As filed with the Securities and Exchange Commission on September 13 1999
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
PIXTECH, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Delaware 3679 04-3214691
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</TABLE>
Avenue Olivier Perroy, 13790 Rousset, France, 011 33 4-42-29-10-00
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
YVES MOREL, CHIEF FINANCIAL OFFICER
PixTech, Inc.
Avenue Olivier Perroy
13790 Rousset, France
011-33-4-42-29-10-00
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
with copies to:
MICHAEL LYTTON, ESQ.
MARC A. RUBENSTEIN, ESQ.
Palmer & Dodge LLP
One Beacon Street
Boston, Massachusetts 02108
(617) 573-0100
Approximate date of commencement of proposed sale to the public: From time to
time after the Registration Statement is declared effective. If any of the
securities being registered on this form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [X] If this form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, please check
the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. [_] If this
form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. [_] If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_] If delivery of the prospectus is expected
to be made pursuant to Rule 434, please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Class of Amount To Be Offering Price Aggregate Amount of
Securities To Be Registered Registered (1) Per Share Offering Price Registration Fee
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock ($.01 par value 16,000,000 Shares $1.6875 (2) $27,000,000 $7,506.00
per share)
Common Stock ($.01 par value 100,000 Shares $1.6875 (2) $168,750 $46.91
per share), issuable upon
exercise of a warrant
Total: 16,100,000 Shares $27,168,750 $7,552.91
================= =========== =========
</TABLE>
<PAGE>
(1) In the event of a stock split, stock dividend, or other transaction
involving our Common Stock, in order to prevent dilution, the number of
shares registered shall automatically be increased to cover the additional
shares in accordance with Rule 416(a) under the Securities Act, which
applies to stock splits, stock dividends, or similar transactions.
(2) Estimated solely for the purpose of calculating the registration fee and
computed pursuant to Rule 457(h) based upon the average of the high and low
sale prices on September 08, 1999 as reported by the Nasdaq National
Market.
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay our effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
Subject to Completion, dated September 13, 1999
16,100,000 Shares
PIXTECH, INC.
Common Stock
This Prospectus may be used only in connection with the resale
(i) by Kingsbridge Capital Limited, from time to time, of up to 16,100,000
shares of the common stock of PixTech as follows:
o 15,000,000 shares of common stock which may be issued by us to
Kingsbridge pursuant to an equity line agreement; and
o 100,000 shares of common stock issuable upon exercise of a warrant
held by Kingsbridge;
and (ii) by Sumitomo Corporation, from time to time, of up to 1,000,000
shares of common stock to be issued upon conversion of a certain convertible
note issued by us to Sumitomo.
The shares of common stock offered may be sold from time to time for the
account of the selling stockholders. We will not receive any of the proceeds
from the sale of the shares by the selling stockholders. We have agreed to pay
the selling stockholders' costs of registering the shares, including
commissions, transfer taxes and certain other expenses of resale of the common
stock.
The price at which the common stock will be issued by us to Kingsbridge
will be 88-90% of the market price of the stock on the date we issue shares,
depending on certain factors described in the equity line agreement. The price
at which the common stock will be issued by us to Sumitomo will be 80% of the
market price of the stock on the date of conversion, the market price being
determined as the average closing market price over the twenty consecutive
trading days immediately prior to the notice of conversion.
The selling stockholders may offer, pursuant to this prospectus, shares of
common stock to purchasers from time to time in transactions on the Nasdaq
National Market, in negotiated transactions, or otherwise, or by a combination
of these methods, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to market prices or at
negotiated prices. Sales of the shares by the selling stockholders may be
effected through broker-dealers, who may, in the case of sales by Kingsbridge,
receive compensation from Kingsbridge in the form of discounts or commissions.
Kingsbridge is an "underwriter" within the meaning of the Securities Act in
connection with such sales.
Our common stock is listed on the Nasdaq National Market under the symbol
"PIXT." The average of the high and low bid prices for our common stock on the
Nasdaq National Market on September 8, 1999 was $1.6875 per share.
Investing in our common stock involves certain risks which are described in
the "Risk Factors" section beginning on page 5.
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
<PAGE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
<PAGE>
PROSPECTUS SUMMARY............................................................3
RISK FACTORS..................................................................5
THE EQUITY LINE AGREEMENT....................................................19
SUMMARY CONSOLIDATED FINANCIAL INFORMATION...................................21
PRICE RANGE OF OUR COMMON STOCK..............................................22
DIVIDEND POLICY..............................................................22
USE OF PROCEEDS..............................................................22
CAPITALIZATION...............................................................23
SELECTED CONSOLIDATED FINANCIAL DATA.........................................24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ..............................................25
BUSINESS OF THE COMPANY......................................................35
MANAGEMENT...................................................................47
EXECUTIVE COMPENSATION.......................................................50
SHARE OWNERSHIP..............................................................54
SELLING STOCKHOLDERS.........................................................57
DESCRIPTION OF CAPITAL STOCK.................................................58
PLAN OF DISTRIBUTION.........................................................61
WHERE YOU CAN FIND MORE INFORMATION..........................................64
LEGAL MATTERS................................................................65
EXPERTS .....................................................................65
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ..................................F-1
2
<PAGE>
PROSPECTUS SUMMARY
The Offering
PixTech and Kingsbridge entered into a private equity line agreement on
August 9, 1999. This agreement entitles us to sell, from time to time, up to
$15,000,000 (after deducting Kingsbridge's discount) worth of our common stock
to Kingsbridge. Pursuant to the agreement, we have:
o filed a registration statement for 15,000,000 shares of common stock
which we may sell to Kingsbridge pursuant to the agreement, which
Kingsbridge may offer to the public through this prospectus; and
o issued a warrant to Kingsbridge to purchase 100,000 shares of our
common stock at an exercise price of $2.30 per share. Shares issuable
on exercise of the Kingsbridge warrant may also be offered to the
public through this prospectus.
On October 27, 1997, we issued a convertible note to Sumitomo. This note
may be converted into shares of our common stock at a price equal to 80% of the
market price of our common stock at the time of conversion, the market price
being determined as the average closing market price over the twenty consecutive
trading days immediately prior to the notice of conversion.
Through this prospectus, the selling stockholders may offer to the public
the common stock acquired under the equity line agreement and the warrant and
through conversion of the convertible note.
Shares Offered by the 16,100,000 shares of common stock of PixTech,
Selling Stockholders Inc., par value $.01 per share.
Offering Price Determined at the time of sale by the selling
stockholders.
Common stock outstanding as
of August 31, 1999 23,567,138 shares
Use of Proceeds We will not receive any of the proceeds of the
shares offered by the selling stockholders.
Any proceeds we receive from the sale of common
stock pursuant to the equity line agreement and
the exercise of the warrant will be used primarily
for general corporate purposes. See "Use of
Proceeds."
Dividend Policy We currently intend to retain any future earnings
to fund the development and growth of our
business. Therefore, we do not currently
anticipate paying cash dividends. See "Dividend
Policy."
Nasdaq National Market Symbol PIXT
3
<PAGE>
Address and Phone Number Avenue Olivier Perroy
13790 Rousset, France
011-33-4-42-29-10-00
4
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors, in addition to
the other information contained in this prospectus, in deciding whether to
invest in the stock offered under this prospectus. This prospectus contains
forward-looking statements which involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in the
following risk factors and elsewhere in this prospectus.
We Have A History of Losses and Accumulated Deficit Which May Continue In The
Future.
We have a history of losses as follows:
<TABLE>
<CAPTION>
Loss to Common
Operating Net Losses Stockholders
-------------------- ------------
<S> <C> <C>
Six Months ended June 30, 1999 $11.9 million $13.7 million
Year Ended December 31, 1998 $19.7 million $17.9 million
Year Ended December 31, 1997 $15.8 million $14.7 million
</TABLE>
The losses were due in part to limited revenues and to various
expenditures, including expenditures associated with:
o research and development activities;
o pilot production activities; and
o preparation and start-up of volume manufacturing in Taiwan, at Unipac.
We expect to incur operating losses in the future due primarily to:
o continuing research and development activities to develop field
emission displays larger than 15 inch in diagonal and color displays;
o manufacturing start-up costs in Taiwan, and
o expansion of our sales and marketing activities.
As a result of these losses, as of June 30, 1999, we had an accumulated
deficit of approximately $67.6 million.
Our ability to achieve and maintain profitability is highly dependent upon
the successful commercialization of our monochrome and color displays. We cannot
assure you that we will ever be able to successfully commercialize our products
or that we will ever achieve profitability.
5
<PAGE>
We Will Need Additional Capital In The Future.
We have incurred negative cash flows from operations since inception, and
have expended, and will need to expend, substantial funds to complete our
planned technology and product development efforts, including:
o continuous improvement of our manufacturing processes in order to
achieve yields that will lead to an acceptable cost of products;
o continuous product development activities in order to develop color
displays that meet market requirements and to develop a range of
products offered for sales;
o continuous research and development activities in order to develop
displays larger than 15 inch in diagonal; and
o expansion of our marketing, sales and distribution activities.
In addition to the above requirements, we expect that we will require
additional capital either in the form of debt or equity, regardless of whether
and when we reach profitability, for the following activities: o working
capital;
o acquisition of manufacturing equipment to expand manufacturing
capacity; and
o further product development.
Our future capital requirements and the adequacy of our available funds
depend on numerous factors, including:
o the rate of increase in manufacturing yields by Unipac, in Taiwan;
o the magnitude, scope and results of our product development efforts;
o the costs of filing, prosecuting, defending and enforcing patent
claims and other intellectual property rights;
o competing technological and market developments; and
o expansion of strategic alliances for the development, manufacturing,
sale, marketing and distribution of our products.
We currently expect to run out of money in September 1999. We have entered
into an equity line agreement with Kingsbridge which provides that we may issue
and sell, from time to time, up to an aggregate of $15,000,000 of our common
stock, subject to the satisfaction of certain conditions. We cannot assure you
that we will meet all of the conditions required to obtain financing under the
equity line agreement. Even if we were able to meet the required conditions, we
may have to raise additional money from other sources in order to continue to
fund our operations.
6
<PAGE>
We May Have Problems Raising Money We Need In The Future.
In the future, we expect that we will need to obtain additional money from
sources outside our company, as we have done in the past. If we cannot obtain
money when we need it, we may need to reduce our production of products and
development of new products. There is no guarantee that any of the outside
sources will provide us with money when we need it. In addition, even if we are
able to find outside sources which will provide us with money when we need it,
in order to raise this money we may be required to issue securities with better
rights than the rights of our common stock or we may be required to take other
actions which lessen the value of our current common stock, including borrowing
money on terms that are not favorable to us.
Our ability to raise capital through the equity line agreement is subject
to the satisfaction of certain conditions at the time of each sale of common
stock to Kingsbridge (none of which is within the control of Kingsbridge). These
conditions include, but are not limited to, the following:
o the registration statement we have filed to register the common stock
purchased by Kingsbridge under the equity line agreement for resale
must have been declared effective by the SEC;
o our representations and warranties to Kingsbridge set forth in the
equity line agreement must be accurate as of the date of each put of
our common stock;
o no statue, rule, regulation, executive order, decree, ruling or
injunction shall be in effect which prohibit or directly and adversely
affects any of the transactions contemplated by the equity line
agreement;
o at the time we put our common stock to Kingsbridge, there cannot have
been any material adverse change in our business, operations,
properties, prospects or financial condition since the date of filing
of our most recent report with the SEC pursuant to the Securities
Exchange Act of 1934;
o the number of shares already held by Kingsbridge, together with those
shares we are proposing to put, cannot exceed 9.9% of the total amount
of our common stock that would be outstanding upon completion of the
put;
o our common stock must meet certain price and trading volume guidelines
including those on Annex A of the equity line agreement; and
o at least 15 trading days must have elapsed since the date of the last
put notice.
We may not satisfy all of these conditions, and therefore may not be able
to sell shares to Kingsbridge pursuant to the equity line agreement. For a more
complete description of the equity line agreement, see The Equity Line Agreement
on page 19.
7
<PAGE>
Due To the Conversion Of Series E Preferred Stock, Holders of Common Stock May
Face Significant Dilution.
In December 1998, we issued 367,269 shares of series E stock, at a price of
$22.5313 per share, to certain institutional investors. The series E stock is
generally convertible into our common stock at a rate equal to the lesser of (a)
$2.25313, and (b) the average closing price of our common stock over the ten
trading day ending period ending on the day immediately preceding the day upon
conversion. When our common stock price falls below $2.25313, the conversion of
the series E stock may result in the issuance of a significant number of
additional shares of common stock, and may cause significant dilution to current
holders of our common stock. Even before the shares of series E stock are
converted, the holders of the series E stock vote on the basis of the number of
shares of common stock that the series E stock can be converted into. Therefore,
a large drop in our stock price may result in a large amount of voting control
being held by a small number of stockholders. As of August 31, 1999, there were
297,269 shares of series E Stock outstanding that would have been convertible
into 3,851,905 shares of our common stock, giving the holders of the series E
stock 14% of the vote of the issued and outstanding common stock.
Holders Of Our Series E Preferred Stock Could Engage In Short Selling To Reduce
Their Conversion Price.
A decrease in the price of our common stock below the $2.25313 maximum
conversion price could result in the series E preferred stock being convertible
into more shares of common stock. Increased sales volume of our common stock
could put downward pressure on the market price of the shares. This fact could
encourage holders of series E preferred stock to sell short our common stock
prior to conversion of the series E preferred stock, thereby potentially causing
the market price to decline. The selling stockholders could then convert their
series E preferred stock and use the share of common stock received upon
conversion to cover their short position. The selling stockholders could thereby
profit by the decline in the market price of the common stock caused by their
short selling.
Qualifications In The Report Of Our Independent Public Accountants May Affect
Our Ability To Continue As A Going Concern.
In their audit report on the consolidated financial statements for the year
ended December 31, 1998 contained in our Annual Report and elsewhere in this
prospectus, our independent public accountants, Ernst & Young, included an
explanatory paragraph indicating their view that we would require additional
funding to continue operations which raised substantial doubt about our ability
to continue as a going concern. We cannot assure you that Ernst & Young's
opinion on future financial statements will not include a similar explanatory
paragraph if we are unable to raise sufficient funds or generate sufficient cash
flow from operations to cover the cost of our operations. The continued
inclusion of this paragraph could raise concerns about our ability to fulfill
our contractual obligations, may adversely affect our relationships with third
parties, and we may not be able to complete future financings.
8
<PAGE>
If We Fail To Continue To Meet Nasdaq's Listing Maintenance Requirement, Nasdaq
May Delist Our Common Stock.
There is a possibility that our common stock could be delisted from the
Nasdaq National Market. While our common stock is currently quoted on the Nasdaq
National Market, in order to remain quoted on the Nasdaq National Market, we
must meet certain requirements with respect to:
o market capitalization (the market value of all outstanding shares of
our common stock);
o public float (the number of outstanding shares of common stock held by
those not affiliated with us);
o market value of public float;
o market price of the common stock;
o number of market makers;
o number of shareholders; and
o net tangible assets (total assets minus total liabilities and
intangible assets).
If the price of our common stock were to fall significantly below our
current trading range, Nasdaq may approach us regarding our continued listing on
the Nasdaq National Market. This situation could result from the rights
contained in the series E stock, which is convertible into common stock at a
conversion price based on a future price of our common stock. If Nasdaq were to
begin delisting proceedings against us, it could reduce the level of liquidity
currently available to our stockholders. With regard to future priced securities
such as our series E stock, Nasdaq is concerned with the following, among other
things:
o disproportionate voting rights;
o minimum bid price of a company's common stock; and
o public interest concerns.
