<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-26380
----------------------------------
PIXTECH, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3214691
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Avenue Olivier Perroy, 13790 Rousset, France
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
011-33-4-42-29-10-00
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities 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
----- -----
The number of shares outstanding of each of the issuer's classes of common stock
as of
Class Outstanding at September 30, 1997
Common Stock, $.01 par value 13,763,654
<PAGE>
PIXTECH, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Balance Sheets as of September 30, 1997
and December 31, 1996........................................ 3
Statements of Operations for the Three Months and Nine Months
Ended September 30, 1997 and 1996, and the period from
June 18, 1992 through September 30, 1997..................... 4
Statements of Cash Flows for the Nine Months ended September
30, 1997 and 1996, and the period from June 18, 1992 through
September 30, 1997........................................... 5
Statement of Stockholders' Equity............................ 6 - 7
Notes to Financial Statements................................ 8 - 9
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 10 - 13
PART II OTHER INFORMATION
ITEM 1 Legal Proceedings............................................ 14
ITEM 2 Changes in Securities........................................ 14
ITEM 3 Default upon Senior Securities............................... 14
ITEM 4 Submission of Matters to a Vote of Security Holders.......... 14
ITEM 5 Other Information............................................ 14
ITEM 6 Exhibits and Reports on Form 8-K............................. 14
Signature..................................................................... 15
Exhibit Index................................................................. 16
</TABLE>
<PAGE>
PixTech, Inc.
(a development stage company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- ------------
<S> <C> <C>
ASSETS (unaudited)
Current assets:
Cash and cash equivalents.......................................... $ 6,089 $ 4,266
Short term investments 840 --
Accounts receivable:
Trade............................................................ 634 1,655
Other............................................................ 20 198
Inventory.......................................................... 612 770
Other.............................................................. 2,236 2,975
---------- ----------
Total current assets 10,431 9,864
Investments - long term.............................................. 9,240 --
Property, plant and equipment, net................................... 9,650 13,409
Goodwill, net........................................................ 254 298
Deferred tax assets.................................................. 4,524 5,167
Other assets - long term............................................. 244 342
Deferred offering costs.............................................. -- 485
---------- ----------
Total assets.................................................... $ 34,343 $ 29,565
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt.................................. $ 883 $ 990
Current portion of capital lease obligations....................... 609 921
Current portion of long term liabilities........................... -- 1,890
Accounts payable................................................... 3,362 5,132
Accrued expenses................................................... 1,096 1,773
Other.............................................................. 136 17
---------- ----------
Total current liabilities....................................... 6,086 10,723
Deferred revenue..................................................... 2,570 3,226
Long term debt, less current portion................................. 1,766 2,146
Capital lease obligation, less current portion....................... 581 833
Other long term liabilities, less current portion.................... 493 538
---------- ----------
Total liabilities............................................... 11,496 17,466
========== ==========
Stockholders' equity
Common stock...................................................... 137 81
Other stockholders' equity........................................ 55,168 33,647
Deficit accumulated during development stage...................... (32,458) (21,629)
Total stockholders' equity...................................... 22,847 12,099
---------- ----------
Total liabilities and stockholders' equity...................... $ 34,343 $ 29,565
========== ==========
</TABLE>
<PAGE>
PixTech, Inc.
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Period from
June 18, 1992
(date of
Three Months Ended Nine Months Ended inception)
September 30, September 30, through
--------------------------------------------- September 30,
1997 1996 1997 1996 1997
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Cooperation & license revenues....... $ -- $ 707 $ 1,718 $ 5,233 $ 24,996
Product sales........................ 152 67 580 428 2,216
Other revenues....................... 284 11 1,004 992 3,800
------------ ------------ ------------ ------------ ------------
436 785 3,302 6,653 31,012
------------ ------------ ------------ ------------ ------------
Cost of revenues
License fees and royalties.......... -- -- (61) -- (1,420)
------------ ------------ ------------ ------------ ------------
Gross margin.......................... 436 785 3,241 6,653 29,592
------------ ------------ ------------ ------------ ------------
Operating expenses:
Research and development:
Acquisition of intellectual
property rights................. -- -- -- -- (4,765)
Other............................. (3,227) (4,269) (11,305) (11,491) (49,047)
------------ ------------ ------------ ------------ ------------
(3,227) (4,269) (11,305) (11,491) (53,812)
Sales and marketing................. (369) (309) (1,151) (755) (4,829)
General and administrative.......... (611) (630) (1,899) (2,105) (9,781)
------------ ------------ ------------ ------------ ------------
Total operating expenses......... (4,207) (5,208) (14,355) (14,351) (68,422)
------------ ------------ ------------ ------------ ------------
Loss from operations.................. (3,771) (4,423) (11,114) (7,698) (38,830)
Other income/(expense)
Interest income/(expense)........... 82 3 424 91 763
Foreign exchange gains/(losses)..... 32 (137) (149) 205 461
------------ ------------ ------------ ------------ ------------
114 (134) 285 296 1,224
Loss before income tax benefit........ (3,657) (4,557) (10,829) (7,402) (37,606)
Income tax benefit.................... -- -- -- -- 5,148
------------ ------------ ------------ ------------ ------------
Net loss.............................. $ (3,657) $ (4,557) $ (10,829) $ (7,402) (32,458)
============ ============ ============ ============ ============
Net loss per share: $(.27) $(.56) $(.84) $(.91)
============ ============ ============ ============
Shares used in computing net loss per
share............................... 13,763 8,141 12,924 8,133
============ ============ ============ ============
</TABLE>
<PAGE>
PixTech, Inc.
(a development stage company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Period from
June 18, 1992
(date of
inception)
Nine Months Ended through
September 30, September 30,
------------------------------------------- -------------------
1997 1996 1997
-------------------- ------------------ ------------------
<S> <C> <C> <C>
Net loss................................................... $ (10,829) $ (7,402) $ (32,458)
Total adjustments to net loss.............................. 4,009 5,037 12,347
----------------- --------------- ---------------
Net cash used in operating activities...................... (6,820) (2,365) (20,111)
----------------- --------------- ---------------
Investing activities
Additions to property plant and equipment.................. (511) (4,560) (16,806)
Additions to intangible assets............................. -- (130) (130)
Reclassification of cash equivalents as investments........ (10,080) -- (10,080)
----------------- --------------- ---------------
Net cash used in investing activities...................... (10,591) (4,690) (27,016)
Financing activities
Stock issued............................................... 21,641 5 55,564
Proceeds from long-term borrowings......................... -- -- 6,287
Proceeds from sale leaseback transactions.................. -- -- 2,731
Payments for equipment purchases financed by accounts
payable................................................... -- -- (3,706)
Repayment of long term borrowing and capital lease
obligations............................................... (1,049) (1,773) (5,069)
----------------- --------------- ---------------
Net cash (used in) / provided by financing activities...... 20,592 (1,768) 55,807
----------------- --------------- ---------------
Effect of exchange rates on cash........................... (1,358) (349) (2,591)
----------------- --------------- ---------------
Net (decrease) / increase in cash and cash equivalents..... 1,823 (9,172) 6,089
Cash and cash equivalents beginning of period.............. 4,266 17,563 --
----------------- --------------- ---------------
Cash and cash equivalents end of period.................... $ 6,089 $ 8,391 $ 6,089
================= =============== ===============
</TABLE>
<PAGE>
PixTech, Inc.
(a development stage company)
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Convertible Preferred Stock
Series A Series B
Shares Shares
issued Amount issued Amount
<S> <C> <C> <C> <C>
Balance at June 18, 1992
Issuance of convertible preferred stock, net of issuance costs ..... 534,587 $ 706 123,005 $ 159
Issuance of Common stock in June ...................................
Translation adjustment .............................................
Net loss from June 18, 1992 (date of inception) through
December 31, 1992 ..................................................
Balance at December 31, 1992 534,587 706 123,005 159
Issuance of convertible preferred stock, net of issuance costs ..... 1,022,416 1,662 240,442 430
Issuance of Common stock in January ................................
Translation adjustment .............................................
Net loss--Year ended December 31, 1993 .............................
Balance at December 31, 1993 1,557,003 2,368 363,447 589
Issuance of Common stock under stock option plan in April ..........
Purchase of 28,761 shares of Common stock--Treasury
stock in April ....................................................
Issuance of convertible preferred stock, net of issuance costs......
Translation adjustment .............................................
Net loss--Year ended December 31, 1994 .............................
Balance at December 31, 1994 1,557,003 2,368 363,447 589
Reissuance of 28,761 shares of Common stock held in
treasury in January ...............................................
Issuance of Common stock under stock option plan ...................
Common stock issued in initial public offering, net of
issuance costs -- $1,080 ..........................................
Conversion of preferred stock ...................................... (1,557,003) (2,368) (363,447) (589)
Translation adjustment .............................................
Net loss--Year ended December 31, 1995 .............................
Balance at December 31, 1995
Issuance of Common stock under stock option plan ...................
Issuance of warrants in connection with acquisition of the
assets of Panocorp ................................................
Translation adjustment .............................................
Net loss--Year ended December 31, 1996 ............................
Balance at December 31, 1996
Common stock issued in public offering and private
placements, net of issuance costs -- $ 796 (unaudited) ............
Issuance of Common stock under stock option plan
(unaudited) .......................................................
Translation adjustment (unaudited) .................................
Net loss--Nine months ended September 30, 1997
(unaudited) .......................................................
Balance at September 30, 1997 -- -- -- --
<CAPTION>
Convertible Preferred Stock
Series C Series D
Shares Shares
issued Amount issued Amount
<S> <C> <C> <C> <C>
Balance at June 18, 1992
Issuance of convertible preferred stock, net of issuance costs ..
Issuance of Common stock in June ................................
Translation adjustment ..........................................
Net loss from June 18, 1992 (date of inception) through
December 31, 1992................................................
Balance at December 31, 1992 .....................................
Issuance of convertible preferred stock, net of issuance costs... 1,999,011 $ 5,686 430,208 $ 1,224
Issuance of Common stock in January..............................
Translation adjustment...........................................
Net loss--Year ended December 31, 1993...........................
Balance at December 31, 1993 ..................................... 1,999,011 5,686 430,208 1,224
Issuance of Common stock under stock option plan in April........
Purchase of 28,761 shares of Common stock--Treasury
stock in April..................................................
Issuance of convertible preferred stock, net of issuance costs... 1,045,835 2,929
Translation adjustment...........................................
Net loss--Year ended December 31, 1994...........................
Balance at December 31, 1994 ..................................... 3,044,846 8,615 430,208 1,224
Reissuance of 28,761 shares of Common stock held in
treasury in January.............................................
Issuance of Common stock under stock option plan.................
Common stock issued in initial public offering, net of
issuance costs -- $1,080........................................
Conversion of preferred stock ................................... (3,044,846) (8,615) (430,208) (1,224)
Translation adjustment...........................................
Net loss--Year ended December 31, 1995...........................
Balance at December 31, 1995
Issuance of Common stock under stock option plan.................
Issuance of warrants in connection with acquisition of the
assets of Panocorp..............................................
Translation adjustment...........................................
Net loss--Year ended December 31, 1996..........................
Balance at December 31, 1996
Common stock issued in public offering and private
placements, net of issuance costs -- $ 796 (unaudited)..........
Issuance of Common stock under stock option plan
(unaudited).....................................................
Translation adjustment (unaudited)...............................
Net loss--Nine months ended September 30, 1997
(unaudited).....................................................
Balance at September 30, 1997 -- -- -- --
</TABLE>
See accompanying notes
<PAGE>
PixTech, Inc.
(a development stage company)
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
Additional Cumulative
Shares Paid-in translation
issued Amount Capital adjustment
<S> <C> <C> <C> <C>
Balance at June 18, 1992
Issuance of convertible preferred stock, net of issuance costs........
Issuance of Common stock in June...................................... 115,045 $ 1 $ 75
Translation adjustment................................................ $ 1
Net loss from June 18, 1992 (date of inception) through
December 31, 1992....................................................
Balance at December 31, 1992 115,045 1 75 1
Issuance of convertible preferred stock, net of issuance costs........
Issuance of Common stock in January................................... 17,256 21
Translation adjustment................................................ (50)
Net loss--Year ended December 31, 1993................................
Balance at December 31, 1993 132,301 1 96 (49)
Issuance of Common stock under stock option plan in April............. 77,356 1 28
Purchase of 28,761 shares of Common stock--Treasury
stock in April....................................................... $(11) (11)
Issuance of convertible preferred stock, net of issuance costs........
Translation adjustment................................................ 230
Net loss--Year ended December 31, 1994................................
Balance at December 31, 1994 209,657 2 123 181
Reissuance of 28,761 shares of Common stock held in
treasury in January ................................................. 3
Issuance of Common stock under stock option plan...................... 6,902 0 3
Common stock issued in initial public offering, net of
issuance costs -- $1,080............................................. 2,500,000 25 20,973
Conversion of preferred stock......................................... 5,395,504 54 12,742
Translation adjustment ...............................................
Net loss--Year ended December 31, 1995 ...............................
Balance at December 31, 1995 8,112,063 81 33,844 515
Issuance of Common stock under stock option plan...................... 29,083 0 11
Issuance of warrants in connection with acquisition of the
assets of Panocorp................................................... 230
Translation adjustment................................................ (953)
Net loss--Year ended December 31, 1996 ..............................
Balance at December 31, 1996 8,141,146 81 34,085 (438)
Common stock issued in public offering and private
placements, net of issuance costs -- $ 796 (unaudited) .............. 5,570,819 56 22,958
Issuance of Common stock under stock option plan
(unaudited)........................................................... 51,689 0 25
Translation adjustment (unaudited)..................................... (1,462)
Net loss--Nine months ended September 30, 1997
(unaudited)...........................................................
Balance at September 30, 1997 13,763,654 $137 $57,068 $(1,900)
<CAPTION>
Deficit
accumulated
during
development Treasury
stage stock Total
<S> <C> <C> <C>
Balance at June 18, 1992
Issuance of convertible preferred stock, net of issuance costs........ $ 865
Issuance of Common stock in June...................................... 76
Translation adjustment................................................ 1
Net loss from June 18, 1992 (date of inception) through
December 31, 1992... ................................................ $ (506) (506)
Balance at December 31, 1992 (506) 436
Issuance of convertible preferred stock, net of issuance costs........ 9,002
Issuance of Common stock in January................................... 21
Translation adjustment................................................ (50)
Net loss--Year ended December 31, 1993................................ (120) (120)
Balance at December 31, 1993 (626) 9,289
Issuance of Common stock under stock option plan in April............. 29
Purchase of 28,761 shares of Common stock--Treasury
stock in April....................................................... (11) (11)
Issuance of convertible preferred stock, net of issuance costs........ 2,929
Translation adjustment................................................ 230
Net loss--Year ended December 31, 1994................................ (2,979) (2,979)
Balance at December 31, 1994 (3,605) (11) 9,487
Reissuance of 28,761 shares of Common stock held in
treasury in January ................................................. 11 14
Issuance of Common stock under stock option plan...................... 3
Common stock issued in initial public offering, net of
issuance costs -- $1,080............................................. 20,998
Conversion of preferred stock.........................................
Translation adjustment ............................................... 334
Net loss--Year ended December 31, 1995 ............................... (6,305) (6,305)
Balance at December 31, 1995 (9,910) 24,530
Issuance of Common stock under stock option plan...................... 11
Issuance of warrants in connection with acquisition of the
assets of Panocorp................................................... 230
Translation adjustment................................................ (953)
Net loss--Year ended December 31, 1996 ............................... (11,719) (11,719)
Balance at December 31, 1996 (21,629) 12,099
Common stock issued in public offering and private
placements, net of issuance costs -- $ 796 (unaudited) .............. 23,014
Issuance of Common stock under stock option plan
(unaudited)........................................................... 25
Translation adjustment (unaudited)..................................... (1,462)
Net loss--Nine months ended September 30, 1997
(unaudited)........................................................... (10,829) (10,829)
Balance at September 30, 1997 $(32,458) $22,847
</TABLE>
See accompanying notes
<PAGE>
PixTech. Inc.
(a development stage company)
Notes to Condensed Consolidated Financial Statements
(all amounts in thousands except share amounts)
(unaudited)
Note A -- Basis of presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results of the three-month or nine-month periods ending
September 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the consolidated financial statements and footnotes thereto for the year
ended December 31, 1996 (the "1996 Financial Statements"), included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
Note B -- Inventories
Inventory consists of raw material and spare parts.
Note C -- Public offering
On February 7, 1997, the Company sold 3,333,000 shares of Common Stock in a
public offering in Europe at a price of $4.50 per share, resulting in net
proceeds of $13,949 before expenses payable by the Company, which amounted to
$796. The Company granted the Underwriters a 30-day option to purchase up to
663,000 shares, and the Underwriters exercised such option and purchased such
shares on February 12, 1997. Including the sale of such shares, the total price
to the public, underwriting discount, and proceeds to the Company before
expenses were $17,982, $1,259, and $16,723, respectively.
Note D -- Private placements
In February 1997, the Company sold 463,708 shares of the Company's Common
Stock to Motorola, Inc., in a private placement at a price of $4.50 per share,
resulting in net proceeds of $2,086. As consideration for this stock purchase,
an amount of $686 was received in cash and the remaining $1,400 was in the form
of forgiveness of $1,400 of obligations from PixTech S.A. to Motorola, Inc.
("Motorola"). In connection with such private placement, Motorola received
warrants to purchase an additional 463,708 shares of the Common Stock of the
Company at a price of $5.50 per share, which warrants expire on December 31,
1998. As of September 30, 1997, these warrants have not been exercised.
In February 1997, the Company sold 1,111,111 shares of the Company's Common
Stock to United Microelectronics Corporation, the parent company of Unipac
Optoelectronics Corporation ("Unipac"), in a private placement at a price of
$4.50 per share resulting in net cash proceeds of $5,000.
Note E -- Net loss Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings par Share", which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method currently
used to compute earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the dilutive
effects of stock options and warrants will be excluded.
<PAGE>
PixTech. Inc.
(a development stage company)
There is no impact of Statement 128 on the calculation of earnings per share
for the three-month periods ended September 30, 1996 and 1997. As net losses
have been reported in these quarters, the dilutive effects of stock options and
warrants have been excluded from the calculation of net loss per share under the
current method of calculating net loss per share.
Note F -- Insurance refund
In September 1997, the Company collected an amount of $620 in payment under
its business insurance policy to cover losses incurred after certain physical
damages suffered in the Company's pilot manufacturing facility in April 1997. An
amount of $328 representing reimbursement of direct costs was recorded as
reduction in research and development expenses. The remaining amount of $292
covering consequential losses was reflected as other revenues in the three-month
period ended September 30, 1997.
Note G -- Bank guaranty
In August 1997, the Company provided Unipac, its Asian manufacturing partner,
with a written bank guaranty in an amount of $10.0 million pursuant to the
Foundry Agreement between Unipac and the Company. The Company granted the
issuing banks a security interest on its cash and cash equivalents for the same
amount. The pledged cash and cash equivalents have been recorded as short-term
and long-term investments in the balance sheet. Under certain conditions of the
Foundry Agreement, Unipac can sell to PixTech certain equipment and payment will
be secured through exercise by Unipac of the bank guaranty. Both the amount of
the guaranty to Unipac and the amount of the security interest to the banks will
be reduced by 1/24th of the initial amount at the end of each quarter, starting
June 1998.
