pay
to the Holder such amounts as shall be sufficient to cover any costs
and expenses including, but not limited to, reasonable attorneys'
fees, including those of appellate proceedings, incurred by Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing
any of its rights, powers or remedies hereunder.
(c) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Purchase
Agreement.
(d) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of the Company and
the Holder.
(e) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant shall
be prohibited by or invalid under applicable law, such provision shall
be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
(f) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.
********************
[Signature Page to Follow]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its officer thereunto duly authorized.
Dated: October __, 2004
eMAGIN CORPORATION
By:_________________________________
Name:
Title:
14
NOTICE OF EXERCISE
The undersigned Holder hereby irrevocably exercises the right to
purchase_______________ of the shares of Common Stock ("Warrant Shares") of
_____________ evidenced by the attached Warrant (the "Warrant"). Capitalized
terms used herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.
1. Form of Exercise. The Holder intends that the Exercise of this
Warrant shall be made as:
______ a Cash Exercise with respect to _________________ Warrant
Shares; and/or
______ a Cashless Exercise with respect to _________________ Warrant
Shares, as permitted by Section 3(d) of the attached Warrant.
2. Payment of Exercise Price. In the event that the Holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares to be issued
pursuant hereto, the Holder shall pay the sum of $________________ to the
Company in accordance with the terms of the Warrant.
Date:_______________________
____________________________
Name of Registered Holder
By:_________________________
Name:
Title:
15
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
_______________________________________________ whose address is
________________________________________________________________
________________________________________________________________
Dated: ______________, _______
Holder's Signature:___________________________
Holder's Address: ___________________________
___________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant. Officers of corporations and those acting in
a fiduciary or other representative capacity should file proper evidence of
authority to assign the foregoing Warrant.