The holders of our series E stock may vote their series E stock as if they
were holders of common stock and are entitled to the number of votes equal to
the number of shares of common stock that the series E stock is convertible into
at the time of voting. If our common stock price were to fall significantly,
this right may be deemed to violate a Nasdaq maintenance requirement due to the
disproportionate voting right, when compared to our common stock, that each
share of series E stock would have.
Moreover, in order to continue to be listed on Nasdaq, the minimum bid
price of our common stock must stay above $1.00. In addition to the fluctuations
of the market in general and our common stock in particular, a decrease in our
common stock price that causes the
9
<PAGE>
number of shares of common stock issuable upon conversion of the series E stock
to increase may exert downward pressure on the price of our common stock. This
may drive the minimum bid price of our common stock below $1.00, thus violating
a Nasdaq maintenance requirement. On August 31, 1999 the minimum bid price on
our common stock was $1.625. Nasdaq has also stated that in egregious
situations, future priced securities, such as our series E stock, may raise
public interest concerns that may result in the delisting of our common stock,
if Nasdaq deems the delisting necessary to prevent fraudulent and manipulative
acts and practices.
If our common stock is delisted from the Nasdaq National Market, we could
apply to have the common stock quoted on the Nasdaq SmallCap Market. The Nasdaq
SmallCap Market has a similar set of criteria for initial and continued
quotation. We may not, however, meet the requirements for initial or continued
quotation on the Nasdaq SmallCap Market. If we were not able to meet the
requirements of the Nasdaq SmallCap Market, trading of our common stock could be
conducted on an electronic bulletin board established for securities that do not
meet the Nasdaq SmallCap Market listing requirements, in what is commonly
referred to as the "pink sheets."
In addition, if our common stock were delisted from the Nasdaq National
Market, we may not have the right to obtain funds under the equity line
agreement and it could be more difficult for us to obtain future financing. In
addition, if our common stock is delisted, investors' interest in our common
stock would be reduced, which would materially and adversely affect trading in,
and the price of, our common stock.
Because We Use a Single Contract Manufacturer To Manufacture Our Field Emission
Displays We May Be Unable To Obtain An Adequate Supply Of Products And We May
Have Less Control Of Price.
Unipac, a liquid crystal display manufacturer and an affiliate of UMC,
Taiwan's second largest Semiconductor manufacturer, is our only contract
manufacturer. In the future, we expect that the products that will be
manufactured at Unipac and sold to our customers will represent the majority of
our revenues. If we are not able to implement our manufacturing plans with
Unipac as soon as we expect, we will not be able to ship medium to large volumes
of field emission display products. Moreover, we will have less control over the
price of the finished products, the timeliness of their delivery and their
reliability and quality. Finally, we will not be able to obtain an acceptable
cost for our field emission displays through high volume manufacturing, as
compared to manufacturing field emission displays at our pilot production
facility. This situation would materially adversely affect our revenues and
costs of producing products.
Expectations about the final timing of this manufacturing plan with Unipac
are forward-looking statements that still involve risks and uncertainties,
including the ease or difficulty of the transfer of the field emission display
technology to Unipac.
Our failure to adequately manage this contract manufacturing relationship
or any delays in the shipment of our products would adversely affect us.
10
<PAGE>
Our Manufacturing Processes Are Still Under Development And We Still Need To
Obtain Commercially Acceptable Yields And Acceptable Costs Of Products Or Our
Costs To Produce Our Displays Will Be Too High for Us To Be Profitable.
In order for us to succeed, we must continue to develop and produce a range
of products incorporating our field emission display technology. At this time,
we have successfully developed only one monochrome field emission display
product that has been incorporated into a commercial end-user application and
that is being targeted at various markets. We will need to complete the
development of additional field emission display products to enlarge our market
opportunity, and there is no guaranty that we will succeed in these development
efforts. If we do not develop these new products, we will need to rely on sales
of a single product to be successful.
We have used our manufacturing facility in Montpellier, France to develop
manufacturing processes but it has produced only a limited number of products
suitable for sale. Additionally, to date, we have not completed testing of our
manufacturing processes at Unipac. In order for us to be successful, we must
improve our manufacturing yields in order to demonstrate the low cost potential
of our field emission display technology. Even if we succeed in completing the
development and testing of our manufacturing processes, we can not be sure that
the favorable characteristics demonstrated by our current displays manufactured
at our pilot manufacturing facility will be reproduced on a cost-effective basis
in commercial production.
We have, at this time, encountered a number of delays in the development of
our products and processes, and it is possible that further delays will occur.
Any significant delays could cause us to miss certain market opportunities and
could reduce our product sales.
We Need to Further Enhance Our Display Performance of Our Color Displays Or Our
Displays May Never Be Accepted By A Large Number Of Potential Customers.
We may never improve the performance characteristics of our color displays
to a level that is commercially acceptable or fail to do so on a timely basis,
either of which could result in potential customers not buying our products. Key
elements of display performance are brightness, power efficiency and stability
over time (life time and reliability). We are seeking to balance brightness with
power efficiency to produce bright and low power-consumption displays. Display
reliability depends on a large number of factors, including the manufacturing
process used in assembling the displays as well as the characteristics of the
materials, including phosphors, used in the display. In order to produce color
displays that will provide the product life and other characteristics necessary
for most applications, we need to make further advances in our manufacturing
processes and in the selection of the materials we use.
We May Never Be Able To Fund The Research And Development Activities Needed To
Develop Large Displays.
We need to conduct a significant research and development effort in order
to bring our current 15-inch field emission display prototype to a stage where
it can be manufactured in volume at an acceptable cost. We may never be able to
fund that effort. Even if we were able to develop a product that could be
manufactured, we would have to locate or build a manufacturing
11
<PAGE>
facility to produce our displays. Currently, Unipac has a facility and equipment
to build small displays only. We may not be able to fund the amount needed in
order to acquire or build a manufacturing facility for our large displays. If we
are unable to develop or manufacture large displays, we will miss large market
opportunities for flat panel displays.
We May Reduce Research Or Development Programs To Conserve Capital, Increasing
Our Dependence On Remaining Programs.
We are constantly reviewing and prioritizing programs, and we may reduce
some programs to conserve capital. Any cut would increase our dependence on our
remaining programs, and would increase the risk from those programs to our
business as a whole, which could materially and adversely affect our chances of
obtaining profitability. While we plan to allocate our resources to those
programs with the greatest potential to contribute to a sound financial and
operating position, we may fail to do so.
We Face Intense Competition And Need To Compete With Current And Future
Competing Technologies That May Outperform Our Displays Thus Making Our Display
Undesirable.
Our competitors may succeed in developing products that outperform our
displays or that are more cost effective. If our competitors develop products
that offer significant advantages over our products and we are unable to improve
our technology, or develop or acquire alternative technology that is more
competitive, we may not be able to sell our displays.
The market for flat panel display products is currently dominated by
products utilizing liquid crystal display technology. Certain liquid crystal
display manufacturers, such as Canon, Sharp, NEC, Hitachi, Samsung and Toshiba
have substantially greater name recognition and financial, technological,
marketing and other resources than us. Presently liquid crystal displays are in
short demand and independent forecasts predict that this may continue over a
certain period of time. However, liquid crystal display manufacturers have made,
and continue to make, substantial investments in increasing capacity as well as
product performance. We believe that, over time, this, combined with new
competitors entering the flat panel displays market, may cause over-supply
conditions and may have the effect of reducing average selling prices of flat
panel displays. In order to effectively compete, we could be required to
increase the performance of our products or reduce prices. In the event of price
reductions, we will not be able to maintain gross margins unless we reduce our
cost of sales.
There are a number of domestic and international companies developing and
marketing display devices using alternative technologies to liquid crystal
display technology, such as vacuum fluorescent displays, electro-luminescent
panels and plasma panels. Additionally, some of the basic field emission display
technology is in the public domain and, as a result, we have a number of
potential direct competitors developing field emission displays or developing
fundamental field emission displays technology, including Canon, Futaba,
Motorola, Sony, Fujitsu, Samsung and Toshiba, as well as smaller companies,
including Candescent, and Silicon Diamond Technology. Although we own the rights
to significant technological advances in field emission display technology,
potential competitors may have developed or may soon develop comparable or
superior field emission display technology. Many of the developers of
alternative
12
<PAGE>
flat panel display and competing field emission display technologies have
substantially greater name recognition and financial, research and development,
manufacturing and marketing resources than us, and have made and continue to
make substantial investments in improving their technologies and manufacturing
processes.
Because Potential Customers May Not Accept Our Products We May Never Sell The
Number Of Displays Required To Make Our Business Profitable.
We are uncertain about the potential size and timing of our target market
opportunities. We anticipate marketing our displays to original equipment
manufacturer customers, which are customers that will incorporate our product
into their final product. It is possible that demand for any particular product
by these customers will not last or that new markets will fail to develop as we
expect, or at all. Our ability to have consumer products sold that incorporate
our displays will depend, in part, on the following factors:
o whether original equipment manufacturers select our products for
incorporation into their products;
o the successful introduction of such products by the original equipment
manufacturers; and
o the successful commercialization of products developed by parties
incorporating our products.
It takes a long time for any product to achieve market success, and any
success is never certain. The introduction of new products is often delayed by
the need to have the products selected by an original equipment manufacturer and
designed into the original equipment manufacturer's products. For certain
products, the delay attributable to a manufacturer's design cycle may be a year
or longer. Factors affecting the length of these delays include:
o the size of the manufacturer;
o the type of application; and
o whether the displays are being designed into new products or fitted
into existing applications.
If volume production of such products is delayed for any reason, our
competitors may introduce new technologies or refine existing technologies which
could diminish the commercial acceptance of our products.
We Have Limited Sales, Marketing And Distribution Capabilities.
We have limited internal sales, marketing and distribution experience and
capabilities. Until recently, we were a development stage company with no
products or product sales. Consequently, we had not established significant
sales, marketing, or distribution operations within our company. Recently,
however, we have begun sales of our displays to customers. We will not be able
to develop significant revenues from the sales of our products unless we can
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<PAGE>
attract and retain highly qualified employees to market and oversee the
distribution of our products. If we are unable to establish and maintain
significant sales, marketing and distribution efforts, either internally or
through arrangements with third parties, we may be adversely affected.
Future Cooperation And License Revenues May Decrease.
From 1993 to 1995, we entered into various cooperation and license
agreements under which we were paid money for achieving certain milestones. At
this time, we have received all expected revenues associated with these
milestone payments. If we fail to enter into new royalty-bearing licenses or
cooperation agreements, we could be adversely affected as we have relied on
these revenues in the past and revenues from product sales may not increase as
we expect. For instance, we must execute further cooperation and/or license
agreements with third parties that are not existing licensees before we will
receive any future cooperation or license revenues. Should we successfully enter
such agreements, a portion of the revenues from these contracts may need to be
shared with our existing licensees. Cooperation and license revenues accounted
for approximately 34% of our revenues in 1998.
In addition, we will only recognize royalty revenues under cooperation and
license agreements with existing or future licenses if any of our licensees
incorporate licensed technology into products that are successfully
commercialized. We can not guarantee that any of our licensees will successfully
develop or commercialize any field emission display products. We believe that
one of our existing licensees, Raytheon Company, may have suspended our internal
program to develop field emission displays.
We May Have Difficulty Protecting Patents And Other Proprietary Rights To Our
Technology And May therefore Be Unable To Prevent Competitors From Using Our
Technology.
We have been granted, have filed applications for, and have been licensed
under a number of patents in the United States and other countries. We rely on
these patents and licenses for an advantage in our industry and any infringement
of these patents and licenses will lessen our advantage. However, rights granted
under patents may not provide us with any competitive advantage over competitors
with similar technology, and any issued patents may not contain claims
sufficiently broad to protect against these competitors.
We have not conducted an independent review of patents issued to other
companies. We cannot be certain that we were the first creator of inventions
covered by pending patent applications or the first to file patent applications
on such inventions because patent applications in the United States are
maintained in secrecy until patents issue and the publication of discoveries in
scientific or patent literature tends to lag behind actual discoveries by
several months. Competitors in both the United States and other countries may
have applied for or obtained, or may in the future apply for and obtain, patents
that will prevent, limit or interfere with our ability to make and sell our
products.
We also rely on unpatented, proprietary technology which is significant to
the development and manufacture of our displays. Others may independently
develop the same or
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<PAGE>
similar technology or obtain access to our unpatented technology. If we are
unable to maintain the proprietary nature of our technologies, our competitors
may develop products using our technology.
Moreover, claims that our products infringe on the proprietary rights of
others are more likely to be asserted after we begin commercial sales of
products using our technology. It is possible that competitors will infringe our
patents. Even the successful defense and prosecution of patent suits is costly
and time consuming. The adverse outcome of a patent suit could subject us to
significant liabilities to other parties, require disputed rights to be licensed
from third parties or require us to stop selling our products.
We have received correspondence from Futaba Corporation and its legal
counsel beginning in February 1998 alleging the following:
o we are infringing one or more patents owned by Futaba relating to the
construction and manufacture of our displays that are not expressly
included under the license agreement between us and Futaba;
o our use of terms such as "alliance" and "partners" in describing the
nature of our contractual relationships with Motorola, Raytheon and
Futaba in reports filed with the SEC is misleading; and
o certain provisions in our agreement with Unipac constitute an
impermissible sublicense of Futaba technology.
We do not believe such claims have any merit and have denied each of the
allegations in correspondences with Futaba and our counsel. Futaba has also
claimed that we improperly supplied certain Futaba proprietary information to
Unipac, and that Unipac has, in turn, disclosed such information to a third
party vendor. If Futaba prevails on any of these claims, we may be required to
modify the construction and manufacture of our displays and may, as a result, be
materially adversely affected.
Because A Large Percentage Of Our Net Assets And Our Costs Is Expressed In
Euros, Currency Fluctuations May Cause Gains Or Losses.
A large percentage of our net assets and of our costs is expressed in
Euros, but our financial statements are stated in U.S. dollars. In 1998, 50% of
our assets and 60% of our costs were expressed in Euros. In the six month period
ended June 30, 1999, 25% of our assets and 58% of our costs were expressed in
Euros. Fluctuations of the value of the U.S. dollar versus the Euro may cause
significant gains or losses. Most of our capital lease obligation is expressed
in Taiwanese dollars and thus fluctuations of the value of the Taiwanese dollar
versus the Euro may also cause significant foreign exchange gains or losses.
Year 2000 Errors In Our Computer Systems May Cause Our Operations To Be
Suspended Or May Be Costly to Correct.
We are in the process of conducting a comprehensive review of our computer
systems and manufacturing equipment to identify applications that could be
affected by the inability of
15
<PAGE>
certain computer systems and manufacturing equipment to format and manipulate
data containing dates including the year 2000 and subsequent years and are
developing an implementation plan to resolve these issues. Our management does
not expect that costs associated with modifying existing computer systems and
manufacturing equipment will have a significant impact on our financial position
or results of operations. However, it is possible that such modifications will
not be successfully implemented or that the costs will be significant. If this
happens, we may be adversely affected. Furthermore, we depend on a limited group
of suppliers. We have no way of knowing whether those suppliers will be
significantly impacted by the Year 2000 issue. If the suppliers are
significantly impacted by the Year 2000 issue, they may be unable to continue
their supply of parts to us without interruption, and we may be adversely
affected. Unipac, our main supplier, has disclosed to us their Year 2000 plan
and their contingency plan should they not achieve success in their plan.
Certain Anti-Takeover Provisions That We Have Instituted May Limit Our Stock
Price.
Certain provisions of our restated certificate of incorporation and by-laws
may discourage a third party from offering to purchase the company and may also
adversely affect the market price of our common stock. These provisions,
therefore, inhibit actions that would result in a change in control of the
company, including an action that may give the holders of the common stock the
opportunity to realize a premium over the then-prevailing market price of their
stock.