Note H -- Subsequent events
On November 7, 1997, Sumitomo Corporation ("Sumitomo") granted PixTech a $10.0
million loan repayable over a period of three years, pursuant to a credit
agreement and following a distribution and financing agreement each dated as of
July 21, 1997 between the Company and Sumitomo (the "Sumitomo Agreement"). Of
this $10.0 million amount, $5.0 million represent a straight loan repayable in
four equal installments every 6 months starting 18 months after funding, bearing
interest at prime rate plus 0.75% per annum. The remaining amount of $5.0
million represent a convertible loan repayable in November 2000, bearing
interest at prime rate plus 0.75% per annum, and partially or totally
convertible, at Sumitomo's option, into shares of Common Stock of the Company at
a conversion price equal to 80% of the market price. This option can be
exercised after April 7, 1999.
As part of the Sumitomo Agreement, the loan is partially secured as follows:
. the Company gave a deed of mortgage on PixTech S.A. land and constructions
located in Rousset. At September 30, 1997, the net book value of this building
and land was $1.1 million.
. the French atomic energy agency ("CEA") undertakes certain contingent payment
obligations towards Sumitomo in case of default by PixTech.
Note I -- Commitments
On October 22 1997, an amendment to the LETI License Agreement was signed
between the CEA and the Company for a period of three years, in return for CEA
guarantying certain contingent payment obligations towards Sumitomo. As
discussed in Note H, the royalty rates and minimum payments from the Company to
CEA are increased. The Company will give a security interest to CEA on all its
patents during the term of the amendment.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of operations
Cooperation and License Revenues. The Company did not recognize any cooperation
and license revenue under the Field Emission Display ("FED") Alliance agreements
in the three-month period ended September 30, 1997, as compared to $707,000 in
the three-month period ended September 30, 1996.
The Company recognized cooperation and license revenues under the FED Alliance
agreements of $1.7 million in the nine-month period ended September 30, 1997, as
compared to $5.2 million in the nine-month period ended September 30, 1996.
These revenues represented the achievement by the Company of contractual
milestones with FED Alliance members. The Company has now recorded most of the
expected revenues associated with the achievement of contractual milestones with
existing FED Alliance members and future FED Alliance milestone revenues are
mostly subject to expansion of the FED Alliance.
Product sales. The Company recognized product sales of $580,000 in the nine-
month period ended September 30, 1997, as compared to $428,000 in the nine-month
period ended September 30, 1996. These product sales represented the shipment of
FED displays and FED cathodes in limited quantities to members of the FED
Alliance and the shipment of FED displays for evaluation by original equipment
manufacturer ("OEM") customers.
Other revenues. The Company recognized other revenues of $284,000 in the three-
month period ended September 30, 1997, as compared to $11,000 in the three-month
period ended September 30, 1996. The revenues recorded in the three-month period
ended September 30, 1997 included primarily an insurance refund covering
consequential losses incurred after certain physical damages suffered in the
Company's pilot manufacturing facility in April 1997. Other revenues amounted to
$1.0 million in the nine-month period ended September 30, 1997, as compared to
$992,000 during the same period in 1996. In the nine-month periods ended
September 30, 1997 and 1996, other revenues were derived principally from
government funded development contracts: respectively $663,000 and $800,000 were
related to a development contract from the French Ministry of Industry to
support manufacturing of FEDs.
Research and Development Expenses. The Company expensed $3.2 million for
research and development costs during the three-month period ended September 30,
1997, as compared to $4.3 million in the three-month period ended September 30,
1996. These expenses included obligations to the French atomic energy agency
("CEA") under the "LETI" Research Agreement (Laboratoire d'Electronique, de
Technologie et d'Instrumentation), contract consulting fees, salaries and
associated operating expenses for in-house research and development activities
and the cost of staffing and operating the Company's pilot manufacturing
facility.
This decrease reflected the reversal of a provision in the amount of $329,000,
following cancellation of potential liabilities to a third party, and the
increase of the parity of the U.S. dollar versus the French Franc in the three-
month period ended September 30, 1997 versus the three-month period ended
September 30, 1996, as most of the Company's research and development costs is
incurred in French Francs. After excluding the effects of currency fluctuation
and reversal of provision, research and development expenses remained stable in
the three-month period ended September 30, 1997 as compared to the three-month
period ended September 30, 1996.
Research and development expenses amounted to $11.3 million for the nine-month
period ended September 30, 1997 as compared to $11.5 million during the nine-
month period ended September 30, 1996.
Sales and Marketing Expenses. The Company expensed $369,000 for sales and
marketing during the three-month period ended September 30, 1997, as compared to
$309,000 during the three-month period ended September 30, 1996. This increase
reflected the expansion of the Company's sales and marketing organization both
in the United States and in Europe, and the increasing support of marketing
efforts through trade show attendance and advertising. The Company believes
sales and marketing expenses may increase in the future, as potential customers
and anticipated shipments of FED displays develop. Sales and marketing expenses
amounted to $1.1 million for the nine-month period ended September 30, 1997 as
compared to $755,000 during the nine-month period ended September 30, 1996.
<PAGE>
General and Administrative Expenses. General and administrative expenses
amounted to $611,000 in the three-month period ended September 30, 1997, a
decrease of 3% over general and administrative expenses incurred in the three-
month period ended September 30, 1996, which amounted to $630,000, reflecting
the effects of currency fluctuation. General and administrative expenses
amounted to $1.9 million for the nine-month period ended September 30, 1997 as
compared to $2.1 million during the nine-month period ended September 30, 1996.
Strategic issues and risks
The Company is focused on the continued development of the FED technology, the
strengthening and expansion of the FED Alliance, the improvement of
manufacturing yields, the successful implementation of contract manufacturing of
FEDs with its Asian partner, Unipac, and the reliability testing of new products
which the Company expects will lead to the shipment of commercial products in
the near future. In evaluating this outlook, the following risks and issues,
among others, which are common with development stage companies, should be
considered.
Risks Associated with Contract Manufacturing of FEDs. The Company believes that
its ability to commercialize medium to large volumes of FEDs is highly dependent
on its ability to have FEDs manufactured by a major manufacturer in the AMLCD
industry. On May 22, 1997, the Company signed a display foundry agreement (the
"Foundry Agreement") with Unipac Optoelectronics Corp. ("Unipac"), an AMLCD
manufacturer based in Taiwan. Under the agreement, Unipac will install volume
production equipment to produce FEDs at its manufacturing line, and will begin
production for exclusive delivery of FED displays to PixTech. Expectations about
the timing of this manufacturing plan with Unipac are forward-looking statements
that involve risks and uncertainties, including the ease or difficulty of the
transfer of the FED technology to Unipac. If such contract manufacturing
agreement is not implemented on a timely basis, the Company will not be able to
ship medium to large volumes of FED products, or to obtain a commercially
acceptable cost for its FED displays. If the Company is unable to have its FED
manufactured in a cost effective manner, the Company would be materially
adversely affected. Significant capital expenditure will be required in order to
install, at the contract manufacturers' facility, equipment that is not common
to the AMLCD manufacturing process. A minimum of $15 million of capital
expenditures will be required. Pursuant to the Foundry Agreement, Unipac will
purchase and fund equipment within a $15 million limit. The amount actually
expended on capital expenditures could vary significantly depending upon
numerous factors, including the inherent unpredictability of the total amount of
a large scale capital expenditure program. Should the Company be successful in
implementing this contract manufacturing relationship, the Company's reliance on
a single contract manufacturer will involve several risks, including a potential
inability to obtain an adequate supply of required products, and reduced control
over the price, timeliness of delivery, reliability and quality of finished
products. Any inability to manage this contract manufacturing relationship or
any circumstance that would cause the Company to delay the shipment of its
products would have an adverse effect on the Company.
Revenues from FED Alliance members. To date, the Company has recorded most of
the expected revenues associated with the achievement of contractual milestones
under existing FED Alliance agreements, and most future FED Alliance milestone
revenues are subject to expansion of the Alliance or to renewal of cooperation
periods with existing members at their respective expiration dates. Expansion of
the FED Alliance and renewal of cooperation periods by existing FED Alliance
members are subject, in part, to matters beyond the Company's control. Failure
to expand the FED Alliance or to obtain renewals of the cooperation periods
could adversely affect the Company.
Products and Manufacturing Processes under Development, Need to increase Yields,
Costs of Products. The Company's products and its manufacturing processes are in
the development stage. The Company has to date encountered a number of delays in
the development of its products and manufacturing processes. No assurance can be
given that further delays will not occur. The Company does not plan to increase
production from its pilot facility beyond low volume levels. The Company
believes that contract manufacturing with its Asian partner (see "Risks
Associated with Contract Manufacturing of FEDs") will make it possible to
manufacture volume quantities of FEDs at commercially acceptable costs. However,
moving from pilot production to volume production involves a number of steps and
challenges. In particular, in order to demonstrate the low cost potential of its
FED technology, the Company will need to improve its manufacturing yields. There
can be no assurance that the Company will be able to implement processes for the
manufacture of volume quantities of FED products at commercially viable cost
levels or on a timely basis. If such processes are not successfully implemented,
the Company would be adversely affected.
<PAGE>
Display Performance Enhancement. Key elements of display performance are
brightness, and the display's stability over time (display reliability), as well
as power efficiency. PixTech is seeking to balance luminous efficiency with
power efficiency to produce bright and low power-consumption displays. Display
reliability is heavily dependent upon the manufacturing process used in
assembling the displays as well as upon the characteristics of the phosphors
used on the anode. In order to produce color displays that will provide the
product life necessary for most applications, the Company believes it will need
to make further advances in phosphors and related manufacturing technologies.
Competition and Competing Technologies. The market for flat panel display
products is intensely competitive and is expected to remain so. The market is
currently dominated by products utilizing liquid crystal display ("LCD")
technology. LCD technology has continued to improve, and there can be no
assurance that advances in LCD technology will not overcome its current
limitations. In addition, as some of the basic FED technology is in the public
domain, the Company has a number of potential direct competitors developing FED
displays. In the event that efforts by the Company's competitors result in the
development of products that offer significant advantages over the Company's
products, the Company could be adversely affected.
No Assurance of Market Acceptance. The potential size and timing of market
opportunities targeted by the Company and the members of the FED Alliance are
uncertain. The Company anticipates marketing its displays to OEMs, and its
success will depend on whether OEMs select the Company's products for
incorporation into their products and upon their successful introduction of such
products, as well as the successful commercialization of products developed by
members of the FED Alliance.
Patents and Protection of Proprietary Technology. The Company's ability to
compete effectively with other companies will depend, in part, on the ability of
the Company to maintain the proprietary nature of its technology. Although the
Company has been granted, has filed applications for and has been licensed under
a number of patents in the United States and other countries, there can be no
assurance as to the degree of protection offered by these patents, as to the
likelihood that pending patents will be issued or as to the validity or
enforceability of any issued patents.
Foreign exchange. A large percentage of the Company's net assets and of the
Company's costs is expressed in French Francs. Fluctuations of the parity of the
U.S. dollar versus the French Franc may cause significant foreign exchange gains
or losses.
Financial Condition
Cash used in operations was $6.8 million for the nine-month period ended
September 30, 1997, as compared to cash used in operations of $2.4 million for
the nine-month period ended September 30, 1996.
The Company has used $20.1 million in cash to fund its operating activities from
inception through September 30, 1997 and has incurred $27.0 million in capital
expenditures and investments.
Cash flows generated from financing activities were $20.6 million in the nine-
month period ended September 30, 1997, as compared to $1.8 million used in
financing activities in the nine-month period ended September 30, 1996. These
financings consisted primarily of sales of shares of Common Stock in a public
offering in Europe and in private placements, resulting in net proceeds to the
Company of $15.9 million (net of issuance costs) and $5.7 million, respectively,
while long term liabilities decreased by $1.0 million. Cash flow generated from
financing activities exclude non-cash transactions related to the sale of
463,708 shares of the Company's Common Stock to Motorola, Inc (See "Notes to
Condensed Consolidated Financial Statements - Note D -- Private placements"). As
consideration for this stock purchase, an amount of $686,000 has been received
in cash and the remaining $1.4 million was in the form of forgiveness of $1.4
million of obligations due from PixTech S.A. to Motorola.
Since its inception, the Company has funded its operations and capital
expenditures primarily from the proceeds of equity financing aggregating $55.5
million and from proceeds aggregating $9.0 million from borrowings and sale-
leaseback transactions.
Capital expenditures were $511,000 during the nine-month period ended September
30, 1997 as compared to $4.7 million during the same period of 1996. In 1997,
capital expenditures were primarily related to the purchase of miscellaneous
tooling for the Company's pilot production line.
Investments amounted to $10.1 million at September 30, 1997 and are related to
the security interest granted by the Company to Unipac (see "Note G - Bank
Guaranty").
The nine-month period ended September 30, 1997 generated positive cash flows of
$1.8 million as compared to negative cash flows of $9.2 million for the nine-
month period ended September 30, 1996.
<PAGE>
On November 7, 1997, the Company was granted by the Japanese firm Sumitomo a
$10.0 million loan (see "Note H - Subsequent Events").
Cash available at September 30, 1997 amounted to $6.1 million as compared to
$4.3 million at December 31, 1996. The Company expects that cash available at
September 30, 1997 together with the proceeds of the loan granted by Sumitomo
will be sufficient to meet its cash requirements for at least 12 months.
The Company's expectations regarding the sufficiency of its sources of cash over
a future period is a forward-looking statement. The rate of expenditures by the
Company will be affected by numerous factors including the rate of development
of the Company's products and manufacturing capabilities, as well as market
demand for such products. In the future, the Company will require substantial
funds to conduct research, development and testing, to develop and expand
commercial-scale manufacturing systems and to market any resulting products.
Changes in technology or a growth of sales beyond currently anticipated levels
will also require further investments. There can be no assurance that funds for
these purposes, whether from equity or debt financing, or other sources, will be
available when needed or on terms acceptable to the Company.
<PAGE>
PIXTECH, INC.
September 30, 1997
PART II Other Information
ITEM 1 Legal Proceedings:
Not applicable.
ITEM 2 Changes in Securities:
(a) Not applicable
(b) Not applicable
(c) Not applicable
ITEM 3 Defaults upon Senior Securities:
Not applicable.
ITEM 4 Submission of Matters to a Vote of Security Holders:
None
ITEM 5 Other Information:
None.
ITEM 6 Exhibits and reports on Form 8-K:
(a) Exhibits :
4.1 Convertible Note issued by PixTech, Inc. to
Sumitomo Corporation, dated October 27, 1997.
10.1 ++ Distribution and Financing Agreement between
Sumitomo Corporation, PixTech Inc. and PixTech
S.A. dated as of July 21, 1997.
10.2 ++ Credit Agreement between Sumitomo Corporation
and PixTech, Inc. dated as of July 21, 1997.
10.3 ++ Cross-Licensing Period Extension between
Raytheon Company and Pixel International,
S.A. (now PixTech S.A.) dated as of
September 4, 1997.
10.4 ++ Amendment No. 4 to the License Agreement on
theMicrotips Display between PixTech the
Commissariate A L'Energie Atomique.
27 Financial Data Schedule.
++ Confidential treatment has been requested for
certain portions of these Exhibits pursuant to
rule 24b-2 of the Securities Exchange Act of
1934, as amended.
<PAGE>
PIXTECH, INC.
September 30, 1997
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PIXTECH, INC.
Date: November 14, 1997 BY:/s/ Yves Morel
Yves Morel
Chief Financial Officer
<PAGE>
PIXTECH, INC.
September 30, 1997
EXHIBIT INDEX
Exhibit No.
- -----------
4.1 Convertible Note issued by PixTech, Inc. to Sumitomo Corporation,
dated October 27, 1997.
10.1++ Distribution and Financing Agreement between Sumitomo Corporation,
PixTech Inc. and PixTech S.A. dated as of July 21, 1997.
10.2++ Credit Agreement between Sumitomo Corporation and PixTech, Inc.
dated as of July 21, 1997.
10.3++ Cross-Licensing Period Extension between Raytheon Company and
Pixel International, S.A. (now PixTech S.A.) dated as of September
4, 1997.
10.4++ Amendment No. 4 to the License Agreement on theMicrotips Display
between PixTech the Commissariate A L'Energie Atomique.
27 Financial Data Schedule.
++ Confidential treatment has been requested for certain portions of
these Exhibits pursuant to rule 24b-2 of the Securities Exchange
Act of 1934, as amended.
<PAGE>
EXHIBIT 4.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS
THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH
SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR ITS SUCCESSOR RULE
UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
CONVERTIBLE NOTE
----------------
27.10, 1997
FOR VALUE RECEIVED, the undersigned, PIXTECH, INC., a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of SUMITOMO CORPORATION, a
--------
Japanese corporation (the "Lender"), the unpaid principal amount of the
------
Convertible Loan outstanding from time to time (the original principal amount
being Five Million United States Dollars (US $5,000,000)), and interest accrued
thereon, at the times and in the amounts set forth in the Credit Agreement dated
as of July 21, 1997, by and between the Borrower and the Lender, (the "Credit
------
Agreement"). Capitalized terms used herein without definition have the
- ---------
respective meanings set forth in the Credit Agreement.
This Note is the "Convertible Note" referred to in, and is entitled to the
benefits of, the Credit Agreement. Reference is hereby made to the Loan
Documents for the rights and obligations of payment and prepayment, collateral
security, Events of Default and the rights of acceleration of the maturity
hereof upon the occurrence of an Event of Default.
1. Conversion of the Note.
----------------------
1.1. Voluntary Conversion. Subject to the terms and conditions of
--------------------
this Note and the Credit Agreement, from time to time after the 18-month
anniversary of the date of execution of this Note, the Lender may elect to
convert all or any portion of the outstanding principal balance of this Note (in
each case, the "Conversion Amount"), into Common Stock of the Borrower. The
-----------------
number of shares of Common Stock issuable upon conversion of the Conversion
Amount (the "Conversion Shares") shall be equal to (a) the Conversion Amount
-----------------
divided by (b) an amount equal to eighty percent (80%) of the average Closing
- ----------
Price over the twenty (20) consecutive Trading Days immediately prior to the
date of the Conversion Notice (as defined below) (subject to appropriate
adjustments in the event of any subdivision, reclassification, consolidation or
the like). For the purpose hereof, (i) "Closing Price" means the closing price
-------------
for shares of Common Stock on the NASDAQ national market system, and (ii)
"Trading Day" means any day on which trading of the Common Stock is conducted on
- ------------
the NASDAQ national market system.
<PAGE>
1.2 Conversion Procedure. The conversion of the Conversion Amount into
--------------------
Conversion Shares shall be made upon written notice by the Lender to the
Borrower (the "Conversion Notice"), given on or before the third Business Day
-----------------
prior to the proposed date of conversion (the "Conversion Date") and delivered
---------------
to the Borrower at the address set forth in the Credit Agreement. The
Conversion Notice shall set forth the name of the Person in whose name the stock
certificate for the Conversion Shares is to be issued, the number of Conversion
Shares into which the Conversion Amount is to be converted and the Conversion
Date. The Borrower shall deliver or cause to be delivered at its address set
forth in the Credit Agreement a stock certificate representing the Conversion
Shares, which shares shall be fully paid and nonassessable. The Borrower shall
record the Lender as the owner of the Convertible Shares on the records of the
Borrower.
1.3. Obligations Under Note. This Note shall cease to be an
----------------------
obligation of the Borrower as of the date upon which all of the outstanding
principal balance of this Note shall have been converted into Conversion Shares
and all interest accrued thereon shall have been paid.
