UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from__________to__________
Commission File Number 0-4643
UNIVERSAL DISPLAY CORPORATION
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2372688
------------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Three Bala Plaza East
Suite 104
Bala Cynwyd, Pennsylvania 19004
------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 617-4010
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $0.01 per share)
----------------------------------------
(Title of Class)
Indicate by check mark whether the registration (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment of this Form 10-KSB [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Series A Common Stock reported
by NASDAQ on December 12, 1996, was approximately $24,411,845. For the purposes
of calculation, all executive officers and directors of the Company and all
beneficial owners of more than 10% of the Company's stock (and their affiliates)
were considered affiliates. As of March 17, 1997, the Registrant had outstanding
8,937,268 shares of Common Stock ($.01 par value).
Documents Incorporated by Reference
Portions of the Company's Proxy Statement to be filed with the Securities and
Exchange Commission for the Annual Meeting of Shareholders to be held on May 20,
1997, are incorporated by reference into Part III of this report.
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TABLE OF CONTENTS
PART 1
ITEM 1. BUSINESS 3
ITEM 2. PROPERTIES 8
ITEM 3. LEGAL PROCEEDINGS 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8
EXECUTIVE OFFICERS OF THE REGISTRANT 8
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
ITEM 7. FINANCIAL STATEMENTS WITHIN THE 10-KSB 11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 11
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT 11
ITEM 10. EXECUTIVE COMPENSATION 11
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 11
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 11
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 11
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This document contains certain forward-looking statements that are subject to
risks and uncertainties. Forward-looking statements include certain information
relating to the flat panel display industry, OLED technology, strategy, markets,
research, development, manufacturing, intellectual property, competition, and
properties, as well as information contained elsewhere in this Report where
statements are preceded by, followed by or include the words "believes,"
"expects", "anticipates", "potential" or similar expressions. For such
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the private Securities Litigation Reform
Act of 1995. Actual events or results may differ materially from those discussed
in forward-looking statements as a result of various factors, including without
limitation, those discussed elsewhere in this Report and in the documents
incorporated herein by reference.
PART I
ITEM 1. BUSINESS
General
Universal Display Corporation (the "Company") is engaged in the research,
development and commercialization of Organic Light Emitting Diode ("OLED")
technology for use in flat panel displays and other applications. The research
is being performed by Princeton University and the University of Southern
California ("USC") pursuant to a certain Sponsored Research Agreement funded by
the Company (See: Business-"Research"). The Company has the exclusive right to
commercialize the technology being developed pursuant to a certain License
Agreement (See: Business-"Intellectual Property"). The Company's present
commercialization strategy is to enter into licensing arrangements and other
strategic alliances for the volume manufacturing of products utilizing this
technology, the Company does not presently intend to become a volume
manufacturer. The Company anticipates that its OLED technology, if successfully
developed, may have a variety of applications, including full color, large area,
high resolution, high information content displays, such as laptop and notebook
computer screens, computer monitors and televisions. Potential applications also
include multi-color, and monochrome small area, low information content
displays, such as consumer electronic equipment, vehicular dashboard displays,
cellular phones and other telecommunication displays, computer games, and
personal digital assistants, as well as transparent applications such as head up
displays for automobile windshields.
The Company was incorporated under the laws of the Commonwealth of Pennsylvania
in April 1985 under the name Enzymatics, Inc. ("Enzymatics"). Another
corporation named "Universal Display Corporation" ("UDC") was incorporated under
the laws of the State of New Jersey in June 1994. On June 22, 1995, a
wholly-owned subsidiary of Enzymatics merged with and into UDC. UDC, the
surviving corporation in the Merger, became a wholly-owned subsidiary of
Enzymatics and changed its name to "UDC, Inc." Simultaneously with the
consummation of the Merger, Enzymatics changed its name to "Universal Display
Corporation."
Flat Panel Display Industry
The market for flat panel displays has been driven by a number of market forces,
including, but not limited to, the increasing popularity of portable computers
and other consumer electronic devices, the increasing availability of
information and visual content of electronic formats, the proliferation of
graphical interfaces and emerging multimedia applications and the conversion of
traditional analog displays to digital or graphical displays. Existing products
that use flat panel displays include notebook and laptop computers, portable
televisions, video cameras, digital watches, calculators, electronic games and
audiovisual equipment, copiers, fax machines, telephones and answering machines.
In addition, flat panel displays have been utilized in military applications,
including missile controls, ground support and communications equipment and
avionics.
Stanford Resources, Inc., ("Standford Resources") in "Flat Information Displays,
Market and Technology Trends" estimated the 1995 market for flat panel displays
to be approximately $11.5 billion and expects the market to increase to
approximately $21.6 billion by the year 2000. According to Stanford Resources,
computer applications currently comprise approximately 55% of the flat panel
display market, followed by business/industrial applications which comprise
approximately 25% of the flat panel display market and consumer applications
(such as portable televisions, calculators, electronic games and other consumer
electronic devices) which comprise approximately 20% of the flat panel display
market.
The Company believes that competition in this market, particularly for full
color, large area, high resolution, high information content displays is based
upon image and color quality, viewing angle, power requirements, cost and
manufacturability. The dominant technology for displays today is the cathode ray
tube ("CRT"), the type of technology in most televisions and computer monitors.
The dominant technology today for flat panel displays is liquid crystal display
("LCD") technology, the type of technology in most laptop computers. The Company
believes LCD technology has certain limitations, such as a limited viewing
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angle, limited scalability, low contrast and inferior image and color quality
when compared to CRT displays. The Company believes that flat panel displays
utilizing its OLED technology, if successfully developed, will provide image and
color quality, brightness, contrast, scalability and viewing angles comparable
to CRT displays, and be manufacturable from light weight, low cost materials and
require a relatively low power source.
The Company's OLED Technology
OLED technology is an emerging innovative technology and the Company is not
aware of any full color, flat panel displays utilizing OLED technology currently
being marketed, although there are numerous companies engaged in research and
development efforts respecting OLED technology. The Company believes that its
OLED technology, if fully developed, will have the capability to address many of
the limitations of LCD and other developing technologies.
Light emitting diodes ("LED's") are solid-state semiconductor devices that emit
light when electrical current passes through them. The color of light emitted
depends on the bandgap of the semiconductor material; narrow bandgap materials
emit light in the red/orange range and wide bandgap materials emit green or blue
light. Traditional LEDs are created from inorganic semiconductors. The OLED
technology currently under development by the Company and its research partners
at Princeton University and USC utilizes a new type of LED created from organic
materials and is expected to allow an individual pixel to emit red, blue and
green, either at the same time or separately. Combinations of such colors create
additional colors so that each individual pixel will be capable of producing a
full range of colors. The OLED technology currently under development is based
upon a proprietary vertically stacked pixel architecture. The technology
architecture is designed so that the blue, green, and red pixels are stacked on
top of each other, rather than side by side as in CRTs and LCDs, theoretically
providing for very high image resolution, since one pixel can occupy the same
space as three or more pixels would in a side by side architecture.
The Company believes that flat panel displays utilizing its OLED technology, if
successfully developed, will provide image and color quality, brightness,
contrast and viewing angles comparable or superior to CRT displays and superior
to LCD; will be manufacturable from light weight, low cost materials; will
demonstrate efficiency in converting electrical power into light and require
very low voltage for operation, which will make the OLED technology compatible
for a variety of flat panel display applications which require light weight and
portability; and will be scaleable for use in large area, high resolution, high
information, full color, flat panel displays.
In the March 7, 1996 issue of the scientific journal Nature, the researchers at
Princeton University and USC announced the laboratory demonstration of the first
transparent, thin film organic light emitting device, ("TOLED") which is
believed to be the crucial first step toward realizing high-definition,
full-color and head up displays using organic material.
In the November 11, 1996 issue of the scientific journal Applied Physics
Letters, the researchers at Princeton University and USC announced the
laboratory demonstration of a tunable multicolor organic light emitting device
employing a novel vertically stacked pixel architecture ("SOLED"). The Company
believes that this was the first demonstration of an integrated, stacked OLED
where both color and intensity can be independently varied by using external
current sources. The color and intensity of the device was varied from red to
blue, which represents the first proof of principle for the achievement of full
color pixels which should provide high image resolution (due to compact pixel
size) and low cost fabrication (due to the elimination of side by side pixel
growth). The novel vertically stacked pixel architecture, stacking the red,
green and blue pixels on top of each other, rather than side by side as in CRTs
and LCDs, was made possible by the creation of the TOLED.
In the February 1, 1997 issue of the scientific journal, Optics Letters, the
researchers at Princeton University and USC announced the laboratory
demonstration of an OLED deposited on a flexible plastic film. Flat panel
displays are commonly built on glass. The Company believes that this is the
first time that small molecule organic layers have been deposited on a flexible
plastic substrate, flexibility being a property that was previously believed to
be unique to polymer materials. This development may also allow the potential
for fabricating OLED products using low cost "roll to roll" processing methods.
While significant advances have been made in the research on OLEDs being
sponsored by the Company, substantial additional research and development work
needs to be performed before products utilizing this technology are manufactured
and sold, including issues of operating life, reliability and issues related to
scalability into a production environment for monochrome, transparent, flexible
and full color, large area and small area applications. Additionally, such
research and development efforts must demonstrate the ability to display a full
range of color and integration with drive electronics for the display.
Additional development efforts relating to cost effective fabrication
technologies also needs to be performed.
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Strategy and Markets
The Company's present commercialization strategy is to continue the research and
development of OLED technology and to license the technology or enter into joint
ventures or other strategic relationships with experienced manufacturers (who
may have much of the needed infrastructure already in place) for the
manufacture, distribution and sale of OLED display products.
The Company believes that an initial market may be for low information content
applications such as cellular phones, instrumentation displays, consumer
electronics, display backlight or optical memory systems. These applications may
be multicolor or monochrome. There are also potential markets for a transparent
device, for example, as head-up displays on vehicle windshields. The Company
believes that the OLED technology under development could also have significant
applicability for small, full color displays, such as for personal digital
assistants, projection displays, viewfinders in camcorders, video phones, hand
held computers and numerous industrial medical and military uses. It also
believes that the technology has potential application in large area, full color
displays such as laptop computers, desktop computers and televisions. The
Company believes its OLED technology can also have applications in numerous
defense-related markets.
There are no assurances that the Company will be able to enter into appropriate
licensing, joint ventures or other strategic relationships, or that the terms of
such relationships, if entered into, would be favorable to the Company.
Research
Research relating to the OLED technology is being conducted at the Princeton
University's Advanced Technology Center and at USC (on a subcontract basis with
Princeton University) pursuant to a Sponsored Research Agreement dated August 1,
1994 between The Trustees of Princeton University and American Biomimetics
Corporation ("ABC"), an affiliate of the Company (the "1994 Sponsored Research
Agreement"), which was assigned by ABC to the Company in June 1995. The
development of commercially viable applications for the OLED technology is
principally dependent on the success of the research efforts of Dr. Stephen
Forrest and Dr. Mark Thompson (the "Principal Investigators") conducted pursuant
to such agreements. The scope of and technical aspects of the research and the
resources and efforts directed to such research is subject to the control of
Princeton University and the Principal Investigators.
The Company provides funding for research and development activities related to
the OLED technology. Princeton University also receives funding from the federal
government, the amount of which the Company is unable to estimate. Research and
development costs incurred by the Company under the 1994 Sponsored Research
Agreement include $1,723,739 in cash and the issuance of 200,000 shares of
Series A Preferred Stock (with a fair market value of $350,000) to ABC in
connection with the assignment of the 1994 Sponsored Research Agreement and a
related License Agreement (the "1994 License Agreement") in June 1995 and
$713,815 in cash in 1996.
The 1994 Sponsored Research Agreement provides that if either of the Principal
Investigators are unavailable to continue to serve as a Principal Investigator,
either because such person is no longer associated with Princeton University or
USC or otherwise, and a successor acceptable to both the Company and Princeton
University is not available, Princeton University has the right to terminate the
1994 Sponsored Research Agreement. Further, the 1994 Sponsored Research
Agreement expires in July 1997. Although the Company believes that its
relationship with Princeton University and the Principal Investigators is
satisfactory, there can be no assurance that the Principal Investigators will
continue to be available to conduct the research, that the Company will be able
to engage Princeton University to conduct further research and development of
the OLED technology upon expiration of the 1994 Sponsored Research Agreement, or
that the 1994 Sponsored Research Agreement will be extended. The Company
believes that additional research and development efforts are required for the
development of products based upon the OLED technology. Moreover, under the 1994
License Agreement, the Company is required to make a first commercial sale or
use within two years following a demonstration of efficacy of a product based on
the OLED technology and Princeton University may terminate the 1994 License
Agreement if the Company does not make a commercial sale or use within the
required time period. Loss to the Company of the Principal Investigators'
services or termination of the 1994 Sponsored Research Agreement would have a
material adverse effect on the Company.
In July 1995, Professor Thompson, one of the Principal Investigators,
transferred to USC. In order to facilitate Professor Thompson's continued
involvement in the research under the 1994 Sponsored Research Agreement,
Princeton University and USC have entered into a Subcontract Agreement dated
August 16, 1995 (the "USC Subcontract") pursuant to which Princeton University
subcontracted to USC (and USC agreed to perform) a portion of the research work
under the 1994 Sponsored Research Agreement
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relating to the fabrication and testing of OLEDs and device packaging
techniques. The USC Subcontract expires on July 31, 1997 (the date on which the
1994 Sponsored Research Agreement expires).
Intellectual Property
The Company's rights to the OLED technology are governed by the 1994 Sponsored
Research Agreement and the 1994 License Agreement. Both Agreements were assigned
to the Company by ABC pursuant to a Technology Transfer Agreement dated June 22,
1995. Pursuant to such agreements, all patents and other intellectual property
rights relating to the OLED technology are the property of Princeton University,
or USC, as applicable. Princeton University and USC have filed approximately 20
patent applications relating to the OLED technology in the United States, and
have filed for intellectual property protection internationally. Princeton
University manages the intellectual property rights being developed pursuant to
the 1994 Sponsored Research Agreement and licensed to the Company pursuant to
the License Agreement, and the Company is required to reimburse Princeton
University for all costs incurred in filing, prosecuting and maintaining patent
applications and patents.
The Company has a worldwide exclusive license to manufacture and market products
based on such pending patent applications and the right to obtain a similar
license to future patent applications and inventions conceived or discovered
under the 1994 Sponsored Research Agreement, and to sublicense those rights. In
circumstances where the Company sublicenses the OLED technology (except to
affiliates), the Company must pay Princeton University one-half of all amounts
received by the Company. In circumstances where the Company sells products
utilizing the OLED technology, the Company is required to pay to Princeton
University a royalty in the amount of 3% of the Company's net sales of products
utilizing the OLED technology.
The Company anticipates that Princeton University will file additional patent
applications in the United States and internationally to protect future
inventions conceived or discovered under the 1994 Sponsored Research Agreement
and that the Company will license technology based on such patent applications.
There can be no assurance that patents applied for will be obtained or that any
such patents will afford the Company and Princeton University commercially
significant protection of its OLED technology. In addition, the patent laws of
other countries may differ from those of the United States as to the
patentability of the OLED technology and the degree of protection afforded.
Other companies and institutions may independently develop equivalent or
superior technologies and may obtain patent or similar rights with respect
thereto. There are a number of other companies and organizations that have been
issued patents and are filing additional patent applications relating to OLED
technology and there can be no assurance that the exercise of the Company's
licensing rights respecting its OLED technology being developed by Princeton
University and USC will not infringe on the patents of others. In the event of
infringement, the Company and Princeton University could, under certain
circumstances, be required to obtain a license or modify its methods or other
aspects of the OLED technology. The 1994 License Agreement provides that
Princeton University has the right, but not the obligation, to enforce its
intellectual property rights against infringement, except that the Company may
prosecute an infringement action only if within six months after having received
notice of infringement Princeton University has not commenced an action or
otherwise successfully terminated the infringement.
The Company has obtained an exclusive worldwide royalty-free license from USC
(the "USC License") to manufacture and market products based on inventions
claimed in a patent issued to USC in May 1994, relating to, among other things,
a method of depositing ultra-thin, very smooth, ordered organic layers. The
Company believes that the USC License may be useful in developing and
commercializing flat panel displays utilizing its OLED technology.
The United States government, through the Advanced Research Projects Agency
("ARPA"), has provided funding to Princeton University for research activities
related to certain aspects of its OLED technology. In the event that all or
certain aspects of its OLED technology developed (if any) from the Company's
funding to Princeton University is deemed to fall within the planned and
committed activities of ARPA's funding, the federal government, pursuant to
federal law, could have certain rights relating to the OLED technology,
including a license to practice or have practiced on its behalf any such
technology and, if the federal government determines that the Company has not
taken effective steps to achieve practical application of such technology in a
field of use in a reasonable time, require the Company to grant licenses to
other parties in any such field of use. In addition, the federal government's
rights could restrict the Company's ability to market the OLED technology to the
federal government for military and other applications which could have a
material adverse effect on the Company. There can be no assurance as to which
aspects of the OLED technology the federal government has any rights and the
extent of such rights. Continued funding of Princeton University's research
activities by the federal government, which is anticipated, may give the federal
government rights to aspects of the OLED technology developed in the future.
In order to protect Princeton University's tax exempt status, the 1994 License
Agreement provides that Princeton University may, in its sole discretion,
determine whether, pursuant to the provisions of the Tax Reform Act of 1986, it
is required to negotiate the
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royalties and other considerations payable to Princeton University on
products not reasonably conceivable by the parties at the time of execution of
the 1994 License Agreement. If Princeton University reasonably concludes that
the consideration payable by the Company for any such product is not fair and
competitive, Princeton University may exercise its right to renegotiate the
royalties and other consideration payable by the Company for any such product
prior to the expiration of 180 days after the first patent is filed or other
intellectual property protection is sought. The Company has the right to
commence arbitration proceedings to challenge Princeton University's exercise of
such renegotiation rights. If the parties are unable to agree to royalties and
other consideration for such products within a specified period of time, then
Princeton University is free to license third parties without repayment of any
funds provided under the 1994 Sponsored Research Agreement.