In addition, under our restated certificate of incorporation we can issue
preferred stock with such designations, rights and preferences as our board of
directors determines from time to time. This type of preferred stock could be
used as a method of discouraging, delaying or preventing a change in control of
the company. In addition, the series E stock issued by the company in December
1998 and any additional shares of preferred stock that we may issue in the
future may adversely affect the voting and dividend rights, rights upon
liquidation and other rights of the holders of common stock. We do not currently
intend to issue any additional shares of preferred stock, but we retain the
right to do so in the future.
Furthermore, we are subject to Section 203 of the Delaware General
Corporation Law, which may discourage takeover attempts.
Our Business May Suffer If We Are Unable To Attract or Retain Key Personnel.
We are highly dependent on the principal members of our management and
staff, the loss of whose services might significantly delay or prevent the
achievement of research, development or strategic objectives. Our success
depends on our ability to retain key employees and to attract additional
qualified employees. Competition for such personnel is intense, and we may not
be able to retain existing personnel and to attract, assimilate or retain
additional highly qualified employees in the future.
Shares Of Our Common Stock Eligible For Future Sale May Adversely Affect The
Market Price Of Our Common Stock.
A large number of shares of common stock already outstanding, or issuable
upon exercise of options and warrants, are eligible for resale, which may
adversely affect the market price of
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<PAGE>
the common stock. As of August 31, 1999, we had 23,567,138 shares of common
stock outstanding. An additional 4,728,690 shares of common stock are issuable
upon the exercise of outstanding options and warrants (including 100,000 shares
issuable upon exercise of the warrant granted to Kingsbridge). Substantially all
of the shares subject to outstanding options and warrants will, when issued upon
exercise, be available for immediate resale in the public market pursuant to
currently effective registration statements under the Securities Act, or
pursuant to Rule 701 promulgated thereunder. In addition, the equity line
agreement provides that we are obligated to issue at least $5,000,000, after
deducting discounts, (up to a maximum of $15,000,000, after deducting discounts)
worth of common stock during the term of the equity line, which continues until
the earliest of when:
o we sell $15,000,000 (after deducting discounts) worth of common stock
to Kingsbridge;
o we fail to meet certain conditions of the equity line agreement; or
o 24 months from the date of effectiveness of the registration statement
covering the shares issuable pursuant to the equity line agreement.
The shares of stock that Kingsbridge may acquire under the equity line
agreement and warrant will be available for immediate resale in the public
market pursuant to this prospectus. Such resales, or the prospect of such
resales, may have an adverse effect on the market price of the common stock.
The Equity Line Agreement And Convertible Note May Have A Dilutive Impact On Our
Shareholders.
The sale of shares pursuant to the equity line agreement or conversion of
the note held by Sumitomo will have a dilutive impact on our stockholders. As a
result, our net income or loss per share could be materially decreased in future
periods, and the market price of our common stock could be materially and
adversely affected. In addition, the common stock to be issued under the equity
line agreement and upon conversion of the Sumitomo note will be issued at a
discount to the then-prevailing market price of the common stock. These
discounted sales could have an immediate adverse effect on the market price of
the common stock. We also issued to Kingsbridge a warrant for 100,000 shares of
common stock exercisable until February 6, 2003 at an exercise price of $2.30
per share. The issuance or resale of such shares and the shares issuable upon
exercise of these warrants would have a further dilutive effect on our common
stock and could adversely affect our price.
We May Not Successfully Integrate Micron's Display Division Operations, and the
Integration of the Businesses May Be Costly.
In May 1999, we purchased certain assets of Micron Technology, Inc.
relating to field emission displays including equipment and other tangible
assets, contract rights related to the tangible assets and $4.35 million in
cash.
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<PAGE>
The continued integration of our operations may temporarily distract
management's attention from the day-to-day business. While the current process
of integrating Micron's operations has shown good progress, if we fail to
integrate Micron's operations quickly and efficiently, our business and results
of operations may be impaired.
Some of the things we must accomplish in order to integrate Micron's
operations include:
o educate previous and new employees about our technologies and
platforms;
o coordinate or combine research and development efforts;
o manage prior and new relationships with suppliers and customers; and
o align the strategic plans of two previously independent management
teams.
These integration efforts may be costly. If we have underestimated these
initial costs of integration, our initial results will be worse than
anticipated.
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<PAGE>
THE EQUITY LINE AGREEMENT
On August 9, 1999, we entered into the equity line agreement with
Kingsbridge, pursuant to which, subject to the satisfaction of certain
conditions, we may issue and sell, from time to time, up to an aggregate of
$15,000,000, after deducting discounts, of our common stock.
Beginning on the date the registration statement, of which this prospectus
forms a part, is declared effective by the SEC, and continuing for a period of
24 months thereafter, we may from time to time in our sole discretion sell, or
put, shares of our common stock to Kingsbridge at a price equal to 90% of the
then current average market price of our common stock, if the current average
market price is greater than or equal to $3.00 per share, or 88% of the then
current average market price if the current average market price is less than
$3.00 per share. The current average market price of our common stock, for
purposes of calculating the purchase price, is the average of the lowest trading
prices of our common stock on the Nasdaq National Market for the five days
beginning two days before and ending two days after we notify Kingsbridge of our
intention to put common stock.
There are conditions to our ability to sell our common stock to Kingsbridge
in the equity line agreement, and we may not be able to satisfy all conditions
required under the equity line agreement to put shares to Kingsbridge at any
given time. If we fail to maintain the quotation of our common stock on the
Nasdaq National Market, we may not be able to sell common stock pursuant to the
equity line agreement. See "Risk Factors - If We Fail To Continue To Meet
Nasdaq's Listing Maintenance Requirement, Nasdaq May Delist Our Common Stock."
In addition, the amount of shares that we can put to Kingsbridge depends on our
trading price and trading volume. Also, we cannot put shares to Kingsbridge at a
time when we have not publicly disclosed material information about our company.
We have filed a registration statement, of which this prospectus forms a
part, in order to permit Kingsbridge to resell to the public any common stock it
buys pursuant to the equity line agreement. Kingsbridge may be entitled to
indemnification by us for lawsuits based on language in this prospectus. We will
prepare and file such amendments and supplements to the registration statement
as may be necessary in accordance with the Securities Act and the rules and
regulations promulgated under it, in order to keep it effective as long as
shares covered by the prospectus have not been sold by Kingsbridge. We have
agreed to bear certain expenses (other than broker discounts and commissions, if
any) in connection with the registration statement.
In conjunction with the equity line agreement, on August 9, 1999, we issued
to Kingsbridge a warrant to purchase 100,000 shares of our common stock at an
exercise price of $2.30 per share. The Kingsbridge warrant is exercisable
through February 6, 2003.
The warrant contains provisions that protect Kingsbridge against dilution
by adjustment of the exercise price and the number of shares issuable thereunder
upon the occurrence of certain events, such as a merger, stock split or reverse
stock split, stock dividend or recapitalization.
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<PAGE>
The exercise price of the Kingsbridge warrant is payable either in cash or by
cashless exercise. In a cashless exercise, the number of shares of common stock
issuable pursuant to the warrant having a fair market value at the time of
exercise equal to the aggregate exercise price are cancelled as payment of the
exercise price.
20
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share data)
The summary consolidated financial information below has been derived from
the Annual and Interim Consolidated Financial Statements of PixTech, Inc.
included elsewhere in this prospectus. You should read this information in
conjunction with our Annual Financial Statements and the Interim Financial
Statements, and the Notes thereto, which are included in this prospectus.
Results of operations for the six months ended June 30, 1999 are not necessarily
indicative of results of operations for the whole year. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Fiscal Year Six months ended
------------------------------------------------ -----------------
June 30, June 30,
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
(in thousands, except per share)
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Total revenues...................... 6,225 $11,513 $7,644 $3,819 $3,652 2,631 2,653
Loss from operations................ (4,940) (9,278) (12,041) (15,774) (19,686) (7,964) (11,904)
Net loss............................ (2,979) (6,305) (11,719) (14,664) (17,863) (7,509) (13,405)
Net loss to holders
of Common Stock..................... (2,979) (6,305) (11,719) (14,664) (17,875) (7,509) (13,704)
Net loss per share.................. (0.51) (0.82) (1.44) (1.12) (1.23) $(0.53) $(0.80)
Shares used in computing net loss
per share........................... 5,840 7,697 8,137 13,140 14,548 14,301 16,816
Balance Sheet
Working deficit / capital........... 813 15,919 (859) 9,290 145 2,886 (4,550)
Total assets, less current assets... 15,300 18,569 19,701 24,058 32,592 30,682 36,904
Long term liabilities, less current
portion............................. 6,626 9,958 6,743 14,568 19,480 18,480 18,765
Stockholders' equity................ 9,487 24,530 12,099 18,780 13,257 15,088 13,589
</TABLE>
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<PAGE>
PRICE RANGE OF OUR COMMON STOCK
Our common stock is currently quoted on the Nasdaq National Market under
the symbol "PIXT." For each quarter since the beginning of 1997, the high and
low trading prices for our common stock, as reported by Nasdaq, were as follows:
High Low
---- ---
Year ended December 31, 1997
First Quarter $6 3/8 $4
Second Quarter $4 7/8 $3 3/8
Third Quarter $4 1/4 $3 1/8
Fourth Quarter $3 7/8 $2
Year ended December 31, 1998
First Quarter $6 1/2 $2 5/16
Second Quarter $7 3/4 $4 1/2
Third Quarter $5 1/2 $2 3/4
Fourth Quarter $3 15/16 $1 3/8
Year ended December 31, 1999
First Quarter $3 5/16 $1 1/2
Second Quarter $2 5/8 $1 11/32
Third Quarter (through August 31, 1999) $2 1/4 $1 15/32
The foregoing bid quotations reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions, and may not represent actual transactions.
As of August 31, 1999, there were approximately 78 holders of record of our
common stock.
DIVIDEND POLICY
We have never paid or declared any cash dividends on our common stock. We
currently intend to retain any future earnings for our business and, therefore,
do not anticipate paying cash dividends in the foreseeable future. Future
dividends, if any, will depend on, among other things, our results of
operations, capital requirements, restrictions in loan agreements and on such
other factors as our board of directors, in our discretion, may consider
relevant.
USE OF PROCEEDS
The proceeds from the sale of the common stock will be received directly by
the selling stockholders. We will receive no proceeds from the sale of the
common stock offered in this registration statement. However, we will receive
the put price pursuant to the equity line agreement to the extent that our
common stock is sold under the equity line agreement. The put price equals
88-90% of the then current average market price of our common stock, as
determined by the equity line agreement. We may also receive proceeds relating
to the exercise, if any, of the warrant. See "The Equity Line Agreement" on page
19. We intend to use the proceeds from puts and the exercise of the warrant to
support general corporate purposes, including continuous support of our
manufacturing plans at Unipac and development of our color and large field
emission displays.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999. You
should be read this table in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations included in this
prospectus on page 25 and with our Consolidated Financial Statements and the
accompanying Notes.
(All amounts in thousands except share data)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY June 30, 1999
<S> <C>
Long term liabilities (1)
Deferred revenue $ 79
Long term debt, less current portion 10,075
Capital lease obligation, less current portion 8,565
Other long term liabilities, less current portion 46
Total Long term liabilities 18,765
Stockholders' equity
Convertible preferred stock series E, $0.01 par value,
authorized shares--500,000; issued and outstanding shares--367,269
4
Common stock, $0.01 par value, authorized shares--60,000,000;
issued and outstanding shares--22,352,918
223
Additional paid-in capital 83,450
Cumulative other comprehensive income (2,527)
Deficit accumulated during development stage (67,561)
--------
Total Stockholders' equity 13,589
Total Capitalization 32,534
========
</TABLE>
(1) For information concerning our long-term debt, see "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity
and Capital Resources" and Notes to Consolidated Financial Statements.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands except per share data)
The following table sets forth selected consolidated financial data of
PixTech, Inc. The selected consolidated financial data as of December 31, 1997
and 1998, and for each of the three years in the period ended December 31, 1998
are derived from our consolidated financial statements included elsewhere in
this prospectus, which have been audited by Ernst & Young, independent auditors.
The selected consolidated financial data as of December 31, 1994, 1995 and 1999
and for the years then ended are derived from audited consolidated financial
statements not included in this prospectus. The selected consolidated financial
data as of June 30, 1999 and for the six-month periods ended June 30, 1998 and
1999 are derived from unaudited consolidated financial statements included
elsewhere in this prospectus. The selected consolidated financial data as of
June 30, 1998 are derived from unaudited consolidated financial statements not
included in this prospectus. The unaudited consolidated statements include all
adjustments, consisting of normal recurring accruals, which Pix Tech, Inc.
considers necessary for fair presentation. You should read this data in
conjunction with our consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in this prospectus on page 25.
<TABLE>
<CAPTION>
Fiscal Year Six months ended
---------------------------------------------------- ------------------
June 30, June 30,
------------------
1994 1995 1996 1997 1998 1998 1999
---- ---- ---- ---- ---- ---- ----
(in thousands, except per share)
<S> <C> <C> <C> <C> <C> <C> <C>
Operations
Revenue
Corporation and license revenues ............... $ 3,645 $ 9,865 $ 5,440 $ 1,932 $ 1,239 $ 1,001 $ --
Product sales .................................. 37 808 791 745 445 87 339
Other revenues ................................. 543 840 1,413 1,142 1,968 1,543 2,314
Total revenues ................................. 6,225 11,513 7,644 3,819 3,652 2,631 2,653
Operating Expenses
Acquisition of intellectual
property rights ................................ (1,654) (3,111) -- -- (125) (125) --
Other research and development ................. (7,157) (12,527) (15,848) (15,497) (19,289) (8,353) (12,203)
Sales and marketing ............................ (741) (1,688) (1,089) (1,496) (1,433) (693) (680)
General and administrative ..................... (1,613) (2,151) (2,703) (2,419) (2,515) (1,223) (1,502)
Total operating expenses ....................... (11,165) (19,477) (19,640) (19,412) (23,362) (10,394) (14,385)
Loss from operations ........................... (4,940) (9,278) (12,041) (15,774) (19,686) (7,964) (11,904)
Interest income (expense), net ................. 216 (27) 66 470 (708) (254) (364)
Foreign exchange gains (losses)................. 38 280 256 54 372 709 (1,137)
Loss before income tax benefit ................. (4,686) (9,025) (11,719) (15,250) (20,022) (7,509) (13,405)
Income tax benefit ............................. 1,707 2,720 -- 586 2,159 -- --
Net loss ....................................... (2,979) (6,305) (11,719) (14,664) (17,863) (7,509) (13,405)
Net loss to holders
of Common Stock ................................ (2,979) (6,305) (11,719) (14,664) (17,875) (7,509) (13,704)
Net loss per share ............................. (0.51) (0.82) (1.44) (1.12) (1.23) $(0.53) $(0.80)
Shares used in computing net loss
per share ...................................... 5,840 7,697 8,137 13,140 14,548 14,301 16,816
Balance Sheet
Working deficit / capital ...................... 813 15,919 (859) 9,290 145 2,886 (4,550)
Total assets, less current assets .............. 15,300 18,569 19,701 24,058 32,592 30,682 36,904
Long term liabilities, less current
portion ........................................ 6,626 9,958 6,743 14,568 19,480 18,480 18,765
Stockholders' equity ........................... 9,487 24,530 12,099 18,780 13,257 15,088 13,589
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Overview
PixTech was founded in June 1992 to develop and commercialize field
emission displays. Since inception, we have been a development stage company and
our operating activities related primarily to raising capital, conducting
research and development activities, concluding cooperation and license
agreements with certain displays manufacturers, including Motorola, Inc. and
Futaba Corporation, and establishing manufacturing capabilities for our field
emission displays. To date, most of our revenues have been cooperation and
license revenues from these cooperation and license agreements and revenues from
funding under grants from the French government and the European Union. In the
future, we expect that our revenue will come primarily from the sale of products
manufactured by Unipac under a contract manufacturing arrangement signed in May
1997. After adaptation of Unipac's plant, including addition of certain
equipment and transfer of our manufacturing processes, Unipac successfully
manufactured field emission display samples in June 1998. While current
shipments by Unipac of field emission displays are still minimal, we expect that
Unipac will be successful in increasing manufacturing yields in 1999 and
therefore that display shipments from Unipac will exceed a thousand units per
month by the end of 1999. However, we do not anticipate generating positive
gross margins on our sale of products in 1999.