1.4. Principal Upon Conversion. Upon conversion, the Conversion
-------------------------
Amount shall be deemed to be repaid in full by the Borrower to the Lender.
1.5. Taxes on Conversion. The Borrower shall pay any documentary,
-------------------
stamp or similar issue or transfer tax due on the issuance of Conversion Shares.
2. No Shareholder Rights. The Lender shall not be entitled to any rights
---------------------
as a shareholder in the Borrower until the Lender has converted this Note or any
portion of the amount owing hereunder.
3. Reservation of Stock. The Borrower covenants that during the period
--------------------
in which this Note is convertible, the Borrower will reserve from its authorized
and unissued Common Stock a sufficient number of shares to provide for the
issuance of Common Stock upon the conversion of this Note. The Borrower agrees
that its execution of this Note shall constitute a grant of full authority to
its officers charged with the duty of executing stock certificates to execute
and issue the necessary certificates for Conversion Shares upon the conversion
of this Note.
4. Loss, Theft, Destruction or Mutilation of Note. Upon receipt by the
----------------------------------------------
Borrower of evidence reasonably satisfactory to the Borrower of the loss, theft,
destruction or mutilation of this Note, and of indemnity or security reasonably
satisfactory to the Borrower, and upon reimbursement to the Borrower of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
this Note, if mutilated, the Borrower will make and deliver a new Note in the
same form as this Note, in lieu of this Note.
5. Governing Law. This Note shall be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of California.
-2-
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed as of
the day and year first above written.
PIXTECH INC.
/s/ Yves Morel
By: Yves Morel
Title: Chief Financial Officer
-3-
<PAGE>
EXHIBIT 10.1
DISTRIBUTION AND FINANCING AGREEMENT
This Distribution and Financing Agreement is entered into as of July 21,
1997 (the "Effective Date") by and between Sumitomo Corporation ("Sumitomo"), a
Japanese corporation, PixTech, Inc., a Delaware corporation, and PixTech SA, a
French Corporation.
RECITALS
WHEREAS, Sumitomo is a major international trading company and Sumitomo
has established business relationships with a number of companies based in
Japan;
WHEREAS PixTech SA has licensed and developed a technology for production
of field emission displays ("FEDs") and plans to develop a range of standard
monochrome and color products based on this technology and its evolution,
WHEREAS PixTech SA has established bilateral Cooperation and License
Agreements with Futaba Corporation, a Japanese corporation, Raytheon
corporation, a Delaware corporation, and Motorola, Inc., a Delaware corporation,
and is seeking to sign additional contracts of the same nature with companies
located in Asia or elsewhere,
WHEREAS PixTech SA has established a pilot line in Montpellier for FED
technology and product development as well as for limited production,
WHEREAS PixTech SA has entered into a Display Foundry Agreement (the
"Foundry Agreement"), with Unipac Optoelectronics Corporation, ("Unipac"), a
Taiwanese corporation that currently manufactures Liquid Crystal Displays,
whereby Unipac will contract manufacture FEDs for sale by PixTech SA,
WHEREAS PixTech SA is currently transferring its manufacturing process to
Unipac to prepare large volume production under the Foundry Agreement,
<PAGE>
WHEREAS Sumitomo desires to obtain distribution rights for PixTech SA's
FED Products in Asia,
WHEREAS PixTech SA desires to find support from Sumitomo for the
distribution of its FED products in Asia,
WHEREAS PixTech, Inc. desires to obtain a loan to allow acquisition of a
limited set of equipment to prepare volume production of Field Emission Displays
("FEDs"),
WHEREAS Sumitomo desires to grant such loan to PixTech, Inc.,
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, Sumitomo, PixTech, Inc. and PixTech SA agree to the following
terms and conditions hereto (hereinafter referred to collectively as the
"Agreement"):
1. DEFINITIONS.
1.1 "Asia" shall mean all Asian countries, including but not limited to
China, Korea, Taiwan, Mongolia, Philippines, Indonesia, Vietnam, Laos,
Singapore, Malaysia, Brunei, Thailand, Burma (Myanmar), Bangladesh,
Sri Lanka, India, Pakistan, except for countries from the former
Soviet Union.
1.2 "Affiliate" of a party shall mean a Person that directly, or
indirectly through one or more intermediaries, is controlled by such
Party. "Control" shall mean the possession of the power to direct or
cause direction of the management and policies of such Party, whether
through the ownership of voting stock, by contract or otherwise. In
the case of a corporation, "control" shall mean, among other things,
the direct or indirect ownership of more than fifty percent (50%) of
its outstanding stock.
1.3 "Borrowing" shall mean the borrowing of a loan by PixTech, Inc. from
Sumitomo pursuant to the Credit Agreement made and dated as of July
21, 1997, by and between PixTech, Inc. and Sumitomo.
1.4 "Commercial Partnership Period" shall mean the period during which
distribution rights are granted by PixTech to Sumitomo, as defined in
paragraph 2 and 3 below.
<PAGE>
1.5 "Confidential Information" shall mean the confidential information of
either Party designed as such by the disclosing Party as set forth
more particularly in Paragraph 10 of this Agreement entitled "Non-
Disclosure and Confidentiality"
1.6 "Effective Date" shall mean the date first written above
1.7 "FED" shall mean Field Emission Display, i.e. a flat panel display
based on a technology that involves a matrix addressed cathode plate
attached to phosphor bearing anode plate with an hermetic seal,
allowing after forming a vacuum between the two plates to generate a
picture on the anode plate by control of electron emission by the
cathode and acceleration of the electrons onto the anode plate.
1.8 "FED related Invention" shall mean any idea, design, concept,
technique, process, invention, discovery or improvement, whether or
not patentable, made by employees of one or more Parties in the field
of FED.
1.9 "Industrial Partner" or "IP" shall mean any Person with which PixTech
SA or PixTech, Inc. has a Cooperation and License Agreement. A
Cooperation and License agreement involves a worldwide non exclusive
license on FED patents and know-how from PixTech to the Industrial
Partners with no right to sublicense, and a worldwide, non exclusive
license on certain Industrial Partner's FED technology to PixTech,
with a right to sublicense, under certain conditions.
1.10 "Japanese Company" shall mean any Japanese Person or any Japanese
Transplant.
1.11 "Japanese Person" shall mean any Person with its main offices located
in Japan.
1.12 "Japanese Transplant" shall mean a Person located in Asia which is
either (i) an Affiliate of a Japanese Person or (ii) a Person which
main activity is to manufacture products under a technology licensed
by a Japanese Company
1.13 "Market Area" shall mean the geographical area within which Sumitomo
shall have exclusive and non exclusive rights to sell PixTech FED
Products.
<PAGE>
1.14 "Person" shall mean any individual, partnership, corporation, firm,
association, unincorporated organization, joint venture, trust or
other entity.
1.15 "PixTech SA" shall mean PixTech SA and its Affiliates.
1.16 "PixTech, Inc." shall mean PixTech Inc. and its affiliates.
1.17 "PixTech" shall mean PixTech SA, and / or PixTech, Inc.
1.18 "PixTech's FED products" shall mean any product manufactured by
PixTech or any product manufactured by a Person under a contract
manufacturing arrangement with PixTech, which incorporates PixTech's
FED Technology.
1.19 "PixTech's FED Technology" shall mean any technology relating to or
useful in the design and manufacturing of FEDs, including without any
limitation any patent, know-how, trade secret, which is owned by or
licensed to PixTech.
1.20 "Term" shall have the meaning set forth in Paragraph 12 hereof.
2. PURPOSE
2.1 Distribution rights. PixTech SA and PixTech, Inc. grant Sumitomo exclusive
--------------------
rights to sell PixTech's FED Products during the Commercial Partnership
Period, within the Market Area defined in paragraph 3 below.
2.2 Loan. Sumitomo grants PixTech, Inc. a loan according to the terms defined
-----
in paragraph 6.1 below.
2.3 Reasonable efforts by PixTech. PixTech agrees to use reasonable efforts to
------------------------------
develop and improve the PixTech Technology, and to make commercial
quantities of PixTech FED Products available.
2.4 Best efforts by Sumitomo. Sumitomo agrees to use best efforts to promote
-------------------------
and sell PixTech FED Products in the Market Area.
<PAGE>
3. DISTRIBUTION RIGHTS
3.1 Grant and Market Area. Subject to Sumitomo's payment to PixTech, Inc. of
----------------------
the principal of the Borrowing, and subject to the limitations described in
Section 11.6 hereof, PixTech SA and PixTech, Inc. hereby grant Sumitomo:
(a) an exclusive right to sell PixTech FED Products to any Person located in
Japan and any Japanese Transplant located in Asia;
(b) a non exclusive right to sell PixTech FED Products to any Person located in
Asia.
3.2 Extension of rights outside Asia for Japanese Transplants. On a case by
----------------------------------------------------------
case basis, PixTech may grant Sumitomo a right to sell PixTech FED Products
to Japanese Transplants outside Asia.
3.3 PixTech to [ ]* to [ ]*, PixTech [ ]* on [ ]* to any
---------------------
[ ]*.
3.4 PixTech to consult with Sumitomo prior to establishing production facility
--------------------------------------------------------------------------
in the Market Area. PixTech shall involve Sumitomo in any project to
-------------------
establish manufacturing capabilities in the Market Area, whether on its own
or by way of a joint-venture with a Japanese Company, and shall submit a
reasonable proposal for Sumitomo to participate in such manufacturing
arrangement. Such proposal shall be negotiated in good faith between the
parties involved. In case a reasonable proposal is waived by Sumitomo,
Sumitomo's rights under this Agreement, including exclusive rights to any
Products manufactured by PixTech's affiliates, shall not be impaired
despite establishment of such manufacturing capabilities.
3.5 Term of Commercial Partnership Period. The Commercial Partnership Period
--------------------------------------
shall commence upon the Effective Date hereof and continue for a period of
seven (7) years. It shall be subject to automatic extension for additional
one (1) year periods unless either party, with or without cause, shall give
written notice of termination to the other not less than ninety (90) days
prior to the end of the initial term of Commercial Partnership Period or
any extension hereof.
* Confidential Treatment Requested
<PAGE>
4. OBLIGATIONS OF THE PARTIES DURING THE COMMERCIAL PARTNERSHIP PERIOD
4.1 Coordination for Expansion of Activity. In order to facilitate expansion of
---------------------------------------
sales activity under this Agreement, the Parties shall meet on a regular
basis to define and agree on a marketing and sales plan and review business
progress under this Agreement. The parties shall also discuss market
conditions and trends and product definitions.
4.2 Technical Training by PixTech. PixTech will use reasonable efforts to
------------------------------
ensure adequate technical training to Sumitomo's representatives. Such
technical training will cover any area needed in order to facilitate sales
of PixTech FED Products.
4.3 PixTech to Notify Sumitomo of Sales of PixTech FED Products to New
------------------------------------------------------------------
Customers in Asia. PixTech shall notify Sumitomo of the occurrence or
------------------
anticipated occurrence of any first sale of PixTech FED Product to a Person
located in Asia (outside Japan) made by PixTech or any distributor of
PixTech's FED products. Sumitomo shall promptly indicate whether Sumitomo
considers that such Person is a Japanese Transplant, and shall describe the
reasons supporting such consideration. Any commercial relationship
initiated between PixTech and a Japanese Transplant located in Asia shall
immediately be transferred to Sumitomo.
4.4 PixTech to Enforce Sumitomo's Exclusivity to Sell PixTech FED Products to
-------------------------------------------------------------------------
Japanese Persons and Japanese Transplants. PixTech and any distributor of
------------------------------------------
PixTech FED products shall not sell any PixTech FED products to Japanese
Persons and Japanese Transplants during the Term of this Agreement. PixTech
shall ensure that any distributor of PixTech FED products shall comply with
that obligation. PixTech shall forward to Sumitomo any request for product
or sales information from Japanese Companies.
4.5 Product Exclusivity. Sumitomo confirms that within the Market Area where
--------------------
PixTech grants Sumitomo exclusive rights to sell its FED Products, the
Electronics and Aerospace Division of Sumitomo, or any successor thereof,
shall not distribute FED products manufactured by or purchased from any
Person other than PixTech, including PixTech IPs.
<PAGE>
5. COMMERCIAL CONDITIONS FOR DISTRIBUTION
5.1 Sales of Products. All sales of PixTech FED products hereunder shall be
-----------------
made by PixTech to Sumitomo for Sumitomo's resale to its customers.
Sumitomo shall be free to resell PixTech FED products purchased from
PixTech to customers within the Market Area at whatever prices and on
whatever terms and conditions Sumitomo shall best promote the purpose of
this Agreement. All sales of PixTech FED products to Sumitomo shall be
subject to the conclusion of an individual sales contract (each hereinafter
an "Individual Sales Contract") and also to the following terms:
(a) PixTech FED products shall be delivered to Sumitomo on [ ]*.
(b) Payments shall be made in the lawful currency of Japanese Yen within
forty five (45) days after PixTech's presentation of invoice and relevant
shipping documents.
The Parties hereto may, in an Individual Sales Contract, agree on terms and
conditions different from those of this Agreement, and, in such event, such
terms and conditions in the Individual Sales Contract (excluding the
printed terms and conditions) shall supersede the conflicting terms and
conditions of this Agreement.
5.2 Discount to Sumitomo. PixTech shall sell its FED Products to Sumitomo at a
--------------------
price based upon PixTech's international price list, less a discount. This
percentage will be [ ]* for an initial period of three years starting
from the Effective Date. After this initial period, this discount may be
adjusted upon mutual agreement between the Parties, depending on sales
volume.
5.3 Costs. Each party will bear its own costs associated with the execution of
------
this Agreement, including training of support personnel, advertising,
organization and participation to trade shows, administration and sales
costs.
5.4 Customer Selection. Within the Market Area and within the limitations set
-------------------
forth in Section 11.6 hereof, Sumitomo will have full discretion to select
or reject a customer for PixTech FED products.
* Confidential Treatment Requested
<PAGE>
6. LOAN TO PIXTECH
6.1 Grant of Loan. In order to facilitate production of volume quantities of
--------------
PixTech FED products, Sumitomo will grant PixTech a loan according to the
terms and conditions described in the Credit Agreement by and between
PixTech, Inc. and Sumitomo, as attach hereto as Appendix 1.
7. REPORTS
7.1 Monthly Sales Activity Report. Commencing with the month in which sales of
------------------------------
PixTech FED Products by Sumitomo first occur, thirty days after the end of
each month while the Agreement is in effect, Sumitomo shall deliver to
PixTech full, true and accurate reports of its sales of PixTech FED
products during that month. These reports shall include the following, but
shall not include unit price and total price:
(a) Name, address and activity of customer
(b) For each PixTech FED Product, number of products sold or returned,
(c) Any adjustment to prior periods.
7.2 Quarterly Sales Activity Report. Commencing with the quarter in which sales
--------------------------------
of PixTech FED Products by Sumitomo first occur, thirty days after the end
of each quarter while the Agreement is in effect, Sumitomo shall deliver to
PixTech full, true and accurate reports of its aggregate sales of PixTech
FED products during that quarter. These reports shall include the
following:
(a) For each PixTech FED Product, Aggregate amounts of sales, using
actual prices applicable to Sumitomo's customers
(b) Any adjustment to prior periods.
7.3 SEC Filings to Sumitomo. During the Term of this Agreement, PixTech will
------------------------
make available to Sumitomo any filings, including all periodical financial
statements and press releases, made by PixTech to the Securities and
Exchange Commissions or any other Market Authority.
<PAGE>
8. INDEMNIFICATION
8.1 PixTech shall indemnify and hold harmless Sumitomo from and against all
actions, proceedings, claims, damages, costs and demands, except for
damages, claims, costs and demands arising out of Sumitomo negligence or
misconduct, including any misrepresentation to third parties, which may
arise out of or in connection with any sales, distribution, marketing or
use of PixTech's FED products sold, distributed or marketed by Sumitomo
directly or indirectly in the Market Area limited to any claims of
infringement of patent, trademark, or other intellectual property right and
any product liability claims, and claims resulting from short shipment by
PixTech or failure to meet the warranty by PixTech, provided, however, that
Sumitomo shall in every instance refrain from making any admission of
liability, shall give either PixTech, Inc. or PixTech, SA. a notice of any
claim made, shall assist in the defense of such claim, and shall refrain
from settling such claim without written consent of either PixTech, Inc. or
PixTech, SA.
8.2 For any single claim or for any single 12 month period under paragraph 8.1,
PixTech shall not be liable to more than five (5) million US dollars.
9. INTELLECTUAL PROPERTY
9.1 Ownership of Inventions PixTech shall own all right, title and interest in
-----------------------
and to any FED Related Inventions made during the Term resulting from the
interaction of PixTech personnel and Sumitomo and its customers.
9.2 No license under PixTech Technology to Sumitomo. No licenses are granted
-------------------------------------------------
under this Agreement, by implication, estoppel or otherwise. Nothing in
this agreement shall be construed as conferring Sumitomo any license, right
to use or other right with respect to any intellectual property of PixTech.
9.3 Infringement by Others; Prosecution by PixTech. Sumitomo shall notify
-----------------------------------------------
PixTech in writing as soon as possible after becoming aware of any
potential patent, copyright, or other potential infringement by a third
party of the PixTech Technology.
<PAGE>
10. NON-DISCLOSURE AND CONFIDENTIALITY
10.1 Confidential Information. "Confidential Information" shall mean all
-------------------------
confidential, proprietary or secret information, including, but not limited
to, PixTech's FED Technology, all related technology, know-how, process,
equipment and patents developed by PixTech production facilities and
industrial plans, production data, relative to process, quality or yield,
design, drive techniques and packaging of PixTech's displays, design and
specification of mask tooling, display test results and performance data,
commercial and financial information that is owned possessed or used by
either Sumitomo and PixTech during the term of this Agreement. During the
term of this Agreement, each of the parties hereto shall not disclose to
any third party any Confidential Information which is conspicuously marked
or identified by the disclosing party as "Confidential".
10.2 Use of Confidential Information. The Parties shall use Confidential
--------------------------------
Information solely for the purposes contemplated by this Agreement and will
limit access to Confidential Information to those employees, consultants,
and advisors who have a need to know.
10.3 Disclosure of PixTech's Confidential Information by Sumitomo to Potential
-------------------------------------------------------------------------
Customers. Sumitomo shall have the right to disclose Confidential
----------
Information to potential customers provided that a non-disclosure
agreement, in a form agreed by the Parties, is entered into between
Sumitomo and its potential customer, and provided that, within ten (10)
days after such disclosure, Sumitomo delivers to PixTech an executed copy
of such non-disclosure agreement.
10.4 Exclusions from Confidential Information. Notwithstanding the provisions of
-----------------------------------------
subsection 10.1 above, Confidential Information shall not include any
information to the extent it (i) is or becomes a part of the public domain
through no act or omission on the part of the receiving Party, (ii) is
disclosed to third parties by the disclosing party without restriction on
such third parties, (iii) is lawfully in the receiving party's possession
at or prior to the time of disclosure under this Agreement; (iv) is
disclosed to the receiving party by a third party having the legal right to
do so, and who at the time of such disclosure has no obligation of
confidentiality to a Party; (v) is independently developed by the receiving
party without reference to the disclosing party's proprietary information;
or (vi) is released from confidential treatment by written consent of the
disclosing party.
<PAGE>
10.5 Obligations of Parties. Each of PixTech and Sumitomo shall hold in
-----------------------
confidence and not disclose (except on a confidential basis to employees
who need to know) all Confidential Information received from the other
Party in the same manner and to the same extent as it holds in confidence
its own Confidential Information of a similar nature and value.