The Company and Princeton University may also rely on proprietary know-how and
trade secrets and employ various methods to protect concepts, ideas and
documentation of their technology. However, such methods may not afford complete
protection, and there can be no assurance that others will not independently
develop similar know-how or obtain access to the Company's or Princeton
University's know-how, trade secrets, concepts, ideas and documentation.
Competition
The display industry is characterized by intense competition. CRTs currently
dominate the television and desktop computer monitor market and improvements in
CRTs have further increased display quality. Flat panel displays have been
developed and are in commercial use in certain applications where the weight,
power requirements, and bulky size of the CRT inhibit its use. CRT displays are
not currently available for flat panel display applications. Flat panel displays
have been available for a significant period of time and a variety of
advancements in flat panel displays have been made over the last several years.
However, flat panel displays with the capabilities necessary to replace CRTs in
all applications have not been developed.
The flat panel display market is currently dominated by products utilizing LCD
technology and is expected to be dominated by LCD technology for the foreseeable
future. The Company believes that LCDs have certain limitations, such as a
limited viewing angle, limited scalability, low response rate, low contrast and
inferior image and color quality when compared to CRT displays (the current
standard for display quality). LCDs are also more expensive to produce than
CRTs. However, compared to CRTs, LCD displays are smaller, have lower power
requirements (leading to longer battery life), emit no measurable radiation, are
not affected by magnetic fields generated by speakers or VCRs and have uniform
brightness throughout the screen. Numerous companies, however, are making
substantial investments in, and conducting research to improve these
characteristics of LCD technology.
Several other flat panel display technologies have recently been developed or
are being developed, such as field emissive, inorganic electroluminescent,
polymeric light emitting diode, gas plasma, and vacuum fluorescent displays.
Field emissive displays essentially employ an array of miniature CRTs, may be
efficient in converting electrical power into light at a relatively low cost,
but high voltage power sources and high temperature fabrication equipment may be
required. Inorganic electroluminescent displays offer better contrast and
broader viewing angles than LCDs and gas plasma displays, but also use more
power than LCDs and are difficult to view in bright ambient light. Displays
utilizing polymeric light emitting diodes may, if successfully developed, offer
better image and color quality and broader viewing angles than LCDs, but require
improvements in operating life and are difficult to manufacture. Gas plasma
displays, used in outdoor signs, some laptop computers and recently introduced
for large screen televisions are durable and reliable, have long lives and
superior video speed (useful in video applications) but have high power
requirements; dot matrix display panels on copiers, microwave ovens and video
cassette recorders, have superior brightness, are inexpensive and are capable of
providing full color, but are difficult to manufacture and have high power
requirements, making them unsuitable for portable products.
The Company believes that each of these developing technologies will have one or
more of the limitations associated with LCD technology or other limitations,
such as lack of reliability, high power requirements (restricting portability),
high production cost and/or difficulty of manufacture. The Company believes that
flat panel displays utilizing its OLED technology, if successfully developed,
will provide image and color quality, brightness, contrast, scalability and
viewing angels comparable to CRT displays, be manufacturable from light weight,
low cost materials and require a relatively low power source.
Numerous domestic and foreign companies have developed or are developing CRT,
LCD, gas plasma and other display technologies. Substantially all of these
competitors, including Sony Corporation, NEC Corporation, Fujitsu Corporation,
Hitachi Corporation, Toshiba Corporation and Samsung Corporation have greater
name recognition and financial, technical, marketing, personnel and research
capabilities than the Company. There can be no assurance that the Company's
competitors will not succeed in developing technologies and applications that
are more cost effective, have fewer display limitations than or have other
advantages as compared to its OLED technology. In addition, a number of
companies, including those mentioned above, and
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Eastman Kodak Company, Pioneer Electronic Corporation, Sharp Corporation,
Sanyo Corporation, TDK Corporation, Mitsubishi Chemical Corporation, Seiko-Epson
Corporation and Idemitsu Corporation are engaged in research and development
activities with respect to technology using OLEDs . There can be no assurance
that the Company will be able to compete successfully or develop commercial
applications for the OLED technology.
Employees
The Company has eight employees, five of whom are full-time.
Facilities
The Company's corporate offices are located at Three Bala Plaza East, Suite 104,
Bala Cynwyd, Pennsylvania.
ITEM 2. PROPERTIES
The Company currently leases approximately 2,700 square feet of office space in
Bala Cynwyd, Pennsylvania and certain of its employees are also guest
researchers at the Princeton University Center for Photonic and Optoelectronic
Research, ("POEM") where they are entitled to use the laboratories and
facilities. The Company also leases approximately 620 square feet in Coeur
D'Alene, Idaho.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders in the fourth quarter of
1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the Company's
executive officers:
Name Age Position
- - ---- --- --------
Sherwin I. Seligsohn 61 Chairman, Chief Executive Officer and Director
Steven V. Abramson 45 President, Chief Operating Officer and Director
Sidney D. Rosenblatt 49 Executive Vice President, Chief Financial Officer,
Treasurer and Secretary and Director
Executive Officers are elected annually and hold office until their successors
are elected and qualified.
Sherwin I. Seligsohn has been Chairman and Chief Executive Officer of the
Company since the Company's inception. He was President of the Company until May
1996. Mr. Seligsohn founded, and since August 1991 has served as sole Director,
Chairman, President and Secretary of, American Biomimetics Corporation ("ABC"),
International Multi-Media Corporation ("IMMC"), and Wireless Unified Network
Systems Corporation ("WUNSC") . He is also Chairman and Chief Executive Officer
of Global Photonic Energy Corporation ("Global"). From June 1990 to October
1991, Mr. Seligsohn was Chairman Emeritus of InterDigital Communications, Inc.
("InterDigital"), formerly International Mobile Machines Corporation. Mr.
Seligsohn was the founder of InterDigital and from August 1972 to June 1990
served as its Chairman. Mr. Seligsohn is a member of the Advisory Board of the
Advanced Technology Center for Photonics and Optoelectronic Materials (POEM) at
Princeton University.
Steven V. Abramson joined Universal Display Corporation as President and
Chief Operating Officer in May 1996. He is also a member of the Board of
Directors. Mr. Abramson is also President and chief Executive Officer of Global
and a member of its Board of Directors. From March, 1992--May, 1996 he was Vice
President, General Counsel, Secretary and Treasurer of Roy F. Weston, Inc. a
worldwide environmental consulting and engineering firm. From 1982-1991 he was
with InterDigital, where he held various positions, including General Counsel,
Executive Vice President and General Manager of the Technology Licensing
Division.
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Mr. Abramson is a member of the Advisory Board of the Advanced Technology
Center for Photonics and Optoelectronic Materials (POEM) at Princeton
University.
Sidney D. Rosenblatt has been Executive Vice President, Chief Financial
Officer, Treasurer and Secretary of the Company since June 1995. He has been a
member of the Board of Directors since May 1996. Mr. Rosenblatt is also
Executive Vice President, Chief Financial Officer, Secretary and Treasurer of
Global, and a member of its Board of Directors. Mr. Rosenblatt is the owner of
and has served as the President and Chief Executive Officer of S. Zitner Company
since August 1990. From May 1982 to August 1990, Mr. Rosenblatt served as the
Senior Vice President, Chief Financial Officer and Treasurer of InterDigital.
Mr. Rosenblatt sits on the Board of Directors and Executive Committee for the
Greater Philadelphia Chamber of Commerce, Chairman of the Board for the Small
Business Division of the Greater Philadelphia Chamber of Commerce and sits on
various Boards for non-profit organizations.
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The following table sets forth the range of the high, low and closing sales
prices of the Company's Common Stock as reported by the NASDAQ. The Company
completed its initial Public Offering of Common Stock on April 11, 1996, at
$5.00 per share.
High Low Close
1996
First Quarter N/A N/A N/A
Second Quarter (from April 11, 1996) 10 1/2 4 7 1/4
Third Quarter 8 4 5/8 6
Fourth Quarter 6 5/8 4 3/4 5 3/4
As of March 17, 1997, there were approximately 262 Holders of Record of the
Company's Common Stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Since inception, the Company has engaged, and for the foreseeable future expects
to continue to be engaged, exclusively in funding research and development
activities related to its OLED technology and attempting to develop and
commercialize such technology. To date, the Company has not generated any
revenues and does not expect to generate any meaningful revenues for the
foreseeable future and until such time, if ever, it successfully demonstrates
that its OLED technology is commercially viable for one or more flat panel
display applications and enters into license agreements, joint ventures or
strategic alliances with third parties with respect to the technology. The
Company has incurred significant losses since its inception, resulting in an
accumulated deficit of $4,852,777 at December 31, 1996.
Years Ended December 31, 1996 and 1995
The Company had a net loss of $1,768,995 (or $.20 per share) for the year ended
December 31, 1996 compared to a net loss of $3,072,661 (or $.38 per share) for
the year ended December 31, 1995. The reduction in the net loss was primarily
attributable to research and development expenses for 1994 and 1995 being
expensed and paid in 1995, and a non-recurring payment for the sublicense of
certain technologies in 1995.
Research and development costs were $948,568 for the year ended December 31,
1996 compared to $2,073,739 for the year ended December 31, 1995. In 1996, the
research and development expense were attributed to payments under the Sponsored
Research Agreement with Princeton University and patent expenses. For the year
ended December 31, 1995, the Company incurred $2,073,739 in research and
development expenses. Such expenses consisted of (i) repayment of $674,000 to
ABC for amounts
9
<PAGE>
previously paid to Princeton University by ABC under the 1994 Sponsored
Research Agreement; (ii) payment of $500,000 to ABC to acquire the sublicense
under the 1993 Sponsored Research Agreement; (iii) payments in the aggregate
amount of $549,739 made to Princeton University under the 1994 Sponsored
Research Agreement; and (iv) a nonrecurring, non-cash expense of $350,000
representing the fair market value of 200,000 shares of Series A Preferred Stock
issued to ABC in connection with the Technology Transfer Agreement.
General and administrative costs were $938,741 for the year ended December 31,
1996 compared to $998,922 for the year ended December 31, 1995. The 1996
expenses were primarily associated with the hiring of executives, support staff
and leasing of office space for the Company's headquarters compared to 1995
general and administrative expenses which were primarily professional fees and
fees associated with financing activities.
Year Ended December 31, 1995 and Period from Inception (June 17, 1994) to
December 31, 1994
As discussed above, the 1995 research and development expenses were attributed
to the Company making payments to Princeton University under the Sponsored
Research Agreement and to ABC for payments made to Princeton University for
research and development conducted in 1994 and 1995, and for the sublicense of
certain technology from ABC and there were no research and development expenses
in 1994.
For the year ended December 31, 1995, the Company incurred $998,922 of general
and administrative expenses. Such expenses consisted of $440,173 of professional
fees, $219,971 in employee compensation and related benefits, $240,602 of
expenses incurred in connection with the April 1996 public offering and $98,176
of other administrative expenses. General administrative expenses of $11,121
incurred for the period from inception (June 17, 1994) to December 31, 1994
consisted of professional and other fees.
Liquidity and Capital Resources
As of December 31, 1996, the Company had cash of $638,225 and short-term
investments of $2,430,000 compared to cash of $40 at December 31, 1995. On April
11, 1996, the Company completed a public offering of 1,300,000 shares of common
stock at a price of $5.00 per share and redeemable warrants to purchase
1,495,000 shares of Common Stock at an exercise price of $3.50 per share, at a
price of $.10 per warrant. The Company received net cash proceeds of $5,282,665
from the public offering (excluding $223,263 representing a portion of the
offering expenses previously charged to general and administrative expenses).
Net working capital increased to $3,023,010 at December 31, 1996 from a working
capital deficit of $589,136 at December 31, 1995, as a result of the April 11,
1996 public offering.
In June and July 1995, the Company issued and sold in two private offerings (the
"Private Placements") an aggregate of 1,114,000 units (the "Units") at a price
of $2.00 per unit, each Unit consisting of one share of Common Stock and a
warrant to purchase one share of Common Stock at an exercise price of $3.50 per
share. The warrants included in the Units are redeemable by the Company if the
price of the Common Stock has been at least $5.00 for 20 consecutive trading
days. The Company received net cash proceeds of $1,928,000 from the Private
Placements. The Company used $924,000 for the proceeds of the Private Placements
to make payments to ABC under the Transfer Agreement, $500,000 of the proceeds
to make a payment to ABC to acquire the sublicense under the 1993 Sponsored
Research Agreement, $366,739 of the proceeds to make payments to Princeton
University under the 1994 Sponsored Research Agreement and the balance of such
proceeds for working capital and general corporate purposes. In addition, the
Company reduced the amount owed to ABC by $250,000 by issuing, as part of the
Private Placement, 125,000 of the Units (with a fair market value of $250,000,
based upon the offering price of the Units sold in the Private Placements) to an
unaffiliated third-party creditor of ABC. Upon consummation of the merger with
Enzymatics in June 1995, (the "Merger"), the Company issued options to purchase
an aggregate of 84,234 shares of Common Stock exercisable at a price of $.29 per
share as a fee to a consulting firm in connection with the Merger. The Company
granted to the holders of the Units and to the consulting firm certain
"piggyback" registration rights with respect to the aggregate of 2,312,234
shares of Common Stock included in the Units and issuable upon exercise of the
warrants included in the Units and the options.
Pursuant to the Company's Sponsored Research Agreement with Princeton
University, the Company is required to pay Princeton University approximately
two remaining equal installments of $173,687 ending May 1, 1997. The Company
anticipates, based on management's internal forecasts and assumptions relating
to its operations (including assumptions regarding working capital requirements
of the Company, the progress of research and development, the availability and
amount of other sources of funding available to Princeton University for
research relating to the OLED technology and the timing and costs associated
with the preparation, filing and prosecution of patent applications and the
enforcement of intellectual property rights) that it has sufficient cash to meet
its obligations for at least the current fiscal year. Substantial additional
funds will be required thereafter for the
10
research, development and commercialization of OLED technology, obtaining
and maintaining intellectual property rights, working capital and other
purposes, the timing and amount of which is difficult to ascertain. There are no
assurances that additional funds will be available when needed, or if available,
on commercially reasonable terms.
ITEM 7. FINANCIAL STATEMENTS WITHIN THE 10K-SB
Incorporated by reference from the financial statements and notes thereto
of the Company which are attached hereto beginning on page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Information with respect to this item is set forth in the Company's
definitive Proxy Statement (the "Proxy Statement") to be filed with the
Securities and Exchange Commission for the Annual Meeting of Shareholders to be
held on May 20, 1997, under the headings "Nominees for Election as Directors"
and "Compliance with Section 16(a) of the Exchange Act" and is incorporated
herein by reference. Information regarding the Company's executive officers is
included in Part I on page 8 herein.
ITEM 10. EXECUTIVE COMPENSATION
Information with respect to this item is set forth in the Proxy Statement
under the heading "Executive Management Compensation" and is incorporated herein
by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to the ownership of securities of the Company by
certain persons is set forth in the Proxy Statement under the heading "Principal
Shareholders" and is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to transactions with management and others is set
forth in the Proxy Statement under the heading "Certain Transactions," and is
incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
11
<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description Number
------ ----------- ------
3.1 Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
4.1 Specimen stock certificate representing the
Common Stock.
4.2 Specimen warrant certificate representing the
Warrants.
4.3 Form of Public Warrant Agreement.
4.4 Form of Underwriter's Warrant Agreement.
4.5 Statement of Designations and Preferences of
Series A Non-Convertible Preferred Stock.
10.1 License Agreement dated August 1, 1994
between The Trustees of Princeton University
and American Biomimetics Corporation.
10.2 Amendment to License Agreement (August 1,
1994) dated April 11, 1995 between the
Trustees of Princeton University and American
Biomimetics Corporation.
10.3 Sponsored Research Agreement dated August 1,
1994 between the Trustees of Princeton
University and American Biomimetics
Corporation.
10.4 Letter Amendment dated May 5, 1995, between
the Trustees of Princeton University and
American Biomimetics Corporation.
10.5 Amendment to Sponsored Research Agreement
(August 1, 1994) dated April 18, 1995 between
the Trustees of Princeton University and
American Biomimetics Corporation.
10.6 Technology Transfer Agreement dated June 22,
1995 between American Biomimetics Corporation
and Universal Display Corporation.
10.7 Assignment and Assumption of License dated
June 22, 1995 between American Biomimetics
Corporation and Universal Display
Corporation.
10.8 Sublicense Agreement and Option dated June
22, 1995 between American Biomimetics
Corporation and Universal Display
Corporation.
10.9 Assignment and Assumption of Agreement dated
August 1, 1995 between the Trustees of
Princeton University and the University of
Southern California.
10.10 Subcontract No. 341-4014-1 dated August 16,
1995 between the Trustees of Princeton
University and the University of Southern
California.
10.11 Assignment of 1994 Sponsored Research
Agreement dated November 1, 1995 between
American Biomimetics Corporation and
Universal Display Corporation.
10.12 Stock Option Agreement dated as of June 23,
1995 between Universal Display Corporation
and Thomas D. Hays, III.
12
<PAGE>
10.13 Stock Option Agreement dated as of June 23,
1995 between Universal Display Corporation
and Harvey Nachman.
10.14 Registration Rights Agreement dated as of
June 23, 1995 between Universal Display
Corporation and Thomas D. Hays, III.
10.15 Registration Rights Agreement dated as of
June 23, 1995 between Universal Display
Corporation and Harvey Nachman.
10.16 Form of Registration Rights Agreement
between Universal Display Corporation and
Certain Subscribers to Purchase Common Stock
of Universal Display Corporation.
10.17 Form of Stock Option Agreement dated as of
June 23, 1995 between Universal Display
Corporation and Sidney D. Rosenblatt.
10.18 1992 Stock Option Plan.
10.19 Form of 1995 Stock Option Plan .
10.20 Employment Agreement dated as of November 1,
1995 between Universal Display Corporation
and Sherwin I. Seligsohn.
10.21 Form of Services Agreement dated as of
December 1, 1995 between Universal Display
Corporation and Dean L. Ledger.
10.22 Form of Stock Option Agreement dated as of
June 23, 1995 between Universal Display
Corporation and Sidney D. Rosenblatt.