Our revenues from 1999 will rely mainly on products sales and funding under
various grants; therefore, historical financial results are not meaningful and
you should not rely upon them as an indication of our future performance.
Our products and manufacturing processes are still in the early stages of
development and testing. To date, we have only shipped limited quantities of
field emission displays. Our only commercially available display is a 5.2-inch
monochrome display which to date has been sold in limited quantities to more
than a hundred customers.
Under a license agreement with the French Atomic Energy Commission, we are
obligated to make royalty payments on our product sales and to pass-through a
portion of royalties on sales of royalty-bearing products by our sublicensees.
Under an amendment to the Laboratoire d'Electronique, de Technologie et
d'Instrumentation License Agreement signed in 1997, the royalty rates and
minimum payments payable to French Atomic Energy Commission were temporarily
increased for a period of three years. Royalty amounts accrued under this
agreement were:
Royalty
Year Amount
---- ------
1996 $45,000
1997 $109,000
1998 $308,000
(See Notes to Consolidated Financial Statements--Note 16--Related Party
transactions).
25
<PAGE>
All of our expenses to date, except royalties and pass-through expenses
payable to French Atomic Energy Commission and tax expenses directly associated
with revenues from cooperation and license agreements, have been recorded as
operating expenses, since we have not shipped enough products to determine a
meaningful cost of products sold category.
We have incurred cumulative losses of $68 million from inception to June
30, 1999. We have incurred operating losses every quarter since 1996, and we
expect to incur additional operating losses. The magnitude and duration of our
future losses will depend on a number of factors within and outside of our
control, including the rate at which we can successfully manufacture and
commercialize our Field emission displays, if at all, and the related costs of
such efforts. Successful commercialization of our displays will in turn depend
on a number of factors, including the successful development of sufficient
market demand for our products.
Results of Operations
Cooperation and License Revenues.
We recognized revenues under cooperation and license agreements of $5.4
million in 1996, $1.9 million in 1997 and $1.2 million in 1998. The significant
decrease in cooperation and license revenues in 1997 and 1998 over 1996 reflects
the achievement at the end of 1996 of most of our contractual milestones. The
cooperation phase of these agreements, which had generated milestone revenues
for us, expired in June 1998. In the future, we may derive royalty revenues only
under existing cooperation and license agreements. These royalty revenues will
be based on licensees' sales, if any, of royalty-bearing products.
We may grant royalty-bearing licenses to third parties to the field
emission display technology cross-licensed to us from our licensees, subject to
certain restrictions. Royalties payable to us under these third-party licenses
would be shared with the existing licensees.
In 1997, we entered into a cooperation agreement with a major Japanese
cathode ray tube manufacturer to demonstrate a 15-inch field emission display.
Revenues generated under this agreement in 1997 and 1998 were included in
Cooperation and License Revenues. In February 1999, we entered into a subsequent
cooperation agreement with our cathode ray tube partner. We will not record any
significant revenues under this agreement.
Product Sales.
We recognized product sales of $791,000 in 1996, $745,000 in 1997 and
$445,000 in 1998. Through 1997, these product sales primarily represented the
shipment of a few high-priced field emission display displays and cathodes to
customers for evaluation and product development purposes. In 1998, product
revenues primarily reflected the shipment of displays to our first volume
customer, Zoll Medical. While we shipped significantly more displays in 1998
over 1997, the average selling price was reduced, reflecting commercially priced
sales. We expect to increase product shipments to new customers in 1999, mainly
from our contract manufacturer, Unipac.
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Other Revenues.
Other revenues consist of funding under European development contracts and
other miscellaneous revenues. Other revenues were $1.4 million in 1996, $1.1
million in 1997 and $2.0 million in 1998. Of these revenues, $800,000 in 1996,
$663,000 in 1997 and $1.2 million in 1998 relate to a development contract
granted in December 1994 from the French Ministry of Industry to support
manufacturing of field emission displays. We successfully completed this
development contract and will not derive any additional revenue from it. In
addition, we expect to earn development-contract related revenues in 1999,
primarily following expected recognition as income of certain amounts which we
collected before December 31, 1998, and previously recorded as Deferred Revenues
(See Notes to Consolidated Financial Statements--Note 12--Other and deferred
revenues).
Research and Development Expenses -- Acquisition of Intellectual Property
Rights.
Since inception, we have expensed $4.9 million for the acquisition of
intellectual property rights from our licensees and other third parties. In
1998, we expensed $125,000 in connection with a license agreement with Coloray
Display Corporation, a California corporation, providing us with a worldwide,
nonexclusive royalty-free license on certain technologies related to field
emission displays.
Other Research and Development Expenses.
Other research and development expenses include salaries and associated
expenses for in-house research and development activities conducted both in our
manufacturing facility in Montpellier, France and our research and development
facility in Santa Clara, the cost of staffing and operating this manufacturing
facility and since 1997, the cost of supporting the transfer of our field
emission display technology to Unipac. Other research and development expenses
also include obligations to the French Atomic Energy Commission under the
Laboratoire d'Electronique, de Technologie et d'Instrumentation Research
Agreement, and miscellaneous contract consulting fees.
Other research and development expenses increased from $15.8 million in
1996 and $15.5 million in 1997 to $19.2 million in 1998. This increase reflected
the continued development of our field emission display technology, the cost of
the transfer and modification of our manufacturing processes to Unipac, as well
as actual production start-up costs relating to labor, material and equipment
depreciation at Unipac, and the significant increase in the level of our
manufacturing activities in France to support early deliveries of our displays
to customers.
Sales and Marketing Expenses.
We incurred sales and marketing expenses of $1.1 million in 1996, $1.5
million in 1997 and $1.4 million in 1998. Sales and marketing expenses may
increase in the future, reflecting the expansion of our sales and marketing
organization both in the United States and in Europe. We signed distribution
agreements of our field emission display products respectively with Sumitomo for
the Japanese and Asian market areas in 1997. In 1999, we will seek to enter into
similar distribution agreements for both the United States and Europe, in order
to expand market reach in a cost effective manner.
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General and Administrative Expenses.
General and administrative expenses amounted to $2.5 million in 1998, an
increase of 4% over general and administrative expenses incurred in 1997, which
amounted to $2.4 million, reflecting an increase in staff expenses. General and
administrative expenses amounted to $2.7 million in 1996.
Interest Income (Expense), Net.
Interest income consists of interest on available and restricted cash.
Interest expense consists of interest payable on long-term obligations. Net
interest expense was $708,000 in 1998, compared to $470,000 in 1997, and to
$66,000 in 1996, reflecting the increase in long-term liabilities.
Currency Fluctuations.
Although a significant portion of our revenues are denominated in U.S.
dollars, a substantial portion of our operating expenses are denominated in
Euros. Gains and losses on the conversion to U.S. dollars of assets and
liabilities denominated in Euros may contribute to fluctuations in our results
of operations, which are reported in U.S. dollars. Most of our capital lease
obligation is expressed in Taiwanese dollars. In 1998, fluctuations of the
parity of the Taiwanese dollar versus the Euro caused significant foreign
exchange gains or losses and may continue to do so in the future. We recorded
net foreign exchange gains of $256,000 in 1996, $54,000 in 1997 and $372,000 in
1998. We cannot predict the effect of exchange rate fluctuations on future
operating results. To date, we have not undertaken hedging transactions to cover
our currency exposure, but we may do so in the future.
Income Tax.
We have recognized French income tax benefit of $7.9 million since our
inception, including $586,000 in 1997 and $2.2 million in 1998. These income tax
benefit represent tax credit for research and development activities we
conducted in France and the benefit of net operating loss carryforwards, net of
valuation allowance. As of December 31, 1998, we provided for a valuation
allowance of $19.2 million against a net deferred tax asset of $23.8 million. We
will collect the tax credits for research and development in cash if we are not
able to credit them against future income tax liabilities within three fiscal
years. We collected $29,000 in 1997 for our 1992 income tax benefit and $2.8
million in 1998 for our 1993 and 1994 income tax benefits.
We may not record significant additional tax credit for research and
development activities, if any, in the foreseeable future, as the benefit is
based on increases in eligible research and development expenses in a given year
over the two previous fiscal years.
As of December 31, 1998, our net operating loss carryforwards in France
were approximately $49.4 million of which $5.6 million will expire in 2000, $5.9
million in 2001, $10.7 million in 2002 and 15.5 million in 2003 if they are not
utilized.
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SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
Results of operations
Product Sales.
We recognized product sales of $339,000 in the six-month period ended June
30, 1999, as compared to $87,000 in the six-month period ended June 30, 1998. In
both periods, product revenues primarily comprised shipments of displays sold at
volume prices to Zoll Medical, thus reflecting a significant increase in the
number of displays shipped. Since 1998, we have begun shipping field emission
displays manufactured by our contract manufacturer, Unipac, to our customers in
limited quantities. During the three-month period ended June 30, 1999, unit
shipments from Taiwan represented 21% of our total shipments. We expect an
increase in the proportion of products shipped from Taiwan as compared to
products shipped from our pilot production facility in the second half of 1999.
Other revenues.
Other revenues consist of funding under various public development
contracts and other miscellaneous revenues. We recognized other revenues of $2.3
million in the six-month period ended June 30, 1999, as compared to $1.5 million
in the six-month period ended June 30, 1998. Of these revenues, in the six-month
period ended June 30, 1999, $1.3 million were related to an incentive from
French local authorities awarded in 1994 to the Company to establish its pilot
plant in Montpellier, France, and $961,000 were related to a development
contract from European Union signed in 1997, for which we had deferred
recognition as revenue of the related contribution, collected mainly in 1997 and
in 1998, until we met all conditions stipulated in the agreement. In the
six-month period ended June 30, 1998, other revenues included $1.2 million
related to a development contract granted in December 1994 from the French
Ministry of Industry to support manufacturing of field emission displays.
Research and Development Expenses.
We expensed $12.2 million for research and development costs during the
six-month period ended June 30, 1999, an increase of 44% over the $8.5 million
incurred in the six-month period ended June 30, 1998. These expenses include
salaries and associated expenses for in-house research and development
activities conducted both in our pilot plant and our research and development
facility in Boise, Idaho, the cost of staffing and operating our pilot
manufacturing facility and the cost of supporting the transfer and adaptation of
our field emission display technology to Unipac, as well as obligations to CEA
under the LETI Research Agreement, and miscellaneous contract consulting fees.
The increase primarily reflected the costs associated with the research and
development activities conducted in Boise following the Micron Transaction and
the cost of supporting the transfer of our field emission display manufacturing
processes to Unipac. As part of the acquisition of Micron Display's assets in
May 1999, we hired 44 employees to work on the production equipment acquired in
the Boise facility, thus reinforcing our field emission display technology
development efforts. In addition, we moved the development team located in Santa
Clara to Boise to accelerate our large display program.
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Sales and Marketing Expenses.
We expensed $680,000 for sales and marketing during the six-month period
ended June 30, 1999, as compared to $693,000 during the six-month period ended
June 30, 1998, reflecting a one-time decrease in staff expenses. We believe
sales and marketing expenses may increase in the future, reflecting the
expansion of our sales and marketing organization both in the United States and
in Europe.
General and Administrative Expenses.
General and administrative expenses amounted to $1.5 million in the
six-month period ended June 30, 1999, an increase of 25% over general and
administrative expenses incurred in the six month period ended June 30, 1998,
which amounted to $1.2 million, reflecting an increase in consulting expenses.
Interest Income (Expense), Net.
Interest income consists of interest on available and restricted cash.
Interest expense consists of interest payable on long-term obligations. Net
interest expense was $364,000 in the six-month period ended June 30, 1999, as
compared to $254,000 in the six-month period ended June 30, 1998, reflecting a
decrease in cash balances and an increase in long-term liabilities.
Currency Fluctuations.
We recorded net foreign exchange loss of $1.1 million in the six-month
period ended June 30, 1999, while we recorded net foreign exchange gain of
$709,000 in the six-month period ended June 30, 1998. The foreign exchange loss
recorded in the six-month period ended June 30, 1999 resulted from the
fluctuations of the parity of the Taiwanese dollar versus the Euro, as most of
the Company's capital lease obligation is expressed in Taiwanese dollars. We
cannot predict the effect of exchange rate fluctuations on future operating
results. To date, we have not undertaken hedging transactions to cover its
currency exposure, but we may do so in the future.
Liquidity and Capital Resources.
Since inception through June 30, 1999, we have used $40.3 million in cash
to fund our operations, and $28.7 million in capital expenditures and
investments. Through June 30, 1999, we have funded our operations and capital
expenditures primarily from sales of $71.7_million of equity securities and
$19.0 million of proceeds from borrowings and sale-leaseback transactions.
In 1998, we used $9.3 million in cash to fund our operations. During the
six-month period ended June 30, 1999, we used $8.3 million in cash to fund our
operations as compared $3.1 million for the six-month period ended June 30,
1998. This increase was caused by the following factors:
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<PAGE>
o absence of significant cash receipts from revenues in the six-month period
ended June 30, 1999; and
o increase in operating expenses associated with Taiwan start-up costs and
with the funding of the operations in Boise.
We expect that the cash needed to fund our operations during the next two
quarters will continue to increase because we will have the full impact of the
additional operating expenses we incur in our new research and development plant
in Boise, Idaho, and because we expect to increase the level of activity in
Unipac's volume manufacturing plant.
Capital expenditures were $5.9 million in 1996, $1.2 million in 1997 and
$1.9 million in 1998, and $396,000 during the six-month period ended June 30,
1999. In 1996, capital expenditures were primarily for leasehold improvements,
facility expansion, and equipment installed in our pilot manufacturing facility,
while 1997 and 1998 capital expenditures remained focused on limited capacity
expansion in our pilot line.
Capital expenditures for the six-month period ended June 30, 1999 exclude
the assets acquired pursuant to the Micron Transaction as those assets were
acquired for the issuance of our common stock. Capital expenditures also exclude
assets acquired under capital lease obligations.
As of June 30, 1999, we had commitments for capital expenditures of
approximately $100,000.
Implementing volume production at Unipac's manufacturing plant required
significant capital expenditures. Under the Foundry Agreement with Unipac,
Unipac acquired and funded $14.9 million of capital expenditures for equipment
only. Unipac leases a portion of that equipment to us, which amounted to $11.6
million as of June 30, 1999. We expect that we will need additional capital
expenditure in 1999 to increase capacity at Unipac and to complete
implementation of manufacturing processes, both for monochrome and for color
products.
Restricted cash amounted to $10.1 million in 1998 and to $8.8 million at
June 30, 1999. Restricted cash is related to the security interest that we
granted to Unipac pursuant to the Foundry Agreement, in relation to the purchase
and funding by Unipac of volume field emission displays production equipment.
The bank guaranty that we provided to Unipac is expected to decrease to match
the net amount of equipment leased by Unipac to us. The decrease of this bank
guaranty in the six-month period ended June 30, 1999 corresponded to a
simultaneous decrease of the same amount of the security interest to the banks,
thus resulting in an $1.3 million increase of the cash available to fund the
Company's activities. Both the amount of this bank guaranty and the
corresponding security interest to the banks are expected to continue decreasing
in the future.