10.6 Permitted Disclosures of Confidential Information. Each Party may disclose
-------------------------------------------------
any Confidential Information under, and to the extent required to comply
with a court or administrative subpoena or order or other applicable
governmental regulation or statutory requirement which appears to be lawful
on its face, provided that the disclosing Party promptly notifies the other
Party.
10.7 Compliance of Employees of Parties. Each of PixTech and Sumitomo shall take
----------------------------------
appropriate action by instruction or agreement with its employees to
satisfy its obligations under paragraph 10 of the Agreement.
11. REPRESENTATIONS AND WARRANTIES
11.1 Warranties of All Parties. Each Party represents and warrants that: (i) it
--------------------------
has the full authority to enter into this Agreement; (ii) there are no
liens or encumbrances of any kind against any obligation under this
Agreement or any outstanding agreements, assignments, or encumbrances
inconsistent with the provisions of this Agreement; and (iii) each Party
has or will obtain any necessary rights from its Affiliates to make the
representations and to grant the rights specified herein on their behalf.
11.2 Representations and Warranties of PixTech. PixTech represents and warrants
------------------------------------------
to Sumitomo as follows:
(a) PixTech's execution of this Agreement will not constitute a breach
of, or default under, any Agreement to which PixTech is a party.
(b) Prior to the Effective Date, only Raytheon Company, Futaba
Corporation, and Motorola, Inc. have a valid license on PixTech's
technology. This license include a right to manufacture and sell
products incorporating the PixTech's FED technology without any
limitation.
(c) PixTech represents that under the Display Agreement between PixTech
SA and Unipac, PixTech has granted Unipac a license to
<PAGE>
manufacture and to sell to PixTech only, and, under certain conditions,
to its industrial Partners, FED products incorporating PixTech's FED
technology
(d) PixTech will not grant any license to its technology to more than
three (3) additional Industrial Partners prior to June 28, 1998.
(e) Amendment 1 dated February 6, 1997 of the Cooperation and License
Agreement between PixTech and Motorola dated June 13, 1995 limits the
number of sublicenses which the Company can grant relating to any
Technology owned by Motorola.
(f) PixTech represents that, as of the Effective Date, it is not aware
of any patent or other intellectual property rights of third parties
that would be infringed by PixTech's FED products.
(g) PixTech represents that it has obtained any necessary rights or
license from Industrial Partners to make the representations and to
grant to Sumitomo the right to distribute PixTech FED products within
the Market Area.
11.3 No Warranty with Respect to Availability, Performance or Cost
-------------------------------------------------------------
Competitiveness of PixTech's FED products. PixTech does not warrant the
------------------------------------------
availability, the timing of such availability, the performance or the
competitiveness of the PixTech FED Products.
11.4 NO WARRANTY OF PERFORMANCE. NEITHER PARTY MAKES ANY WARRANTY WITH RESPECT
---------------------------
TO THE RESULTS TO BE OBTAINED BY THE OTHER PARTY UNDER THIS AGREEMENT.
EXCEPT AS OTHERWISE PROVIDED HEREIN, NO WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY PIXTECH HEREUNDER.
11.5 NO CONSEQUENTIAL DAMAGES. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
-------------------------
ANY LOST REVENUE, LOST PROFITS OR OTHER INCIDENTAL, CONSEQUENTIAL, SPECIAL
OR INDIRECT DAMAGES BY REASON OF ANY PERFORMANCE OR NON-PERFORMANCE UNDER
THIS AGREEMENT.
<PAGE>
11.6 [ ]* not Included in Market Area. PixTech represents that
------------------------------------------------
under a valid cooperation agreement with a major [ ]*,
PixTech has waived all rights to market its products, directly or
indirectly, to any competing [ ]* or to any Person that
intends to sell PixTech's FED products to any [ ]*.
12. TERM AND TERMINATION
12.1 Term. This Agreement shall commence upon the Effective Date hereof and
----
shall continue in full force and effect until the expiration of the
Commercial Partnership Period, as defined under Section 3.5 hereof.
12.2 Either of PixTech and Sumitomo may terminate this Agreement by giving a
written notice of termination to the other party:
(a) if the other party breaches any of the provisions of this Agreement or
any Individual Sales Contract and does not remedy within one hundred and
eighty (180) days after a written notice is given requesting such party to
remedy the breach;
(b) if the other party becomes insolvent, or any voluntary or involuntary
petition in bankruptcy or for corporate reorganization is filed by or
against the other party, or a receiver is appointed with respect to any of
the assets of the other party, or a liquidation proceeding is commenced by
or against the other party;
(c) if the whole or any substantial portion of the other party is
transferred to a third party by agreement, order of court, or otherwise,
the result of which, in the reasonable judgment of Sumitomo, would
materially affect Sumitomo's rights and position under this Agreement ; or
(d) if the whole or any substantial part of the ownership, control or
management of the other party is changed, the result of which, in the
reasonable judgment of Sumitomo, would materially affect Sumitomo's rights
and position under this Agreement ; or
(e) if any merger or consolidation will occur, the result of which would in
the reasonable judgment of Sumitomo materially affect the ability of
PixTech to fulfill its obligation under this agreement.
* Confidential Treatment Requested
<PAGE>
Nothing in this Section 12.2 shall affect, be construed, or operate as a
waiver of any right of the party aggrieved by any breach of this Agreement
to recover any loss or damage incurred as a result of such breach, either
before or after the termination hereof.
12.3 Force Majeure. "Force Majeure" shall mean an event beyond the control of
--------------
the parties (including but not limited to fire, flood, tornado, earthquake,
war, riot, strike, lockout or any act of government or governmental
authority) which results in impossibility of performance of a Party's
duties and obligations under this Agreement. Any party that asserts the
occurrence of Force Majeure shall give immediate notice thereof to the
other Party. During the existence of such event, the duties and obligations
of the Parties under this Agreement shall be suspended and the Parties
shall take all reasonable action to assure resumption of normal
performance under this Agreement as soon as possible. If such impossibility
of performance continues for more than ninety (90) days after the
occurrence of Force Majeure, such other party shall have the right to
terminate this Agreement.
12.4 Effect of Expiration or Termination. Upon expiration of this Agreement or
-----------------------------------
termination hereof for any reason, nothing herein shall be construed to
release either Party from any obligation that matured prior to the
Effective date of such termination. In addition, upon termination of this
Agreement before full repayment of the Borrowing described under Section
6.1, the outstanding principal balance of the Borrowing, interest accrued
but unpaid thereon, and all other amounts payable thereunder shall become
immediately due and payable, without demand upon or presentment to PixTech,
Inc., which are expressly waived by PixTech, Inc. and Sumitomo may
immediately exercise all rights, powers and remedies available to it at
law, in equity or otherwise.
12.5 Survival. The rights and obligations of the following paragraphs and
--------
sections of this Agreement shall, to the extent relevant, survive and
continue after the expiration or termination hereof and shall bind the
Parties and their legal representatives, successors, heirs and assigns;
paragraph 8; paragraph 10; paragraph 13; Section 14.1, 14.2, and 14.3.
13. DISPUTE RESOLUTION
13.1 The parties hereby agree that they will attempt in good faith to resolve
any controversy or claim arising out of or relating to this Agreement
promptly
<PAGE>
by negotiations. If a controversy or claim should arise hereunder, either
Party, or both parties, shall promptly prepare and exchange memoranda
stating the issues in disputes and their positions, summarizing the
negotiations which have taken place, and attaching relevant documents. The
Senior Executives will meet for negotiations within thirty (30) days after
the date of communication of such memoranda to the other Party, at a
mutually agreed time and place. If the matter has not been resolved within
thirty (30) days of the first meeting of the Senior Executives, subject to
rights to injunctive relief and unless otherwise specifically provided for
herein, any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be finally settled in New York, New
York under the Rules of the American Arbitration Association by one or more
arbitrators appointed in accordance with such Rules. Any award resulting
therefrom shall be final and binding on the parties hereto.
14. GENERAL
14.1 Expenses. Except as otherwise expressly provided herein, each Party hereto
--------
shall be responsible for its own costs and expenses incurred in connection
with the performance hereof, including, without limitation, legal fees, and
expenses incurred in connection with the transactions contemplated
hereunder.
14.2 Public disclosure. Each Party hereby acknowledges and agrees that it will
-----------------
not disclose the terms of this Agreement or any information relating to its
subject matter to any third party without the express written consent of
the other Party, except to the extent required by law or government rule
and regulation. The foregoing notwithstanding, the Parties intend that a
joint press release will be issued on a mutually agreed date following the
Effective Date, the text of which shall have been approved by all parties.
14.3 Notices. Any notice, claim, request or other communication required or
-------
permitted under this Agreement shall be valid and effective only if given
by written instrument, duly delivered, and addressed as follows:
If to PixTech :
PixTech SA or PixTech Inc (as applicable)
Avenue Perroy
Zone Industrielle de Rousset
13 790 ROUSSET
<PAGE>
FRANCE
Attention: Francis Courreges
Executive Vice President
Fax: 33 4 42 29 05 09
Telephone : 33 4 42 29 10 00
or other individuals or addresses as shall hereafter be furnished by written
notice to Sumitomo.
If to Sumitomo :
Mr. Yoshihiro Bito
General Manger, Electronics Department
Fax: 81 - 3 - 3230 79 36
Telephone: 81 - 3 - 3230 - 77 33
Sumitomo Corporation
Electronics Department
1-2-2, Hitotsubashi, Chiyoda-ku
Tokyo, 100 Japan
or other individuals or addresses as shall hereafter be furnished by written
notice to PixTech.
14.4 Independent contractors. For the purpose of this Agreement and all services
-----------------------
provided hereunder, both Parties shall be, and shall be deemed to be,
independent contractors and not agents or employees of the other. Neither
Party shall have the authority to make statements, representation or
commitments of any kind, or take any actions, that will be binding on the
other Party.
14.5 Compliance with government regulations. Each party agrees to comply with
--------------------------------------
all applicable laws, regulations and ordinances, insofar as such laws,
regulations and ordinances related to any of the activities to be performed
by either Party under this Agreement.
14.6 Assignment. Neither this Agreement nor any part hereof shall be assignable
----------
by either Party without the express consent of the other.
<PAGE>
14.7 Governing Law. The validity and interpretation of this Agreement and the
-------------
legal relations of the parties shall be governed by the laws of the New
York State.
14.8 Entire Agreement. This instrument, including the Appendixes hereto,
----------------
contains the entire Agreement between the Parties. No verbal agreement,
conversation or representation between any officers agent or employees of
the Parties hereto either before or after execution of this Agreement shall
affect or modify any of the terms or obligations herein contained. The
Parties hereby expressly terminate the Memorandum of Understanding dated as
of May 6, 1997.
14.9 Modifications in Writing. No change, modification, extension, termination
------------------------
or waiver of this Agreement, or any provisions herein contained, shall be
valid unless made in writing and signed by a duly authorized representative
of each Party.
14.10 Severability. If any one or more of the provisions of this Agreement shall
------------
be held invalid, illegal or unenforceable, the validity, legality, or
enforceability of the remaining provisions of this Agreement shall not in
any way be affected or impaired thereby, and the Parties shall promptly
negotiate a substitute provision, in good faith, that achieves the
original intent of the severed provision, consistent with applicable law.
14.11 Binding Effect. This Agreement shall be binding upon and shall inure to
--------------
the benefit of the Parties hereto, their Affiliates, and their respective
successors and permitted assigns.
14.12 Headings. Headings used in this Agreement are for reference purposes only
--------
and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
<TABLE>
<CAPTION>
Sumitomo Corporation PixTech Inc. PixTech S.A.
<S> <C> <C>
By: /s/ Akio Yamane By: /s/ Jean-Luc Grand-Clement By: /s/ Francis Courreges
---------------- ---------------------------- -----------------------
Mr. Akio Yamane
Assistant General Manager Mr. Jean-Luc Grand-Clement Mr. Francis Courreges
Electronics Department Chief Executive Officer Executive V.P.
</TABLE>
<PAGE>
EXHIBIT 10.2
CREDIT AGREEMENT
----------------
This CREDIT AGREEMENT (this "Agreement") is made and dated as of July 21,
---------
1997, by and between SUMITOMO CORPORATION, a Japanese corporation (the
"Lender"), and PIXTECH, INC., a Delaware corporation (the "Borrower").
------ --------
RECITALS
--------
A. The Borrower has requested the Lender to extend credit to the Borrower,
and the Lender has agreed to do so.
B. The Borrower and the Lender desire to set forth herein the mutually
agreed upon terms and conditions of such credit extension.
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
---------
1. Definitions
-----------
1.1 Specific Definitions: For purposes of this Agreement, the terms set
--------------------
forth below shall have the following meanings:
"Affiliate" means with respect to any Person (the "Specified Person"), (a)
--------- ----------------
any Person other than the Specified Person directly or indirectly controlling,
controlled by or under direct or indirect common control with, the Specified
Person, or (b) any Person who is a commissioner, director or executive officer
(i) of the Specified Person, (ii) of any Subsidiary of such Specified Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, the term "control" when used with respect to any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
------------
on which banks in San Francisco, California, New York, New York , London, the
United Kingdom, or Tokyo, Japan are authorized or obligated to close their
regular banking business.
"CEA Letter" shall have the meaning given such term in Section 4.1 (g).
---------- ---------------
"CEA License Agreement" shall have the meaning given such term in Section
--------------------- -------
4.1 (g).
- -------
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
----
rules and regulations issued thereunder as from time to time in effect.
"Collateral" shall have the meaning given such term in Section 2.10.
---------- ------------
"Common Stock" shall mean the common stock, par value $0.01 per share, of
------------
the Borrower.
"Contractual Obligation" shall mean as to any Person any provision of any
----------------------
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
<PAGE>
"Conversion" or "Conversion Rights" shall mean the exchange of, or the
---------------------------------
rights to exchange, the principal amount of the Convertible Loan, or any part
thereof, for the Borrower's fully paid and nonassessable Common Stock on the
terms and conditions set forth in the Convertible Note.
"Conversion Shares" shall mean the shares of Common Stock issued upon
-----------------
Conversion of the Convertible Note.
"Convertible Loan" shall have the meaning given such term in Section 2.2.
---------------- -----------
"Convertible Note" shall have the meaning given such term in Section 2.6.
---------------- -----------
"Deed of Guaranty" has the meaning given such term in Section 2.10.
---------------- ------------
"Deed of Mortgage" has the meaning given such term in Section 4.1 (f)
---------------- ---------------
"Default" shall mean an event which but for the lapse of time or the giving
-------
of notice, or both, would constitute an Event of Default.
"Default Rate" shall have the meaning given such term in Section 2.4.
------------ -----------
"Dollar" and "$" each mean the lawful currency of the United States of
------ -
America.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended, and the rules and regulations issued thereunder as from time to time in
effect.
"ERISA Affiliate" shall mean each trade or business, including the
---------------
Borrower, whether or not incorporated, which together with the Borrower would be
treated as a single employer under Section 4001 of ERISA.
"Event of Default" shall have the meaning given such term in Section 9
---------------- ---------
below.
"Existing Licensing Agreements" shall mean the agreements identified on
-----------------------------
Exhibit A.
- ---------
"Funding Date" shall mean the date the conditions precedent set forth in
------------
Section 4 below have been satisfied and the Loans are funded.
- ----------
"GAAP" shall mean general accepted accounting principles in the United
----
States of America in effect from time to time, consistently applied.
"Governmental Authority" shall mean any nation or government, any state or
----------------------
other political subdivision thereof, or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Indebtedness" of any Person shall mean all items of indebtedness which, in
------------
accordance with GAAP and industry practices, would be included in determining
liabilities as shown on the liability side of a balance sheet of such Person as
of the date as of which indebtedness is to be determined, including, without
limitation, all obligations for money borrowed and capitalized lease
obligations, and shall also include all indebtedness and liabilities of any
other Person assumed or guaranteed by such Person or in respect of which such
Person is secondarily or contingently liable (other than by endorsement of
instruments in the course of collection) whether by reason of any agreement to
acquire such indebtedness or to supply or advance sums or otherwise.
"Indemnified Parties" shall have the meaning given such term in Section 7.9
------------------- -----------
below.
"Intercompany Agreement" shall have the meaning given such term in Section
---------------------- -------
2.10.
- ----
<PAGE>
"Interest Period" shall mean (a) initially, the period beginning on the
---------------
Funding Date and ending on the three (3)-month anniversary of the Funding Date
and (b) thereafter, the period beginning on the last day of the previous
Interest Period and ending on the three (3) month anniversary thereof; provided,
--------
however, that (i) any Interest Period that begins on a day for which there is no
- -------
numerically corresponding day in the calendar month during which such Interest
Period is to end shall end on the last day of such calendar month, and (ii) no
Interest Period shall extend beyond the Maturity Date.
"Lien" shall mean any security interest, mortgage, pledge, privilege, lien,
----
claim on property, charge or encumbrance (including any conditional sale or
other title retention agreement), any lease in the nature thereof, and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction.
"Lien Certificate" shall have the meaning specified in Section 4.1 (c).
---------------- ---------------
"Loan Documents" shall mean this Agreement, the Notes, the Security
--------------
Documents, and each other document, instrument or agreement executed by the
Borrower or any guarantor in connection herewith or therewith, as any of the
same may be amended, extended or replaced from time to time.
"Loans" shall mean the Straight Loan and Convertible Loan.
-----
"Material Adverse Effect" shall mean (a) a material adverse change in, or a
-----------------------
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower and PixTech S.A. taken as
a whole which, in the good faith judgment of the Lender, is reasonably likely to
impair the ability of the Borrower to make payments hereunder; (b) a material
adverse change in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the Borrower or
PixTech S.A. which, in the good faith judgment of the Lender, is reasonably
likely to impair the ability of the Borrower or PixTech S.A. to perform any of
their respective obligations under the Loan Documents (other than the Borrower's
payment obligations hereunder) and to avoid any Event of Default; (c) a material
adverse event caused by the actions or failure to act on the part of the
Borrower or PixTech S.A. which affects the legality, validity, binding effect or
enforceability against the Borrower or PixTech S.A. of any Loan Document which,
in the good faith judgment of the Lender, is reasonably likely to impair the
ability of the Lender to enforce the Notes or the other Credit Documents; or (d)
a material adverse effect on the value or marketability of the Collateral caused
by an action taken or a failure to act on the part of the Borrower or PixTech
S.A. which, in the good faith judgment of the Lender, is reasonably likely to
impair the ability of the Lender to realize sufficient value in any orderly
liquidation of the Collateral.
"Maturity Date" shall mean the earliest of: (a) the thirty-six (36)-month
-------------
anniversary of the Funding Date, (b) the date the Loans, all interest thereon
and all other amounts payable hereunder have been paid in full, and ( c) the
date the Loans are accelerated pursuant to Section 9 below.
---------
"1933 Act" shall mean the Securities Act of 1933, as amended.
--------
"1934 Act" shall mean the Securities and Exchange Act of 1934, as amended.
--------
"Notes" shall have the meaning given such term in Section 2.6 below.
----- -----------
"Obligations" shall mean any and all debts, obligations and liabilities of
-----------
the Borrower to the Lender arising out of or related to the Loan Documents
(whether principal, interest, fees or otherwise, now existing or hereafter
arising, whether voluntary or involuntary, whether or not jointly owed with
others, whether direct or indirect, absolute or contingent, contractual or
tortious, liquidated or unliquidated, arising by operation of law or otherwise,
whether or not from time to time decreased or extinguished and later increased,
created or incurred, and
<PAGE>
whether or not extended, modified, rearranged, restructured, refinanced or
replaced, including without limitation, modifications to interest rates or other
payment terms of such debts, obligations or liabilities).