10.23 Form of Stock Option Agreement dated as of
September 1, 1995 between Universal Display
Corporation and Stephen R. Forrest.
10.24 Form of Stock Option Agreement dated as of
September 1, 1995 between Universal Display
Corporation and Mark E. Thompson.
10.25 Form of Stock Option Agreement dated as of
September 1, 1995 between Universal Display
Corporation and Paul E. Burrows.
10.26 License Agreement dated January 26, 1996
between Universal Display Corporation and
University of Southern California.
10.27 Letter Agreement dated September 20, 1995
Agreeing to a Royalty Rate between the
Trustees of Princeton University and
Universal Display Corporation.
10.28 Agreement and Plan of Reorganization dated
as of April 6, 1995 between Enzymatics, Inc.,
Enzymatics Merger Subsidiary, Inc. and
Universal Display Corporation.
10.29 Form of Consulting Agreement between the
Universal Display Corporation and Whale
Securities Co., L.P.
10.30* Warrant Agreement dated April 25, 1996
between the Company and Steven V. Abramson
10.31* Warrant Agreement dated April 25, 1996
between the Company and Sherwin I. Seligsohn
13
<PAGE>
10.32* Warrant Agreement dated April 25, 1996
between the Company and Dean L. Ledger
10.33* Warrant Agreement dated April 25, 1996
between the Company and Sidney D. Rosenblatt
11* Statement Regarding Computation of Net Loss
Per Share.
21 Subsidiaries of the Registrant.
- - ------------
All Exhibits Previously Filed, except those marked by *.
Note: Any of the exhibits listed in the foregoing index not included with
this Annual Report on Form 10-K may be obtained without charge by writing to Mr.
Sidney D. Rosenblatt, Corporate Secretary, Universal Display Corporation, Three
Bala Plaza, Suite 104 East, Bala Cynwyd, Pennsylvania 19004.
(b) No reports were filed on Form 8-K.
14
<PAGE>
UNIVERSAL DISPLAY CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange
Act of 1934, Universal Display Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized:
UNIVERSAL DISPLAY CORPORATION
By: /s/ SHERWIN I. SELIGSOHN
-----------------------------
Sherwin I. Seligsohn
Chairman of the Board and
Chief Executive Officer
Date: March 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ SHERWIN I. SELIGSOHN Chairman of Board and Chief March 26, 1997
- - ---------------------------- Executive Officer
Sherwin I. Seligsohn
/s/ STEVEN V. ABRAMSON President, Chief Operating Officer March 26, 1997
- - ---------------------------- and Director
Steven V. Abramson
/s/ SIDNEY D. ROSENBLATT Executive Vice President, Chief March 26, 1997
- - ---------------------------- Financial Officer, Treasurer,
Sidney D. Rosenblatt Secretary and Director
/s/ DEAN L. LEDGER Executive Vice President and Director March 26, 1997
- - ----------------------------
Dean L. Ledger
/s/ CAMILLE NAFFAH Director March 26, 1997
- - ----------------------------
Camille Naffah
</TABLE>
15
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
INDEX TO FINANCIAL STATEMENTS
Consolidated Financial Statements of the Company:
Report of Independent Public Accountants F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Shareholders' Equity (Deficit) F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Universal Display Corporation:
We have audited the accompanying consolidated balance sheets of Universal
Display Corporation (a Pennsylvania corporation in the development-stage) and
subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity (deficit) and cash flows for the
years ended December 31, 1996 and 1995, the period from inception (June 17,
1994) to December 31, 1994 and the period from inception (June 17, 1994) to
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Universal Display Corporation and subsidiary as of December 31, 1996 and 1995,
and the results of their operations and their cash flows for the years ended
December 31, 1996 and 1995, the period from inception (June 17, 1994) to
December 31, 1994, and the period from inception (June 17, 1994) to December 31,
1996, in conformity with generally accepted accounting principles.
Philadelphia, PA
March 6, 1997
F-2
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS December 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (See Note 3) $ 638,225 $ 40
Short-term investments (See Note 3) 2,430,000 --
Other current assets 59,091 --
----------- -----------
Total current assets 3,127,316 40
----------- -----------
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $11,955 and $1,029 (See Note 3) 61,512 5,144
DEPOSITS 93,419 --
----------- -----------
Total assets $ 3,282,247 $ 5,184
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 104,306 $ 483,700
Payable to related parties (See Note 7) -- 105,476
----------- -----------
Total current liabilities 104,306 589,176
----------- -----------
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred Stock, par value $0.01 per share,
5,000,000 shares authorized, 200,000 shares
designated
Series A Nonconvertible Preferred
Stock, par value $.01 per share, 200,000 issued
and outstanding (liquidation value of $7.50 per
share or $1,500,000) 2,000 2,000
Common Stock, par value $.01 per share, 25,000,000
shares authorized, 8,937,268 shares issued and
outstanding (see Note 2) 89,373 76,373
Additional paid-in capital 7,939,345 2,421,417
Deficit accumulated during development-stage (4,852,777) (3,083,782)
----------- -----------
Total shareholders' equity (deficit) 3,177,941 (583,992)
----------- -----------
Total liabilities and shareholders' equity (deficit) $ 3,282,247 $ 5,184
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
--------------------------------------------
(a development-stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
Period from Inception Period from Inception
Year Ended Year Ended (June 17, 1994) to (June 17, 1994) to
December 31, 1996 December 31, 1995 December 31, 1994 December 31, 1996
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
OPERATING EXPENSES:
Research and development (See Note 3) $ 948,568 $ 2,073,739 $ -- $ 3,022,307
General and administrative 938,741 998,922 11,121 1,948,784
----------- ----------- ----------- -----------
Total operating expenses 1,887,309 3,072,661 11,121 4,971,091
OTHER INCOME AND EXPENSES:
Interest income 118,314 -- -- 118,314
----------- ----------- ----------- -----------
Total other income and expenses 118,314 -- -- 118,314
----------- ----------- ----------- -----------
NET LOSS $(1,768,995) $(3,072,661) $ 11,121 $(4,852,777)
----------- ----------- ----------- -----------
NET LOSS PER COMMON SHARE $ (0.20) $ (0.38) $ --
----------- ----------- -----------
SHARES USED IN COMPUTING NET LOSS
PER COMMON SHARE 8,739,402 8,145,806 8,145,806
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deficit
Accumulated
Series A Nonconvertible Common Stock Additional During Total
Preferred Stock Paid-In Development Shareholders'
Shares Amount Shares Amount Capital Stage Equity
------ ---------- ---------- --------- ----------- ----- ------------
(Deficit)
---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, INCEPTION - (JUNE 17, 1994) -- $ -- 6,000,000 $ 6,000 $ -- $ -- $ 6,000
Net Loss -- -- -- -- (11,121) (11,121)
--------- ----------- ---------- ---------- ---------- ----------- -----------
--
BALANCE, DECEMBER 31, 1994 -- -- 6,000,000 6,000 -- (11,121) (5,121)
Recapitalization by issuance of
Common Stock to Enzymatics, Inc.
(Note 2) -- -- 523,268 59,233 (243,393) -- (184,160)
Issuance of Common Stock options
to former sole director of
Enzymatics, Inc. to satisfy an
Enzymatics, Inc. liability
(Note 2) -- -- -- -- 140,000 -- 140,000
Issuance of Series A Nonconvertible
Preferred Stock in connection
with assignment of research and
license agreements (Note 2) 200,000 2,000 -- -- 348,000 350,000
Issuance of Common Stock
through private placements, net
of issuance expenses of -- -- 1,114,000 11,140 2,166,860 -- 2,178,000
$50,000 (Note 2)
Issuance of Common
Stock options (Note 6) -- -- -- -- 9,950 -- 9,950
Net loss -- -- -- -- -- (3,072,661) (3,072,661)
--------- ---------- --------- ---------- ---------- ----------- -----------
BALANCE, DECEMBER 31, 1995 200,000 2,000 7,637,268 76,373 2,421,417 (3,083,782) (583,992)
Issuance of Common Stock
in Initial Public Offering
on April 11, 1996 (Note 6) -- -- 1,300,000 13,000 5,492,928 -- 5,505,928
Issuance of Common Stock
warrants (Note 6) -- -- -- -- 25,000 -- 25,000
Net loss -- -- -- -- -- (1,768,995) (1,768,995)
--------- --------- ---------- --------- ---------- ----------- -----------
BALANCE, DECEMBER 31, 1996 200,000 $ 2,000 8,937,268 $89,373 $7,939,345 $(4,852,777) $3,177,941
========= ========== ========== ========= ========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Year Ended Period from Inception Period from Inception
December 31, December 31, (June 17, 1994) to (June 17, 1994) to
1996 1995 December 31, 1994 December 31, 1996
---- ---- ----------------- -----------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,768,995) $(3,072,661) $ (11,121) $(4,852,777)
Depreciation 10,926 1,029 -- 11,955
Issuance of Common Stock options 25,000 9,950 -- 34,950
Adjustments to reconcile net
loss to net cash used in
operating activities
Acquired in-process technology -- 350,000 -- 350,000
(Increase) decrease in assets:
Other current assets (59,091) -- -- (59,091)
Deposits (93,419) -- -- (93,419)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (379,394) 439,540 -- 60,146
Payable to related parties (105,476) 350,355 5,121 250,000
------------ ------- ------------- -----------
Net cash used in operating (2,370,449) (1,921,787) (6,000) (4,298,236)
activities ------------ ----------- ------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- - -------------------------------------
Purchases of equipment (67,294) (6,173) -- (73,467)
Purchases of short-term investments (2,430,000) -- -- (2,430,000)
----------- ----------- ------------- -----------
Net cash used in investing activities (2,497,294) (6,173) -- (2,503,467)
----------- ----------- ------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- - -------------------------------------
Proceeds from issuance of Common Stock 5,505,928 1,928,000 6,000 7,439,928
----------- ----------- ------------- -----------
Net cash provided by financing activities 5,505,928 1,928,000 6,000 7,439,928
INCREASE IN CASH AND CASH EQUIVALENTS: 638,185 40 -- 638,225
- - --------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD: 40 -- -- --
- - --------- ------------- ----------- ------------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD: $ 638,225 $ 40 $ -- 638,225
- - ----------------------------------------- ============= =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND
Universal Display Corporation (the "Company"), a development-stage company, is
engaged in the research and development and commercialization of organic light
emitting diode ("OLED") technology for potential flat panel display
applications.
The Company, formerly known as Enzymatics, Inc. ("Enzymatics"), was incorporated
under the laws of the Commonwealth of Pennsylvania on April 24, 1985 and
commenced its current business activities on August 1, 1994. The New Jersey
corporation formerly known as Universal Display Corporation ("UDC") was
incorporated under the laws of the State of New Jersey on June 17, 1994. See
Note 2.
Research and development of the OLED technology is being conducted at the
Advanced Technology Center for Photonics and Optoelectronic Materials at
Princeton University and at the University of Southern California ("USC") (on a
subcontract basis with Princeton University), pursuant to a Sponsored Research
Agreement dated August 1, 1994, as amended (the "1994 Sponsored Research
Agreement"), originally between the Trustees of Princeton University ("Princeton
University") and American Biomimetics Corporation ("ABC"), a privately held
Pennsylvania corporation and affiliate of the Company. The 1994 Sponsored
Research Agreement, assigned to the Company by ABC in November 1995, expires on
July 31, 1997. Pursuant to a license agreement dated August 1, 1994 (the "1994
License Agreement") between Princeton University and ABC, assigned to the
Company by ABC in June 1995, the Company has a worldwide exclusive license to
manufacture and market products based on Princeton University's pending patent
application relating to the OLED technology and the right to obtain a similar
license to inventions conceived or discovered under the 1994 Sponsored Research
Agreement. The Company's Chairman and Chief Executive Officer holds similar
positions in ABC, a company which is controlled by members of his family. See
Notes 2, 4, and 7.
The Company is a development-stage entity with no significant operating activity
to date. Expenses incurred have primarily been in connection with research and
development funding, obtaining financing and administrative activities. The
developmental nature of the activities is such that significant inherent risks
exist in the Company's operations. To the extent that Princeton University's
research efforts do not result in the development of commercially viable
applications for the OLED technology, the Company will not have any meaningful
operations. Even if a product incorporating the OLED technology is developed and
introduced into the marketplace, additional time and funding may be necessary
before significant revenues are realized. In addition, if a commercial sale is
not made in the required time period, as defined, Princeton University may
terminate the 1994 Sponsored Research and License Agreements. Completion of the
commercialization of the Company's technology will require funds substantially
greater than the proceeds of the April 11, 1996 public offering. There is no
assurance that such financing will be available to the Company when needed, on
commercially reasonable terms or at all. Notwithstanding the risks discussed
above, the Company anticipates, based on management's internal forecasts and
assumptions relating to its operations, that it has sufficient cash to meet its
obligations for at least the current fiscal year. Also, while the Company funds
the OLED technology research, the scope of and technical aspects of the research
and the resources and efforts directed to such research is subject to the
control of Princeton University and the principal investigators. Accordingly,
the Company's success is dependent on the efforts of Princeton University and
the principal investigators. The 1994 Sponsored Research Agreement provides that
if certain of the principal investigators are unavailable to continue to serve
as a principal investigator, because such person is no longer associated with
Princeton University or USC or otherwise, and a successor acceptable to both the
Company and Princeton University is not available, the 1994 Sponsored Research
Agreement will terminate. Although the 1994 Sponsored Research Agreement expires
in July 1997 the Company believes that the agreement will be extended beyond
that date. See Note 4.
2. STOCK TRANSACTIONS, MERGER, RECAPITALIZATION AND PUBLIC OFFERING
On June 22, 1995, a wholly-owned subsidiary of the Company consummated an
Agreement and Plan of Reorganization ("Merger Agreement") with a New Jersey
corporation formerly known as Universal Display Corporation (herein referred to
as "UDC"). At the time of the merger, UDC was engaged in the business which is
currently being conducted by the Company. Prior to the merger, the Company was
known as Enzymatics, an inactive Pennsylvania corporation, and was engaged in a
business separate from and unrelated to that of UDC. Enzymatics had incurred
significant losses since its inception in 1985 and, notwithstanding a public
offering, failed to find significant alternative sources of financing to enable
it to continue its operations on any scale. In June 1994, the shareholders of
Enzymatics approved the sale of substantially all of its assets to a third
party. Management of UDC concluded that merging with a former publicly traded
company, and acquiring access to its shareholder base, would facilitate its
ability to raise additional capital in the private or public markets. Management
of UDC determined that such additional capital would be necessary to fulfill its
financial obligations under the Transfer Agreement (as herein defined) pursuant
to which it obtained certain rights and obligations related to the OLED
technology, obtain funds to commercialize the OLED technology, fund the
acquisition of additional intellectual property rights useful to the OLED
technology and to fund working capital. As of June 22, 1995, Enzymatics had
F-7
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
523,268 shares issued and outstanding (after giving effect to a reverse stock
split of 10.9672) which were not actively traded. Pursuant to the Merger
Agreement, the former Enzymatics shareholders received 523,268 shares of the
merged entity's Common Stock. Additionally, Nachman, Hays & Associates (NHA), a
consulting firm, received options to purchase 84,234 shares of the merged
entity's Common Stock at an exercise price of $.29 per share (see Note 6) as
payment of NHA's consulting services in connection with the wind-down of
Enzymatics. These options were issued to satisfy a liability which was reflected
on the balance sheet of Enzymatics on the date of the merger. The sole director
of Enzymatics, is also a principal of NHA.
The merger was treated, for accounting purposes, as a recapitalization of UDC
whereby UDC issued 523,268 shares of Common Stock to the Enzymatics shareholders
and assumed Enzymatics shareholders' deficit of $184,160. The assets and
liabilities of both companies have been recorded at their historical book values
in these financial statements. The assets of Enzymatics consisted of cash and
its liabilities consisted of payables related to the merger and other
professional fees.
Upon consummation of the merger, UDC's shareholders collectively owned
approximately 92% of the outstanding shares of the merged entity, with the
former Enzymatics shareholders retaining the balance of approximately 8%. UDC
was the surviving corporation in the merger, changed its name to UDC, Inc., and,
as a result of the merger, became a wholly-owned subsidiary of Enzymatics. At
the effective time of the merger, Enzymatics changed its name to Universal
Display Corporation. Universal Display Corporation and its wholly owned
subsidiary, UDC, Inc., are herein referred to collectively as the "Company."
Contemporaneous with the merger, the Company and ABC entered into a Technology
Transfer Agreement dated June 22, 1995 (the "Transfer Agreement") pursuant to
which, among other things, ABC assigned the 1994 License Agreement to the
Company, and granted to the Company an exclusive worldwide sublicense to patents
and other intellectual property rights to display technology developed under a
Sponsored Research Agreement dated October 22, 1993 between ABC and Princeton
University (the "1993 Sponsored Research Agreement") in exchange of (i)
reimbursement of ABC's scheduled payments and expenses previously made to
Princeton University under the 1994 Sponsored Research Agreement in the amount
of $674,000 and a payment of $500,000 for the sublicense under the 1993
Sponsored Research Agreement which were charged to research and development
expense (see Notes 3 and 4); (ii) the Company's assumption of ABC's obligation
to pay all future scheduled payments under the 1994 Sponsored Research
Agreement, which were approximately $1,610,000, plus expenses related thereto
estimated to be $500,000 for a total of $2,110,000; and (iii) 200,000 shares of
the Company's Series A Nonconvertible Preferred Stock (see Notes 3, and 6) with
a fair value of $350,000.
Also, contemporaneous with the merger, the Company sold 781,500 units ("Units")
at a price of $2.00 per Unit, in a private placement which generated proceeds of
$1,513,000, which is net of offering expenses in the amount of $50,000. Each
Unit consisted of one share of Common Stock and one warrant to purchase one
share of Common Stock at an exercise price of $3.50 per share. Additionally,
125,000 Units with a fair value of $250,000, based upon the price of the Units,
were transferred to a non-affiliate debt holder of ABC to satisfy $250,000 of
ABC's outstanding debt. Therefore, the Company had a receivable of this amount
from ABC. Accordingly, ABC netted this $250,000 receivable against the Company's
payable to related parties account as shown on the accompanying Consolidated
Balance Sheets (see Note 7). In addition, on July 17, 1995, the Company sold an
additional 207,500 Units which generated gross proceeds of $415,000.