We have existing contracts with French authorities providing for the
payment of grants totaling approximately $4.0 million, which were fully paid to
us as of December 31, 1998. In 1997 and January 1999, we entered into two R&D
agreements with French authorities. Under these agreements, we expect to benefit
from zero-interest loans totaling approximately $3.0 million, of which we
received $2.0 million during the three-month period ended June 30, 1999, and of
which we expect to receive $800,000 in the second half of 1999.
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In February 1997, we entered into an R&D agreement with the European Union
and other European industrial companies. The contribution of the European Union
to our costs under this agreement amounted to $941,000 over the period. We
received $423,000 in 1997 and $293,000 in 1998 from this contribution, which we
recognized as income in the three-month period ended June 30, 1999, as all
conditions stipulated in the agreement were met. During the three month period
ended June 30, 1999, we recognized as income an amount of $225,000 representing
the remaining revenue from this contract, of which $140,000 was collected and
$85,000 is expected through the end of 1999.
In November 1998, we entered into an R&D agreement with French authorities.
Under this agreement, we expect to benefit from a grant totaling approximately
$880,000, of which we expect to collect $230,000 in the second half of 1999.
In 1998, we received $96,000 in relation to another R&D agreement entered
into in 1993 with the European Union and other European industrial companies.
The total contribution of the European Union amounted to $546,000. We received
$330,000 in 1994, $120,000 in 1995 and $96,000 in 1998 from this contribution.
We do not expect to derive any additional revenue from this contract.
Since inception, we recognized French income tax benefits of $7.9 million.
These income tax benefits represent tax credits for research and development
activities conducted in France, which are paid in cash if we are not able to
credit them against future income tax liabilities within three fiscal years. In
1998, we collected $2.8 million, representing research and development tax
credits recorded in 1993 and 1994. In April 1999, we collected $3.0 million from
research and development tax credits recorded in 1995.
We generated $9.5 million in cash flows from financing activities in 1998,
as compared to $30.3 million in 1997. These financings consisted primarily of
sales of shares of Common Stock and of Convertible Preferred Stock in private
placements, resulting in net proceeds us of $4.5 million (net of issuance costs)
and $7.5 million, respectively. Cash flow generated from financing activities
exclude non-cash transactions related respectively to (i) the issuance of 14,000
shares of the Company's Common Stock to Coloray Display Corporation with a value
of $50,000 (See "Notes to Consolidated Financial Statements - Note 11 --
Stockholders' Equity") and (ii) the dividends attached to the shares of
Convertible Preferred Stock in the amount of $12,000 (See "Notes to Consolidated
Financial Statements - Note 11 -- Stockholders' Equity").
Cash flows generated from financing activities were $3.8 million in the
six-month period ended June 30, 1999, as compared to $1.4 million in the
six-month period ended June 30, 1998. This net cash flow consisted of sales of
shares of Common Stock, resulting in net proceeds to the Company of $4.2
million, while long term liabilities decreased by $360,000. In consideration of
the 7,133,562 shares of Common Stock and 310,000 warrants issued pursuant to the
Micron Transaction, we received certain assets, assumed certain liabilities, and
collected $4.3 million in cash. Cash flows generated from financing activities
in the six-month period ended June 30, 1999 excluded non-cash transactions
related to the acquisition of these assets and the assumption of these
liabilities, and resulted in net proceeds to the Company of $3.8 million (net of
issuance costs). In addition, cash flows generated from financing activities
included the sales of shares of Common Stock in a private placement in January
1999, resulting in net proceeds of $352,000.
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Long term liabilities increased by $2.0 million in the six-month period
ended June 30, 1999, representing two zero-interest loans granted to the Company
by French local authorities, while the repayments amounted to $2.4 million,
resulting in a net decrease of $360,000. Of the repayments occurring in the
six-month period ended June 30, 1999, $1.3 million was related to the first
repayment of the $5.0 million note granted to the Company in 1997 by Sumitomo
Corporation.
On August 9, 1999, we entered into a private equity line agreement with
Kingsbridge. Under the terms of the equity line agreement, we have the
irrevocable right, subject to certain conditions, to draw up to $15 million cash
in exchange for our common stock, in increments over a two-year period. Such
conditions include limitations depending on the volume and the market price of
our common stock. We may begin to make draws under the facility upon
registration of the shares for resale with the Securities and Exchange
Commission. Shares will be issued at a 10% discount to the market price at the
time of any draw, if the market is at or above $3.00, or at a 12% discount if
the stock price is below $3.00.
On August 5, 1999, DARPA (Defense Advanced Research Projects Agency)
awarded a development contract to us. Under the terms of the contract, we may
receive approximately $4.7 million to develop a color field emission display.
We believe that cash available at June 30, 1999, which amounted to $7.0
million, together with the anticipated proceeds during 1999 from R&D tax credits
and from the various grants and loans described above will be sufficient to meet
our cash requirements until at least September 30, 1999. We intend to improve
our liquidity and financial position through capital increases expected to take
place in 1999.
We 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
levels we currently anticipate will also require further investment. Our capital
requirements will depend on many factors, including the rate at which we can
develop our products, the market acceptance of our products, the levels of
promotion and advertising required to launch our products and attain a
competitive position in the marketplace and the response of competitors to our
products. Funds for these purposes, whether from equity or debt financing, or
other sources, may not be available when needed or on terms acceptable to us.
Year 2000 Disclosure
There is a significant uncertainty regarding the effect of the Year 2000
issue because computer systems that do not properly recognize date sensitive
information when the year changes to 2000 could generate erroneous data or
altogether fail. The Company has conducted a comprehensive review of its
computer systems and manufacturing equipment to identify applications that could
be affected by the inability of certain computer systems to format and
manipulate data containing dates including the year 2000 and subsequent years.
Based upon that review, we expect to have our systems Year 2000 compliant in
November, 1999. Although management does not expect that costs associated with
modifying existing computer systems and manufacturing equipment will have a
significant impact on its financial position or result of
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operations, there can be no assurance that such modifications will be
successfully implemented or that these costs will not be significant. To date,
we estimate that we have expended $60,000 on our Year 2000 program and
anticipated expending an additional $40,000 during the remainder of 1999. In
addition, the Company depends on a limited group of suppliers. There can be no
assurance that those suppliers will not be significantly impacted by the "Year
2000" issue. If those suppliers are significantly impacted by the "Year 2000"
issue, such suppliers may not be able to continue their supply of parts to the
Company without interruption. The Company is in the process of identifying third
party vendors that are non-Year 2000 compliant and of assessing the following
consequences. In particular, the Company requested Unipac, its Taiwanese
manufacturing partner, to assess whether its computer systems and manufacturing
equipment could be affected by the "Year 2000" issue and, if so, to present a
contingency plan. To implement its large volume manufacturing strategy, the
Company is dependent on Unipac's ability to be successful in addressing the
"Year 2000" issue. The Company's continued use of a vendor which is not Year
2000 compliant or the failure of the Company's own computer systems or
manufacturing equipment to be fully Year 2000 compliant could materially
adversely affect the Company's business, financial position and results of
operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk exposure inherent to our international operations creates
potential for losses arising from adverse changes in foreign currency exchange
rates. We are exposed to such foreign currency exchange rate risk in two main
areas: (i) a substantial portion of our operating expenses are and are expected
to be denominated in Euros, (ii) most of our capital lease obligation is
expressed in Taiwanese dollars. Fluctuations of the parity of the Taiwanese
dollar versus the Euro or the US dollar may cause significant foreign exchange
gains or losses. In addition, gains and losses arising from the conversion to
U.S. dollars of assets and liabilities denominated in Euros or in Taiwanese
dollars may contribute to fluctuations in our results of operations, which are
reported in U.S. dollars. To date, we have not undertaken hedging transactions
to cover its currency exposure. We are also exposed to interest rate risks in
connection with certain long term debt. We do not, however, enter into market
sensitive instruments for trading purposes. As of June 30, 1999, we had a $8.75
million loan payable, bearing interest at the prime rate plus 0.75%, of which
$3.75 million is payable in three equal installments every six months, the next
payment being due November 7, 1999. The remaining $5 million is due November
2000 and is convertible, partially or wholly, at the holder's option, into
shares of our common stock at a conversion price equal to 80% of the market
price on the date of conversion, the market price being determined as the
average closing market price over the twenty consecutive trading days
immediately prior to the notice of conversion. The loan became convertible in
April 1999.
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BUSINESS OF THE COMPANY
PixTech, Inc. was incorporated in Delaware in November 1993 as the parent
company of PixTech S.A., a French corporation formed in June 1992. Our principal
executive offices are located at Avenue Olivier Perroy, 13790, Rousset, France.
Our main telephone numbers are 011-33-(0)442-29-10-00 and (408) 986-8868.
We are dedicated to commercializing our field emission displays. We expect
that field emission displays will provide higher viewing quality, lower
manufacturing costs and more efficient power consumption than current flat panel
display technologies.
Since we were established, we have attempted to contain costs by
collaborating with other parties to make use of their expertise and resources.
Initially, we applied this strategy to the area of fundamental research,
manufacturing process and product development. We licensed our technology to
display manufacturers, including Motorola and Futaba. With the market
introduction of our first commercial displays, we now employ the same strategy
for manufacturing and distributing our products through an agreement with our
Taiwanese manufacturing partner, Unipac.
During 1998, we supplied more than 1,000 field emission displays to our
main customer, Zoll Medical Inc., a manufacturer of portable medical equipment.
To date, we are not aware of any other field emission display manufactured by a
competitor that has been incorporated into an end-user product. In addition, we
successfully demonstrated the world's first 15-inch color field emission display
prototype, thus keeping a leadership position in field emission display
technology development.
We are currently focused on:
o increasing production yields and capacities with Unipac;
o expanding our customer base and product offering; and
o further developing large-size displays based on field emission display
technology.
In May, 1999, we acquired substantially all the assets of Micron's field
emission display division located in Boise, Idaho. As a result of this
transaction, Micron has become the largest owner of our shares of common stock.
As part of the acquisition, we hired 44 Micron employees who have continued to
work in the Boise facility. Micron also granted us a ten-year, worldwide,
royalty-free license to its patents and patent applications related to field
emission display technology.
The Flat Panel Display Market
According to Stanford Resources, Inc., a market research organization, the
market for flat panel displays is expanding rapidly and is projected to grow
from $13.8 billion in 1998 to $20.6 billion in 2002. We expect field emission
displays to penetrate the existing flat panel display market by offering better
viewing quality than existing technologies, such as active matrix liquid crystal
displays, at similar manufacturing costs.
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We expect the continued proliferation of products requiring flat panel
displays, including desktop computers, car navigation systems, hand-held
computers, and instrumentation, to drive the strong growth of the flat panel
display market. We expect advanced display applications requiring full color and
video to become more prevalent over the next few years. Field emission displays
may also offer an alternative technology in markets which are currently only
served by cathode ray tubes due to performance requirements such as brightness
or range of operating temperature. Because field emission displays may be able
to meet these performance requirements, we also consider the cathode ray tube
replacement market as an opportunity for our field emission displays.
Laptop computers constitute the largest single market for flat panel
displays. However, desktop and handheld computers will drive much of the growth
in the computer flat panel display market.
We believe that emerging field emission display technology has the
potential to address many of the shortcomings of active matrix liquid crystal
displays. The following table summarizes some of the differentiating
characteristics of cathode ray tube, active matrix liquid crystal display and
field emission display technologies(1):
<TABLE>
<CAPTION>
ACTIVE MATRIX LIQUID
CHARACTERISTICS CATHODE RAY TUBE CRYSTAL DISPLAY FIELD EMISSION DISPLAY
--------------- ---------------- --------------- ----------------------
<S> <C> <C> <C>
Viewing angle Very wide horizontal and Wide horizontal, limited Very wide horizontal and
vertical vertical vertical
Video speed High speed over full Adequate speed over High speed over full
temperature range limited temperature range temperature range
Brightness range From low to very high, From low to medium, From low to very high,
easy to dim limited dimming easy to dim
capabilities
Dynamic range * High Limited High
Operating temperature Wide range Limited range due to Wide range and instant-on
liquid crystal behavior at low temperature
Power consumption High Current industry standard Comparable to current
industry standard
Manufacturability Mature process offering Complex process Early stage of
lowest cost manufacturing development
Fewer process steps than
active matrix liquid
crystal display
</TABLE>
* Dynamic range results from a combination of contrast and peak brightness.
(1) The information set forth in this table is based upon our assessment of
existing cathode ray tube and active matrix liquid crystal display products when
compared to field emission display products and prototypes manufactured at our
pilot plant. We cannot assure you that field emission displays, if manufactured
in commercial quantities, will achieve such performance characteristics on a
cost-effective basis.
Strategy
Our strategy is to develop sales based on the key differentiating factors
of our displays relative to other display technology. These factors include
better viewing quality, greater brightness and lower power consumption. Key
elements of this strategy include:
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Exploit niche market opportunities in the industrial market
Our strategy is to initially focus on niche applications where the specific
performance of our field emission displays, such as wide viewing angles, high
contrast and low power usage are highly valued by the customer and have yet to
be equaled by other display technologies. These applications, where the cost of
the display is a small percentage of the total equipment cost, are primarily in
the portable medical area, but can also spread over a wide range of industrial
equipment where, so far, mainly cathode ray tubes have been used. We will
thereby avoid competing directly with existing major flat panel display
manufacturers during the initial commercialization period and subsequent ramping
up of production. We expect that 4-to-8 inch diagonal, monochrome field emission
displays for industrial usage will provide the majority of our revenues in the
next two to three years.
Increase market penetration, mainly by entering the transportation market
In order to significantly increase our market penetration, we intend to
launch further products directed towards large volume, high growth market
segments, such as dashboard, mapping and entertainment displays for the
transportation market. Currently, various display technologies are being used,
ranging from very cost competitive vacuum fluorescent displays over reflective
liquid crystal displays to expensive active matrix color liquid crystal
displays. However, we expect this market to grow significantly and major car
manufacturers to adopt a very aggressive strategy to incorporate more displays
into cars during the next five to ten years. We believe our field emission
display technology will offer significant advantages in most display
applications needed for cars. We currently have an active program to develop
color field emission displays in the size of 4-to-8 inches to participate in
those future opportunities.
Ramp to Volume Manufacturing
We entered into a contract-manufacturing agreement with Unipac, an active
matrix liquid crystal display manufacturer based in Taiwan in 1997. Beginning in
1998, we installed field emission display specific equipment required to
complement Unipac's active matrix liquid crystal display manufacturing plant and
transferred and started adjustment of all of our proprietary field emission
display manufacturing processes, leading, in October 1998, to the successful
delivery to PixTech's customers of the first field emission displays
manufactured in Taiwan. Since then, we have focused on solving a number of
manufacturing issues which have prevented us, so far, from shipping any
meaningful quantity of displays from Unipac. The volume production of displays
will be initially carried out at Unipac, which we expect to provide a flexible
and cost effective way to produce displays in large volumes, while keeping our
capital commitment to a minimum level. While current shipments by Unipac of
field emission displays are still minimal, we expect that Unipac will be
successful in increasing manufacturing yields in the second half of 1999 and
that therefore display shipments from Unipac will exceed several thousand units
per month before mid 2000.
Develop large display capability
Whereas the laptop computer display market is strongly covered by today's
active matrix liquid crystal display technology, we believe that the market for
flat panel displays for desktop
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applications and wall televisions are still under development. We also believe
that the tremendous advantages of flat screens for desktop computing will fuel a
very rapid transition from cathode ray tubes to flat panel displays for desktop
computer applications. We believe that the requirements for certain desktop
monitor applications, such as video motion, or multi viewer usage, will
facilitate field emission display penetration in that segment.