"Person" shall mean any corporation, natural person, firm, joint venture,
------
partnership, trust, unincorporated organization, government or any department or
agency of any government.
"PixTech S.A." shall mean PixTech S.A., a French company having its
------------
registered office at Rousset (13790), Avenue Olivier Perroy.
"Plan" shall mean any plan subject to Title IV of ERISA maintained for
----
employees of the Borrower or any ERISA Affiliate (and any such plan no longer
maintained by the Borrower or any of its ERISA Affiliates to which the Borrower
or any of its ERISA Affiliates has made or was required to make any
contributions during the five years preceding the date on which such plan ceased
to be maintained).
"Principal Repayment Date" shall mean each of the eighteen (18)-month,
------------------------
twenty-four (24)-month, thirty (30)-month and the thirty-six (36)-month
anniversary of the Funding Date.
"Prime Rate" shall mean the prime rate publicly announced by The Chase
----------
Manhattan Bank, New York from time to time; provided, however, that if The Chase
-------- -------
Manhattan Bank, New York shall for any period of time cease to announce publicly
its prime rate, the Lender during such period shall determine the applicable
rate based upon the prime commercial lending rate of other financial
institutions selected by the Lender in its sole discretion. Each change in the
Prime Rate shall be effective on the date such rate changes, as announced
publicly by The Chase Manhattan Bank, New York or such other financial
institution, without notice to the Borrower.
"Requirements of Law" shall mean as to any Person the Certificate of
-------------------
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation, or a final and binding
determination of an arbitrator or a determination of a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" shall mean the chief executive officer, the president
-------------------
or an executive vice president of the Borrower and, as to financial matters, the
chief financial officer of the Borrower.
"Security Documents" shall mean the Lien Certificate, the Intercompany
------------------
Agreement, the Deed of Guaranty, the Deed of Mortgage, the CEA Letter, the
minutes of the Board of Directors of PixTech S.A. referenced in Section 4.1 (k)
---------------
and all additional documents, instruments and agreements delivered by the
Borrower or any other Person pursuant to Section 3.1 below.
-----------
"Straight Loan" shall have the meaning given such term in Section 2.1
------------- -----------
"Straight Loan Note" shall have the meaning given such term in Section 2.6
------------------ -----------
"Subsidiary" shall mean any Person with respect to which Borrower holds,
----------
directly or indirectly, more than fifty percent (50%) of the equity having
ordinary voting power to elect the board of directors, managers or trustees of
such Person (irrespective of whether or not at the time stock of any other class
or classes of such Person shall have or might have voting power by reason of the
happening of any contingency).
<PAGE>
1.2 Other Interpretative Provisions.
-------------------------------
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms. The words "hereof," "herein,"
"hereunder" and similar words refer to this Agreement as a whole and not to any
particular provision of this Agreement; and Section, subsection, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(b) The term "including" is not limiting and means "including without
limitation." In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including," the words "to"
and "until" each mean "to but excluding," and the word "through" means "to and
including."
(c) Unless otherwise expressly provided herein, references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments, restatements and other
modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document.
(d) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(e) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Lender and the
Borrower and are the products of both parties. Accordingly, they shall not be
construed against the Lender, merely because of the Lender's involvement in
their preparation.
1.3 Accounting Principles.
---------------------
Unless the context otherwise clearly requires, all accounting terms
not expressly defined herein shall be construed, and all financial computations
required under this Agreement shall be made, in accordance with GAAP,
consistently applied.
2. Loan Facilities.
---------------
2.1 Straight Loan. On the terms and subject to the conditions set forth
--------------
herein, the Lender agrees that on the Funding Date it shall make a term loan to
the Borrower in the amount of $5,000,000.00 (the "Straight Loan"). Subject to
-------------
the prepayment provisions of Section 2.8 and acceleration of the Straight Loan
------------
pursuant to Section 9 the Borrower shall repay to the Lender the principal
----------
amount of the Straight Loan in four (4) equal installments, each in the amount
of $1,250,000.00, on each Principal Repayment Date.
2.2 Convertible Loan. On the terms and subject to the conditions set
----------------
forth herein, the Lender agrees that on the Funding Date it shall make a term
loan to the Borrower in the amount of $5,000,000.00 (the "Convertible Loan").
----------------
Subject to the prepayment provisions of Section 2.8, the conversion rights set
------------
forth in the Convertible Note, and the acceleration of the Convertible Loan
pursuant to Section 9 the Borrower shall repay to the Lender the principal
----------
amount of the Convertible Loan in a single installment on the Maturity Date.
2.3 Interest. The Borrower shall pay interest on the outstanding
--------
principal balance of each of the Loans from the Funding Date to but not
including the date of payment at a rate per annum equal to the sum of: (i) the
Prime Rate, plus (ii) three-quarters of one percent (0.75%). The Borrower shall
----
pay all interest accrued on the Loans for each Interest Period, in arrears, on
the last day of each Interest Period; provided, however, that the Borrower shall
-------- -------
pay all accrued interest on the Loans then outstanding on the Maturity Date.
2.4 Default Interest. Notwithstanding anything to the contrary contained
----------------
herein, on any date on which there shall have occurred and be continuing an
Event of Default, any and
<PAGE>
all Obligations then due and payable shall bear interest at a per annum rate
(the "Default Rate") equal to the sum of: (i) the Prime Rate, plus (ii) one and
------------ ----
three-quarters percent (1.75%).
2.5 Highest Lawful Rate of Interest. Anything herein to the contrary
-------------------------------
notwithstanding, the obligations of the Borrower hereunder shall be subject to
the limitation that payments of interest shall not be required, for any period
for which interest is computed hereunder, to the extent (but only to the extent)
that contracting for or receiving such payment by the Lender would be contrary
to the provisions of any law applicable to the Lender limiting the highest rate
of interest which may be lawfully contracted for, charged or received by the
Lender, and in such event the Borrower shall pay the Lender interest at the
highest rate permitted by applicable law.
2.6 Notes. The obligation of the Borrower to repay the Straight Loan
-----
shall be evidenced by a note payable to the order of the Lender in the form of
that attached hereto as Exhibit B (the "Straight Loan Note"), and the obligation
--------- ------------------
of the Borrower to repay the Convertible Loan shall be evidenced by a note
payable to the order of the Lender in the form of that attached hereto as
Exhibit C (the "Convertible Note", and together with the Straight Loan Note, the
- --------- ----------------
"Notes").
-----
2.7 Computations. All computations of interest and fees payable hereunder
------------
shall be based upon a year of three hundred sixty (360) days for the actual
number of days elapsed.
2.8 Prepayments. The Borrower may, upon at least ten Business Days'
-----------
notice to the Lender, prepay the Straight Loan only, in whole or in part, in
amounts of $500,000 or any multiple of $500,000 in excess thereof. Such notice
of prepayment shall specify the date and amount of such prepayment and shall not
thereafter be revocable by the Borrower. If such notice is given, the Borrower
shall make such prepayment, and the payment amount specified in such notice
shall be due and payable on the date specified therein, together with accrued
interest to such date on the amount prepaid and any amounts required pursuant to
Section 2.9 that have been properly notified to the Borrower at least three
Business Days prior to such prepayment. Principal amounts prepaid shall be
applied to reduce the remaining scheduled repayments of the Straight Loan in the
inverse order of maturity (including the repayment to be made on the Maturity
Date).
2.9 Funding Losses. The Borrower shall reimburse, without duplication
--------------
with any other indemnity pursuant hereto, the Lender and hold the Lender
harmless from any loss or expense which the Lender may reasonably sustain or
incur as a consequence of:
(a) the failure of the Borrower to make any payment of principal of
the Convertible Loan or any payment or prepayment of principal of the Straight
Loan when due (including payments made after any acceleration thereof);
(b) the failure of the Borrower to make any prepayment after the
Borrower has given a notice in accordance with Section 2.8 above; or
(c) the prepayment of the Straight Loan on a day which is not the last
day of the relevant Interest Period.
2.10 Use of Proceeds.
---------------
(a) The entire proceeds of the Loan shall be lent by the Borrower to
PixTech S.A.:
(i) In accordance with a loan agreement which shall be executed
prior to the availability of the proceeds of the Loan and according to
which PixTech S.A. shall be liable vis-a-vis the Borrower under the same
provisions as expressed herein (the "Intercompany Agreement"); and
<PAGE>
(ii) Subject to the execution by PixTech S.A. of a notarial deed
to be executed in front of the notary as selected by the Lender, according
to which PixTech S.A., with the prior written approval of its Board of
Directors, shall be a joint guarantor of the Borrower vis-a-vis the Lender,
with a waiver of any right to claim a prior prosecution of the Borrower by
the Lender (the "Deed of Guaranty"); and
(iii) Such guarantee being secured by a mortgage to be
registered on the property owned by PixTech S.A. at Rousset as per a deed
of acquisition dated June 27, 1996 (the "Land") and on the constructions
built on this site in accordance with a construction permit no. PC 13 087
95 L0049 (the Constructions," collectively with the Land, the "Collateral")
(b) PixTech S.A. shall deposit such proceeds in an account with the
Worms Bank, to serve as security for a guarantee to be issued by Worms Bank for
the benefit of Unipac Optoelectronics Corp. ("Unipac"), all as contemplated in
the Display Foundry Agreement entered into between Unipac and PixTech S.A.
(c) In reliance upon such guarantee, Unipac will obtain financing that
will facilitate the installation at Unipac's manufacturing facility of volume
production equipment for the manufacture of field emission displays
incorporating proprietary technology of the Borrower and PixTech S.A.
2.11 Nature and Place of Payments. All payments made on account of the
----------------------------
Obligations arising hereunder:
(a) shall be made by the Borrower, without setoff or counterclaim, in
Dollars in immediately available funds, free and clear of, and without
deduction, set-off or withholding for or on account of, present or future income
or other taxes, levies, imposts, duties or charges of any nature imposed in the
United States (all such taxes, levies, imposts, duties or charges, "Taxes"); and
-----
if any Taxes are required to be withheld from any principal, interest, fees or
other amounts payable to the Lender hereunder or under the other Loan Documents,
the amounts so payable shall be increased to the extent necessary to yield to
the Lender (after payment of all Taxes) the amount of such principal, interest,
fees or other amounts intended to be paid hereunder at the rates or in the
amounts specified in this Agreement and the other Loan Documents; provided,
--------
however, that notwithstanding the foregoing, the Lender agrees to absorb Taxes
- -------
required to be withheld by the Borrower from payments of interest made pursuant
to Section 2.3 (and excluding interest payable under Section 2.4) provided that
the rate at which such Taxes are required to be absorbed does not exceed ten
percent (10%);
(b) must be received by the Lender by 10:00 a.m. (Tokyo time) on the
day of payment, it being expressly agreed and understood that if a payment is
received after 10:00 a.m. (Tokyo time) by the Lender, such payment will be
considered to have been made by the Borrower on the next succeeding Business Day
and interest thereon shall be payable by the Borrower at the Default Rate during
such extension; and
(c) shall be made to the Lender at The Bank of Tokyo-Mitsubishi, Ltd.,
Head Office, account number 9015100 or to such office or accounts as the Lender
may notify the Borrower in writing from time to time.
2.12 Payments on Business Days. If any payment required to be made by the
-------------------------
Borrower hereunder becomes due and payable on a day other than a Business Day,
the due date thereof shall be extended to the next succeeding Business Day and
interest thereon shall be payable at the then applicable rate during such
extension; provided that if such extension would cause such payment to be made
--------
in the next succeeding calendar month, such payment shall be made on the next
preceding Business Day.
<PAGE>
2.13 Allocation of Payments Received. All amounts received by the Lender
-------------------------------
on account of the Obligations hereunder shall be applied by the Lender as
follows:
(a) first, to the payment of expenses incurred by the Lender in the
enforcement of its rights under the Loan Documents, including, without
limitation, all costs and expenses of collection, attorneys' fees, court costs
and foreclosure expenses;
(b) then, to the Lender in payment of all other outstanding
Obligations and interest accrued thereon until such amounts have been paid in
full for application in such order as the Lender may elect; and
(c) then, to such Persons as may be legally entitled thereto.
3. Collateral; Conversion of Convertible Loan.
------------------------------------------
3.1 Collateral Security; Additional Documents. As collateral security for
-----------------------------------------
the Obligations, the Borrower shall execute and deliver and shall cause PixTech
S.A. to execute and deliver to the Lender each of the Security Documents to
which such Person is a party. The Borrower further agrees to execute and
deliver or to cause PixTech S.A. to execute and deliver to the Lender from time
to time such confirmatory and supplemental security agreements, financing
statements, consents of and notices to third parties and such documents,
instruments and agreements, including, without limitation, relating to the
creation or perfection of Liens under any relevant state or Federal law, or the
law of any relevant foreign jurisdiction as the Lender may reasonably request
which are in the Lender's judgment necessary or desirable to obtain for the
Lender the benefit of the Security Documents and the Collateral.
3.2 Stock Conversion Rights. The Convertible Note shall be exchangeable
-----------------------
for shares of the Borrower's common stock on such terms and in such amounts as
shall be stated in the Convertible Note. The holders of the stock issued upon
exercise of the right of conversion as provided in the Convertible Note shall be
entitled to all of the rights of the Lender as stated in this Agreement or the
other Loan Documents to the extent such rights are specifically stated to
survive the conversion of the Convertible Note.
3.3 Registration Rights. The holders of shares of common stock of the
-------------------
Borrower issued upon the conversion of the Convertible Note shall be entitled to
the rights as provided in Section 10 of this Agreement.
-----------
4. Conditions to Making the Loans.
------------------------------
As conditions precedent to the obligations of the Lender to make the Loans:
4.1 Documentation. The Borrower shall have delivered or shall have caused
-------------
to be delivered to the Lender each of the following (which, if not in the
English language, shall be accompanied by an English translation thereof):
(a) A duly executed counterpart of this Agreement;
(b) A duly executed original of each of the Notes;
(c) A certificate of the relevant local land registrar of a recent
date showing the Collateral to be free of any and all Liens (the "Lien
----
Certificate");
- -----------
(d) A certified copy of the executed Intercompany Agreement;
(e) A certified copy of the Deed of Guaranty;
<PAGE>
(f) A certified copy of a notarial deed of mortgage (the "Deed of
-------
Mortgage") registered on the Land and the Constructions in form and substance
- --------
satisfactory to Lender and its counsel (the "Deed of Mortgage");
----------------
(g) An executed original letter to the Lender from the Commissariat a
l'Energie Atomique ("CEA") or other appropriate documentation reflecting CEA's
agreement to pay to the Lender, upon the occurrence of any Event of Default,
[ ]* of any and all royalties received by CEA pursuant to the CEA License
Agreement, in form and substance satisfactory to the Lender (the "CEA Letter");
----------
(h) A duly executed original of each of the other Security Documents,
each in form and substance satisfactory to Lender and its counsel;
(i) Evidence that all documents (including, without limitation,
Uniform Commercial Code or other financing statements) required or advisable to
be obtained, filed, registered or recorded in order to create, in favor of the
Lender, a perfected Lien with a priority acceptable to the Lender on the
Collateral shall have been properly obtained, filed, registered or recorded in
each office in each jurisdiction in which such filings, registrations and
recordations are required;
(j) Such credit applications, financial statements, authorizations and
such information concerning the Borrower, PixTech S.A. and their respective
businesses, operations and condition (financial and otherwise) as any Lender may
reasonably request;
(k) Certified copies of resolutions of the Boards of Directors of the
Borrower and PixTech S.A. approving the execution, delivery and performance of
the Loan Documents to which such Person is a party, including without limitation
with respect to PixTech S.A., certified copies of minutes of the Board of
Directors approving in advance the loan contemplated in the Intercompany
Agreement, the mortgage by way of "caution hypothecaire" to be registered for an
amount of FF 1OM on the Collateral contemplated in the Deed of Mortgage, and
granting full authority to any person of Lender's choice, with the power of such
person to substitute any third party at his or her option, to execute the Deed
of Mortgage in favor of the Lender of the Collateral for an amount of FF 1OM (if
the documents provided under this Section are not in the English language, the
accompanying English translation shall be certified as to accuracy and
completeness by counsel to the Borrower or PixTech S.A., as the case may be);
(l) A certificate or certificates of the Secretary, Assistant
Secretary or other appropriate officer of each of the Borrowers and PixTech S.A.
certifying the names and true signatures of the officers of such Person
authorized to sign the Loan Documents to which such Person is a party;
(m) A copy of the Certificate of Incorporation or similar
organizational document of the Borrower and PixTech S.A., certified by the
Secretary of State or other official of the state or jurisdiction of
incorporation of such Person as of a recent date;
(n) A copy of the Articles of Incorporation and Bylaws or other
similar organizational documents of the Borrower and PixTech S.A., certified by
the Secretary, Assistant Secretary or other appropriate officer of such Person
as of the Funding Date as being accurate and complete;
(o) A certificate of authority and good standing as of a recent date
for the Borrower from the Secretary of State of the State of Delaware and for
PixTech S.A. from the appropriate official of its jurisdiction of incorporation;
(p) Certificates of all insurance policies covering any tangible asset
which may be included in the Collateral, including without limitation such
policies as are required to
* Confidential Treatment Requested
<PAGE>
be carried by the Borrower and PixTech S.A. pursuant to the terms of the Loan
Documents, showing the Lender named as loss payee or named insured, as
applicable, thereunder; and
(q) Opinions of counsel for the Borrower and PixTech S.A. in form and
substance satisfactory to the Lender and its counsel.
4.2 Amounts Payable. All amounts payable hereunder on or prior to the
---------------
Funding Date shall have been paid.
4.3 Distribution and Financing Agreement. The Distribution and Financing
------------------------------------
Agreement dated July 21, 1997 between the Borrower and the Lender shall be in
full force and effect.
4.4 Other Acts. All acts and conditions and things (including, without
----------
limitation, the obtaining of any necessary regulatory approvals and the making
of any required filings, recordings or registrations) required to be done and
performed and to have happened precedent to the execution, delivery and
performance of the Loan Documents and to constitute the same legal, valid and
binding obligations of the parties thereto, enforceable in accordance with their
respective terms, shall have been done and performed and shall have happened in
compliance with all applicable laws.
4.5 Other Documentation. All documentation, including, without
-------------------
limitation, documentation for corporate and legal proceedings in connection with
the transactions contemplated by the Loan Documents shall be in form and
substance reasonably satisfactory to the Lender and its counsel, and the Lender
and its counsel shall have received any and all further information and
documents, which the Lender and its counsel may reasonably have requested in
connection therewith, such documents where appropriate to be certified by proper
authorities and the Borrower.
4.6 Representations and Warranties True. The representations and
-----------------------------------
warranties of the Borrower and PixTech S.A. contained in the Loan Documents
shall be true and correct.
4.7 No Default or Event of Default. There shall not have occurred a
------------------------------
Default or an Event of Default.
5. Representations and Warranties of the Borrower
----------------------------------------------
As an inducement to the Lender to enter into this Agreement and to make the
Loans, the Borrower represents and warrants to the Lender, as of the date hereof
and as of the Funding Date, that:
5.1 Financial Statements. Any and all financial information which has
--------------------
been delivered to the Lender with respect to the Borrower or PixTech S.A. is
accurate and complete in all respects and has been prepared in accordance with
GAAP.