On April 11, 1996, the Company consummated a public offering of 1,300,000 shares
of Common Stock at a price of $5.00 per share and redeemable warrants to
purchase 1,495,000 shares of Common Stock at an exercise price of $3.50 per
share, at a price of $.10 per warrant. The Company received net cash proceeds of
$5,282,665 from the public offering (excluding $223,263 representing a portion
of the offering expenses previously charged to general and administration
expenses).
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of Universal Display
Corporation and its wholly-owned subsidiary, UDC, Inc. (see Note 2). All
significant intercompany transactions and accounts have been eliminated.
F-8
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Management's Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Cash, Cash Equivalents and Short-Term Investments
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Investments
are carried at market value, and at December 31, 1996, are classified as
short-term investments. At December 31, 1996, all of the Company's investments
are classified as available for sale pursuant to Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," (SFAS 115). Therefore, any unrealized holding gains or
losses should be presented as a separate component of shareholders' equity. At
December 31, 1996, unrealized holding gains or losses were not material. The
gross proceeds from sales and maturities of investments were $575,000 for the
year ended December 31, 1996. Gross realized gains and losses for the year ended
December 31, 1996, were not material. For the purpose of determining gross
realized gains and losses, the cost of securities sold is based upon specific
identification.
Cash, cash equivalents and short-term investments consisted of the following:
December 31
-----------
Cash and cash equivalents: 1996 1995
---- ----
Money market funds and demand accounts $ 638.225 $ 40
=========== =========
Short-term investments:
Certificates of deposits 1,830,000
Corporate bonds 600,000 --
----------- ---------
$ 2,430,000 $ --
=========== =========
Property and Equipment
Property and equipment are stated at cost and depreciated on a straight-line
basis over 3 years.
Net Loss Per Common Share
Net loss per Common share was calculated by dividing the net loss by the
weighted average number of Common shares outstanding for the respective periods.
Pursuant to the requirements of the Securities and Exchange Commission, Common
stock issued by the Company during the twelve months immediately preceding the
initial public offering has been included in the calculation of shares used in
computing net loss per Common share as if they were outstanding for all periods
presented. In addition, options and warrants to purchase Common stock issued by
the Company during the twelve months immediately preceding the public offering
have been included in the calculation of shares used in computing net loss per
Common share as if they were outstanding for all periods presented (using the
treasury stock method and an initial public offering price of $5.00 per share).
Excluded from the calculation were options granted pursuant to the Enzymatics
1992 Stock Option Plan (see Note 6) as these options have exercise prices
significantly higher than the Initial Public Offering price per share.
Research and Development
Expenditures for research and development are charged to operations as incurred.
Research and development expenses consist of the following:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Payments made to Princeton University under the 1994
Sponsored Research Agreement (Note 2) $713,815 $549,739
</TABLE>
F-9
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
<TABLE>
<CAPTION>
<S> <C> <C>
Patent application expenses 234,753 ---
Reimbursement of ABC payments made to Princeton University --- 674,000
under the 1994 Sponsored Research Agreement (Note 2)
Payment made to ABC for sublicense under the 1993 Sponsored --- 500,000
Research Agreement (Note 2) accounted for as acquired
in-process technology
Issuance of 200,000 shares of the Company's Series A --- 350,000
Nonconvertible Preferred Stock to ABC in connection with the ----- -------
Transfer Agreement (see Notes 2 and 6) accounted for as
in-process technology
$948,568 $2,073,739
======== ==========
</TABLE>
The 200,000 shares of the Company's Series A Nonconvertible Preferred Stock were
valued at $1.75 per share which was based upon an independent appraisal.
Income Taxes
The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes". SFAS No. 109 requires the liability method of
accounting for deferred income taxes. Deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities. Deferred tax assets or liabilities at the end of each
period are determined using the tax rate expected to be in effect when taxes are
actually paid or recovered.
4. SPONSORED RESEARCH AGREEMENT WITH PRINCETON UNIVERSITY
On August 1, 1994, ABC entered into the 1994 Sponsored Research Agreement with
Princeton University which was transferred to the Company in 1995, to fund and
develop the OLED technology over a three-year period. Research is also being
performed at USC on a subcontract basis with Princeton University (See Note 2).
The Company has an exclusive worldwide license to manufacture and market
products based on Princeton University's pending patent applications relating to
the OLED technology and the right to obtain a similar license to inventions
conceived or discovered under the 1994 Sponsored Research Agreement. In certain
circumstances where the Company sublicenses the OLED technology (except to
affiliates), the Company must pay Princeton University one-half of all amounts
received by the Company. The Company is required to pay Princeton University a
royalty in the amount of 3% of the Company's net sales of products utilizing the
OLED technology. These royalty rates are subject to upward adjustments under
certain conditions. In connection with the 1994 Sponsored Research Agreement,
the Company is obligated to make certain payments to Princeton University. The
1994 Sponsored Research Agreement expires on July 31, 1997 and the minimum
remaining payments under this agreement as of December 31, 1996 are as follows:
F-10
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
February 1, 1997 $ 173,687
May 1, 1997 173,687
----------
$ 347,374
==========
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following:
December 31, 1996 December 31, 1995
----------------- -----------------
Accrued professional fees $ 65,076 $ 401,457
Other 39,230 82,243
------ ------
$ 104,306 $ 483,700
======= =======
6. SERIES A NONCONVERTIBLE PREFERRED STOCK, STOCK OPTIONS AND WARRANTS:
Series A Nonconvertible Preferred Stock
In 1995, the Company issued 200,000 shares of Series A Nonconvertible Preferred
Stock ("Series A") to ABC (See Notes 2 and 3), which has a liquidation value of
$7.50 per share. Series A holders, as a single class, have the right to elect
two of the Company's Board of Directors. Each Series A share is entitled to one
vote. The Series A holders are not entitled to dividends.
Stock Options
Enzymatics 1992 Stock Option Plan
The stock options granted prior to the merger by Enzymatics under the 1992 Stock
Option Plan and which have been assumed by the Company and after giving effect
to the reverse stock split, were adjusted to options to purchase 20,538 shares
of Common Stock at exercise prices ranging from $11.74 to $29.61 per share. Such
options are currently exercisable. These options expire on December 31, 1998.
1995 Stock Option Plan
In 1995, the directors of the Company adopted the 1995 Stock Option Plan ("1995
Plan"), under which a maximum of 500,000 options may be granted at prices not
less than 100% of the fair market value of the Common Stock on the date of grant
as determined by the Board of Directors . The 1995 Plan provides for the
granting of both incentive and nonqualified stock options to employees,
officers, directors and consultants of the Company. The stock options are
exercisable over a period determined by the Board of Directors, but no longer
than ten years after the grant date. The 1995 Plan is subject to shareholder
approval.
In June 1995, the Company granted options to purchase 70,000 shares of Common
Stock to an officer of the Company at an exercise prices of $2.00 per share,
which approximated the fair market value of the Common Stock at the grant date.
These options vest as follows: 20,000 options vested immediately upon grant with
the remaining 50,000 options vesting in equal amounts over three years.
Accordingly, as of December 31, 1996, 36,667 options were exercisable. These
options expire in 2005. In addition, in June 1995, the Company granted options
to purchase 5,000 shares of Common Stock to the same officer of the Company at
an exercise price of $.01 per share. These options vested on the grant date. The
Company recorded a charge of $9,950, which represents the difference between the
deemed value of the Common Stock for accounting purposes and the exercise price
of the options at the grant date. This charge is included in general and
F-11
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
administrative expenses in the accompanying Consolidated Statements of
Operations. These options expire in 2005.
In 1995, the Company granted nonqualified stock options to three principal
investigators who are conducting research under the 1994 Sponsored Research
Agreement and the 1993 Sponsored Research Agreement. The Company granted options
to purchase an aggregate of 240,000 shares of Common Stock to the three
principal investigators at an exercise price of $4.00 per share, which
approximated the fair market value of the Common Stock at the grant date. These
options vest as follows: 33% at the grant date with the remaining 67% vesting
over two years. Accordingly, as of December 31, 1996, approximately 160,000
options were exercisable. These options expire in 2005.
In 1996, the Company granted non-qualified stock options to two employees and
one consultant. The company granted options to purchase an aggregate of 30,000
shares of Common Stock at an exercise price of $4.12 per share, which
approximated the fair market value of the Common Stock at the date of grant.
These options vest as follows: 10,000 shares at the grant date with the
remaining 20,000 shares vesting over 5 years. As of December 31, 1996,
approximately 10,000 shares were exercisable. These options expire in 2006.
Other Options
In connection with NHA's services relative to consummation of the merger
discussed in Note 2, in June 1995, the Company granted options to purchase
84,234 shares of Common Stock at an exercise price of $.29 per share to NHA.
These options were used to satisfy a liability reflected on the balance sheet of
Enzymatics on the date of the merger. These options vested 100% upon grant.
Accordingly, as of December 31, 1996, 84,234 options were exercisable. These
options expire in 2005.
The following table summarizes all stock option activity:
<TABLE>
<CAPTION>
1996 1995
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ ---------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 419,772 $3.69 20,538 $20.67
Granted 30,000 $4.12 399,234 $2.82
Outstanding at end of year 449,772 $3.72 419,772 $3.69
------- ----- ------- -----
Exercisable at end of year 316,439 $3.80 208,772 $3.86
------- ----- ------- -----
Available for future grant 155,000 185,000
------- -------
Weighted average fair value of $3.18 $2.54
options granted ===== =====
</TABLE>
The weighted average remaining contractual life for options outstanding at
December 31, 1996 and 1995 was 8 years and 9 years, respectively.
Common Stock Warrants
In connection with the June 22, 1995 private placement and the July 17, 1995
private placement (See Note 2), the Company issued 906,500 warrants and 207,500
warrants, respectively, each warrant entitles the holder to purchase one share
of Common Stock at an exercise price of $3.50 per share. The expiration date of
these warrants was extended to July 17, 1997.
On April 11, 1996, the Company consummated a public offering of 1,300,000 shares
of Common Stock at a price of $5.00 per share and redeemable warrants to
purchase 1,495,000 shares of Common Stock at an exercise price of $3.50 per
share. In connection with the public offering, the Company issued warrants to
its underwriter to purchase up to 130,000 shares of Common Stock at an exercise
price of $8.25 per share and warrants to purchase an additional 130,000 shares
of Common Stock at an exercise price of $3.675 per share. In April 1996, the
Company issued warrants to third parties to purchase up to 578,000 shares of
Common Stock at an exercise price of $4.125 per share. These warrants expire in
2006.
F-12
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
In August 1996, the Company granted warrants to purchase 20,000 shares of Common
Stock to an individual in exchange for consulting services. These warrants have
an exercise price of $6.00 per share, vest immediately, and expire in August
2006. The Company recorded a charge of $25,000, which represents the value of
the warrant as determined in accordance with Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation". This charge is
included in general and administrative expenses in the accompanying Consolidated
Statements of Operations.
In April 1996 the Company granted warrants to four employees and one consultant
to purchase 925,000 shares of the Company's Common Stock at an exercise price of
$4.125 per share, which approximated the fair market value of the Common Stock
at the date of grant. These warrants vest at 25% at the date of grant and the
remaining 75% vesting over 5 years, provided these employees are employed by the
Company on the vesting date. These warrants expire in 2006. The Company accounts
for these warrants as stock-based compensation.
Pro Forma Disclosure for Stock-Based Compensation
The Company accounts for its employee stock-based compensation plans under APB
Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no
compensation expense has been recognized other than the $9,950 charge relating
to 5,000 options granted to an officer in the Company in 1995. In 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS
123 establishes a fair value based method of accounting for stock-based
compensation plans. SFAS 123 requires that an employer's financial statements
include certain disclosures about stock-based employee compensation arrangements
regardless of the method used to account for the plan. Had the Company
recognized compensation cost for its stock based compensation plans consistent
with the provisions of SFAS 123, the Company's net loss and net loss per share
would have been increased to the following pro forma amounts:
1996 1995
---- ----
Net Loss:
As Reported $(1,768,995) $(3,072,661)
Pro Forma (2,432,979) (3,373,918)
Net Loss per Share:
As Reported $(.20) $(.38)
Pro Forma (.28) (.41)
The fair value of each option or warrant granted is estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions used for grants in 1996 and 1995, respectively: risk-free interest
rates of 6.6% and 5.9% to 6.1%, expected dividend yields zero for each year,
expected volatility of 80% for each year and expected lives of 7 years for each
year.
Because the SFAS 123 method of accounting has not been applied to options and
warrants granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
7. RELATED PARTY TRANSACTIONS
ABC paid professional fees of $16,154, as well as certain other administrative
expenses of $138,019 on behalf of the Company from November 1994 through
December 1995. As of December 31, 1995, the Company had reimbursed ABC for
$63,245 of such expenses. Accordingly, the net effect of these transactions is
shown as a payable to related parties in the accompanying Consolidated Balance
Sheets. ABC provided the Company with certain administrative services, however
there was no charge from ABC to the Company for these services for the period
from inception (June 17, 1994) to December 31, 1994 and for the year ended
December 31, 1995.
As discussed in Note 2, the Company had a payable to ABC of $1,174,000 (due to
the Transfer Agreement) and a receivable from ABC of $250,000 (see Note 2). As
of December 31, 1995, the Company had reimbursed ABC the net amount due of
$924,000.
F-13
<PAGE>
UNIVERSAL DISPLAY CORPORATION AND SUBSIDIARY
(a development-stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
8. COMMITMENTS
Lease Commitments
The Company has entered into several operating lease arrangements in 1996 for
office space and office equipment. Total rent expense was $37,408 for the year
ended December 31, 1996. Minimum future rental payments for operating leases as
of December 31, 1996 are as follows:
Year Amount
1997 $75,084
1998 $76,404
1999 $72,238
2000 $69,540
2001 $35,049
$328,315
9. INCOME TAXES
The components of income taxes are as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Current $ -- $ --
Deferred (601,344) (966,152)
(601,344) (966,152)
Increase in valuation allowance provision 601,344 966,152
---------------- ----------------
$ -- $ --
================ ================
</TABLE>
The difference between the Company's federal statutory income tax rate and its
effective income tax rate is primarily due to non-deductible expenses and the
valuation allowance.
As of December 31, 1996, the Company had net operating loss carryforwards of
approximately $2,200,000, which will begin to expire in 2010. The net operating
loss carryforwards differ from the accumulated deficit principally due to the
timing of the recognition of certain expenses. In accordance with the Tax Reform
Act of 1986, the net operating loss carryforwards could be subject to certain
limitations.
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Gross deferred tax assets
Net operating loss carryforwards $ 747,961 $ 454,569
Capitalized start-up costs 590,458 279,786
Capitalized technology license 170,000 170,000
Other 59,077 61,797
------ ------
1,567,496 966,152
Valuation allowance (1,567,496) (966,152)
Net deferred tax assets $ -- $ --
================= ===============
</TABLE>
A valuation allowance was established for 100% of the net deferred tax asset, as
realization of the tax benefits is not assured.
WARRANT HOLDER: Steven V. Abramson
1499 Flat Rock Road
Narberth, PA 19072
NUMBER OF WARRANT SHARES: 200,000
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION, AND MAY NOT BE
DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT
OF THE COMPANY TO SUCH PROPOSED SALE, PLEDGE, TRANSFER OR ENCUMBRANCE AND TO THE
PROPOSED ASSIGNEE, PLEDGEE OR TRANSFEREE.
No. WA96-126
UNIVERSAL DISPLAY CORPORATION
Common Stock Purchase Warrant
Universal Display Corporation, a Pennsylvania corporation, for value
received, hereby grants to the undersigned holder, its successors and permitted
assigns (collectively, the "Holder"), this right (the "Warrant"), subject to the
terms set forth below, to purchase at the purchase price per share as defined in
Section 2.1 below (the "Purchase Price"), up to that number of Shares (defined
below) set forth on the signature page of the Subscription Agreement attached
hereto (the "Signature Page"), subject to adjustment as herein provided (such
total number of Shares that may be purchased hereunder being referred to herein
as the "Warrant Shares").
1. Definitions. As used herein, the following terms, unless the context
otherwise requires, have the following respective meanings:
1.1. "Company" shall include Universal Display Corporation, a
Pennsylvania corporation, and, unless otherwise noted to the contrary, any
company which shall succeed to, by merger, consolidation or similar arrangement
of the Company's and assume the obligations of Universal Display Corporation
hereunder.
1.2. "Other Securities" refers to any stock (other than the Shares) and
other securities of the Company or any other person (corporate or otherwise)
that the Holder at any time shall be entitled to receive, or shall have
received, on the exercise of this Warrant, in lieu of or in addition to Shares,
or which at any time shall be issuable or shall have been issued in exchange for
or in replacement of Shares.
1.3. "Shares" means (a) the Company's Common Stock, as authorized on
the date of this Warrant and (b) if the class of securities described in (a)
shall cease to be issued and outstanding, securities of the same class issued in
exchange for or in respect of the securities described in (a) pursuant to a plan
of merger, consolidation, recapitalization or reorganization, the sale of
substantially all of the Company's assets or a similar transaction.
<PAGE>
1.4. "Registrable Common Stock" means the number of shares of common
stock underlying the warrants issued hereunder. As to any particular Registrable
Common Stock, such securities will cease to be Registrable Common Stock when
they (a) have been effectively registered under the Securities Act of 1933, as
amended (the "Act") and obtained or disposed of in accordance with the
registration statement covering them, (b) have been transferred pursuant to Rule
144 under the Act (or any similar provision then in force), or (c) are no longer
subject to restrictions under transfer pursuant to the provisions of Rule 144(k)
under the Act.
1.5. "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges on which similar
securities issued by the Company are then listed, and fees and disbursements of
counsel for the Company (but not of counsel to the Shareholder) and of all
independent certified public accountants, underwriters (other than Underwriting
Commissions) and other persons retained by the Company.
1.6. "Underwriting Commissions" means all underwriting discounts or
commissions relating to the sale of securities of the Company.