In 1998, we demonstrated the world's first 15-inch color field emission
display prototype, which we developed together with a major cathode ray tube
manufacturer. Since then, we have started an ambitious program with that partner
to be able to address the 17-inch diagonal desktop monitor market by 2002. If
the cost goals of this program are met, economically viable "wall TVs" using
field emission displays in the 15 to 30-inch diagonal range may then become a
reality.
Maintain significant research and development effort
The development of field emission displays manufacturing processes and
products require a significant ongoing effort. Since inception, we have
leveraged the development activities of Laboratoire d'Electronique, de
Technologie et d'Instrumentation, an electronics research institute from which
we have exclusively licensed many of our key patents. We anticipate that
Laboratoire d'Electronique, de Technologie et d'Instrumentation and our pilot
plant in Montpellier will be specialized to cathode development in the next 12
to 18 months, with a focus on new product development, new process architecture
for cost reduction and enhanced performance. Our plant in Boise, with its
strengths in anode, sealing and spacer technology, will concentrate on the back
end part of the process development, for color and large displays.
Assessing the challenge to successfully penetrate the markets described
above, we are very open-minded to team up with display specialists which can add
value to the development process.
Build Intellectual property base
Shortly after we were founded, we spearheaded the creation of a cooperative
program among ourselves, Motorola, Raytheon, Texas Instruments and Futaba to
advance field emission display technology. Due to this program, as of August,
1999, we held or had a license to approximately 1,445 patents and pending
applications, of which approximately 709 patents are counterparts in various
jurisdictions of originally filed patents.
Products
Our current product is a 5.2-inch monochrome display. This display has 320
lines and 240 columns (1/4 Video Graphic Adapter (VGA) format), a pixel pitch of
0.33 millimeters, and a viewing angle or more than 160 degrees both horizontally
and vertically. Its brightness varies over a range from 120 to 240 candellas per
square meter. Its power consumption is approximately 2.4 watts, depending on the
content of the image, and its weight is less 200 grams.
We expect to sell the first samples of our full color 5.6-inch display
during the first half of 2000 to customers in the automotive industry. In
addition, we intend to expand our product range within the 4 to 8 inch display
market segment.
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Marketing and Sales
Target segments:
We are currently marketing our displays directly to original equipment
manufacturers and system integrators in the instrumentation, medical, and
transportation market segments where the benefits of our products are highly
valued. We have not targeted certain segments of the market, such as the
computer laptop display market and other consumer markets, which are large but
extremely price competitive. We believe that as we are still early in the field
emission display manufacturing learning curve, we would not be able to compete
effectively on price with well established liquid crystal display manufacturers.
Pricing:
We believe that field emission display screens will provide significant
quality and operational advantages compared with competing flat panel displays.
To allow fast market penetration, our current pricing strategy is, however, to
offer our displays with better viewing quality at similar prices to competing
products in the markets that we are targeting.
Distribution and Sales:
We intend to achieve sales coverage through a combination of the following:
o our own sales and marketing force which will address major original
equipment manufacturer customers in the US and in Europe;
o a network of sales representatives to expand coverage mainly in the
US; and
o a network of distributors to address specific areas of the worldwide
market and to offer technical and commercial customer support.
We have granted exclusive distribution rights to Sumitomo Corporation in
Japan. In 1999, we intend to progress on our efforts to conclude non exclusive
distribution agreements for both the United States and Europe, in order to
expand market reach in a cost effective manner.
Customers:
To date, we have sold samples of our displays to more than one hundred
customers, mostly based in the United States and in Europe. Since early 1998, we
shipped a large proportion of our products to Zoll Medical Corporation, a US
medical equipment manufacturer which markets a portable defibrillator
incorporating our field emission displays. We received a purchase order to
deliver 50,000 displays to Zoll Medical over 5 years. Zoll Medical uses the
screens as a key differentiator against competing products using liquid crystal
display screens, emphasizing some of the key characteristics of field emission
displays, including brightness and viewing angle. We are negotiating with
potentially new customers, and we believe that we can book new orders when units
shipments from Unipac exceed deliveries to Zoll Medical.
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<PAGE>
Manufacturing
Outsourcing high-volume manufacturing.
In 1997, we chose to partner with Unipac, a liquid crystal display
manufacturer and an affiliate of UMC, Taiwan's second largest Semiconductor
manufacturer, because much of the equipment used for field emission display
manufacturing is common to the active matrix liquid crystal display
manufacturing process. In doing so, we are able to make use of Unipac's
installed base of equipment and extensive expertise in the production of
displays.
In 1998, we installed all of the field emission display-specific equipment
needed to complement Unipac's active matrix liquid crystal display manufacturing
plant. We are currently transferring our field emission display manufacturing
processes, and have started qualification of the first displays manufactured in
Taiwan. While current shipments by Unipac of field emission displays are still
minimal, we expect that Unipac will be successful in increasing manufacturing
yields in the second half of 1999 and therefore that display shipments from
Unipac will exceed several thousand units per month by mid 2000. However, we do
not expect to generate positive gross margins on the sale of our displays until
we can significantly improve our manufacturing yields over the levels we
experienced in our pilot plant.
Under the agreement with Unipac, we will purchase displays from Unipac on a
cost plus basis during the initial production period. After the startup phase of
manufacturing, we and Unipac will determine a unit price per display on a
quarterly basis, which is expected to decrease over time to take into account
yield and process improvements. We intend to implement profit-sharing mechanisms
with Unipac, so that Unipac will be motivated to seek continuous manufacturing
improvements to reduce cost.
Manufacturing Engineering.
Our pilot production line in Montpellier currently supports early
deliveries to customers ahead of volume production requirements. It is also
being used to streamline manufacturing processes, develop new products and
refine field emission display technology. After start-up of volume production at
Unipac, the pilot production line will be used to support market introduction of
color displays and development of large displays using high voltage technology.
Our pilot facility has approximately 31,100 square feet of space and
contains approximately 10,900 square feet of clean room ranging from class 10 to
class 1000. As of December 31, 1998, we had 136 employees engaged in process
development and pilot production at this facility.
Technology
The basic principle used in field emission displays is the same as in
conventional cathode ray tubes. In both technologies, electrons are extracted
from a source, called the cathode, and collected by a phosphor-coated screen,
called the anode, held at positive voltage to accelerate electrons. The
electrons travel in a vacuum between the cathode and the anode. The phosphor
coating is a cathodoluminescent material, meaning that it emits light when hit
by electrons.
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Color is created by using different colored phosphors and by directing the
electrons so that they address each different color phosphor separately.
In a field emission display, each picture element, called a pixel, on the
screen has multiple electron sources from an array of electron-emitting
microtips. The emitting cathode surface, organized into a matrix of rows and
columns, is held closely to the receiving anode. Selection of cathode row and
column voltages determines which pixel will be illuminated.
A field emission display color display can be designed using either a low
voltage or high voltage structure between anode and cathode. The advantages of a
high voltage anode structure are that well characterized cathode ray tube
phosphors can be used, with high luminous efficiency. The potential drawbacks
are that the use of high voltage--at least 5,000 volts--between cathode and
anode may lead to the occurrence of uncontrolled flash-over, limiting the useful
life of such high voltage devices. Furthermore, spacer materials, glass sealing
manufacturing steps and driving electronics may be more costly for high-voltage
field emission displays.
Our cathode technology can be incorporated with equal performance and cost
effectiveness in the design of high voltage field emission displays for large
screen applications or low voltage field emission displays for smaller screen
applications. We believe that the low voltage switched-anode technology is the
most cost effective solution for displays of 12 inches or less, and that high
voltage field emission display technology, with further development, could
address larger performance requirements.
Research and Development
We are focusing our research and development programs in three areas:
o display performance enhancement;
o manufacturing efficiency; and
o scaling-up of the technology to 15-inch and larger displays.
Display Performance Enhancement.
The key elements of display performance are brightness, lifetime, and power
efficiency. We are seeking to balance luminous efficiency with power efficiency
to produce bright, low-power-consumption displays. Display reliability depends
heavily upon the manufacturing process used in assembling the displays as well
as upon the characteristics of the phosphors used on the anode. We are working
to make further advances in phosphors and related manufacturing technologies.
Manufacturing efficiency and costs.
We believe that we can obtain improved manufacturing efficiency by
simplifying manufacturing processes and reducing specific equipment costs. We
have recently focused on
41
<PAGE>
simplifying the assembly process to achieve equipment and material cost
reduction associated with these steps.
Large Display Development.
We conduct a development program to demonstrate the large display (15-inch
and larger) capability of field emission display technology with the goal of
addressing the desktop monitor replacement market. We have strengthened this
program through collaboration with a major Japanese cathode ray tube
manufacturer.
A portion of our research and development activities is carried out at
Laboratoire d'Electronique, de Technologie et d'Instrumentation, a laboratory
under the French Atomic Energy Commission. The research and development
Agreement between French Atomic Energy Commission and us provides for us and the
French Atomic Energy Commission to contribute equally to the funding of field
emission display-related research and development activities at Laboratoire
d'Electronique, de Technologie et d'Instrumentation. The Laboratoire
d'Electronique, de Technologie et d'Instrumentation research agreement provides
for the French Atomic Energy Commission to perform this research and development
work exclusively for us.
Our research and development expenses in the fiscal year ended December 31,
1998 were $19.4 million, as compared to $15.5 million in 1997.
Our licensing program
Between 1993 and 1995, we entered into bilateral cooperation and license
agreements with Motorola, Futaba, Raytheon and Texas Instruments to advance
field emission display technology. These agreements provided each of these
companies with a license, subject to certain limitations, to all field emission
display technology owned by us, Laboratoire d'Electronique, de Technologie et
d'Instrumentation and the other parties. These agreements gave us a royalty-free
license to any field emission display technology held within the group at the
term of the agreements, with certain rights to sublicense. In addition, we
received milestone revenues under these agreements during the cooperation phase.
The agreement with Texas Instruments was terminated in March 1996, but we
maintain our license to Texas Instruments' field emission display technology. We
believe that one of our existing licensees, Raytheon Company, may have suspended
its internal program to develop field emission displays.
Although the cooperation phases of these agreements have all ended, we are
granted royalty-free licenses to all field emission display technology held by
each other party at the end of each respective cooperation period, with certain
rights to sublicense. We are also entitled to royalties on future sales by any
of these licensees of any field emission display products which are based on our
technology.
Micron
In May, 1999, we purchased certain assets and liabilities of Micron's field
emission display division in Boise, Idaho. At the same time, we hired 44 Micron
employees who will continue to work in the Boise facility. Since that time we
have moved development personnel
42
<PAGE>
from Santa Clara to Boise, and the integrated team will continue to focus on
color products and large displays.
In connection with our acquisition, we were granted a ten-year, worldwide
royalty-free license to Micron's field emission display-related patents and
patent applications.
Competition
The market for flat panel display products is intensely competitive. It is
currently dominated by liquid crystal display technology. Liquid crystal display
manufacturers, such as Sharp, NEC and Hitachi, have substantially greater name
recognition and financial, technological, marketing and other resources than we
have, and continue to make substantial investments in improving liquid crystal
display technology, manufacturing processes and in manufacturing facilities. The
recent increase in world-wide manufacturing capacity of flat panel displays and
the entrance of new competitors in the flat panel display market have caused
over-supply conditions leading to dramatic reductions in the price of flat panel
displays over the last few years. In order to effectively compete, we could be
required to continuously increase the performance of our products and to reduce
prices. In the event of price reductions, our ability to maintain gross margins
would depend on our ability to reduce our cost of sales.
There are a number of domestic and international companies developing and
marketing display devices using alternative technologies, such as:
o passive matrix liquid crystal displays;
o active matrix liquid crystal displays;
o vacuum fluorescent displays;
o electroluminescent panels; and
o plasma panels.
We ended our cooperation phase with Futaba in January 1997 and with
Motorola in June 1998, and are aware of significant continued investments in
field emission display technology development by both of them. In the future, we
expect to face competition from both of them. In addition, some of the basic
field emission display technology is in the public domain and, as a result, we
have a number of potential direct competitors developing field emission
displays.
We are aware of several other companies which are developing field emission
display technologies similar to ours, including but not limited to:
o Sony;
o Fujitsu;
o Samsung;
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<PAGE>
o Candescent;
o FED Corporation; and
o SI Diamond Technology Incorporated.
Many of these companies have made, and may continue to make, significant
advancements to their field emission display technology.
Although we have proprietary rights to significant technological advances
in field emission display technology, our technology and products are still in
development stage. We cannot assure you that such potential competitors have not
developed or will not develop comparable or superior field emission display
technology. Many of these developers of alternative flat panel display and
competing field emission display technologies have substantially greater name
recognition and financial, research and development, manufacturing and marketing
resources than we have, and have made and continue to make substantial
investments in improving their technologies and manufacturing processes. In the
event efforts by our competitors result in the development of products that
offer significant advantages over our products, and we are unable to improve our
technology or develop or acquire alternative technology that is more
competitive, we would be adversely affected.
Patents and Trade Secrets
As of August 31, 1999, we held or had license to 370 U.S. patents and 270
pending U.S. patent applications. We also actively pursue foreign patent
protection in countries of interest to us. As of August 31, 1999, we had filed,
or were licensed under, 794 patent and patent applications in foreign countries.
Our fundamental technology was developed by Laboratoire d'Electronique, de
Technologie et d'Instrumentation and licensed to us in 1992. Under the
Laboratoire d'Electronique, de Technologie et d'Instrumentation License
Agreement, which has a term of twenty years, the French Atomic Energy Commission
granted us an exclusive, worldwide, royalty-bearing license, with right to
sub-license, of all field emission display technology developed by the French
Atomic Energy Commission (including Laboratoire d'Electronique, de Technologie
et d'Instrumentation).
In addition to the payment of royalties on sales of products incorporating
the licensed technology, we must pass through to the French Atomic Energy
Commission a percentage of any royalties on licensed product sales by our
sub-licensees.
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Employees
The following table represents the number of employees working with us over
the past three years.
Year Number of Employees
---- -------------------
1996 (average) 143
1997 (average) 144
1998 (average) 164
1999 (at 8/31) 194 (177 full-time, 17 part-time)
On August 31, 1999:
o 64 employees were engaged in research and development;
o 101 employees were engaged in process development, pilot production
and support of the transfer and adjustment of our manufacturing
processes to Unipac;
o 6 employees were engaged in marketing and sales;
o 23 employees were engaged in general and administrative functions.
Our success will depend in large part on our ability to attract and retain
skilled and experienced employees. We consider our relations with our employees
to be good.
In addition, as of August 31, 1999,
o Laboratoire d'Electronique, de Technologie et d'Instrumentation had 10
full-time employees working exclusively for our R&D program; and
o Unipac had 59 full-time employees working exclusively on the start-up
of the field emission display manufacturing and relies on other
manufacturing employees to perform a significant portion of the
manufacture of field emission displays
The number of the employees working on the field emission display
manufacturing is expected to increase significantly in the next 12 months.
Facilities
Montpellier, France
We rent a facility in including a clean room, office area, and engineering
laboratories in Montpellier, France, having 31,100 square feet of space. The
Montpellier lease terminates in 2003, with an option to renew.
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Boise, Idaho
We lease a total of approximately 73,000 square feet of space in Boise,
Idaho, including a clean room, devoted to our research and development
activities, under a three-year lease from Micron expiring in May, 2002. The
lease is renewable for an additional three-year term.