5.2 No Material Adverse Change. Since the date of the most recent
--------------------------
financial information provided to the Lender, there has been no Material Adverse
Effect.
5.3 Corporate Existence; Compliance with Law. Each of the Borrower and
----------------------------------------
PixTech S.A.: (1) is duly organized, validly existing and in good standing as a
corporation under the laws of its jurisdiction of incorporation and is qualified
to do business in each jurisdiction where its ownership of property or conduct
of business requires such qualification and where failure to qualify could have
a Material Adverse Effect, (2) has the corporate power and authority and the
legal right to own and operate its property and to conduct business in the
manner in which it does and proposes so to do, and (3) is in compliance with all
Requirements of Law and Contractual Obligations, the failure to comply with
which could have a Material Adverse Effect.
<PAGE>
5.4 Corporate Power; Authorization; Enforceable Obligations. Each of the
-------------------------------------------------------
Borrower and PixTech S.A. has the corporate power and authority and the legal
right to execute, deliver and perform the Loan Documents to which it is a party
and has taken all necessary corporate action to authorize the execution,
delivery and performance of such Loan Documents. The Loan Documents have been
duly executed and delivered on behalf of the Borrower and PixTech S.A. and
constitute legal, valid and binding obligations of such Persons enforceable
against such Persons in accordance with their respective terms, subject to the
effect of applicable bankruptcy and other similar laws affecting the rights of
creditors generally and the effect of equitable principles whether applied in an
action at law or a suit in equity.
5.5 No Legal Bar. The execution, delivery and performance of the Loan
------------
Documents, the borrowing hereunder and the use of the proceeds thereof, will not
violate any Requirement of Law binding upon or any Contractual Obligation of the
Borrower or PixTech S.A. or create or result in the creation of any Lien (except
the Liens created by the Security Documents) on any assets of either of the
Borrower or PixTech S.A.
5.6 No Material Litigation. No litigation, investigation or proceeding of
----------------------
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or PixTech S.A.
or against any of such Persons' properties or revenues which is likely to have a
Material Adverse Effect.
5.7 Taxes. Each of the Borrower and PixTech S.A. has filed or caused to
-----
be filed all tax returns that are required to be filed and have paid all taxes
shown to be due and payable on said returns or on any assessments made against
them or any of their property other than taxes which are being contested in good
faith by appropriate proceedings and as to which the Borrower or PixTech S.A.
has established adequate reserves in conformity with GAAP.
5.8 Investment Company Act. None of the Borrower, PixTech S.A. nor any
----------------------
Subsidiary of the Borrower is an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
5.9 Subsidiaries. Attached hereto as Exhibit D is an accurate and
------------ ---------
complete list of all Subsidiaries of the Borrower existing at the date hereof,
their respective jurisdictions of incorporation and the percentage of their
capital stock owned by the Borrower. All of the issued and outstanding shares
of capital stock of such Subsidiaries have been duly authorized and issued and
are fully paid and non-assessable.
5.10 Federal Reserve Board Regulations. Neither the Borrower nor PixTech
---------------------------------
S.A. is engaged or will engage, principally or as one of its important
activities, in the business of extending credit for the purpose of "purchasing"
or "carrying" any "margin stock" within the respective meanings of such terms
under Regulation U of the Board of Governors of the Federal Reserve System (as
from time to time in effect and any successor to all or any portion thereof).
No part of the proceeds of the Loans issued hereunder will be used for
"purchasing" or "carrying" "margin stock" as so defined or for any purpose which
violates, or which would be inconsistent with, the provisions of the Regulations
of the Board of Governors of the Federal Reserve System.
5.11 Assets. Each of the Borrower and PixTech S.A. has good and
------
marketable title to all property and assets reflected in the financial
statements referred to in Section 5.1 above, except property and assets sold or
------------
otherwise disposed of in the ordinary course of business subsequent to the
respective dates thereof.
5.12 Securities Acts. Neither the Borrower nor PixTech S.A. has issued
---------------
any unregistered securities in violation of the registration requirements of
Section 5 of the 1933 Act, or any other law or is violating any rule, regulation
or requirement under the 1933 Act, or the 1934 Act. Neither the Borrower nor
PixTech S.A. is required to qualify an indenture
<PAGE>
under the Trust Indenture Act of 1939, as amended, in connection with its
execution and delivery of the Notes.
5.13 Consents, etc. No consent, approval, authorization of, or
--------------
registration, declaration or filing with any Person, including, without
limitation, any Governmental Authority, is required on the part of the Borrower
or PixTech S.A. in connection with the execution and delivery of the Loan
Documents (other than filings to perfect the Liens granted by such Persons to
the Lender under the Loan Documents) or the performance of or compliance with
the terms, provisions and conditions or thereof.
5.14 Regulated Entities. Neither the Borrower nor PixTech S.A. is subject
------------------
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or any
other Federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.15 Intellectual Property. Each of Borrower and PixTech S.A. has
---------------------
sufficient title and ownership of, or rights with respect to, all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information,
formulas, and processes (collectively, "Intellectual Property") necessary for
---------------------
its business as now conducted and as proposed to be conducted, without any
conflict with or infringement of the rights of others. Except for the Existing
Licensing Agreements, there are no outstanding options, licenses, or agreements
of any kind relating to the Borrower's and PixTech S.A.'s Intellectual Property,
nor is the Borrower or PixTech S.A. bound by or a party to any options, licenses
or agreements of any kind with respect to the Intellectual Property of any other
Person except for the Licensing Agreement dated as of September 17, 1992 between
Commissariat a l'Energie Atomique and PixTech S.A. (formerly known as Pixel
International, S.A.) (the "CEA License Agreement"). Neither the Borrower nor
PixTech S.A. have received any communications alleging that the Borrower or
PixTech S.A. have violated or, by conducting its business as proposed, would
violate any of the Intellectual Property rights of any other Person. To the
Borrower's knowledge, none of its employees or the employees of PixTech S.A. is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his
best efforts to promote the interests of the Borrower or PixTech S.A. or that
would conflict with the Borrower's or PixTech S.A.'s business as proposed to be
conducted. Neither the carrying on of the Borrower's or PixTech S.A.'s business
by the employees of the Borrower and PixTech S.A., nor the conduct of the
Borrower's or PixTech S.A.'s business as proposed will conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which the Borrower or PixTech
S.A. or, to the Borrower's knowledge, any of its employees or the employees of
PixTech S.A., is now obligated.
5.16 ERISA. There are no Plans for the Borrower or any of its ERISA
-----
Affiliates.
5.17 Insurance. The properties of the Borrower and PixTech S.A. are
---------
insured with financially sound and reputable insurance companies (not
Affiliates) acceptable to the Lender, in such amounts, with such deductibles and
covering such risks as are customarily carried by companies engaged in similar
businesses and owning similar properties in localities where the Borrower and
PixTech S.A. operate.
5.18 Capitalization and Voting Rights. The authorized capital stock of
--------------------------------
the Borrower consists of (a) 30,000,000 shares of Common Stock, of which
13,747,303 shares are issued and outstanding, and (b) 1,000,000 shares of
undesignated preferred stock, $0.01 par value per share, none of which are
issued and outstanding. Except as set forth on Exhibit E, there are not
---------
outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Borrower of any
shares of its capital stock. The Borrower is not a party or subject to any
agreement or understanding, and, to the Borrower's knowledge, there is no
agreement or understanding
<PAGE>
between any Persons, which affects or relates to the voting or giving of written
consents with respect to any security or by a director of the Borrower.
5.19 Valid Issuance of Shares.
------------------------
(a) The Conversion Shares, when issued, sold and delivered upon
conversion of the Convertible Note, will be duly and validly issued, fully paid
and nonassessable and, based in part upon the Borrower's representations herein,
will be issued in compliance with all applicable securities laws.
(b) The currently outstanding shares of capital stock of the Borrower
are all duly and validly authorized and issued, fully paid and nonassessable,
and were issued in compliance with all applicable securities laws.
5.20 Full Disclosure. None of the representations or warranties made by
---------------
the Borrower or PixTech S.A. in the Loan Documents as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Borrower or PixTech S.A. in connection with the Loan
Documents contains or will contain any untrue statement of a material fact or
omits or will omit any material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they are made, not misleading as of the time when made or delivered.
6. Responsibilities and Warranties of the Lender.
---------------------------------------------
The Lender hereby represents and warrants to the Borrower that, as of the
date hereof and as of the Funding Date, that:
6.1 Authorization. This Agreement constitutes its valid and legally
-------------
binding obligation, enforceable in accordance with its terms.
6.2 Purchase Entirely for Own Account. This Agreement is made with the
---------------------------------
Lender in reliance upon the Lender's representations to the Borrower, which by
the Lender's execution of this Agreement the Lender hereby confirms, that the
Conversion Shares to be received by the Lender will be acquired for investment
for the Lender's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that the Lender has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Lender further
represents that the Lender does not have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participations to such
Person or to any third person, with respect to any of the Conversion Shares.
The Lender represents that it has full power and authority to enter into this
Agreement.
6.3 Investment Experience. The Lender acknowledges that it can bear the
---------------------
economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the Conversion Shares contemplated hereby.
6.4 Restricted Securities. The Lender understands that the Conversion
---------------------
Shares are characterized as "restricted securities" under the U.S. federal
securities laws inasmuch as they are being acquired from the Borrower in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, the
Lender represents that it is familiar with SEC Rule 144, as presently in effect,
and understands the resale limitations imposed thereby and by the 1933 Act.
6.5 Legends. It is understood that the certificates evidencing the
-------
Conversion Shares may bear one or all of the following legends:
<PAGE>
(a) "These securities have not been registered under the Securities
Act of 1933, as amended (the "Act") and may not be sold, transferred, assigned
or hypothecated unless there is an effective registration statement under the
Act covering such securities, the sale is made pursuant to Rule 144 or its
successor rule under the Act or the Company receives an opinion of counsel
satisfactory to the Company that an exemption from such registration is
available."
(b) Any legend required by applicable U.S. state law.
7. Affirmative Covenants
---------------------
The Borrower hereby covenants and agrees with the Lender that, as long as
any Obligations remain unpaid, the Borrower shall:
7.1 Reporting Requirements. Furnish or cause to be furnished to the
----------------------
Lender:
(a) Within 120 days after the last day of each fiscal year of the
Borrower, the consolidated and consolidating balance sheets of the Borrower as
at the end of, and the related statements of income, shareholders' equity and
cash flows for such year, and the comparative financial statements as at the end
of, and for, the preceding fiscal year all prepared in accordance with GAAP
accompanied by an opinion, which opinion shall be unqualified and otherwise
satisfactory to the Lender, of Ernst & Young or any other internationally-
recognized firm of independent certified public accountants.
(b) Within forty-five (45) days after the last day of each fiscal
quarter (other than the last fiscal quarter in the Borrower's fiscal year), (a)
the consolidated and consolidating balance sheets of the Borrower as of the end
of, and the related statements of income, shareholders' equity and cash flows
for such fiscal quarter for the period from the beginning of the then current
fiscal year to the end of such quarter, and (b) the comparative financial
statements as at the end of, and for, the corresponding period in the preceding
fiscal year, in each case, consistent with prior practice, together with a
certificate of a Responsible Officer of the Borrower stating that such financial
statements are presented fairly in accordance with GAAP subject only to year-end
audit adjustments.
(c) Promptly, such additional financial and other information,
including, without limitation, financial statements of the Borrower or PixTech
S.A., if available to the Borrower, as the Lender may from time to time
reasonably request.
7.2 Payment of Indebtedness. And shall cause each of its Subsidiaries to
-----------------------
pay, discharge or otherwise satisfy at or before maturity or before it becomes
delinquent, defaulted or accelerated, as the case may be, all of such Person's
Indebtedness (including taxes), except Indebtedness being contested in good
faith and for which provision is made to the satisfaction of the Lender for the
payment thereof in the event the Borrower or any Subsidiary is found to be
obligated to pay such Indebtedness and which Indebtedness is thereupon promptly
paid by the Borrower or such Subsidiary.
7.3 Maintenance of Existence and Properties. And shall cause each of its
---------------------------------------
Subsidiaries to maintain its corporate existence and maintain all rights,
privileges, licenses, approvals, franchises, properties and assets, necessary or
desirable in the normal conduct of its business, as presently conducted and all
other rights, privileges and franchises necessary in the normal conduct of its
business, keep its properties useful or necessary in its business in good
working order and condition, and from time to time make all needed repairs,
renewals and replacements thereto.
7.4 Inspection of Property; Books and Records; Discussions. And shall
------------------------------------------------------
cause each of its Subsidiaries (1) to keep proper books of record and account on
the same fiscal year basis as maintained on the date of this Agreement in which
full, true and correct entries in conformity with GAAP and all Requirements of
Law shall be made of all dealings and
<PAGE>
transactions in relation to its business and activities, and (2) permit
representatives of the Lender (i) to visit, inspect and examine and make
abstracts from and copies of any of its books and records relating to the
Collateral at any reasonable time and as often as may reasonably be desired by
the Lender, and (ii) with prior notice to the Borrower or any Subsidiary, to
discuss the business, operations, properties and financial and other condition
of the Borrower and any such Subsidiary with the officers and directors of such
Person and with its independent certified public accountants.
7.5 Notices. Within ten (10) days after the occurrence of any such
-------
event, give written notice to the Lender of: (a) the occurrence of any Default
or Event of Default, the details of such Default or Event of Default and the
action which the Borrower proposes to take with respect thereto; (b) any
litigation or proceeding affecting the Borrower, PixTech or the Collateral which
could have a Material Adverse Effect; and (c) any other event the Borrower
believes could have a Material Adverse Effect.
7.6 Expenses. Immediately upon notice from the Lender, pay all
--------
reasonable out-of-pocket expenses (including fees and disbursements of counsel)
of the Lender incident to the enforcement of payment of the Obligations and any
other rights of the Lender under the Loan Documents, whether by judicial
proceedings or otherwise, including, without limitation, in connection with
bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar
proceedings involving the Borrower. The obligations of the Borrower under this
Section 7.6 shall be effective and enforceable whether or not the Loans are made
- -----------
hereunder and shall survive payment of all other Obligations and the conversion
of the Convertible Note into common stock of the Borrower.
7.7 Loan Documents. Use the proceeds of the Loans as contemplated by
--------------
Section 2.10 and comply with and observe all terms and conditions of the Loan
- -------------
Documents.
7.8 Insurance. Maintain insurance with responsible and reputable
---------
insurance companies or associations (which shall not be Affiliates of the
Borrower) in such amounts and covering such risks as is customarily carried by
companies engaged in the same or similar businesses and owning similar
properties in the same general areas in which the Borrower operates; and, in any
event, maintain the insurance required under the Loan Documents.
7.9 Indemnification. Indemnify and hold harmless the Lender and each of
---------------
its Affiliates, directors, officers, employees, attorneys and agents (the
"Indemnified Parties") from and against all damages and liabilities
- --------------------
(collectively and severally, "Losses") assessed against any of them resulting
------
from the claims of any party relating to or arising out of the Loan Documents or
the transactions contemplated thereby, except for Losses caused by the gross
negligence or willful misconduct of such Indemnified Party, and reimburse the
Lender and each other Indemnified Party for any expenses (including the fees and
disbursements of legal counsel) reasonably incurred in connection with the
investigation of, preparation for or defense of any actual or threatened claim,
action or proceeding arising therefrom (including any such costs of responding
to discovery request or subpoenas), regardless of whether the Lender or such
other Indemnified Person is a party thereto. It is acknowledged and agreed by
the Borrower that the indemnification rights of the Indemnified Parties
hereunder are in addition to and cumulative with all other rights of the
Indemnified Parties, including, without limitation, the right of the Lender to
damages against the Borrower for breach of its obligations hereunder. With
reference to the provisions set forth above in this Section 7.9 for payment by
-----------
the Borrower of attorneys' fees incurred by the Indemnified Parties in any
action or claim brought by a third party, the Borrower shall, if it admits
liability hereunder to the Lender or any other such Indemnified Party,
diligently defend the Lender and each other such Indemnified Party and
diligently conduct the defense. If the Lender or any other such Indemnified
Party desires to engage separate counsel, it may do so at its own expense;
provided, however, that such limitation on the obligation of the Borrower to pay
- -------- -------
the fees of separate counsel for the Lender or any other such Indemnified Party
shall not apply if the Lender or any other such Indemnified Party, respectively,
has retained said separate counsel because of a reasonable belief that the
Borrower is not diligently defending it and/or not
<PAGE>
diligently conducting the defense and so notifies the Borrower. The obligations
of the Borrower under this Section 7.9 shall survive payment in full of all
-----------
other Obligations and conversion of the Convertible Note into common stock of
the Borrower.
7.10 Compliance with Laws, Etc. Comply with all applicable laws, rules,
-------------------------
regulations and orders with respect to which noncompliance could have a Material
Adverse Effect.
7.11 Cooperation. Execute and deliver to the Lender any and all
-----------
instruments, documents and agreements and do or cause to be done from time to
time any and all other acts reasonably deemed necessary or desirable by the
Lender to effect the provisions and purposes of the Loan Documents.
8. Negative Covenants
------------------
The Borrower hereby agrees that, as long as any Obligations remain unpaid,
the Borrower shall not, directly or indirectly through any Subsidiary:
8.1 Indebtedness. Create, incur, assume or suffer to exist any
------------
Indebtedness, except:
(a) Indebtedness under the Loan Documents;
(b) Indebtedness reflected in the financial statements described in
Section 5.1; and
(c) Indebtedness incurred after the date hereof in the ordinary
course of business.
8.2 Liens. Create, incur, assume or suffer to exist, any Lien upon any
-----
of the Collateral, except Liens in favor of the Lender.
8.3 Consolidation and Merger. (a) Liquidate, wind up or dissolve itself
------------------------
(or suffer any liquidation or dissolution), or (b) convey, sell, lease, assign,
transfer or otherwise dispose of, all or substantially all of its property,
business or assets, or (c) enter into any merger, consolidation or amalgamation,
unless the Borrower is the surviving entity.
8.4 Sale of Collateral. Sell, lease, assign, transfer or otherwise
------------------
dispose of any of the Collateral or any interest therein.
8.5 Conduct of Business, Etc.
------------------------
(a) Engage in any business activities substantially different from
the Borrower's current business activities; or
(b) change the accounting policies or principles on which its
financial statements are prepared or presented.
8.6 Modifications to Contracts. Amend, modify or waive any of the
--------------------------
provisions of the Contractual Obligations other than in the ordinary course of
business.
8.7 Transactions with Affiliates. Purchase, acquire or lease any
----------------------------
property from, or sell, transfer or lease any property to, or lend or advance
any money to, or borrow any money from, or guarantee any obligation of, or
acquire any stock, obligations or securities of, or enter into any merger or
consolidation agreement, or any management or similar fee agreement with any
Affiliate, or enter into any other transaction or arrangement or make any
payment to (including, without limitation, on account of any management fees,
service fees, home office charges, consulting fees, technical services charges
or tax sharing charges) or otherwise deal
<PAGE>
with, in the ordinary course of business or otherwise, any Affiliate on terms
which are not arm's length.
8.8 ERISA. Neither the Borrower nor any ERISA Affiliate shall adopt,
-----
establish, maintain, sponsor, administer, contribute to, participate in, or
incur any material liability under or obligation to contribute to, any Plan or
incur any material liability to provide post-retirement welfare benefits in
violation of any Requirement of Law.