2. Exercise of Warrant.
2.1. Purchase Price. The Warrant may be exercised, subject to the terms
specified herein, at the purchase price of $4.18 per Share (the "Purchase
Price").
2.2. Exercise Period. The Warrant may be exercised (the "Exercise
Period") at any time for a period of ten years from April 25, 1996.
2.3. Vesting. The shares subject to this warrant vest as follows:
50,000 shares immediately and 30,000 shares in the next five anniversary dates
thereof, provided that Holder must be an employee or consultant of the Company
on the anniversary date, or such shares shall not be vested, although the shares
already vested shall remain vested for the term of the warrant.
2.4. Exercise in Full. Subject to the limitations stated above, this
Warrant may be exercised in full at the option of the Holder by surrender of
this Warrant, with the form of subscription at the end hereof duly executed by
the Holder, to the Company at its principal office in the United States,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
Shares for which this Warrant may be exercised by the Purchase Price.
2.5. Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in subsection
2.4 along with payment in the amount determined by multiplying (a) the number of
Shares designated by the holder in the subscription at the end hereof by (b) the
Purchase Price. On any such partial exercise, the Company at its expense will
forthwith issue and deliver to or upon the order of the Holder a new Warrant or
Warrants of like tenor, in the name of the Holder or as the Holder (upon payment
by the Holder of any applicable transfer taxes) may request, calling in the
aggregate on the face or faces thereof for the number of Shares for which such
Warrant or Warrants may still be exercised.
<PAGE>
3. Delivery of Share Certificates on Exercise.
3.1. As soon as practicable after the exercise of this Warrant in full
or in part, the Company, at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to
the Holder, or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of
fully paid and non-assessable Shares (or Other Securities) to which the Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which the Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share, together with any
other stock or other securities and property (including cash, where applicable)
to which the Holder is entitled upon such exercise pursuant to Section 2 or
otherwise.
4. Covenants as to Shares.
4.1. Issuance of Shares upon Exercise. All Shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be validly issued, fully paid and non-assessable and free from all taxes, liens
and charges with respect to the issue thereof. The Company will at all times
have authorized and reserved, free from preemptive rights, a sufficient number
of its Shares to provide for the exercise of the rights represented by this
Warrant.
4.2 Restrictions on Transfer. Holder represents to the company that it
is acquiring the Warrants for its own investment account and without a view to
the subsequent public distribution of the Warrants or Shares otherwise than
pursuant to an effective registration statement under the Securities Act. Each
Warrant and each certificate for Shares issued to the Holder and any subsequent
holder that have not been sold to the public pursuant to an effective
registration statement under the Securities Act or as to which the restrictions
on transfer have not been removed as hereinafter provided, shall bear a
restrictive legend reciting that the same have not been registered pursuant to
the Securities Act and may not be transferred in the absence of an effective
registration statement under the Securities Act, the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and shall be
accompanied by an opinion of counsel experienced in federal securities laws
matters and reasonably acceptable to the company and its counsel to the effect
that the proposed transfer may be effected without registration under the
Securities Act, whereupon, the holder of such Registrable Common Stock shall be
entitled to transfer such securities in accordance with the terms of its notice
and such opinion. Restrictions imposed under this Section 4 upon the
transferability of the Warrants or of Shares shall cease when:
(a) a registration statement covering such Shares becomes effective
under the Securities Act, or
(b) the Company receives from the holder thereof an opinion of counsel
experienced in federal securities laws matters, which counsel shall be
reasonably acceptable to the Company, that such restrictions are no longer
required in order to insure compliance with the Securities Act.
When such restrictions terminate, the Company shall, or shall instruct the
Warrant Agent to, issue new securities in the name of the holder not bearing the
legends required by this Section 4.
<PAGE>
5. Adjustment for Reorganization, Consolidation or Merger.
5.1. Reorganization, Consolidation or Merger. If at any time or from
time to time, the Company shall (a) effect a plan of merger, consolidation,
recapitalization or reorganization or similar transaction with a corporation
(the "Acquiror") whereby the shareholders of the Company will exchange their
shares of the Company for the shares of the parent corporation of the Acquiror,
or (b) transfer all or substantially all of its properties or assets to any
other person, under any plan or arrangement contemplating the dissolution of the
Company (which along with any transactions set forth in (a) hereof shall be an
"Extraordinary Transaction"), then, in each such case, the holder of this
Warrant, on the exercise hereof as provided in Section 2 at any time after the
completion of any Extraordinary Transaction shall receive, such Shares or Other
Securities and property (including cash) to which such holder would have been
entitled in any Extraordinary Transaction as if such holder had so exercised
this Warrant, immediately prior thereto.
5.2. Dissolution. If the Company dissolves following the transfer of
all or substantially all of its properties or assets, the Company, prior to such
dissolution, shall at its expense deliver or cause to be delivered to the Holder
the stock and other securities and property (including cash, where applicable)
receivable by the Holder after the effective date of such dissolution pursuant
to this Section 5.
5.3. Continuation of Terms. Upon any Extraordinary Transaction, this
Warrant shall continue in full force and effect and the terms hereof shall be
applicable to the securities, Shares and Other Securities and property
receivable on the exercise of this Warrant after the consummation of
reorganization, consolidation or merger or the effective date of dissolution
following any such transfer, as the case may be, any Extraordinary Transaction
and shall be binding upon the party or parties to the Extraordinary Transaction
and their successors, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the Company,
whether or not such person shall have expressly assumed the terms of this
Warrant as provided in Section 7.
6. Adjustments for Other Events.
6.1. Changes in Capital Structure. If the Company shall (a) issue
additional Shares as a dividend or other distribution on outstanding Shares, (b)
subdivide its outstanding Shares, or (c) combine its outstanding Shares into a
smaller number of Shares, then, in each such event, the Shares immediately prior
to such event shall, simultaneously with the happening of such event, be
adjusted by multiplying the Warrant Shares by a fraction, the numerator of which
shall be the total number of Shares issued and outstanding immediately after
such event and the denominator of which shall be the total number of Shares
issued and outstanding immediately prior to such event, and the product so
obtained shall thereafter be the Warrant Shares then in effect. The Shares, as
so adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 6. After any such
event specified in this subsection 6.1, the original Purchase Price shall
continue to apply to any exercise of the Warrant, except that the Purchase Price
shall be adjusted in any such event by multiplying the Purchase Price by a
fraction the numerator of which shall be the total number of Shares issued and
outstanding immediately before such event and the denominator of which shall be
the total number of shares issued and outstanding immediately after such event,
provided, however, the Warrant Shares shall not be issued at a discount from the
par value stated in the Company's Articles of Incorporation (currently, $.0l par
value per share). The Purchase Price as so adjusted, shall be readjusted in the
same manner upon the happening of any successive event or events described
herein in this Section 6.
7. Notices of Record Date, etc. In the event of:
7.1. any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
<PAGE>
7.2. any merger, consolidation or capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company any other person, or
7.3. any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (a) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, and (b) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Shares
(or Other Securities) shall be entitled to exchange their Shares (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 10
days prior to the date specified in such notice on which any such action is to
be taken.
8. Transfers.
8.1. The Warrants are not transferable, in whole or in part, without
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
and any applicable state securities laws.
8.2. Subject to subsection 8.1, this Warrant, or any portion hereof,
may be transferred by the Holder's execution and delivery of the form of
assignment attached hereto along with this Warrant. Any transferee shall be
required, as a condition to the assignment, to deliver all such documentation as
the Company deems appropriate. However, until such assignment and such other
documentation are presented to the Company at its principal offices in the
United States, the Company shall be entitled to treat the registered holder
hereof as the absolute owner hereof for all purposes.
8.3. Upon a transfer of this Warrant in accordance with this Section 8,
the Company, at its expense, will issue and deliver to or on the order of the
Holder a new Warrant or Warrants of like tenor, in the name of the Holder or as
the Holder (on payment by the Holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the Shares
called for on the face or faces of the Warrant or Warrants so surrendered. If
this Warrant is divided into more than one Warrant, or if there is more than one
Holder thereof, all references herein to "this Warrant" shall be deemed to apply
to the several Warrants, and all references to "the Holder" shall be deemed to
apply to the several Holders, except in either case to the extent that the
context indicates otherwise.
8.4. To the extent the Holder is a party to the Registration Rights
Agreement, the Warrants issued hereunder shall be subject to the transfer
restrictions and other provisions set forth therein.
9. Replacement of Warrants.
9.1. On receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of any Warrant and, in the case of
any such loss, theft or destruction of any Warrant, on delivery of an indemnity
agreement or security reasonably satisfactory in form and amount to the Company
or, in the case of any such mutilation, on surrender and cancellation of such
Warrant, the Company at its expense will execute and deliver, in lieu thereof, a
new Warrant of like tenor.
<PAGE>
10. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register under
the Act any of its common stock for sale to the public for cash in an
underwritten offering, and the registration form to be used would permit
inclusion thereto of the Registrable Common Stock (a "Piggyback Registration"),
the Company will give prompt written notice to Shareholder and will include in
such Piggyback Registration, subject to the allocation provisions below, all
Registrable Common Stock with respect to which the Company has received from the
Shareholder a written request for inclusion within 20 days after the Company's
sending of such notice; provided however, that the Company shall not be required
to effect any registration of Registrable Common Stock if (i) registration is
effected by the Company on behalf of a shareholder exercising registration
rights that pursuant to the terms thereof prohibit the Shareholder's shares from
being included in such registration (a "Limited Demand Registration") or (ii)
the Registrable Common Stock was previously included in a Registration
Statement, whether an underwriten offering or otherwise.
(b) Piggyback Expenses. In a Piggyback Registration, the Company will
pay the Registration Expenses related to the sale of Registrable Common Stock by
the Shareholder, but the Shareholder will pay the Underwriting Commissions
related to the sale of such Registrable Common Stock; provided, however, that
the Shareholder will pay its pro rata share of Registration Expenses incurred by
the Company in connection with the registration if required to do so in
connection with any Blue Sky law clearance sought by the Company.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company and the managing
underwriters advise the Company that in their opinion the number of securities
requested to be included in such registration exceeds the number that can be
sold in such offering at a price reasonably related to fair value, the Company
will allocate the securities to be included as follows: first, to the securities
the Company proposes to sell on its own behalf; and second, to the Registrable
Common Stock requested to be included in such registration by the Shareholder
and to securities of the Company requested to be included in such registration
by any other selling shareholder participating in the registration statement,
pro rata on the basis of the number of securities of the Company owned by all
such selling shareholders participating in the registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration is
initiated as an underwritten secondary registration on behalf of holders of the
Company's securities (other than pursuant to a Limited Demand Registration), and
the managing underwriters advise the Company that in their opinion the number of
securities requested to be included in such registration exceeds the number that
can be sold in such offering at a price reasonably related to fair value, the
Company will allocate the securities to be included as follows: first, to the
securities requested to be included by the holders initiating such registration;
second, to any securities requested to be included in such registration by the
Company; and third, to Registrable Common Stock requested to be included in such
registration by the Shareholder and to securities of the Company requested to be
included in such registration by any other selling shareholders participating in
the registration statement, pro rata on the basis of the number of securities of
the Company owned by all such selling shareholders participating in the
registration.
(e) Selection of Underwriters. The selection of the lead underwriter or
underwriters and all other decisions regarding the underwriting arrangements for
the offering will be made solely by the Company, subject to the rights, if any,
of the holders initiating a registration if the registration is under Section
2(d).
(f) Holdback Agreements. Shareholder hereby agrees that if so requested
by the Company or any representative of the underwriters in connection with the
initial public offering of the Company or any other registration of any
securities of the Company under the Act in which the Shareholder is given the
opportunity to participate pursuant to this Agreement, the Shareholder shall not
sell or otherwise transfer securities of the Company registered hereunder during
the 120-day period following the effective date of a registration statement of
the Company filed under the Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 120 day period.
<PAGE>
(g) Indemnification.
(i) In connection with any registration statement in which the
Shareholder is participating, the Company will indemnify, to the extent
permitted by law, Shareholder, its officers and directors, and each person who
controls such holder (within the meaning of the Act), against all losses,
claims, damages, liabilities and expenses arising out of or resulting from any
untrue or alleged untrue statement of material fact contained in such
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are caused by or contained in any information furnished in writing to
the Company by or on behalf of the Shareholder or such other indemnified party
expressly for use therein or by the failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished the underwriters with a sufficient number of
copies of the same.
(ii) In connection with any registration statement in which the
Shareholder is participating, the Shareholder will furnish to the Company in
writing such information as is reasonably requested by the Company for use in
any such registration statement or prospectus and will indemnify, to the extent
permitted by law, the Company, its directors and officers and each person who
controls the Company (within the meaning of the Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact or any omission or alleged omission of a material
fact required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in information so furnished in writing by the Shareholder
specifically for use in preparing the registration statement.
(iii) Any person entitled to indemnification hereunder will (a)
give prompt notice (and in all events within 30 days) to the indemnifying party
of any claim with respect to which it seeks indemnification and (b) unless a
conflict of interest exists with respect to such claim that prohibits the
parties from using counsel selected by the indemnifying party, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled, or elects not, to assume the defense of
a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim.
(h) Participation in Underwritten Registrations. The Shareholder may
not participate in any registration hereunder unless such holder (i) agrees to
sell such holder's securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements under Section 2(e), and (ii) completes and executes all
questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
(i) Subsequent Registration Rights. The Shareholder acknowledges that,
from and after the date of this Agreement, the Company may enter into agreements
with any holder or prospective holder of any securities of the Company that
would allow such holders or prospective holders to include such securities in
any registration, whether such registration is pursuant to a demand registration
or a piggyback registration.
11. Notices.
11.1. All notices required hereunder shall be deemed to have been given
and shall be effective only when personally delivered or sent by Federal
Express, DHL or other express delivery service or by certified or registered
mail to the address of the Company's principal office in the United States as
follows:
Universal Display Corporation
Three Bala Plaza, East
Suite 104
Bala Cynwyd, PA 19004
<PAGE>
in the case of any notice to the Company, and until changed by notice to the
Company, to the address of the Holder set forth above in the case of any notice
to the Holder.
12. Miscellaneous.
12.1. This Warrant and any term hereof may be changed, waived,
discharged or terminated, other than on expiration, only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be construed and enforced
in accordance with and governed by the laws of the Commonwealth of Pennsylvania.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision. This Warrant embodies the entire
agreement and understanding between the Company and the other parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
UNIVERSAL DISPLAY CORPORATION
By: /s/ SIDNEY D. ROSENBLATT
------------------------------
Sidney D. Rosenblatt, Executive Vice
President
Date: April 25, 1996
------------------
Accepted:
/s/ STEVEN V. ABRAMSON
- - ------------------------
Holder Signature
Date
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto __________________________ the right represented by the attached
Warrant to purchase _____________ Shares (as defined in the Warrant Agreement
governing the attached Warrant) to which the within Warrant relates, and
appoints __________________________ Attorney to transfer such right on the books
of ____________________________ with full power of substitution in the premises.
Dated: ___________________________
------------------------------------
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant)
------------------------------------
------------------------------------
(Address)
Signed in the presence of:
- - -----------------------------------
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO ________________________________:
The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to exercise such Warrant for, and to purchase thereunder,
__________ Shares (as defined in the Warrant Agreement governing the attached
Warrant) and herewith makes payment of $___________ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
_____________________, whose address is ___________________________________.
Dated: ___________________________
------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face
of the Warrant)
------------------------------------
------------------------------------
(Address)
WARRANT HOLDER: Dean L. Ledger
3545 Granite Point Road
Coeur d'Alene, Idaho 83814-9757
NUMBER OF WARRANT SHARES: 200,000
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION, AND MAY NOT BE
DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT
OF THE COMPANY TO SUCH PROPOSED SALE, PLEDGE, TRANSFER OR ENCUMBRANCE AND TO THE
PROPOSED ASSIGNEE, PLEDGEE OR TRANSFEREE.
No. WA96-123
UNIVERSAL DISPLAY CORPORATION
Common Stock Purchase Warrant
Universal Display Corporation, a Pennsylvania corporation, for
value received, hereby grants to the undersigned holder, its successors and
permitted assigns (collectively, the "Holder"), this right (the "Warrant"),
subject to the terms set forth below, to purchase at the purchase price per
share as defined in Section 2.1 below (the "Purchase Price"), up to that number
of Shares (defined below) set forth on the signature page of the Subscription
Agreement attached hereto (the "Signature Page"), subject to adjustment as
herein provided (such total number of Shares that may be purchased hereunder
being referred to herein as the "Warrant Shares").
1. Definitions. As used herein, the following terms, unless the context
otherwise requires, have the following respective meanings:
1.1. "Company" shall include Universal Display Corporation, a
Pennsylvania corporation, and, unless otherwise noted to the contrary, any
company which shall succeed to, by merger, consolidation or similar arrangement
of the Company's and assume the obligations of Universal Display Corporation
hereunder.
1.2. "Other Securities" refers to any stock (other than the
Shares) and other securities of the Company or any other person (corporate or
otherwise) that the Holder at any time shall be entitled to receive, or shall
have received, on the exercise of this Warrant, in lieu of or in addition to
Shares, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Shares.
1.3. "Shares" means (a) the Company's Common Stock, as
authorized on the date of this Warrant and (b) if the class of securities
described in (a) shall cease to be issued and outstanding, securities of the
same class issued in exchange for or in respect of the securities described in
(a) pursuant to a plan of merger, consolidation, recapitalization or
reorganization, the sale of substantially all of the Company's assets or a
similar transaction.
1.4. "Registrable Common Stock" means the number of shares of
common stock underlying the warrants issued hereunder. As to any particular
Registrable Common Stock, such securities will cease to be Registrable Common
Stock when they (a) have been effectively registered under the Securities Act of
1933, as amended (the "Act") and obtained or disposed of in accordance with the
registration statement covering them, (b) have been transferred pursuant to Rule
144 under the Act (or any similar provision then in force), or (c) are no longer
subject to restrictions under transfer pursuant to the provisions of Rule 144(k)
under the Act.