Santa Clara, California
We lease a total of approximately 2,570 square feet of space in Santa
Clara, California, for our sales offices, under a lease which terminates in
2001. The lease is renewable for an additional term of three years.
Rousset, France
Our corporate offices are located in an approximately 11,000 square foot
facility located in Rousset, France. We own the facility and occupy
approximately 5,500 square feet of floor space. A third party rents the rest of
the area under a lease which terminates in June 2002.
Legal Proceedings
We have received correspondence from Futaba Corporation and its legal
counsel beginning in February 1998 alleging the following:
o we are infringing one or more patents owned by Futaba relating to the
construction and manufacture of our displays that are not expressly
included under the license agreement between us and Futaba;
o our use of terms such as "alliance" and "partners" in describing the
nature of our contractual relationships with Motorola, Raytheon and
Futaba in reports filed with the SEC is misleading; and
o certain provisions in our agreement with Unipac constitute an
impermissible sublicense of Futaba technology.
We do not believe such claims have any merit and have denied each of the
allegations in correspondences with Futaba and our counsel. Futaba has also
claimed that we improperly supplied certain Futaba proprietary information to
Unipac, and that Unipac has, in turn, disclosed such information to a third
party vendor. If Futaba prevails on any of these claims, we may be required to
modify the construction and manufacture of our displays and may, as a result, be
materially adversely affected.
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MANAGEMENT
Directors and Executive Officers
As of August 31, 1999, our executive officers were as follows:
Name Age Position held with us
---- --- ---------------------
Jean-Luc Grand-Clement 60 Chairman of the Board of Directors
Dieter Mezger 56 President, Chief Executive Officer and Director
James J. Cathey 35 Vice President, Marketing and Sales
Francis G. Courreges 46 Executive Vice President, Development
Chief Technology Officer
Donald E. Crim 57 Vice President, Manufacturing, Taiwan
Michel Garcia 52 Vice President, Industrial Partners
Jean-Jacques Louart 50 Vice President, Operations
Yves Morel 33 Vice President, Chief Financial Officer
John A. Hawkins 38 Director
Will C. Schmidt 43 Director
Each officer's term of office extends until the first meeting of the Board
of Directors following the next annual meeting of stockholders and until a
successor is elected and qualified.
Jean-Luc Grand-Clement, a founder of PixTech, has been our Chairman of the
Board of Directors since our inception in 1992. Mr. Grand-Clement has been our
President through March 1998 and our Chief Executive Officer thorough January
1999. Prior to founding PixTech, Mr. Grand-Clement co-founded European Silicon
Structures, a European applications specific integrated circuit supplier for
cell based and full custom semiconductor products, and served as Chief Executive
Officer and then as Chairman of the Board of Directors of European Silicon
Structures from its founding in 1985 until 1991. From 1967 to 1978 and from 1982
to 1985, Mr. Grand-Clement held various positions with Motorola, Inc., most
recently as Vice-President and Assistant General Manager of the Motorola
European Semiconductor Group from 1983 to 1985. From 1978 to 1982, Mr.
Grand-Clement was the Managing Director of Eurotechnique, a metal-oxide
semiconductor design and fabrication joint venture between National
Semiconductor and Saint-Gobain. Mr. Grand-Clement graduated from Ecole Nationale
Superieure des Telecommunications in Paris.
Dieter Mezger joined PixTech in March 1998 as President and was elected
Chief Executive Officer in January 1999. Between 1996 and 1998, Mr. Mezger
worked as a marketing consultant in California. Between 1990 and 1996, Mr.
Mezger was President of Compass Design Automation, a wholly-owned subsidiary of
VLSI Technology, Inc. which develops and markets computer assisted design
software tools for IC designs. From 1984 to 1990, Mr. Mezger established VLSI's
European presence in Munich, building the European marketing and sales
organizations, design centers, research and development operations, as well as
its finance and human resources departments. Mr. Mezger simultaneously built
VLSI's wireless and GSM (Global System for Mobile Communications) businesses.
Prior to joining VLSI, Mr. Mezger
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career included fifteen years with Texas Instruments, where he rose to the
position of Manager, Sales and Marketing, Europe. He holds a BS in engineering
from the University of Stuttgart.
James J. Cathey has been our Vice President, Marketing and Sales since May
1999. Mr. Cathey served as Vice President Sales and Marketing for the display
division of Micron Technology from 1994 to 1999. From 1991 to 1994 Mr. Cathey
was Vice President Sales and Marketing for G2, a software development company.
From 1989 to 1991 he was key accounts manager for Micron Technology's Memory
applications group. Mr. Cathey holds a BA in Marketing from Boise State
University.
Francis G. Courreges has served as our Executive Vice-President,
Development since July 1995. He was promoted to Chief Technology Officer in May
1999. From July 1993 to July 1995, he was our Vice-President of Marketing and
Development. Prior to joining PixTech, Mr. Courreges was a co-founder of
European Silicon Structures, and served as Manager of direct write technology
for metal-oxide semiconductors and gate array products from 1985 to 1991 and
Vice-President of Marketing from 1991 to 1992. Prior to joining European Silicon
Structures, Mr. Courreges was product engineering manager at Sierra
Semiconductor from 1984 to 1985. He held various process and product engineering
positions at Electronic Arrays from 1977 to 1979, at National Semiconductor,
from 1979 to 1980 and at Eurotechnique, from 1980 to 1984. Mr. Courreges
graduated from Ecole Nationale Superieure des Arts et Metiers and holds M.S. and
Ph.D. degrees in Materials Science from Stanford University.
Donald E. Crim has been our Vice President, Manufacturing, Taiwan since
April 1999. From June 1988 to December 1995, Mr. Crim was senior vice president
Wafer Fabrication and Technology at Silicon Systems, Inc. Over that period, he
grew the manufacturing activities to support sales growth from $100 million to
$400 million. His responsibilities included overseeing all semiconductor wafer
manufacturing, technology development and wafer foundry services. Additional
responsibilities included establishing outside foundry suppliers in Taiwan,
Japan, Korea, Singapore and USA. Since June 1998 and in 1996, Mr. Crim was a
consultant for several companies. His customers included IBM, Dallas
Semiconductor, Tower Semiconductor and others.
Michel Garcia, a founder of PixTech, has served as our Vice President,
Industrial Partners since August 1995. From inception to August 1995, he had
served as Vice-President of Equipment Engineering. In 1986, Mr. Garcia founded
Microsolve, a semiconductor processing equipment company, which he managed for
five years. From 1981 to 1985, he served as operations manager at Eurotechnique;
from 1979 to 1981, he served as fab process manager at Eurotechnique; and from
1977 to 1979 he served as a process engineer at Motorola. In 1970, Mr. Garcia
graduated from Ecole Nationale Superieure d'Electronique et de Radioelectricite
de Grenoble, and he received a degree of Doctor of Microelectronics from
Grenoble University.
Jean-Jacques Louart joined PixTech in May 1997 as Vice-President of
Operations. Mr. Louart served as Quality Director of LX Management, a consultant
agency, from 1995 to 1997. From 1993 to 1995, he was president of SIP, an
equipment engineering company. Prior to that, Mr. Louart spent 18 years with
IBM, holding process and manufacturing management positions. Mr. Louart
graduated from Ecole de l'Air and holds a management degree from CPA, Paris.
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Yves Morel joined PixTech in April 1994 as Director of Finance and
Administration. He was promoted to Chief Financial Officer in March 1997 and to
Vice President in March 1998. From 1993 to 1994, Mr. Morel was Finance Manager
of International Software Enterprise, a hardware and software distribution
group. From 1992 to 1993, Mr. Morel served as Controller at Genoyer S.A., a
manufacturing and distribution company in the industrial valve and piping field.
From 1989 to 1992, Mr. Morel was employed at Price Waterhouse. Mr. Morel
graduated from the Ecole des Hautes Etudes Commerciales and he obtained a
Diplome d'Etudes Superieures Comptables et Financieres.
John A. Hawkins has been a director of PixTech since 1994. Since August
1995, Mr. Hawkins has been a co-founder and managing partner of Generation
Partners, L.P., a private equity firm. From 1992 until August 1995, Mr. Hawkins
was a general partner of various funds affiliated with Burr, Egan, Deleage & Co.
Mr. Hawkins is a director of P-COM, Inc., Enso Audio Imaging Corporation, Dover
Pacific computing, Inc., High End Systems, Inc. and Linguateq, Inc. Mr. Hawkins
holds degrees from Harvard College and Harvard Business School.
William C. Schmidt has been a director of PixTech since June 1992. Since
1988, Mr. Schmidt has been an investment partner at Advent International, an
international venture capital company, where he also manages the activities of
Advent International's corporate investment programs in Europe. From 1981 to
1987, Mr. Schmidt worked as a management consultant at Bain & Company in Europe
and the United States. Mr. Schmidt holds degrees from Williams College and
Harvard Business School.
Committees of the Board
The audit committee, which consisted in 1998 of Mr. Schmidt and Mr. Jean-
Pierre Noblanc and currently consists of Messrs. Schmidt and Hawkins, is
responsible for providing the board of directors with an independent review of
our financial health and our financial controls and reporting. The audit
committee's primary functions are to recommend independent auditors to the board
of directors, review the results of the annual audit and the auditors' reports,
and ensure the adequacy of our financial controls and procedures. The audit
committee met five times in 1998. The compensation committee, whose members in
1998 were Messrs. Schmidt, Hawkins, and Roger W. Johnson from September 22, 1998
to December 31, 1998, acts for the board of directors with respect to our
compensation practices and implementation of those practices. The compensation
committee sets and implements the compensation of our officers and administers
the amended and restated 1993 stock option plan and the 1995 employee stock
purchase plan. The compensation committee held two meetings in 1998. The entire
board of directors functions as a nominating committee, considering nominations
submitted by the Chairman of the Board. The board of directors held ten meetings
during 1998, and each director attended at least 75% of all meetings of the
Board and of all committees of the Board on which he served, except Mr. Roger W.
Johnson who attended 25% of all meetings of the Board and of all committees of
the Board on which he served. Mr. Roger W. Johnson served as one of our
directors from September 22, 1998 to December 31, 1998.
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EXECUTIVE COMPENSATION
Summary Compensation Table (1)
The following table provides summary information on the cash compensation
and certain other compensation paid, awarded, or accrued by us and our
subsidiaries to or for the Chief Executive Officer of PixTech and each of our
other five most highly compensated executive officers for 1998.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation (1) Awards
--------------------------------- --------------
Securities
Underlying
Name and Principal Position Year Salary($) Other ($) Options(#)
- --------------------------- ---- --------- --------- ----------
<S> <C> <C> <C> <C>
Jean-Luc Grand-Clement 1998 $192,246 -- --
Former President, Former Chief Executive 1997 193,708 -- 165,000
Officer, and Chairman of the Board 1996 212,502 -- 40,000 (2)
Dieter Mezger (3) 1998 156,000 -- 300,000
President and Chief Executive Officer 1997 10,500 -- --
Francis G. Courreges 1998 149,201 -- --
Executive Vice President, 1997 150,850 -- 77,000
Chief Technology Officer 1996 172,053 -- 20,000 (2)
Michel Garcia (6) 1998 101,728 53,808 --
Vice President, 1997 102,852 -- 56,000
Industrial Partners 1996 107,045 -- 15,000 (2)
Tom M. Holzel (5) 1998 122,500 -- --
Vice President, 1997 122,500 -- 85,000
Marketing & Sales 1996 122,500 -- 10,000 (2)
Jean-Jacques Louart (4) 1998 101,728 -- --
Vice President, 1997 64,349 -- 68,000
Operations --
</TABLE>
(1) All dollar amounts (except for amounts paid to Messrs. Mezger and Holzel)
reflect the conversion of Euros to U.S. dollars at an average conversion rate
for Euros to U.S. dollars of 0.7797 for 1996, 0.8893 for 1997 and 0.8992 in
1998.
(2) All of these options were unexercised and terminated as of February 21,
1997.
(3) Dieter Mezger joined PixTech in March 1998 and was elected President and
Chief Executive Officer as of March 1998 and January 1999, respectively. Prior
to that, Mr. Mezger was a consultant to us from November 1997 to March 1998, an
activity for which he received $10,500 in 1997 and $21,000 in 1998.
(4) Jean-Jacques Louart joined PixTech in May 1997.
(5) Tom M. Holzel left PixTech in April 1999.
(6) Michel Garcia is an employee of PixTech S.A., a wholly owned subsidiary of
PixTech. Other compensation received in 1998 included daily allowances for
$29,450, rent for $22,120 and car payments of $2,238.
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Stock Option Grants in Last Fiscal Year
The following table provides information on stock options granted during
1998 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
Number of % of Total
--------- ---------- Potential Realized Value at
Securities Options Assumed Annual Rates of
---------- ------- Stock Price Appreciation for
Underlying Granted to Option Term ($) (1)
---------- ---------- -------------------
Options Employees in Exercise Price Expiration
------- ------------ -------------- ----------
Name Granted (#) 1998 ($/ share) Date 5% 10%
---- ----------- ---- ---------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Dieter Mezger 300,000 (2) 67% 5.271 03/25/2008 994,471 2,520,185
</TABLE>
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% appreciation rates set by the Securities and Exchange Commission of a
value for the common stock equal to the market price of the common stock on the
date of grant of the option. These amounts are not intended to forecast possible
future appreciation, if any, in the price of the common stock.
(2) These options became or become exercisable as follows: 37,500 shares on
March 25, 1998, 75,000 shares on July 23, 1998, 75,000 shares on January 05,
1999, 37,500 shares on March 25, 1999, 37,500 shares on March 25, 2000 and
37,500 shares on March 25, 2001.
Aggregated Option Exercises in Last Fiscal Year and Year-End Stock Option Values
The following table sets forth certain information concerning the
unexercised stock options as of December 31, 1998 held by the executive officers
named in the Summary Compensation Table. No options were exercised during 1998
by any named executive officer.
<TABLE>
<CAPTION>
Number of Securities Underlying Unexercised Value of Unexercised In-The-Money Options
Options at 12/31/98 (#) at 12/31/98 ($) (1)
----------------------- -------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jean-Luc Grand-Clement 521,988 189,473 941,890 88,137
Dieter Mezger 225,000 75,000 -- --
Francis Courreges 134,757 75,577 227,953 22,484
Michel Garcia 117,772 49,333 215,135 5,519
Tom Holzel 76,250 8,750 -- --
Jean-Jacques Louart -- 68,000 -- --
</TABLE>
(1) Based on the difference between the respective option exercise price and the
closing market price of the Common Stock on December 31, 1998, which was 2 3/8.
Executive Employment Agreements
Each of Messrs. Grand-Clement, Courreges, Garcia and Louart have entered
into employment agreements with us in substantially the same form as most of our
other employees. The material terms of the employment agreements provide for
employment by each individual for an indefinite period. Pursuant to the
employment agreements, each individual agrees to non-competition and non-
solicitation provisions which survive for a one-year period following
termination of employment. The employment agreements also contain obligations of
each employee concerning confidentiality and assignment of inventions and
intellectual property to us. Mr. Cathey has entered into an employment agreement
providing for employment for an indefinite period, non-competition and
non-solicitation for one year following termination, and
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<PAGE>
confidentiality provisions. Mr. Mezger is employed at will and has signed
similar non-competition and non-solicitation provisions.
Compensation Committee Interlocks And Insider Participation
During the fiscal year ended December 31, 1998, our compensation committee
consisted of Messrs. Schmidt and Hawkins. None of the members of the
compensation committee has been an officer or employee of ours.
Mr. Noblanc, who was a member of our board of directors and its audit
committee until March 1999, is an officer of CEA Industrie, S.A., which is
controlled by the French Atomic Energy Commission. In September 1992, we
licensed its fundamental technology from the Laboratoire d'Electronique, de
Technologie et d'Instrumentation, a research laboratory of the French Atomic
Energy Commission, pursuant to an exclusive, worldwide, royalty- bearing license
agreement with French Atomic Energy Commission, which has a term of twenty
years. The Laboratoire d'Electronique, de Technologie et d'Instrumentation
License Agreement was amended in July 1993, March 1994 and October 1997.