8.9 Assignment of Royalties. The Borrower agrees that immediately upon
-----------------------
the occurrence of an Event of Default, it shall assign to the Lender [ ]*
of all royalty payments pursuant to, and other amounts due and payable under,
the agreements identified as items 1, 2, 3 and 6 on Exhibit A hereto.
9. Events of Default
-----------------
Upon the occurrence of any of the following events (each an "Event of
--------
Default"):
- -------
9.1 The Borrower shall fail to pay any principal or interest on the Loans
or any other Obligation under the Loan Documents on the date when due; or
9.2 Any representation or warranty made by the Borrower or PixTech S.A.
in any Loan Document or in connection with any Loan Document shall be materially
inaccurate or incomplete in any respect on or as of the date made; or
9.3 The Borrower or PixTech S.A. shall fail to maintain its corporate
existence; or
9.4 The Borrower shall default in any material respect in the observance
or performance of any covenant or agreement contained in Section 2.10 and any
-------------
such default continues for five (5) days after any Responsible Officer of the
Borrower obtains knowledge of such default; or
9.5 The Borrower shall fail to observe or perform in any material respect
any other term or provision contained in this Agreement or in the other Loan
Documents and such failure shall continue for thirty (30) days after any
Responsible Officer of the Borrower obtains knowledge thereof; or
9.6 The Borrower shall default in any payment of principal of or interest
on any Indebtedness in excess of [ ]* (other than the Obligations
or any Indebtedness to [ ]* not exceeding [ ]* or, any
Indebtedness to [ ]* not exceeding [ ]* or any such
Indebtedness shall be declared or otherwise become due prior to its stated
maturity; or
9.7 (a) The Borrower or PixTech S.A. shall commence any case, proceeding
or other action (i) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (ii) seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its assets, or the Borrower or PixTech
S.A. shall make a general assignment for the benefit of its creditors; or (b)
there shall be commenced against the Borrower or PixTech S.A. any case,
proceeding or other action of a nature referred to in clause (a) above which (i)
results in the entry of an order for relief or any such adjudication or
appointment, or (ii) remains undismissed, undischarged or unbonded for a period
of sixty (60) days; or (c) there shall be commenced against the Borrower or
PixTech S.A. any case, proceeding or other action seeking issuance of a warrant
of attachment, execution, distraint or similar process against all or
substantially all of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, stayed, satisfied or
bonded or appealed against
* Confidential Treatment Requested
<PAGE>
pending appeal within sixty (60) days from the entry thereof; or (d) the
Borrower or PixTech S.A. shall take any action in furtherance of, or indicating
its consent to, approval of, or acquiescence in (other than in connection with a
final settlement), any of the actions set forth in clause (a), (b) or (c) above;
or (e) the Borrower or PixTech S.A. shall generally not, or shall be unable to,
or shall admit in writing its inability to pay its debts as they become due; or
9.8 One or more judgments or decrees for an aggregate amount in excess of
[ ]* shall be entered against the Borrower or PixTech S.A. and all
such judgments or decrees shall not have been vacated, discharged, stayed,
satisfied or bonded pending appeal within thirty (30) days from the entry
thereof or in any event later than five days prior to the date of any proposed
sale thereunder; or
9.9 Any Material Adverse Effect shall occur; or
9.10 The Lender shall fail to have an enforceable Lien (subject only to
such prior Liens as the Lender shall have consented to in writing) on the
Collateral; or
9.11 Any financial or other information delivered by the Borrower or
PixTech S.A. to the Lender proves to be false or misleading in any material
respect; or
9.12 PixTech S.A. shall fail to observe or comply with any material term
or condition of any Loan Document to which it is a party, provided that the
Lender shall determine what is a material term or condition thereof in its sole
and reasonable discretion; or
9.13 The Distribution and Financing Agreement dated July 21, 1997 between
the Lender and the Borrower shall terminate; or
9.14 The CEA Letter shall for any reason, cease to be in full force and
effect.
THEN:
----
(a) Automatically upon the occurrence of an Event of Default under
Section 9.7 above; and
- ------------
(b) In all other cases, at the option of the Lender and effective
immediately upon notice to the Borrower that the Lender exercises such option
(which right to exercise such option shall be irrespective of whether or not the
Borrower shall have delivered a notice to the Lender pursuant to Section 7.5),
the outstanding principal balance of the Loans, interest accrued but unpaid
thereon and all other amounts payable hereunder shall become immediately due and
payable, without demand upon or presentment to the Borrower, which are expressly
waived by the Borrower, and the Lender may immediately exercise all rights,
powers and remedies available to it at law, in equity or otherwise.
10. Registration Rights.
-------------------
The Borrower covenants and agrees as follows:
10.1 Definitions. For purposes of this Section 10:
-----------
(a) "Register," "Registered," and "Registration" refer to a
-------- ---------- ------------
registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of effectiveness of such registration statement or document;
(b) "Registrable Securities" means (1) the Conversion Shares and (2)
----------------------
any security of the Borrower issued as (or issuable upon the conversion or
exercise of any warrant,
* Confidential Treatment Requested
<PAGE>
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, the Conversion Shares;
(c) The number of shares of "Registrable Securities then outstanding"
---------------------------------------
shall be determined by the number of shares of Common Stock, and other
securities, outstanding which are Registrable Securities but shall not include
---
Registrable Securities once sold by the Holder pursuant to a registered sale
following a registration effected hereunder.
(d) "Holder" shall mean any person owning or having the right to
------
acquire Registrable Securities or any assignee thereof in accordance with
Section 10.10; and
(e) "Form S-3" shall mean such form under the 1933 Act as in effect
--------
on the date hereof or any registration form under the 1933 Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Borrower with the SEC.
(f) "SEC" means the U.S. Securities and Exchange Commission.
---
10.2 Request for Registration.
------------------------
(a) Subject to the Holder's Conversion Rights and to the additional
terms and conditions set forth below, within 60 days following receipt of a
written request from the Holder requesting the Registration of no less than a
majority of the Registrable Securities then outstanding, the Borrower shall file
a registration statement under the 1933 Act covering the registration of such
Registrable Securities.
(b) If the Holder intends to distribute the Registrable Securities
covered by its request by means of an underwriting, it shall so advise the
Borrower as a part of its request made pursuant to this Section 10.2. The
underwriter will be selected by the Holder and shall be reasonably acceptable to
the Borrower. In such event, the right of the Holder to include Registrable
Securities in such registration shall be conditioned upon the Holder's
participation in such underwriting and the inclusion of the Holder's Registrable
Securities in the underwriting to the extent provided herein. The Holder shall
(together with the Borrower as provided in Section 10.4 (e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting as provided above.
(c) Notwithstanding the foregoing, if the Borrower shall furnish to
the Holder a certificate signed by the President of the Borrower stating that in
the good faith judgment of the Board of Directors of the Borrower, it would be
seriously detrimental to the Borrower and its shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Borrower shall have the right to defer such filing
for a period of not more than 120 days after receipt of the request of the
Holder; provided, however, that the Borrower may not utilize this right more
than once in any twelve-month period.
10.3 Borrower Registration. If the Borrower proposes to register
---------------------
(including for this purpose a registration effected by the Borrower for
shareholders other than the Holder) any of its stock or other securities under
the 1933 Act in connection with the public offering of such securities solely
for cash (other than a registration relating either to the sale of securities to
employees of the Borrower pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction or a registration on any form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Registrable Securities),
the Borrower shall, at such time, promptly give the Holder written notice of
such registration. Upon the written request of the Holder given within 20 days
after mailing of such notice by the Borrower in accordance with Section 11.8,
the Borrower shall, subject to Section 10.7, and subject to the rights of those
existing stockholders of the Borrower who have been granted registration rights
previously, cause to be registered under the 1933 Act the Registrable Securities
that the Holder has requested to be
<PAGE>
registered; provided that the Borrower shall have the right to postpone or
withdraw any registration effected pursuant to this Section 10.3 without
obligation to the Holder.
10.4 Obligations of the Borrower. Whenever required under this Section 10
---------------------------
to effect the registration of any Registrable Securities, the Borrower shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holder,
keep such registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
1933 Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holder such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
1933 Act, and such other documents as it may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or U.S. state
"Blue Sky" laws of such jurisdictions as shall be reasonably requested by the
Holder, provided that the Borrower shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. The Holder shall also
enter into and perform its obligations under such an agreement.
(f) Notify the Holder at any time when a prospectus relating to a
registration statement covering Registrable Securities is required to be
delivered under the 1933 Act, of the happening of any event as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of the Holder, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 10 if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of counsel
representing the Borrower for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holder and (ii) a
letter dated such date, from the independent certified public accountants of the
Borrower, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holder.
10.5 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings and qualifications pursuant to Section 10.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Borrower, and the
reasonable fees and disbursements of one counsel for the Holder, shall be borne
by the Borrower; provided, however, that the Borrower shall not be required to
-------- -------
pay for any expenses
<PAGE>
of any registration proceeding begun pursuant to Section 10.2 if the
registration request is subsequently withdrawn at the request of the Holder (in
which case the Holder shall bear such expenses); provided further, however, that
if at the time of such withdrawal, the Holder has learned of a material adverse
change in the condition, business, or prospects of the Borrower from that known
to the Holder at the time of its request and has withdrawn the request with
reasonable promptness following disclosure by the Borrower of such material
adverse change, then the Holder shall not be required to pay any of such
expenses and shall retain its rights pursuant to Section 10.2.
10.6 Expenses of Borrower Registration. The Borrower shall bear and pay
---------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 10.3 for the Holder, including (without limitation) all
registration, filing, and qualification fees, printers' and accounting fees,
fees and disbursements of counsel for the Borrower, but excluding underwriting
discounts and commissions relating to Registrable Securities and the fees of
special counsel to the Holder, which shall be borne by the Holder.
10.7 Underwriting Requirements. In connection with any offering involving
-------------------------
an underwriting of shares of the Borrower's capital stock, the Borrower shall
not be required under Section 10.3 to include any of the Holder's securities in
such underwriting unless it accepts the terms of the underwriting as agreed upon
between the Borrower and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Borrower. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Borrower that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Borrower shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders),
subject to the rights of those existing stockholders of the Borrower who have
been granted registration rights previously.
10.8 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 10:
(a) To the extent permitted by law, the Borrower will indemnify and
hold harmless the Holder, any underwriter (as defined in the 1933 Act) for the
Holder and each person, if any, who controls the Holder or underwriter within
the meaning of the 1933 Act or the 1934 Act, against any losses, claims,
damages, or liabilities (joint or several) to which they may become subject
under the 1933 Act, the 1934 Act and other U.S. federal or state law, insofar as
such losses, claims, damages, or liabilities (or actions in respect thereof)
arise out of or are based upon any of the following statements, omissions or
violations (a "Violation"): (i) any untrue statement or alleged untrue
---------
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Borrower of the 1933 Act, the 1934 Act, any state securities
law or any rule or regulation promulgated under the 1933 Act, the 1934 Act or
any state securities law; and the Borrower will pay to the Holder and each such
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 10.8(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Borrower (which consent shall
not be unreasonably withheld), nor shall the Borrower be liable in any
<PAGE>
such case for any such loss, claim, damage, liability, or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by the Holder, or any such underwriter or
controlling person.
(b) To the extent permitted by law, the selling Holder will indemnify
and hold harmless the Borrower, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Borrower within the meaning of the 1933 Act, any underwriter, any controlling
person of any such underwriter, against any losses, claims, damages, for
liabilities (joint or several) to which any of the foregoing persons may become
subject, under the 1933 Act, the 1934 Act and other U.S. federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by the Holder expressly for use
in connection with such registration; and the Holder will pay, as incurred, any
legal or other expenses reasonably incurred by any person to be indemnified
pursuant to this Section 10.8(b) in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 10.8(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; and provided further, that in no event shall any
indemnity under this Section 10.8(b) exceed the gross proceeds from the offering
received by the Holder.
(c) Promptly after receipt by an indemnified party under this Section
10.8 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 10.8 deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party (together with all other indemnified parties which may be represented
without conflict by one counsel) shall have the right to retain one separate
counsel, with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
10.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 10.8.
(d) The obligations of the Borrower and the Holder under this Section
10.8 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 10, and otherwise.
10.9 Reports Under Securities 1934 Act. With a view to making available
---------------------------------
to the Holder the benefits of Rule 144 promulgated under the 1933 Act and any
other rule or regulation of the SEC that may at any time permit the Holder to
sell securities of the Borrower to the public without registration or pursuant
to a registration on Form S-3, the Borrower agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after 90 days after the
effective date of the first registration statement filed by the Borrower for the
offering of its securities to the general public;
<PAGE>
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holder to utilize Form S-3 for the sale of Registrable Securities;
(c) file with the SEC in a timely manner all reports and other
documents required of the Borrower under the 1933 Act and the 1934 Act; and
(d) furnish to the Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Borrower that
it has complied with the reporting requirements of SEC Rule 144, the 1933 Act
and the 1934 Act, or that it qualifies as a registrant whose securities may be
resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly
report of the Borrower and such other reports and documents so filed by the
Borrower, and (iii) such other information as may be reasonably requested in
availing the Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
10.10 No Right to Assign Registration Rights. The rights to cause the
--------------------------------------
Borrower to register Registrable Securities pursuant to this Section 10 may not
be assigned by the Holder without the prior written consent of the Borrower,
which consent may be granted or denied in the sole discretion of the Borrower.
10.11 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement and until the rights granted in this Section 10 terminate
pursuant to Section 10.13 below, the Borrower shall not, without the prior
written consent of the Holder, enter into any agreement with any holder or
prospective holder of any securities of the Borrower which would allow such
holder or prospective holder (a) to include such securities in any registration
filed under Section 10.2 unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holder which is included, or (b) to make a
demand for registration which could result in such registration statement being
declared effective within 180 days after the effective date of any registration
effected pursuant to Section 10.2
10.12 Amendment of Registration Rights. Any provision of this Section
--------------------------------
10 may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Borrower and Holder. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon the Holder and
the Borrower.
10.13 Termination. The Holder's registration rights hereunder shall
-----------
terminate as to any Registrable Securities upon the earlier of (i) six months
after the issuance of the Conversion Shares, (ii) effectuation by the Company of
two registrations pursuant to Section 10.2 which registrations have been
declared or ordered effective and pursuant to which Registrable Securities have
been sold or (iii) such time as the Borrower can sell all Registrable Securities
without restriction under Rule 144.
11. Miscellaneous Provisions
------------------------
11.1 No Assignment. The Borrower may not assign its rights or obligations
-------------
under this Agreement without the prior written consent of the Lender. Subject to
the foregoing, all provisions contained in this Agreement or any document or
agreement referred to herein or relating hereto shall inure to the benefit of
the Lender, its successors and assigns, and shall be binding upon the Borrower,
its successors and assigns.
11.2 Amendments. This Agreement may not be amended or terms or provisions
----------
hereof waived unless such amendment or waiver is in writing and signed by the
Lender and the Borrower.
<PAGE>
11.3 Cumulative Rights; No Waiver. The rights, powers and remedies of the
----------------------------
Lender hereunder are cumulative and in addition to all rights, powers and
remedies provided under any and all agreements between the Borrower and the
Lender relating hereto, at law, in equity or otherwise. No delay or failure by
the Lender to exercise any right, power or remedy shall constitute a waiver
thereof, and no single or partial exercise by the Lender of any right, power or
remedy shall preclude other or further exercise thereof or any exercise of any
other rights, powers or remedies.
11.4 Entire Agreement. This Agreement and the documents and agreements
----------------
referred to herein embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings relating to
the subject matter hereof and thereof.
11.5 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
choice of law rules.
11.6 Waiver of Jury Trial. THE BORROWER AND THE LENDER EACH HEREBY WAIVES
--------------------
ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING
IN CONTRACT, TORT OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS. INSTEAD, ANY DISPUTES RESOLVED IN COURT
WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.
11.7 Counterparts. This Agreement and the other Loan Documents may be
------------
executed in any number of counterparts, all of which together shall constitute
one agreement.
11.8 Notices. All notices required or permitted under this Agreement will
-------
be in writing in the English language, will reference this Agreement and will be
deemed given: (a) when delivered personally; (b) when sent by confirmed
facsimile; or (c) three Business Days after deposit with a commercial overnight
carrier specifying next-day delivery, with written verification of receipt..
All communications will be sent to the addresses set forth below (or to such
other address as may be designated by a party by giving written notice to the
other party pursuant to this Section 11.8).
-------------
The Lender Sumitomo Corporation
1-2-2, Hitotsubashi, Chiyoda-ku
Tokyo, 100 Japan
Attention: Mr. Yoshihiro Bito
General Manager, Electronics Department
Tel 81 3 3230 77 33
Fax 81 3 3230 79 36
The Borrower PixTech, Inc.
Avenue Olivier Perroy
Zone Industrielle de Rousset
13790 Rousset, France
Attention: Yves Morel
Chief Financial Offier
Tel: 33 4 42 29 10 00
Fax 33 4 42 29 05 09
<PAGE>
11.9 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their respective successors and assigns.
The Borrower may not assign or transfer any of its rights or obligations under
this Agreement or any of the other Loan Documents and any such assignment or
transfer in violation hereof shall be null and void.
11.10 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts (including by telecopy), and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.
11.11 Severability. If any provision of this Agreement is declared invalid
------------
or unenforceable by any lawful tribunal, then it shall be adjusted to conform to
legal requirements of that tribunal and that modification shall automatically
become a part of this Agreement. If no adjustment can be made, the provision
shall be deleted as though never included in this Agreement and the remaining
provisions of this Agreement shall remain in full force and effect unless such
invalidity or unenforceability causes substantial deviation from the underlying
intent of the parties expressed in this Agreement, in which case the parties
shall replace the invalid or unenforceable provision with a valid or enforceable
provision which corresponds as far as possible to the spirit and purpose of the
invalid or unenforceable provision.
11.12 English Language. All documents to be delivered under this Agreement
----------------
shall be in the English language.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PIXTECH, INC.
By /s/ Jean-Luc Grand-Clement
---------------------------
Name Mr. Jean-Luc Grand-Clement
Title President and CEO
SUMITOMO CORPORATION
By /s/ Akio Yamane
----------------
Name Mr. Akio Yamane
Title Assistant General Manager
Electronics Department
<PAGE>
EXHIBIT 10.3
(English Translation)
AGREEMENT L 3387-4
CEA PixTech
AMENDMENT no. 4
TO THE LICENSE AGREEMENT
ON THE MICROTIPS DISPLAYS
(LICENSE AGREEMENT)
<PAGE>
BETWEEN:
The (( COMMISSARIAT A L'ENERGIE ATOMIQUE )), a scientific, technical and
industrial Public Company (( CEA )), having their registered office in Paris
15e, 31-33, rue de la Federation, represented by Mr. Marc Leger, Director of the
Legal and Commercial Operations,
and:
the company PixTech, S.A. , formerly named Pixel International S. A., with a
registered capital of FF. 53,529,600, registration no. 387 823 990 00024, hereby
designated as (( PixTech )), having their registered office in 13790 ROUSSET,
avenue Perroy, Zone Industrielle de Rousset, represented by Mr. Jean-Luc Grand-
Clement, President,
IT HAS BEEN AGREED THE FOLLOWING:
<PAGE>
P R E A M B L E
WHEREAS, on September 17, 1992, the CEA and PixTech have signed a license
agreement in the field of microtips (the LICENSE AGREEMENT),
WHEREAS, in order to develop a subcontracted volume production, PixTech needs
important financial means,
WHEREAS, in order to commercialize the presently contemplated volume
production, PixTech is in discussion with the Japanese corporation SUMITOMO,
WHEREAS, within a DISTRIBUTION AND FINANCING AGREEMENT and of a CREDIT
AGREEMENT, signed on July 21st, 1997, between PixTech, PixTech, Inc. a 100 %
shareholder of PixTech, and SUMITOMO, SUMITOMO grants to PixTech, Inc. and thus
indirectly to PixTech a $10 million loan over a 3 year period, subject to such
modifications of the LICENSE AGREEMENT allowing SUMITOMO to obtain a
CONDITIONAL GUARANTEE from CEA,
WHEREAS, according to the expected volume production and the commercialization
by SUMITOMO of such production, yielding to licensing fees for CEA, CEA has
agreed to support the implementation of the provisions of the DISTRIBUTION AND
FINANCING CONTRACT,
WHEREAS, the present financial and technical situation of PixTech makes
uncertain CEA's expected benefits from THE DISTRIBUTION AND FINANCING CONTRACT,
IT AS BEEN AGREED THE FOLLOWING:
<PAGE>
ARTICLE 1 - PURPOSE OF THE AMENDMENT
------------------------------------
The present amendment no. 4 is intended to temporarily amend the
LICENSE AGREEMENT as to the license fees clauses, the commitment towards
SUMITOMO and the pledge of PixTech's patents.