1.5. "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges on which similar
securities issued by the Company are then listed, and fees and disbursements of
counsel for the Company (but not of counsel to the Shareholder) and of all
independent certified public accountants, underwriters (other than Underwriting
Commissions) and other persons retained by the Company.
1.6. "Underwriting Commissions" means all underwriting discounts
or commissions relating to the sale of securities of the Company.
2. Exercise of Warrant.
2.1. Purchase Price. The Warrant may be exercised, subject to
the terms specified herein, at the purchase price of $4.18 per Share (the
"Purchase Price").
2.2. Exercise Period. The Warrant may be exercised (the
"Exercise Period") at any time for a period of ten years from April 25, 1996.
2.3. Vesting. The shares subject to this warrant vest as
follows: 50,000 shares immediately and 30,000 shares in the next five
anniversary dates thereof, provided that Holder must be an employee or
consultant of the Company on the anniversary date, or such shares shall not be
vested, although the shares already vested shall remain vested for the term of
the warrant.
2.4. Exercise in Full. Subject to the limitations stated above,
this Warrant may be exercised in full at the option of the Holder by surrender
of this Warrant, with the form of subscription at the end hereof duly executed
by the Holder, to the Company at its principal office in the United States,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
Shares for which this Warrant may be exercised by the Purchase Price.
2.5. Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in subsection
2.4 along with payment in the amount determined by multiplying (a) the number of
Shares designated by the holder in the subscription at the end hereof by (b) the
Purchase Price. On any such partial exercise, the Company at its expense will
forthwith issue and deliver to or upon the order of the Holder a new Warrant or
Warrants of like tenor, in the name of the Holder or as the Holder (upon payment
by the Holder of any applicable transfer taxes) may request, calling in the
aggregate on the face or faces thereof for the number of Shares for which such
Warrant or Warrants may still be exercised.
3. Delivery of Share Certificates on Exercise.
3.1. As soon as practicable after the exercise of this Warrant
in full or in part, the Company, at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the Holder, or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of
fully paid and non-assessable Shares (or Other Securities) to which the Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which the Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share, together with any
other stock or other securities and property (including cash, where applicable)
to which the Holder is entitled upon such exercise pursuant to Section 2 or
otherwise.
4. Covenants as to Shares.
4.1. Issuance of Shares upon Exercise. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof. The Company will at
all times have authorized and reserved, free from preemptive rights, a
sufficient number of its Shares to provide for the exercise of the rights
represented by this Warrant.
4.2 Restrictions on Transfer. Holder represents to the company
that it is acquiring the Warrants for its own investment account and without a
view to the subsequent public distribution of the Warrants or Shares otherwise
than pursuant to an effective registration statement under the Securities Act.
Each Warrant and each certificate for Shares issued to the Holder and any
subsequent holder that have not been sold to the public pursuant to an effective
registration statement under the Securities Act or as to which the restrictions
on transfer have not been removed as hereinafter provided, shall bear a
restrictive legend reciting that the same have not been registered pursuant to
the Securities Act and may not be transferred in the absence of an effective
registration statement under the Securities Act, the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and shall be
accompanied by an opinion of counsel experienced in federal securities laws
matters and reasonably acceptable to the company and its counsel to the effect
that the proposed transfer may be effected without registration under the
Securities Act, whereupon, the holder of such Registrable Common Stock shall be
entitled to transfer such securities in accordance with the terms of its notice
and such opinion. Restrictions imposed under this Section 4 upon the
transferability of the Warrants or of Shares shall cease when:
(a) a registration statement covering such Shares becomes
effective under the Securities Act, or
(b) the Company receives from the holder thereof an opinion of
counsel experienced in federal securities laws matters, which counsel shall be
reasonably acceptable to the Company, that such restrictions are no longer
required in order to insure compliance with the Securities Act.
When such restrictions terminate, the Company shall, or shall instruct the
Warrant Agent to, issue new securities in the name of the holder not bearing the
legends required by this Section 4.
5. Adjustment for Reorganization, Consolidation or Merger.
5.1. Reorganization, Consolidation or Merger. If at any time or
from time to time, the Company shall (a) effect a plan of merger, consolidation,
recapitalization or reorganization or similar transaction with a corporation
(the "Acquiror") whereby the shareholders of the Company will exchange their
shares of the Company for the shares of the parent corporation of the Acquiror,
or (b) transfer all or substantially all of its properties or assets to any
other person, under any plan or arrangement contemplating the dissolution of the
Company (which along with any transactions set forth in (a) hereof shall be an
"Extraordinary Transaction"), then, in each such case, the holder of this
Warrant, on the exercise hereof as provided in Section 2 at any time after the
completion of any Extraordinary Transaction shall receive, such Shares or Other
Securities and property (including cash) to which such holder would have been
entitled in any Extraordinary Transaction as if such holder had so exercised
this Warrant, immediately prior thereto.
5.2. Dissolution. If the Company dissolves following the
transfer of all or substantially all of its properties or assets, the Company,
prior to such dissolution, shall at its expense deliver or cause to be delivered
to the Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder after the effective date of such
dissolution pursuant to this Section 5.
5.3. Continuation of Terms. Upon any Extraordinary Transaction,
this Warrant shall continue in full force and effect and the terms hereof shall
be applicable to the securities, Shares and Other Securities and property
receivable on the exercise of this Warrant after the consummation of
reorganization, consolidation or merger or the effective date of dissolution
following any such transfer, as the case may be, any Extraordinary Transaction
and shall be binding upon the party or parties to the Extraordinary Transaction
and their successors, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the Company,
whether or not such person shall have expressly assumed the terms of this
Warrant as provided in Section 7.
6. Adjustments for Other Events.
6.1. Changes in Capital Structure. If the Company shall (a)
issue additional Shares as a dividend or other distribution on outstanding
Shares, (b) subdivide its outstanding Shares, or (c) combine its outstanding
Shares into a smaller number of Shares, then, in each such event, the Shares
immediately prior to such event shall, simultaneously with the happening of such
event, be adjusted by multiplying the Warrant Shares by a fraction, the
numerator of which shall be the total number of Shares issued and outstanding
immediately after such event and the denominator of which shall be the total
number of Shares issued and outstanding immediately prior to such event, and the
product so obtained shall thereafter be the Warrant Shares then in effect. The
Shares, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 6.
After any such event specified in this subsection 6.1, the original Purchase
Price shall continue to apply to any exercise of the Warrant, except that the
Purchase Price shall be adjusted in any such event by multiplying the Purchase
Price by a fraction the numerator of which shall be the total number of Shares
issued and outstanding immediately before such event and the denominator of
which shall be the total number of shares issued and outstanding immediately
after such event, provided, however, the Warrant Shares shall not be issued at a
discount from the par value stated in the Company's Articles of Incorporation
(currently, $.0l par value per share). The Purchase Price as so adjusted, shall
be readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 6.
7. Notices of Record Date, etc. In the event of:
7.1. any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
7.2. any merger, consolidation or capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company any other person, or
7.3. any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (a) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, and (b) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Shares
(or Other Securities) shall be entitled to exchange their Shares (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 10
days prior to the date specified in such notice on which any such action is to
be taken.
8. Transfers.
8.1. The Warrants are not transferable, in whole or in part,
without compliance with the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable state securities laws.
8.2. Subject to subsection 8.1, this Warrant, or any portion
hereof, may be transferred by the Holder's execution and delivery of the form of
assignment attached hereto along with this Warrant. Any transferee shall be
required, as a condition to the assignment, to deliver all such documentation as
the Company deems appropriate. However, until such assignment and such other
documentation are presented to the Company at its principal offices in the
United States, the Company shall be entitled to treat the registered holder
hereof as the absolute owner hereof for all purposes.
8.3. Upon a transfer of this Warrant in accordance with this
Section 8, the Company, at its expense, will issue and deliver to or on the
order of the Holder a new Warrant or Warrants of like tenor, in the name of the
Holder or as the Holder (on payment by the Holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for the
Shares called for on the face or faces of the Warrant or Warrants so
surrendered. If this Warrant is divided into more than one Warrant, or if there
is more than one Holder thereof, all references herein to "this Warrant" shall
be deemed to apply to the several Warrants, and all references to "the Holder"
shall be deemed to apply to the several Holders, except in either case to the
extent that the context indicates otherwise.
8.4. To the extent the Holder is a party to the Registration
Rights Agreement, the Warrants issued hereunder shall be subject to the transfer
restrictions and other provisions set forth therein.
9. Replacement of Warrants.
9.1. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Warrant and, in the
case of any such loss, theft or destruction of any Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register under
the Act any of its common stock for sale to the public for cash in an
underwritten offering, and the registration form to be used would permit
inclusion thereto of the Registrable Common Stock (a "Piggyback Registration"),
the Company will give prompt written notice to Shareholder and will include in
such Piggyback Registration, subject to the allocation provisions below, all
Registrable Common Stock with respect to which the Company has received from the
Shareholder a written request for inclusion within 20 days after the Company's
sending of such notice; provided however, that the Company shall not be required
to effect any registration of Registrable Common Stock if (i) registration is
effected by the Company on behalf of a shareholder exercising registration
rights that pursuant to the terms thereof prohibit the Shareholder's shares from
being included in such registration (a "Limited Demand Registration") or (ii)
the Registrable Common Stock was previously included in a Registration
Statement, whether an underwriten offering or otherwise.
(b) Piggyback Expenses. In a Piggyback Registration, the Company will
pay the Registration Expenses related to the sale of Registrable Common Stock by
the Shareholder, but the Shareholder will pay the Underwriting Commissions
related to the sale of such Registrable Common Stock; provided, however, that
the Shareholder will pay its pro rata share of Registration Expenses incurred by
the Company in connection with the registration if required to do so in
connection with any Blue Sky law clearance sought by the Company.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company and the managing
underwriters advise the Company that in their opinion the number of securities
requested to be included in such registration exceeds the number that can be
sold in such offering at a price reasonably related to fair value, the Company
will allocate the securities to be included as follows: first, to the securities
the Company proposes to sell on its own behalf; and second, to the Registrable
Common Stock requested to be included in such registration by the Shareholder
and to securities of the Company requested to be included in such registration
by any other selling shareholder participating in the registration statement,
pro rata on the basis of the number of securities of the Company owned by all
such selling shareholders participating in the registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration is
initiated as an underwritten secondary registration on behalf of holders of the
Company's securities (other than pursuant to a Limited Demand Registration), and
the managing underwriters advise the Company that in their opinion the number of
securities requested to be included in such registration exceeds the number that
can be sold in such offering at a price reasonably related to fair value, the
Company will allocate the securities to be included as follows: first, to the
securities requested to be included by the holders initiating such registration;
second, to any securities requested to be included in such registration by the
Company; and third, to Registrable Common Stock requested to be included in such
registration by the Shareholder and to securities of the Company requested to be
included in such registration by any other selling shareholders participating in
the registration statement, pro rata on the basis of the number of securities of
the Company owned by all such selling shareholders participating in the
registration.
(e) Selection of Underwriters. The selection of the lead underwriter or
underwriters and all other decisions regarding the underwriting arrangements for
the offering will be made solely by the Company, subject to the rights, if any,
of the holders initiating a registration if the registration is under Section
2(d).
(f) Holdback Agreements. Shareholder hereby agrees that if so requested
by the Company or any representative of the underwriters in connection with the
initial public offering of the Company or any other registration of any
securities of the Company under the Act in which the Shareholder is given the
opportunity to participate pursuant to this Agreement, the Shareholder shall not
sell or otherwise transfer securities of the Company registered hereunder during
the 120-day period following the effective date of a registration statement of
the Company filed under the Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 120 day period.
(g) Indemnification.
(i) In connection with any registration statement in which the
Shareholder is participating, the Company will indemnify, to the extent
permitted by law, Shareholder, its officers and directors, and each person who
controls such holder (within the meaning of the Act), against all losses,
claims, damages, liabilities and expenses arising out of or resulting from any
untrue or alleged untrue statement of material fact contained in such
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are caused by or contained in any information furnished in writing to
the Company by or on behalf of the Shareholder or such other indemnified party
expressly for use therein or by the failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished the underwriters with a sufficient number of
copies of the same.
(ii) In connection with any registration statement in which the
Shareholder is participating, the Shareholder will furnish to the Company in
writing such information as is reasonably requested by the Company for use in
any such registration statement or prospectus and will indemnify, to the extent
permitted by law, the Company, its directors and officers and each person who
controls the Company (within the meaning of the Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact or any omission or alleged omission of a material
fact required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in information so furnished in writing by the Shareholder
specifically for use in preparing the registration statement.
(iii) Any person entitled to indemnification hereunder will (a)
give prompt notice (and in all events within 30 days) to the indemnifying party
of any claim with respect to which it seeks indemnification and (b) unless a
conflict of interest exists with respect to such claim that prohibits the
parties from using counsel selected by the indemnifying party, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled, or elects not, to assume the defense of
a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim.
(h) Participation in Underwritten Registrations. The Shareholder may
not participate in any registration hereunder unless such holder (i) agrees to
sell such holder's securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements under Section 2(e), and (ii) completes and executes all
questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
(i) Subsequent Registration Rights. The Shareholder acknowledges that,
from and after the date of this Agreement, the Company may enter into agreements
with any holder or prospective holder of any securities of the Company that
would allow such holders or prospective holders to include such securities in
any registration, whether such registration is pursuant to a demand registration
or a piggyback registration.
11. Notices.
11.1. All notices required hereunder shall be deemed to have
been given and shall be effective only when personally delivered or sent by
Federal Express, DHL or other express delivery service or by certified or
registered mail to the address of the Company's principal office in the United
States as follows:
Universal Display Corporation
Three Bala Plaza, East
Suite 104
Bala Cynwyd, PA 19004
in the case of any notice to the Company, and until changed by notice to the
Company, to the address of the Holder set forth above in the case of any notice
to the Holder.
12. Miscellaneous.
12.1. This Warrant and any term hereof may be changed, waived,
discharged or terminated, other than on expiration, only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be construed and enforced
in accordance with and governed by the laws of the Commonwealth of Pennsylvania.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision. This Warrant embodies the entire
agreement and understanding between the Company and the other parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
UNIVERSAL DISPLAY CORPORATION
By: /s/ STEVEN V. ABRAMSON
---------------------------
Steven V. Abramson, President
Date: April 25, 1996
Accepted:
/s/ DEAN L. LEDGER
- - -------------------
Holder Signature
- - ----------------
Date
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO ________________________________:
The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to exercise such Warrant for, and to purchase thereunder,
__________ Shares (as defined in the Warrant Agreement governing the attached
Warrant) and herewith makes payment of $___________ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
_____________________, whose address is ___________________________________.
Dated: ___________________________
------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
------------------------------------
------------------------------------
(Address)
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto __________________________ the right represented by the attached
Warrant to purchase _____________ Shares (as defined in the Warrant Agreement
governing the attached Warrant) to which the within Warrant relates, and
appoints __________________________ Attorney to transfer such right on the books
of ____________________________ with full power of substitution in the premises.
Dated: ___________________________
------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the Warrant)
------------------------------------
------------------------------------
(Address)
Signed in the presence of:
- - -----------------------------------
WARRANT HOLDER: Sherwin I. Seligsohn
1221 Centennial Road
Narberth, PA 19072
NUMBER OF WARRANT SHARES: 200,000
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION, AND MAY
NOT BE DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SECURITIES UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT
OF THE COMPANY TO SUCH PROPOSED SALE, PLEDGE, TRANSFER OR ENCUMBRANCE AND TO THE
PROPOSED ASSIGNEE, PLEDGEE OR TRANSFEREE.
No. WA96-122
UNIVERSAL DISPLAY CORPORATION
Common Stock Purchase Warrant
Universal Display Corporation, a Pennsylvania corporation, for
value received, hereby grants to the undersigned holder, its successors and
permitted assigns (collectively, the "Holder"), this right (the "Warrant"),
subject to the terms set forth below, to purchase at the purchase price per
share as defined in Section 2.1 below (the "Purchase Price"), up to that number
of Shares (defined below) set forth on the signature page of the Subscription
Agreement attached hereto (the "Signature Page"), subject to adjustment as
herein provided (such total number of Shares that may be purchased hereunder
being referred to herein as the "Warrant Shares").
1. Definitions. As used herein, the following terms, unless the
context otherwise requires, have the
following respective meanings:
1.1. "Company" shall include Universal Display Corporation, a
Pennsylvania corporation, and, unless otherwise noted to the contrary, any
company which shall succeed to, by merger, consolidation or similar arrangement
of the Company's and assume the obligations of Universal Display Corporation
hereunder.
1.2. "Other Securities" refers to any stock (other than the
Shares) and other securities of the Company or any other person (corporate or
otherwise) that the Holder at any time shall be entitled to receive, or shall
have received, on the exercise of this Warrant, in lieu of or in addition to
Shares, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Shares.
1.3. "Shares" means (a) the Company's Common Stock, as
authorized on the date of this Warrant and (b) if the class of securities
described in (a) shall cease to be issued and outstanding, securities of the
same class issued in exchange for or in respect of the securities described in
(a) pursuant to a plan of merger, consolidation, recapitalization or
reorganization, the sale of substantially all of the Company's assets or a
similar transaction.
<PAGE>
1.4. "Registrable Common Stock" means the number of shares of
common stock underlying the warrants issued hereunder. As to any particular
Registrable Common Stock, such securities will cease to be Registrable Common
Stock when they (a) have been effectively registered under the Securities Act of
1933, as amended (the "Act") and obtained or disposed of in accordance with the
registration statement covering them, (b) have been transferred pursuant to Rule
144 under the Act (or any similar provision then in force), or (c) are no longer
subject to restrictions under transfer pursuant to the provisions of Rule 144(k)
under the Act.
1.5. "Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges on which similar
securities issued by the Company are then listed, and fees and disbursements of
counsel for the Company (but not of counsel to the Shareholder) and of all
independent certified public accountants, underwriters (other than Underwriting
Commissions) and other persons retained by the Company.
1.6. "Underwriting Commissions" means all underwriting discounts
or commissions relating to the sale of securities of the Company.
2. Exercise of Warrant.
2.1. Purchase Price. The Warrant may be exercised, subject to
the terms specified herein, at the purchase price of $4.18 per Share (the
"Purchase Price").