ARTICLE 2 - TEMPORARY ADDITIONAL LICENSE FEES
---------------------------------------------
1. PixTech will pay for the use of the CEA KNOWLEDGE and PATENTS, as well as
of the joint share of the patents held in co-ownership with PixTech, a [ ]*
additional temporary licensing fee as to the license and under-licenses on
the out of tax amount of their sales of displays (including their
addressing electronics should it result from all or part of the KNOWLEDGE),
ex works, packaging expenses, transportation and commissions excluded.
PixTech will cease paying the temporary additional licensing fee as soon as
the cumulated amounts effectively due to CEA as to this licensing fee, or
the attached minima as per article 2 (2.) , will have reached an amount of
[ ]*.
2. PixTech's commitments as to the cumulated minima of remuneration as per
article 2 (1.) of the present amendment will be the following (in million
of dollars):
<TABLE>
<CAPTION>
Years Cumulated US$ (x000)
----- ---------------------
<S> <C>
[ ]* [ ]*
[ ]* [ ]*
[ ]* [ ]*
[ ]* [ ]*
</TABLE>
The parties hereby agree that at the signature date, an amount of [ ]*,
corresponding to the minima forecaster for 1997, will be paid by PixTech to
CEA. As for 1998, 1999 and 2000, the payments will occur respectively on
October 23rd, 1998, October 23rd, 1999, October 23rd, 2000, i.e. at the
anniversary dates of the present amendment, being specified that these
amounts will be considered as an advanced payment to the amounts due
* Confidential Treatment Requested
<PAGE>
for the addition temporarily license fee and payable the next following 31st of
March of the corresponding year.
ARTICLE 3 - COMMITMENT FROM CEA TOWARDS SUMITOMO
------------------------------------------------
After duly motivated notification sent by SUMITOMO corporation to CEA,
informing CEA of PixTech's failure as part of the CREDIT AGREEMENT between
SUMITOMO and Pixtech, Inc., (the NOTIFICATION), CEA will transfer to SUMITOMO
[ ]* of the amounts which will have been paid directly to CEA by Motorola,
Raytheon, Futaba or any other PixTech licensee, and not questioned by a third
party at the date of the payment by CEA to SUMITOMO, should these amounts being
due by PixTech's licensees at the time of the notification by SUMITOMO or should
these amounts become due to PixTech or CEA after notification by SUMITOMO. This
pay-back will be allocated by SUMITOMO to the repayment of the debts from
PixTech, Inc. towards SUMITOMO.
The obligation of CEA towards SUMITOMO will cease when PixTech, Inc.'s debts
towards SUMITOMO as per the LOAN AGREEMENT will have reached [ ]*, being
agreed that all the pay-backs made by CEA in favor of SUMITOMO will never
exceed a cumulated amount of [ ]*.
A NOTIFICATION by SUMITOMO will only be validly received by CEA if it is made
within the validity period of the present agreement, i.e. during the three (3)
year and eight (8) days period starting from the date when SUMITOMO has
transferred the funds to PixTech, Inc. A NOTIFICATION issued after this date
will free CEA from any obligation towards SUMITOMO.
CEA's obligations towards SUMITOMO resulting from a valid NOTIFICATION might
be extended beyond the validity period of the present amendment.
ARTICLE 4 - PLEDGE OF PixTech's PATENTS
---------------------------------------
PixTech will pledge in favor of CEA all of the patents they own of might
acquire ownership during the validity period of the present amendment.
The pledging instruments will be done jointly between PixTech and CEA, within
all countries for which such acts or similar instruments are valid.
Upon the signature of the amendment, and without delay, the Parties will
proceed to the pledging formalities by the competent authorities.
At the end of the validity period of the present amendment, CEA and PixTech
will take any necessary steps to cancel the granted pledges.
* Confidential Treatment Requested
<PAGE>
The registration costs by the competent authorities as well as the counsel
fees will be at PixTech's expenses.
ARTICLE 5 - TERM OF THE AGREEMENT
---------------------------------
The provisions of the present amendment no. 4 will be effective as of the date
of signature of such amendment and will remain into effect for a period of three
(3) years and eight (8) days and only at the date when the funds will have been
transferred by SUMITOMO, which transfer should occur on January 31st, 1998, at
the latest. Should the transfer of the funds not have taken place on January
31st, 1998, the present amendment no. 4 would be null and void, being specified
that the amounts already paid by PixTech under articles 2 (1.) and 2 (2.) of the
present amendment would remain CEA's property.
ARTICLE 6 - OTHER DISPOSITIONS
------------------------------
All of the dispositions of the LICENSE AGREEMENT and of its non modified
amendments no. 1, no. 2 and no. 3 by the present amendment no. 4, remain
unchanged and apply to the present amendment no. 4.
Done in Paris, in
two originals
For CEA For PixTech
Marc Leger Jean-Luc Grand-Clement
<PAGE>
EXHIBIT 10.3
(French Version)
ACCORD L 3387-4
CEA PixTech
AVENANT N 4 A
L'ACCORD DE LICENCE
DANS LE DOMAINE DES ECRANS PLATS A MICROPOINTES
(ACCORD DE LICENCE)
<PAGE>
ENTRE :
Le COMMISSARIAT A L'ENERGIE ATOMIQUE, Etablissement Public de caractere
scientifique, technique et industriel, ci-apres denomme "CEA", dont le Siege est
a Paris 15eme, 31-33 rue de la Federation, represente par Monsieur Marc Leger,
Directeur Juridique et des Relations Commerciales,
d'une part,
Et
La Societe PixTech, S.A., connue auparavant sous la raison sociale Pixel
International S.A., au capital de 53 529 600 F, n 387 823 990 00024, ci-apres
designee "PixTech", dont le Siege est Avenue Olivier Perroy, Zone Industrielle
de Rousset, 13790 Rousset, representee par Monsieur Jean-Luc Grand-Clement,
President Directeur General,
d'autre part,
IL EST EXPOSE CE QUI SUIT:
<PAGE>
P R E A M B U L E
ATTENDU que, le 17 septembre 1992, le CEA et PixTech ont conclu un accord de
licence dans le domaine des ecrans plats micropointes (L'ACCORD DE LICENCE),
ATTENDU que, pour developper une production de volume en sous-traitance, PixTech
fait face a des besoins de financement importants,
ATTENDU que, pour commercialiser la production de volume actuellement envisagee,
PixTech s'est rapprochee de la societe de negoce japonaise SUMITOMO,
ATTENDU que, dans le cadre d'un CONTRAT DE FINANCEMENT ET DE DISTRIBUTION et
d'un ACCORD DE PRET conclus le 21 juillet 1997 entre PixTech, PixTech, Inc.,
actionnaire a 100% de PixTech et SUMITOMO, SUMITOMO accorde a PixTech, Inc. et
indirectement a PixTech un financement de 10 millions de dollars, pour une
periode de 3 ans, sous reserve de modifications de l'ACCORD de LICENCE
permettant a SUMITOMO d'obtenir une garantie conditionnelle de la part du CEA,
ATTENDU que, compte tenu des perspectives de production de volume et de
commercialisation par SUMITOMO de cette production, generatrices de redevances
pour le CEA, le CEA souhaite favoriser la mise en oeuvre des dispositions du
CONTRAT DE FINANCEMENT ET DE DISTRIBUTION,
ATTENDU que, la situation financiere et technique de PixTech rendent incertains
les benefices esperes par le CEA du CONTRAT DE FINANCEMENT ET DE DISTRIBUTION,
IL A ETE CONVENU CE QUI SUIT:
<PAGE>
ARTICLE 1 - OBJET DE L'AVENANT
- ------------------------------
Le present avenant n 4 a pour objet de modifier l'ACCORD DE LICENCE a titre
temporaire sur les clauses en matiere de redevances, d'engagement vis-a-vis de
SUMITOMO et de nantissement des brevets de PixTech.
ARTICLE 2 - REDEVANCES ADDITIONNELLES TEMPORAIRES
- -------------------------------------------------
2.1 PixTech paiera pour l'usage des CONNAISSANCES et BREVETS du CEA, ainsi que
de la quote-part indivise des BREVETS detenus en copropriete avec PixTech,
une redevance temporaire additionnelle de [ ]* au titre de la licence et
des sous-licences sur le montant hors taxe de ses ventes d'ECRANS (y compris
leur electronique d'adressage si celle-ci ressort de tout ou partie des
CONNAISSANCES) depart usine, frais d'emballage, de transport et de
commission non compris.
PixTech cessera de verser la redevance temporaire additionnelle lorsque les
montants cumules effectivement dus au CEA au titre de cette redevance, ou
des minima vises a l'article 2.2 qui y sont attaches, auront atteint un
montant de [ ]*.
2.2 Les engagements, par PixTech, de minima cumules de remunerations prevues au
2.1 du present avenant au titre des redevances temporaires, seront les
suivants (en milliers de US dollars) :
<TABLE>
Cumules KUSD
<S> <C>
[ ]* [ ]*
[ ]* [ ]*
[ ]* [ ]*
[ ]* [ ]*
</TABLE>
Les parties conviennent qu'a la date de signature, une somme de [ ]*,
correspondant aux minima prevus pour l'annee 1997, sera versee par PixTech au
CEA. Pour les annees 1998, 1999, 2000, les paiements interviendront
respectivement le 23.10.1998, 23.10.1999, 23.10.2000, soit aux dates
anniversaires du present avenant, etant precise que ces sommes serviront
d'acompte aux sommes dues au titre des redevances additionnelles temporaires
et payables le 31 mars suivant chaque annee correspondante.
* Confidential Treatment Requested
<PAGE>
ARTICLE 3 - ENGAGEMENT DU CEA VIS-A-VIS DE SUMITOMO
- ---------------------------------------------------
Apres notification motivee adressee par la societe SUMITOMO au CEA, informant le
CEA d'une defaillance de PixTech, Inc. dans le cadre de l'ACCORD DE PRET entre
SUMITOMO et PixTech, Inc. (la NOTIFICATION), le CEA reversera a SUMITOMO [
]* des sommes qui auront ete versees directement au CEA par Motorola, Raytheon,
Futaba ou par tout autre licencie de PixTech, et non contestes par un tiers a la
date du versement par le CEA a SUMITOMO, que ces sommes soient dues par les
licencies de PixTech au jour de la notification par SUMITOMO ou que ces sommes
deviennent dues a PixTech ou au CEA apres notification par SUMITOMO. Ce
reversement sera affecte par SUMITOMO au remboursement des dettes de PixTech,
Inc. envers SUMITOMO.
L'obligation du CEA envers SUMITOMO cessera lorsque les dettes de PixTech, Inc.
envers SUMITOMO au titre de l'ACCORD DE PRET atteindront [ ], * etant
entendu que l'ensemble des reversements effectues par le CEA au profit de
SUMITOMO ne peut en aucun cas depasser un montant cumule de [ ]*.
Une NOTIFICATION par SUMITOMO ne sera validement recue par le CEA que si elle
intervient au cours de la periode de validite du present avenant, c'est-a-dire
pendant la periode de trois annees et 8 jours a compter de la mise a disposition
des fonds par SUMITOMO a PixTech, Inc. Une NOTIFICATION emise apres cette
periode n'entrainera aucune obligation du CEA envers SUMITOMO.
Les obligations du CEA envers SUMITOMO decoulant d'une NOTIFICATION valide
pourront s'etendre au-dela de la periode de validite du present avenant.
ARTICLE 4 - NANTISSEMENT DES BREVETS DE PIXTECH
- -----------------------------------------------
PixTech nantira au profit du CEA l'ensemble des brevets dont il a la propriete
ou dont il acquerra la propriete pendant la periode de validite du present
avenant.
Les actes de nantissement seront effectues conjointement entre PixTech et le
CEA, dans l'ensemble des pays pour lesquels de tels actes, ou des actes
similaires, peuvent etre valides.
Des la signature de l'avenant et dans les meilleurs delais, les Parties
effectueront les formalites de nantissement aupres des organismes competents.
Au terme de la periode de validite du present avenant, le CEA et PixTech
prendront les dispositions necessaires pour annuler les nantissements ainsi
accordes.
L'ensemble des couts d'enregistrement aupres des organismes competents et les
frais de conseils seront supportes par PixTech.
* Confidential Treatment Requested
<PAGE>
ARTICLE 5 - DUREE DE L'AVENANT
- ------------------------------
Les dispositions prevues par le present avenant n 4 prendront effet a compter
de la date de signature et seront valables pour une periode de 3 annees et 8
jours seulement a compter de la date de mise a disposition des fonds par
SUMITOMO, laquelle devra intervenir au plus tard le 31 janvier 1998. En
l'absence de versement au 31 janvier 1998, le present avenant n 4 deviendrait
nul et non avenu, etant precise que les sommes deja payees par PixTech au titre
des articles 2.1 et 2.2 du present avenant resteraient acquises au CEA.
ARTICLE 6 - AUTRES DISPOSITIONS
- --------------------------------
Toutes les dispositions de l'ACCORD DE LICENCE et des avenants n 1, n 2 et n
3 non modifiees par le present avenant n 4 restent inchangees et s'appliquent
au present avenant n 4.
Fait a Paris, le 23 octobre 1997
en deux exemplaires
Pour le CEA Pour PixTech
/s/ Marc Leger /s/ Jean-Luc Grand- Clement
Marc Leger Jean-Luc Grand-Clement
<PAGE>
Exhibit 10.4
4 September 1997
PixTech, S.A.
Parc Industrial de la Pompignane
Rue de la Vieille Poste
34055 Montpellier Cedex - France
Attention: Jean-Luc Grand-Clement
Subject: Cross-Licensing Period Extension and Other Matters Related to the
Cooperation and License Agreement of 1 June 1994 between Raytheon
Company and Pixel International, S.A. (now PixTech, S.A.)
Gentlemen:
This Letter Agreement is to confirm certain understandings and agreements
between PixTech S.A. ("PixTech") and Raytheon Company ("Raytheon") related to
the extended Cross-Licensing Period provided for under the above Agreement and
also concerning certain other matters related to said Agreement as follows:
1. Raytheon and PixTech hereby agree to enter into the Extended Cross-
Licensing Period provided for under section 3.3 of the above referenced
Agreement with said Extended Cross-Licensing Period commencing as of 1 June 1997
and expiring on 1 June 1999. During this Extended Cross-Licensing Period,
Raytheon and PixTech shall (a) exchange technology in the FED Field (as defined
in said Agreement) and (b) cross-license such technology to each other, all as
provided for by and in accordance with Section 3.3 of said Agreement. All other
provisions of the Agreement of 1 June 1994 applicable to the Extended Cross-
Licensing Period and exchanges thereunder shall continue to apply.
2. Raytheon may elect to pursue a refund claim for all or part of the
[ ]* in withholding taxes which were paid to the United States Internal Revenue
Service in connection with the payments made to PixTech or its predecessor
company Pixel International, S.A. pursuant to Sections 5.1 and 5.2 of the above
referenced Agreement. Any recovery pursuant to any such claim for refund will be
for the benefit of Raytheon, and PixTech shall execute all documents necessary
to insure that any refunds obtained are paid to and are for the benefit of
Raytheon. Furthermore, PixTech shall grant Raytheon a Power of Attorney and
shall execute such other documents as may be required to permit Raytheon to
pursue the above mentioned refund claim. PixTech shall also assist Raytheon in
preparing and documenting any such request for refund. Provided that PixTech
complies with the requirements of this paragraph, Raytheon shall withdraw its
Invoice No. 9999-399 to PixTech in the amount of [ ]* dated 13 March 1997.
3. During the Extended Cross-Licensing Period set forth in Section 1 above,
PixTech agrees to supply cathodes to Raytheon as requested by Raytheon in
connection with Raytheon's FED Program which is the subject of the above
referenced Agreement. PixTech agrees to supply such cathodes under reasonable
terms and conditions consistent with past practices between the parties. During
the Extended Cross-Licensing Period set forth in Section 1 above, Raytheon
agrees to purchase its cathode requirements for the aforementioned FED Program
from PixTech subject, however, to mutual agreement as to price and terms and
conditions of supply. In connection with the above, Raytheon shall provide
PixTech with periodic estimates of Raytheon's cathode requirements in the form
of a 12 month rolling forecast to be updated quarterly.
* Confidential Treatment Requested
<PAGE>
4. During the above referenced Extended Cross-Licensing Period, Raytheon shall
endeavor to utilize PixTech as a subcontractor / vendor for goods and services
which Raytheon requires from third parties in connection with any contracts
which Raytheon may obtain for the supply of Royalty Bearing Products (as defined
in the above referenced Agreement) provided that PixTech has the capability to
supply such goods and services in accordance with Raytheon's and its customer's
requirements and subject to (a) agreement on terms and conditions and pricing,
(b) PixTech being competitive as to price and schedule with other potential
suppliers, (c) applicable government regulations, and (d) customer approval
where required.
5. Raytheon's presently intended development activities during the Extended
Cross-Licensing Period, depending on whether or not DARPA funding is obtained,
are summarized below.
<TABLE>
<CAPTION>
Planned Raytheon Estimated Raytheon
Effort with DARPA Effort without
Funding DARPA Funding
----------------------- ---------------------------
<S> <C> <C>
[ ]* [ ]* [ ]*
[ ]* [ ]* [ ]*
[ ]* [ ]* [ ]*
</TABLE>
Raytheon presently anticipates that it may receive additional funding beyond
that presently planned in which case the above described efforts may be
expanded. PixTech understands that the efforts described in this Section 5
represent Raytheon's current plans and intent with regard to development efforts
and that Raytheon may modify these plans at any time based on its own business
requirements and budget constraints.
Raytheon and PixTech have confirmed their agreement to the terms of this Letter
Agreement as evidenced by the signatures of their respective duly authorized
representatives as set forth below. This Letter Agreement has been executed in
duplicate with one original copy for each party.
Very truly yours,
/s/ W.E. Graham
- ----------------
Raytheon Company
W.E. Graham
Contracts Manager
Agreed:
PixTech, S.A.
/s/ Jean-Luc Grand Clement
- ---------------------------
By: Jean-Luc Grand-Clement
Title: President
*Confidential Treatment Requested
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