2.2. Exercise Period. The Warrant may be exercised (the
"Exercise Period") at any time for a period of ten years from April 25, 1996.
2.3. Vesting. The shares subject to this warrant vest as
follows: 50,000 shares immediately and 30,000 shares in the next five
anniversary dates thereof, provided that Holder must be an employee or
consultant of the Company on the anniversary date, or such shares shall not be
vested, although the shares already vested shall remain vested for the term of
the warrant.
2.4. Exercise in Full. Subject to the limitations stated above,
this Warrant may be exercised in full at the option of the Holder by surrender
of this Warrant, with the form of subscription at the end hereof duly executed
by the Holder, to the Company at its principal office in the United States,
accompanied by payment, in cash or by certified or official bank check payable
to the order of the Company, in the amount obtained by multiplying the number of
Shares for which this Warrant may be exercised by the Purchase Price.
2.5. Partial Exercise. This Warrant may be exercised in part by
surrender of this Warrant in the manner and at the place provided in subsection
2.4 along with payment in the amount determined by multiplying (a) the number of
Shares designated by the holder in the subscription at the end hereof by (b) the
Purchase Price. On any such partial exercise, the Company at its expense will
forthwith issue and deliver to or upon the order of the Holder a new Warrant or
Warrants of like tenor, in the name of the Holder or as the Holder (upon payment
by the Holder of any applicable transfer taxes) may request, calling in the
aggregate on the face or faces thereof for the number of Shares for which such
Warrant or Warrants may still be exercised.
<PAGE>
3. Delivery of Share Certificates on Exercise.
3.1. As soon as practicable after the exercise of this Warrant
in full or in part, the Company, at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the Holder, or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of
fully paid and non-assessable Shares (or Other Securities) to which the Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which the Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share, together with any
other stock or other securities and property (including cash, where applicable)
to which the Holder is entitled upon such exercise pursuant to Section 2 or
otherwise.
4. Covenants as to Shares.
4.1. Issuance of Shares upon Exercise. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof. The Company will at
all times have authorized and reserved, free from preemptive rights, a
sufficient number of its Shares to provide for the exercise of the rights
represented by this Warrant.
4.2 Restrictions on Transfer. Holder represents to the company
that it is acquiring the Warrants for its own investment account and without a
view to the subsequent public distribution of the Warrants or Shares otherwise
than pursuant to an effective registration statement under the Securities Act.
Each Warrant and each certificate for Shares issued to the Holder and any
subsequent holder that have not been sold to the public pursuant to an effective
registration statement under the Securities Act or as to which the restrictions
on transfer have not been removed as hereinafter provided, shall bear a
restrictive legend reciting that the same have not been registered pursuant to
the Securities Act and may not be transferred in the absence of an effective
registration statement under the Securities Act, the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and shall be
accompanied by an opinion of counsel experienced in federal securities laws
matters and reasonably acceptable to the company and its counsel to the effect
that the proposed transfer may be effected without registration under the
Securities Act, whereupon, the holder of such Registrable Common Stock shall be
entitled to transfer such securities in accordance with the terms of its notice
and such opinion. Restrictions imposed under this Section 4 upon the
transferability of the Warrants or of Shares shall cease when:
(a) a registration statement covering such Shares becomes
effective under the Securities Act, or
(b) the Company receives from the holder thereof an opinion
of counsel experienced in federal securities laws
matters, which counsel shall be reasonably acceptable to
the Company, that such restrictions are no longer
required in order to insure compliance with the
Securities Act.
When such restrictions terminate, the Company shall, or shall instruct the
Warrant Agent to, issue new securities in the name of the holder not bearing the
legends required by this Section 4.
<PAGE>
5. Adjustment for Reorganization, Consolidation or Merger.
5.1. Reorganization, Consolidation or Merger. If at any time or
from time to time, the Company shall (a) effect a plan of merger, consolidation,
recapitalization or reorganization or similar transaction with a corporation
(the "Acquiror") whereby the shareholders of the Company will exchange their
shares of the Company for the shares of the parent corporation of the Acquiror,
or (b) transfer all or substantially all of its properties or assets to any
other person, under any plan or arrangement contemplating the dissolution of the
Company (which along with any transactions set forth in (a) hereof shall be an
"Extraordinary Transaction"), then, in each such case, the holder of this
Warrant, on the exercise hereof as provided in Section 2 at any time after the
completion of any Extraordinary Transaction shall receive, such Shares or Other
Securities and property (including cash) to which such holder would have been
entitled in any Extraordinary Transaction as if such holder had so exercised
this Warrant, immediately prior thereto.
5.2. Dissolution. If the Company dissolves following the
transfer of all or substantially all of its properties or assets, the Company,
prior to such dissolution, shall at its expense deliver or cause to be delivered
to the Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder after the effective date of such
dissolution pursuant to this Section 5.
5.3. Continuation of Terms. Upon any Extraordinary Transaction,
this Warrant shall continue in full force and effect and the terms hereof shall
be applicable to the securities, Shares and Other Securities and property
receivable on the exercise of this Warrant after the consummation of
reorganization, consolidation or merger or the effective date of dissolution
following any such transfer, as the case may be, any Extraordinary Transaction
and shall be binding upon the party or parties to the Extraordinary Transaction
and their successors, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the Company,
whether or not such person shall have expressly assumed the terms of this
Warrant as provided in Section 7.
6. Adjustments for Other Events.
6.1. Changes in Capital Structure. If the Company shall (a)
issue additional Shares as a dividend or other distribution on outstanding
Shares, (b) subdivide its outstanding Shares, or (c) combine its outstanding
Shares into a smaller number of Shares, then, in each such event, the Shares
immediately prior to such event shall, simultaneously with the happening of such
event, be adjusted by multiplying the Warrant Shares by a fraction, the
numerator of which shall be the total number of Shares issued and outstanding
immediately after such event and the denominator of which shall be the total
number of Shares issued and outstanding immediately prior to such event, and the
product so obtained shall thereafter be the Warrant Shares then in effect. The
Shares, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 6.
After any such event specified in this subsection 6.1, the original Purchase
Price shall continue to apply to any exercise of the Warrant, except that the
Purchase Price shall be adjusted in any such event by multiplying the Purchase
Price by a fraction the numerator of which shall be the total number of Shares
issued and outstanding immediately before such event and the denominator of
which shall be the total number of shares issued and outstanding immediately
after such event, provided, however, the Warrant Shares shall not be issued at a
discount from the par value stated in the Company's Articles of Incorporation
(currently, $.0l par value per share). The Purchase Price as so adjusted, shall
be readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 6.
7. Notices of Record Date, etc. In the event of:
7.1. any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
<PAGE>
7.2. any merger, consolidation or capital reorganization of the
Company, any reclassification or recapitalization of the capital stock of the
Company any other person, or
7.3. any voluntary or involuntary dissolution, liquidation or
winding-up of the Company, then and in each such event the Company will mail or
cause to be mailed to the Holder a notice specifying (a) the date on which any
such record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, and (b) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Shares (or Other Securities) shall be entitled to
exchange their Shares (or Other Securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 10 days prior to the date specified in such
notice on which any such action is to be taken.
8. Transfers.
8.1. The Warrants are not transferable, in whole or in part,
without compliance with the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable state securities laws.
8.2. Subject to subsection 8.1, this Warrant, or any portion
hereof, may be transferred by the Holder's execution and delivery of the form of
assignment attached hereto along with this Warrant. Any transferee shall be
required, as a condition to the assignment, to deliver all such documentation as
the Company deems appropriate. However, until such assignment and such other
documentation are presented to the Company at its principal offices in the
United States, the Company shall be entitled to treat the registered holder
hereof as the absolute owner hereof for all purposes.
8.3. Upon a transfer of this Warrant in accordance with this
Section 8, the Company, at its expense, will issue and deliver to or on the
order of the Holder a new Warrant or Warrants of like tenor, in the name of the
Holder or as the Holder (on payment by the Holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for the
Shares called for on the face or faces of the Warrant or Warrants so
surrendered. If this Warrant is divided into more than one Warrant, or if there
is more than one Holder thereof, all references herein to "this Warrant" shall
be deemed to apply to the several Warrants, and all references to "the Holder"
shall be deemed to apply to the several Holders, except in either case to the
extent that the context indicates otherwise.
8.4. To the extent the Holder is a party to the Registration
Rights Agreement, the Warrants issued hereunder shall be subject to the transfer
restrictions and other provisions set forth therein.
9. Replacement of Warrants.
9.1. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Warrant and, in the
case of any such loss, theft or destruction of any Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
<PAGE>
10. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register under
the Act any of its common stock for sale to the public for cash in an
underwritten offering, and the registration form to be used would permit
inclusion thereto of the Registrable Common Stock (a "Piggyback Registration"),
the Company will give prompt written notice to Shareholder and will include in
such Piggyback Registration, subject to the allocation provisions below, all
Registrable Common Stock with respect to which the Company has received from the
Shareholder a written request for inclusion within 20 days after the Company's
sending of such notice; provided however, that the Company shall not be required
to effect any registration of Registrable Common Stock if (i) registration is
effected by the Company on behalf of a shareholder exercising registration
rights that pursuant to the terms thereof prohibit the Shareholder's shares from
being included in such registration (a "Limited Demand Registration") or (ii)
the Registrable Common Stock was previously included in a Registration
Statement, whether an underwriten offering or otherwise.
(b) Piggyback Expenses. In a Piggyback Registration, the Company will
pay the Registration Expenses related to the sale of Registrable Common Stock by
the Shareholder, but the Shareholder will pay the Underwriting Commissions
related to the sale of such Registrable Common Stock; provided, however, that
the Shareholder will pay its pro rata share of Registration Expenses incurred by
the Company in connection with the registration if required to do so in
connection with any Blue Sky law clearance sought by the Company.
(c) Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company and the managing
underwriters advise the Company that in their opinion the number of securities
requested to be included in such registration exceeds the number that can be
sold in such offering at a price reasonably related to fair value, the Company
will allocate the securities to be included as follows: first, to the securities
the Company proposes to sell on its own behalf; and second, to the Registrable
Common Stock requested to be included in such registration by the Shareholder
and to securities of the Company requested to be included in such registration
by any other selling shareholder participating in the registration statement,
pro rata on the basis of the number of securities of the Company owned by all
such selling shareholders participating in the registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration is
initiated as an underwritten secondary registration on behalf of holders of the
Company's securities (other than pursuant to a Limited Demand Registration), and
the managing underwriters advise the Company that in their opinion the number of
securities requested to be included in such registration exceeds the number that
can be sold in such offering at a price reasonably related to fair value, the
Company will allocate the securities to be included as follows: first, to the
securities requested to be included by the holders initiating such registration;
second, to any securities requested to be included in such registration by the
Company; and third, to Registrable Common Stock requested to be included in such
registration by the Shareholder and to securities of the Company requested to be
included in such registration by any other selling shareholders participating in
the registration statement, pro rata on the basis of the number of securities of
the Company owned by all such selling shareholders participating in the
registration.
(e) Selection of Underwriters. The selection of the lead underwriter or
underwriters and all other decisions regarding the underwriting arrangements for
the offering will be made solely by the Company, subject to the rights, if any,
of the holders initiating a registration if the registration is under Section
2(d).
(f) Holdback Agreements. Shareholder hereby agrees that if so requested
by the Company or any representative of the underwriters in connection with the
initial public offering of the Company or any other registration of any
securities of the Company under the Act in which the Shareholder is given the
opportunity to participate pursuant to this Agreement, the Shareholder shall not
sell or otherwise transfer securities of the Company registered hereunder during
the 120-day period following the effective date of a registration statement of
the Company filed under the Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 120 day period.
<PAGE>
(g) Indemnification.
(i) In connection with any registration statement in which the
Shareholder is participating, the Company will indemnify, to the extent
permitted by law, Shareholder, its officers and directors, and each person who
controls such holder (within the meaning of the Act), against all losses,
claims, damages, liabilities and expenses arising out of or resulting from any
untrue or alleged untrue statement of material fact contained in such
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are caused by or contained in any information furnished in writing to
the Company by or on behalf of the Shareholder or such other indemnified party
expressly for use therein or by the failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished the underwriters with a sufficient number of
copies of the same.
(ii) In connection with any registration statement in which the
Shareholder is participating, the Shareholder will furnish to the Company in
writing such information as is reasonably requested by the Company for use in
any such registration statement or prospectus and will indemnify, to the extent
permitted by law, the Company, its directors and officers and each person who
controls the Company (within the meaning of the Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact or any omission or alleged omission of a material
fact required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in information so furnished in writing by the Shareholder
specifically for use in preparing the registration statement.
(iii) Any person entitled to indemnification hereunder will (a)
give prompt notice (and in all events within 30 days) to the indemnifying party
of any claim with respect to which it seeks indemnification and (b) unless a
conflict of interest exists with respect to such claim that prohibits the
parties from using counsel selected by the indemnifying party, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled, or elects not, to assume the defense of
a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim.
(h) Participation in Underwritten Registrations. The Shareholder may not
participate in any registration hereunder unless such holder (i) agrees to sell
such holder's securities on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements under
Section 2(e), and (ii) completes and executes all questionnaires, powers of
attorney, custody agreements, indemnities, underwriting agreements and other
documents required under the terms of such underwriting arrangements.
(i) Subsequent Registration Rights. The Shareholder acknowledges that,
from and after the date of this Agreement, the Company may enter into agreements
with any holder or prospective holder of any securities of the Company that
would allow such holders or prospective holders to include such securities in
any registration, whether such registration is pursuant to a demand registration
or a piggyback registration.
11. Notices.
11.1. All notices required hereunder shall be deemed to have
been given and shall be effective only when personally delivered or sent by
Federal Express, DHL or other express delivery service or by certified or
registered mail to the address of the Company's principal office in the United
States as follows:
Universal Display Corporation
Three Bala Plaza, East
Suite 104
Bala Cynwyd, PA 19004
<PAGE>
in the case of any notice to the Company, and until changed by notice to the
Company, to the address of the Holder set forth above in the case of any notice
to the Holder.
12. Miscellaneous.
12.1. This Warrant and any term hereof may be changed, waived,
discharged or terminated, other than on expiration, only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be construed and enforced
in accordance with and governed by the laws of the Commonwealth of Pennsylvania.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision. This Warrant embodies the entire
agreement and understanding between the Company and the other parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
UNIVERSAL DISPLAY CORPORATION
By: /s/STEVEN V. ABRAMSON
--------------------------------
Steven V. Abramson, President
Date: April 25, 1996
------------------------------
Accepted:
/s/SHERWIN I. SELIGSOHN
- - -----------------------
Holder Signature
- - -----------------------
Date
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO ________________________________:
The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to exercise such Warrant for, and to purchase thereunder,
__________ Shares (as defined in the Warrant Agreement governing the attached
Warrant) and herewith makes payment of $___________ therefor, and requests that
the certificates for such shares be issued in the name of, and delivered to
_____________________, whose address is ___________________________________.
Dated: ___________________________ ___________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
------------------------------------
------------------------------------
(Address)
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto __________________________ the right represented by the attached
Warrant to purchase _____________ Shares (as defined in the Warrant Agreement
governing the attached Warrant) to which the within Warrant relates, and
appoints __________________________ Attorney to transfer such right on the books
of ____________________________ with full power of substitution in the premises.
Dated: ___________________________ ___________________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant)
------------------------------------
------------------------------------
(Address)
Signed in the presence of:
- - -----------------------------------
WARRANT HOLDER: Sidney D. Rosenblatt
6400 Woodbine Avenue
Philadelphia, PA 19151
NUMBER OF WARRANT SHARES: 125,000
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION, AND MAY NOT BE
DISPOSED OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES
UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS.
IN ADDITION, THE SECURITIES REPRESENTED BY THIS INSTRUMENT MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED OR ENCUMBERED WITHOUT THE PRIOR WRITTEN CONSENT
OF THE COMPANY TO SUCH PROPOSED SALE, PLEDGE, TRANSFER OR ENCUMBRANCE AND TO THE
PROPOSED ASSIGNEE, PLEDGEE OR TRANSFEREE.
No. WA96-125
UNIVERSAL DISPLAY CORPORATION
Common Stock Purchase Warrant
Universal Display Corporation, a Pennsylvania corporation, for
value received, hereby grants to the undersigned holder, its successors and
permitted assigns (collectively, the "Holder"), this right (the "Warrant"),
subject to the terms set forth below, to purchase at the purchase price per
share as defined in Section 2.1 below (the "Purchase Price"), up to that number
of Shares (defined below) set forth on the signature page of the Subscription
Agreement attached hereto (the "Signature Page"), subject to adjustment as
herein provided (such total number of Shares that may be purchased hereunder
being referred to herein as the "Warrant Shares").
1. Definitions. As used herein, the following terms, unless the context
otherwise requires, have the following respective meanings:
1.1. "Company" shall include Universal Display Corporation, a
Pennsylvania corporation, and, unless otherwise noted to the contrary, any
company which shall succeed to, by merger, consolidation or similar arrangement
of the Company's and assume the obligations of Universal Display Corporation
hereunder.
1.2. "Other Securities" refers to any stock (other than the
Shares) and other securities of the Company or any other person (corporate or
otherwise) that the Holder at any time shall be entitled to receive, or shall
have received, on the exercise of this Warrant, in lieu of or in addition to
Shares, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Shares.
1.3. "Shares" means (a) the Company's Common Stock, as
authorized on the date of this Warrant and (b) if the class of securities
described in (a) shall cease to be issued and outstanding, securities of the
same class issued in exchange for or in respect of the securities described in
(a) pursuant to a plan of merger, consolidation, recapitalization or
reorganization, the sale of substantially all of the Company's assets or a
similar transaction.
1.4. "Registrable Common Stock" means the number of shares of
common stock underlying the warrants issued hereunder. As to any particular
Registrable Common Stock, such securities will cease to be Registrable Common
Stock when they (a) have been effectively registered under the Securities Act of
1933, as amended (the "Act") and obtained or disposed of in accordance with the
registration statement covering them, (b) have been transferred pursuant to Rule
144 under the Act (or any similar provision then in force), or (c) are no longer
subject to restrictions under transfer pursuant to the provisions of Rule 144(k)
under the Act.
1.5. "Registration Expenses" means all expenses incident to
the Company's performance of or compliance with this Agreement, including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, printing expenses, messenger and delivery expenses, expenses and
fees for listing the securities to be registered on exchanges on which similar
securities issued by the Company are then listed, and fees and disbursements of
counsel for the Company (but not of counsel to the Shareholder) and of all
independent certified public accountants, underwriters (other than Underwriting
Commissions) and other persons retained by the Company.
1.6. "Underwriting Commissions" means all underwriting
discounts or commissions relating to the sale of securities of the Company.
2. Exercise of Warrant.
2.1. Purchase Price. The Warrant may be exercised, subject to
the terms specified herein, at the purchase price of $4.18 per Share (the
"Purchase Price").
2.2. Exercise Period. The Warrant may be exercised (the
"Exercise Period") at any time for a period of ten years from April 25, 1996.
2.3. Vesting. The shares subject to this warrant vest as
follows: 25,000 shares immediately; 5,000 shares on the next two anniversary
dates; and 30,000 shares on three following anniversary dates thereof, provided
that Holder must be an employee or consultant of the Company on the anniversary
date, or such shares shall not be vested, although the shares already vested
shall remain vested for the term of the warrant.
2.4. Exercise in Full. Subject to the limitations stated
above, this Warrant may be exercised in full at the option of the Holder by
surrender of this Warrant, with the form of subscription at the end hereof duly
executed by the Holder, to the Company at its principal office in the United
States, accompanied by payment, in cash or by certified or official bank check
payable to the order of the Company, in the amount obtained by multiplying the
number of Shares for which this Warrant may be exercised by the Purchase Price.
2.5. Partial Exercise. This Warrant may be exercised in part
by surrender of this Warrant in the manner and at the place provided in
subsection 2.4 along with payment in the amount determined by multiplying (a)
the number of Shares designated by the holder in the subscription at the end
hereof by (b) the Purchase Price. On any such partial exercise, the Company at
its expense will forthwith issue and deliver to or upon the order of the Holder
a new Warrant or Warrants of like tenor, in the name of the Holder or as the
Holder (upon payment by the Holder of any applicable transfer taxes) may
request, calling in the aggregate on the face or faces thereof for the number of
Shares for which such Warrant or Warrants may still be exercised.
3. Delivery of Share Certificates on Exercise.
3.1. As soon as practicable after the exercise of this Warrant
in full or in part, the Company, at its expense (including the payment by it of
any applicable issue taxes) will cause to be issued in the name of and delivered
to the Holder, or as the Holder (upon payment by the Holder of any applicable
transfer taxes) may direct, a certificate or certificates for the number of
fully paid and non-assessable Shares (or Other Securities) to which the Holder
shall be entitled on such exercise, plus, in lieu of any fractional share to
which the Holder would otherwise be entitled, cash equal to such fraction
multiplied by the then current market value of one full share, together with any
other stock or other securities and property (including cash, where applicable)
to which the Holder is entitled upon such exercise pursuant to Section 2 or
otherwise.
4. Covenants as to Shares.
4.1. Issuance of Shares upon Exercise. All Shares that may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be validly issued, fully paid and non-assessable and free from all
taxes, liens and charges with respect to the issue thereof. The Company will at
all times have authorized and reserved, free from preemptive rights, a
sufficient number of its Shares to provide for the exercise of the rights
represented by this Warrant.
4.2 Restrictions on Transfer. Holder represents to the company
that it is acquiring the Warrants for its own investment account and without a
view to the subsequent public distribution of the Warrants or Shares otherwise
than pursuant to an effective registration statement under the Securities Act.
Each Warrant and each certificate for Shares issued to the Holder and any
subsequent holder that have not been sold to the public pursuant to an effective
registration statement under the Securities Act or as to which the restrictions
on transfer have not been removed as hereinafter provided, shall bear a
restrictive legend reciting that the same have not been registered pursuant to
the Securities Act and may not be transferred in the absence of an effective
registration statement under the Securities Act, the holder thereof shall give
written notice to the Company of its intention to effect such transfer. Each
such notice shall describe the manner of the proposed transfer and shall be
accompanied by an opinion of counsel experienced in federal securities laws
matters and reasonably acceptable to the company and its counsel to the effect
that the proposed transfer may be effected without registration under the
Securities Act, whereupon, the holder of such Registrable Common Stock shall be
entitled to transfer such securities in accordance with the terms of its notice
and such opinion. Restrictions imposed under this Section 4 upon the
transferability of the Warrants or of Shares shall cease when:
(a) a registration statement covering such Shares becomes
effective under the Securities Act, or
(b) the Company receives from the holder thereof an opinion of
counsel experienced in federal securities laws matters, which counsel shall be
reasonably acceptable to the Company, that such restrictions are no longer
required in order to insure compliance with the Securities Act.
When such restrictions terminate, the Company shall, or shall instruct the
Warrant Agent to, issue new securities in the name of the holder not bearing the
legends required by this Section 4.
5. Adjustment for Reorganization, Consolidation or Merger.
5.1. Reorganization, Consolidation or Merger. If at any time
or from time to time, the Company shall (a) effect a plan of merger,
consolidation, recapitalization or reorganization or similar transaction with a
corporation (the "Acquiror") whereby the shareholders of the Company will
exchange their shares of the Company for the shares of the parent corporation of
the Acquiror, or (b) transfer all or substantially all of its properties or
assets to any other person, under any plan or arrangement contemplating the
dissolution of the Company (which along with any transactions set forth in (a)
hereof shall be an "Extraordinary Transaction"), then, in each such case, the
holder of this Warrant, on the exercise hereof as provided in Section 2 at any
time after the completion of any Extraordinary Transaction shall receive, such
Shares or Other Securities and property (including cash) to which such holder
would have been entitled in any Extraordinary Transaction as if such holder had
so exercised this Warrant, immediately prior thereto.
5.2. Dissolution. If the Company dissolves following the
transfer of all or substantially all of its properties or assets, the Company,
prior to such dissolution, shall at its expense deliver or cause to be delivered
to the Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder after the effective date of such
dissolution pursuant to this Section 5.
5.3. Continuation of Terms. Upon any Extraordinary
Transaction, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the securities, Shares and Other Securities and
property receivable on the exercise of this Warrant after the consummation of
reorganization, consolidation or merger or the effective date of dissolution
following any such transfer, as the case may be, any Extraordinary Transaction
and shall be binding upon the party or parties to the Extraordinary Transaction
and their successors, including, in the case of any such transfer, the person
acquiring all or substantially all of the properties or assets of the Company,
whether or not such person shall have expressly assumed the terms of this
Warrant as provided in Section 7.
6. Adjustments for Other Events.
6.1. Changes in Capital Structure. If the Company shall (a)
issue additional Shares as a dividend or other distribution on outstanding
Shares, (b) subdivide its outstanding Shares, or (c) combine its outstanding
Shares into a smaller number of Shares, then, in each such event, the Shares
immediately prior to such event shall, simultaneously with the happening of such
event, be adjusted by multiplying the Warrant Shares by a fraction, the
numerator of which shall be the total number of Shares issued and outstanding
immediately after such event and the denominator of which shall be the total
number of Shares issued and outstanding immediately prior to such event, and the
product so obtained shall thereafter be the Warrant Shares then in effect. The
Shares, as so adjusted, shall be readjusted in the same manner upon the
happening of any successive event or events described herein in this Section 6.
After any such event specified in this subsection 6.1, the original Purchase
Price shall continue to apply to any exercise of the Warrant, except that the
Purchase Price shall be adjusted in any such event by multiplying the Purchase
Price by a fraction the numerator of which shall be the total number of Shares
issued and outstanding immediately before such event and the denominator of
which shall be the total number of shares issued and outstanding immediately
after such event, provided, however, the Warrant Shares shall not be issued at a
discount from the par value stated in the Company's Articles of Incorporation
(currently, $.0l par value per share). The Purchase Price as so adjusted, shall
be readjusted in the same manner upon the happening of any successive event or
events described herein in this Section 6.
7. Notices of Record Date, etc. In the event of:
7.1. any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
7.2. any merger, consolidation or capital reorganization of
the Company, any reclassification or recapitalization of the capital stock of
the Company any other person, or
7.3. any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
then and in each such event the Company will mail or cause to be mailed to the
Holder a notice specifying (a) the date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and stating the amount
and character of such dividend, distribution or right, and (b) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Shares
(or Other Securities) shall be entitled to exchange their Shares (or Other
Securities) for securities or other property deliverable on such reorganization,
reclassification, recapitalization, transfer, consolidation, merger,
dissolution, liquidation or winding-up. Such notice shall be mailed at least 10
days prior to the date specified in such notice on which any such action is to
be taken.
8. Transfers.
8.1. The Warrants are not transferable, in whole or in part,
without compliance with the Securities Act of 1933, as amended (the "Securities
Act"), and any applicable state securities laws.
8.2. Subject to subsection 8.1, this Warrant, or any portion
hereof, may be transferred by the Holder's execution and delivery of the form of
assignment attached hereto along with this Warrant. Any transferee shall be
required, as a condition to the assignment, to deliver all such documentation as
the Company deems appropriate. However, until such assignment and such other
documentation are presented to the Company at its principal offices in the
United States, the Company shall be entitled to treat the registered holder
hereof as the absolute owner hereof for all purposes.
8.3. Upon a transfer of this Warrant in accordance with this
Section 8, the Company, at its expense, will issue and deliver to or on the
order of the Holder a new Warrant or Warrants of like tenor, in the name of the
Holder or as the Holder (on payment by the Holder of any applicable transfer
taxes) may direct, calling in the aggregate on the face or faces thereof for the
Shares called for on the face or faces of the Warrant or Warrants so
surrendered. If this Warrant is divided into more than one Warrant, or if there
is more than one Holder thereof, all references herein to "this Warrant" shall
be deemed to apply to the several Warrants, and all references to "the Holder"
shall be deemed to apply to the several Holders, except in either case to the
extent that the context indicates otherwise.
8.4. To the extent the Holder is a party to the Registration
Rights Agreement, the Warrants issued hereunder shall be subject to the transfer
restrictions and other provisions set forth therein.
9. Replacement of Warrants.
9.1. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Warrant and, in the
case of any such loss, theft or destruction of any Warrant, on delivery of an
indemnity agreement or security reasonably satisfactory in form and amount to
the Company or, in the case of any such mutilation, on surrender and
cancellation of such Warrant, the Company at its expense will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
10. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to register under
the Act any of its common stock for sale to the public for cash in an
underwritten offering, and the registration form to be used would permit
inclusion thereto of the Registrable Common Stock (a "Piggyback Registration"),
the Company will give prompt written notice to Shareholder and will include in
such Piggyback Registration, subject to the allocation provisions below, all
Registrable Common Stock with respect to which the Company has received from the
Shareholder a written request for inclusion within 20 days after the Company's
sending of such notice; provided however, that the Company shall not be required
to effect any registration of Registrable Common Stock if (i) registration is
effected by the Company on behalf of a shareholder exercising registration
rights that pursuant to the terms thereof prohibit the Shareholder's shares from
being included in such registration (a "Limited Demand Registration") or (ii)
the Registrable Common Stock was previously included in a Registration
Statement, whether an underwriten offering or otherwise.
(b) Piggyback Expenses. In a Piggyback Registration, the Company will
pay the Registration Expenses related to the sale of Registrable Common Stock by
the Shareholder, but the Shareholder will pay the Underwriting Commissions
related to the sale of such Registrable Common Stock; provided, however, that
the Shareholder will pay its pro rata share of Registration Expenses incurred by
the Company in connection with the registration if required to do so in
connection with any Blue Sky law clearance sought by the Company.
(c) Priority on Primary Registrations. If a Piggyback Registration is
an underwritten primary registration on behalf of the Company and the managing
underwriters advise the Company that in their opinion the number of securities
requested to be included in such registration exceeds the number that can be
sold in such offering at a price reasonably related to fair value, the Company
will allocate the securities to be included as follows: first, to the securities
the Company proposes to sell on its own behalf; and second, to the Registrable
Common Stock requested to be included in such registration by the Shareholder
and to securities of the Company requested to be included in such registration
by any other selling shareholder participating in the registration statement,
pro rata on the basis of the number of securities of the Company owned by all
such selling shareholders participating in the registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration is
initiated as an underwritten secondary registration on behalf of holders of the
Company's securities (other than pursuant to a Limited Demand Registration), and
the managing underwriters advise the Company that in their opinion the number of
securities requested to be included in such registration exceeds the number that
can be sold in such offering at a price reasonably related to fair value, the
Company will allocate the securities to be included as follows: first, to the
securities requested to be included by the holders initiating such registration;
second, to any securities requested to be included in such registration by the
Company; and third, to Registrable Common Stock requested to be included in such
registration by the Shareholder and to securities of the Company requested to be
included in such registration by any other selling shareholders participating in
the registration statement, pro rata on the basis of the number of securities of
the Company owned by all such selling shareholders participating in the
registration.
(e) Selection of Underwriters. The selection of the lead underwriter or
underwriters and all other decisions regarding the underwriting arrangements for
the offering will be made solely by the Company, subject to the rights, if any,
of the holders initiating a registration if the registration is under Section
2(d).
(f) Holdback Agreements. Shareholder hereby agrees that if so requested
by the Company or any representative of the underwriters in connection with the
initial public offering of the Company or any other registration of any
securities of the Company under the Act in which the Shareholder is given the
opportunity to participate pursuant to this Agreement, the Shareholder shall not
sell or otherwise transfer securities of the Company registered hereunder during
the 120-day period following the effective date of a registration statement of
the Company filed under the Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 120 day period.
(g) Indemnification.
(i) In connection with any registration statement in which the
Shareholder is participating, the Company will indemnify, to the extent
permitted by law, Shareholder, its officers and directors, and each person who
controls such holder (within the meaning of the Act), against all losses,
claims, damages, liabilities and expenses arising out of or resulting from any
untrue or alleged untrue statement of material fact contained in such
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are caused by or contained in any information furnished in writing to
the Company by or on behalf of the Shareholder or such other indemnified party
expressly for use therein or by the failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Company has furnished the underwriters with a sufficient number of
copies of the same.
(ii) In connection with any registration statement in which
the Shareholder is participating, the Shareholder will furnish to the Company in
writing such information as is reasonably requested by the Company for use in
any such registration statement or prospectus and will indemnify, to the extent
permitted by law, the Company, its directors and officers and each person who
controls the Company (within the meaning of the Act) against any losses, claims,
damages, liabilities and expenses resulting from any untrue or alleged untrue
statement of material fact or any omission or alleged omission of a material
fact required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is contained in information so furnished in writing by the Shareholder
specifically for use in preparing the registration statement.
(iii) Any person entitled to indemnification hereunder will
(a) give prompt notice (and in all events within 30 days) to the indemnifying
party of any claim with respect to which it seeks indemnification and (b) unless
a conflict of interest exists with respect to such claim that prohibits the
parties from using counsel selected by the indemnifying party, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled, or elects not, to assume the defense of
a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim.
(h) Participation in Underwritten Registrations. The Shareholder may
not participate in any registration hereunder unless such holder (i) agrees to
sell such holder's securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements under Section 2(e), and (ii) completes and executes all
questionnaires, powers of attorney, custody agreements, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
(i) Subsequent Registration Rights. The Shareholder acknowledges that,
from and after the date of this Agreement, the Company may enter into agreements
with any holder or prospective holder of any securities of the Company that
would allow such holders or prospective holders to include such securities in
any registration, whether such registration is pursuant to a demand registration
or a piggyback registration.
11. Notices.
11.1. All notices required hereunder shall be deemed to have
been given and shall be effective only when personally delivered or sent by
Federal Express, DHL or other express delivery service or by certified or
registered mail to the address of the Company's principal office in the United
States as follows:
Universal Display Corporation
Three Bala Plaza, East
Suite 104
Bala Cynwyd, PA 19004
in the case of any notice to the Company, and until changed by notice to the
Company, to the address of the Holder set forth above in the case of any notice
to the Holder.
12. Miscellaneous.
12.1. This Warrant and any term hereof may be changed, waived,
discharged or terminated, other than on expiration, only by an instrument in
writing signed by the party against which enforcement of such change, waiver,
discharge or termination is sought. This Warrant shall be construed and enforced
in accordance with and governed by the laws of the Commonwealth of Pennsylvania.
The headings in this Warrant are for purposes of reference only, and shall not
limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision. This Warrant embodies the entire
agreement and understanding between the Company and the other parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
UNIVERSAL DISPLAY CORPORATION
By: /s/ STEVEN V. ABRAMSON
-----------------------
Steven V. Abramson, President
Date: April 25, 1996
Accepted:
/s/ SIDNEY D. ROSENBLATT
--------------------------
Holder Signature
Date
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only on exercise of Warrant)
TO ________________________________:
The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to exercise such Warrant for, and to purchase thereunder,
__________ Shares (as defined in the Warrant Agreement governing the
attached Warrant) and herewith makes payment of $___________ therefor, and
requests that the certificates for such shares be issued in the name of, and
delivered to _____________________, whose address is
-----------------------------------.
Dated: ___________________________ ___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
------------------------------------
-----------------------------------
(Address)
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto __________________________ the right represented by the
attached Warrant to purchase _____________ Shares (as defined in the Warrant
Agreement governing the attached Warrant) to which the within Warrant
relates, and appoints __________________________ Attorney to transfer such
right on the books of ____________________________ with full power of
substitution in the premises.
Dated: ___________________________ ___________________________________
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant)
------------------------------------
-----------------------------------
(Address)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 638,225
<SECURITIES> 2,430,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,127,316
<PP&E> 61,512
<DEPRECIATION> 11,955
<TOTAL-ASSETS> 3,282,247
<CURRENT-LIABILITIES> 104,306
<BONDS> 0
0
2,000
<COMMON> 89,373
<OTHER-SE> 3,177,941
<TOTAL-LIABILITY-AND-EQUITY> 3,282,247
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 938,741
<OTHER-EXPENSES> 948,568
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,887,309)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,887,309)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,768,995)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