Beginning in 1996, we became obligated under the Laboratoire d'Electronique, de
Technologie et d'Instrumentation License Agreement to make royalty payments to
the Laboratoire d'Electronique, de Technologie et d'Instrumentation based on the
sales of products incorporating licensed technology. In addition to such royalty
payments, we must pass through to French Atomic Energy Commission a percentage
of any lump sum sublicense fees earned after 1993 and royalties on sales of
licensed products by the Company's sublicenses. Pursuant to an amendment to the
Laboratoire d'Electronique, de Technologie et d'Instrumentation License
Agreement signed in 1997, the royalty rates and minimum payments from us to
French Atomic Energy Commission were increased for a period of three years. An
amount of $308,000 was accrued in 1998 in that respect.
We also entered into a research and development agreement with French
Atomic Energy Commission in 1992, under which we funds research at the
Laboratoire d'Electronique, de Technologie et d'Instrumentation. Pursuant to the
Laboratoire d'Electronique, de Technologie et d'Instrumentation Research
Agreement, we expensed $36,000 in 1992, $1,335,000 in 1993, $1,506,000 in 1994,
$1,339,000 in 1995, $644,000 in 1996, and $637,000 in 1997. In 1998, we recorded
$848,000 as expenses pursuant to the Laboratoire d'Electronique, de Technologie
et d'Instrumentation Research Agreement.
Director Compensation
Director Fees
We reimburse non-employee directors for expenses incurred in attending
meetings, and they also receive $1,500 for each meeting of the board of
directors that they attend, plus an additional $4,000 if they attend at least
four meetings in a year. Such payments may not exceed a total of $10,000 in any
one year. Mr. Grand-Clement and Mr. Mezger are the only directors who are
employees of the Company, and will not receive additional compensation for their
service as directors.
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<PAGE>
1995 Director Stock Option Plan
The 1995 director stock option plan provides that each director who is not
a PixTech employee and who is elected or re-elected into office following the
annual meeting of stockholders receives an automatic grant of options to
purchase 6,000 shares of common stock. The options become exercisable in
increments of 2,000 shares as follows: 2,000 shares on the grant date, and an
additional 2,000 shares at each of the following two annual meetings of
stockholders so long as the director remains in office. The options expire ten
years from the grant date. The exercise price of each option is the fair market
value of the common stock on the day immediately preceding the grant date.
The director plan authorizes the grant of stock options to purchase up to a
maximum of 50,000 shares (subject to adjustment in the event of a stock split or
other recapitalization) of common stock. Messrs. Schmidt and Hawkins are
currently eligible to participate under the director plan. Because the only
director elected at the 1999 Annual Meeting of Stockholders is an employee of
PixTech, no options were granted under the Director Plan at the 1999 Annual
Meeting of Stockholders.
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<PAGE>
SHARE OWNERSHIP
The following tables set forth certain information regarding the ownership
of our common stock and series E preferred stock as of August 31, 1999 by (i)
persons known by us to be beneficial owners of more than 5% of our common stock
and series E preferred stock, (ii) the executive officers named in the Summary
Compensation Table on page 50, and (iii) all of our current executive officers
and directors as a group:
Common Stock
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficial Owner Beneficially Owned (1)
- ---------------------------- ------------------------------------
Shares Percent of Class
------------ ----------------
<S> <C> <C>
Micron Technology, Inc. 7,443,562 31.2%
8000 South Federal Way
Boise, Idaho 83716-9632
Sumitomo Corporation 3,305,662(2) 12.3%
1-2-2 Hitotsubashi, Chiyoda-Ku
Tokyo, 100 Japan
The Kaufmann Fund, Inc. 1,678,169(3) 7.1%
140 East 45th Street
43rd floor
New York, NY 10017
Jean-Luc Grand-Clement 725,464(4) 3.0%
Dieter Mezger 375,000(5) 1.6%
Francis G. Courreges 93,307(6) *
Michel Garcia 135,116(7) *
Tom M. Holzel 0 *
John A. Hawkins 16,000(8) *
William C. Schmidt 4,000(9) *
All directors and executive officers as a group 1,413,594(10) 5.7%
(10 persons)
</TABLE>
* Less than one percent.
(1) Except as otherwise indicated in these footnotes, the persons and entities
named in the table have sole voting and investment power with respect to all
shares beneficially owned by them. Share ownership information includes shares
of common stock issuable pursuant to outstanding options which may be exercised
within 60 days after August 31, 1999.
(2) Includes 3,255,662 shares of common stock subject to the conversion of a $5
million convertible note issued in 1997, of which approximately $4.9 million is
outstanding as of August 31, 1999. This note is convertible into shares
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<PAGE>
of our common stock at a conversion price equal to 80% of the market price on
the conversion date, the market price being determined as the average closing
market price over the twenty consecutive trading days immediately prior to the
notice of conversion.
(3) Consists of 1,678,169 shares of common stock (information as of April 15,
1998). In addition, The Kaufmann Fund, Inc. holds 266,297 shares of series E
preferred stock which are convertible into common stock. As of August 31, 1999,
these shares of series E preferred stock would have been convertible into
3,450,581 shares of common stock (See series E preferred stock chart below).
(4) Includes 53,605 shares held by Mr. Grand-Clement's wife and 600,753 shares
of common stock subject to options exercisable as of August 31, 1999 or within
60 days thereafter, of which 6,792 shares are subject to options held by Mr.
Grand-Clement's wife.
(5) Consists of 375,000 shares of common stock subject to options exercisable as
of August 31, 1999 or within 60 days thereafter.
(6) Includes 89,307 shares of common stock subject to options exercisable as of
August 31, 1999 or within 60 days thereafter.
(7) Includes 127,355 shares of common stock subject to options exercisable as of
August 31, 1999 or within 60 days thereafter.
(8) Includes 6,000 shares of common stock subject to an option exercisable as
of August 31, 1999 or within 60 days thereafter.
(9) Consists of 4,000 shares of common stock subject to an option exercisable as
of August 31, 1999 or within 60 days thereafter. Mr. Schmidt, a director of
PixTech, is a Vice President of Eventech Limited and of Advent International
Corporation. Mr. Schmidt disclaims beneficial ownership of all 675,945 shares
held by the funds affiliated with Advent International Corporation, except for
80 shares which he beneficially owns as a partner in Advent International
Investors Limited Partnership and 192 Shares which he beneficially owns as a
partner in Advent International Investors II L.P.
(10) Excludes shares, as to which beneficial ownership is disclaimed, described
in footnotes (8)-(9). Includes 1,250,415 shares of common stock subject to
options exercisable as of August 31, 1999 or within 60 days thereafter.
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<PAGE>
Series E Preferred Stock
Shares of Common Stock
Beneficial Owner Beneficially Owned (1)
- ------------------------------ ------------------------------------
Shares Percent of Class
------------ ----------------
The Kaufmann Fund, Inc. 266,297 (1) 89.6%
140 East 45th Street
43rd floor
New York, NY 10017
Citadel Investment Group, L.L.C. 18,766 (2) 6.3%
225 West Washington Street
Chicago, Illinois 60606
(1) As of August 31, 1999, these shares of series E preferred stock would have
been convertible into 3,450,581 shares of common stock. In addition, the
Kaufmann Fund holds 1,678,169 shares of our common stock (See common stock chart
above). As of August 31, 1999, the Kaufmann Fund holds 5,128,750 shares of
common stock on a as-converted basis.
(2) The 18,766 shares of series E preferred stock are convertible into shares of
common stock starting June 1999. As of August 31, 1999, these shares of series E
preferred stock would have been convertible into 243,163 shares of common stock.
In addition, Citadel Investment Group, L.L.C. holds 336,702 shares of our common
stock (Information as of January 4, 1999). As of August 31, 1999, Citadel
Investment Group holds 579,865 shares of our common stock on a as-converted
basis.
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<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock by Kingsbridge and Sumitomo as of August 31, 1999.
<TABLE>
<CAPTION>
Number of Shares of Number of Shares of
Common Stock Number of Shares of Common Stock
Name and Address of Beneficially Owned Prior Common Stock Offered Beneficially Owned
Stockholder to the Offering Hereby Following the Offering
------------------- ------------------------ -------------------- ----------------------
Number Per Cent Number Per Cent
------ -------- ------ --------
<S> <C> <C> <C> <C> <C>
Sumitomo Corporation 3,305,662 (1) 12.3 1,000,000 2,305,662 5.5%
1-2-2 Hitotsubashi, Chiyoda-Ku
Tokyo, 100 Japan
Kingsbridge Capital Limited 0 * 15,100,000 (3) 0(4) 0
3rd Floor,
Barclays House,
PO Box
3340 Wickhams Cay 1,
Road Town
Tortola,
British Virgin Islands(2)
</TABLE>
* Less than 1%.
(1) Includes 3,255,662 shares of common stock subject to the conversion of a $5
million convertible note issued in 1997, of which approximately $4.9 million is
outstanding as of August 31, 1999. This note is convertible into shares of our
common stock at a conversion price equal to 80% of the market price on the
conversion date, the market price being determined as the average closing market
price over the twenty consecutive trading days immediately prior to the notice
of conversion.
(2) The natural person controlling Kingsbridge Capital Limited is Valentine
O'Donoghue.
(3) Includes 100,000 shares of common stock issuable pursuant to the Kingsbridge
warrant. If all of the shares offered pursuant to the equity line agreement were
purchased and held by Kingsbridge, it would hold 39% of our outstanding common
stock. Pursuant to the equity line agreement, however, unless PixTech obtains
the required approval from its shareholders in accordance with Delaware law and
the rules of the National Association of Securities Dealers, Inc., no more than
19.9% of the number of outstanding shares of common stock may be issued to
Kingsbridge.
(4) Assumes that all shares acquired pursuant to the equity line agreement and
the warrant are sold pursuant to this prospectus. Kingsbridge has not had any
material relationship with us or our affiliates other than as a result of the
ownership of common stock or as a result of the negotiation and the execution of
the equity line agreement. The shares offered hereby are to be acquired by
Kingsbridge pursuant to the equity line agreement or upon exercise of the
warrant.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock of consists of 60,000,000 shares of common
stock, and 1,000,000 shares of preferred stock
The following summary of certain provisions of the common stock and
preferred stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of our restated certificate of incorporation
and our amended and restated by-laws which are included as exhibits to this
registration statement, and by the provisions of applicable law.
Common Stock
Holders of common stock are entitled to one vote per share on matters to be
voted upon by the stockholders. There are no cumulative voting rights. Holders
of common stock are entitled to receive ratable dividends when declared by our
board of directors. Upon the liquidation, dissolution or winding up of PixTech,
holders of common stock share ratably in PixTech's assets available for
distribution to its stockholders, subject to the preferential rights of any
preferred stock. The common stock outstanding upon the effective date of this
prospectus are fully paid and nonassessable. As of August 31, 1999, 23,567,138
shares of our common stock are issued and outstanding, and 582,500 were reserved
for issuance upon the exercise of certain outstanding warrants and approximately
4,146,190 were reserved for issuance pursuant to stock option plans and employee
stock purchase plans.
We have issued to Sumitomo Corporation a note in the principal amount of
$5,000,000 convertible, in whole or in part, into our common stock at 80% of the
fair market value of our common stock on the day Sumitomo converts the note. As
of August 31, 1999, we issued 100,000 shares of our common stock to Sumitomo
following the conversion of $144,636 of the note.
We have issued a warrant to Micron to purchase an aggregate of 310,000
shares of our common stock at $2.25313 per share.
We have issued a warrant to purchase 62,500 shares of our common stock to
Comdisco, Inc. in connection with a master lease agreement between us and
Comdisco which is exercisable at a price of $2.88 per share and expires on July
18, 2000.
We are obligated to issue a warrant to purchase 35,000 shares of our common
stock to Needham & Company, Inc., in connection with an agreement for financial
advisory services, which is exercisable at a price of $2.26 per share and
expires on May 10, 2004.
We are obligated issue a warrant to purchase 75,000 shares of our common
stock to Josephthal and Co, in connection with an agreement for financial
advisory services, which is exercisable at a price of $2.26 per share and
expires on June 17, 2004.
In addition, we have issued a warrant to Kingsbridge to purchase 100,000
shares of our common stock at $2.30 per share which expires on February 6, 2003.
58
<PAGE>
Preferred Stock
In December 1998, we issued 367,269 shares of series E stock, at a price of
$22.5313 per share, to certain institutional investors. The series E stock is
generally convertible into our common stock at a rate equal to the lesser of (a)
$2.25313, and (b) the average closing price of our common stock over the ten
trading day ending period ending on the day immediately preceding the day upon
conversion.
There currently are 500,000 shares of preferred stock designated as series
E stock, 297,269 shares of which are currently outstanding. The holders of
series E stock will receive, if declared, cumulative compounding dividends at
the rate of six percent per year which we may pay with additional shares of
common stock upon conversion of the series E stock. In addition, we are required
to pay an additional dividend equal to the higher of (a) two percent per year,
pro rated on the basis of twelve 30-day months and a 360-day year, for the
number of days that our common stock has a closing bid price that is less than
$2.25313 and (b) four percent per year, pro rated on the basis of twelve 30-day
months and a 360-day year, for the number of days that our common stock has a
closing bid price that is less than $1.12657.
Our board of directors has the authority to issue 500,000 shares of
additional preferred stock in one or more series and to fix the relative rights,
preferences, privileges, qualifications, limitations and restrictions, including
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption, redemption prices, liquidation preferences and the number of shares
constituting any series or the designation of such series, without further vote
or action by the stockholders. Our board of directors could, without the
approval of the stockholders, issue preferred stock having voting or conversion
rights that could adversely affect the voting power of the holders of common
stock, and the issuance of preferred stock could be used, under certain
circumstances, to render more difficult or discourage a hostile takeover of
PixTech. We have no present plans to issue any additional shares of preferred
stock.
Anti-Takeover Measures
In addition to the directors' ability to issue shares of preferred stock in
one or more series, our restated certificate of incorporation and by-laws
contain several other provisions that are commonly considered to have an
anti-takeover effect. Our restated certificate includes a provision classifying
our board of directors into three classes with staggered three-year terms, a
provision prohibiting stockholder action by written consent except as otherwise
provided by law and a provision requiring 70% stockholder approval for certain
acquisitions, including a merger consolidation, sale or other disposition of all
or substantially all of our assets, which has not been approved by a majority of
the independent members of our board of directors. Under our restated
certificate and by-laws, the directors may enlarge the size of our board and
fill any vacancies on the board. Our by-laws provide that nominations for
directors may not be made by stockholders at any annual or special meeting
unless the stockholder intending to make a nomination notifies us of its
intention a specified period in advance and furnishes certain information. Our
by-laws also provide that special meetings of our stockholders may be called
only by the President or the directors and require advance notice of business to
be brought by a stockholder before the annual meeting.
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<PAGE>
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, a law regulating corporate takeovers. In certain circumstances,
the Anti-Takeover Law prevents certain Delaware corporations, including those
whose securities are listed on the Nasdaq National Market, from engaging in a
"business combination" (which includes a merger or sale of more than ten percent
of the corporation's assets) with an "interested stockholder" (a stockholder who
owns 15% or more of the corporation's outstanding voting stock) for three years
following the date on which such stockholder became an "interested stockholder"
subject to certain exceptions, unless the transaction is approved by the board
of directors and the holders of at least 66 2/3% of the outstanding voting stock
of the corporation (excluding shares held by the interested stockholder). The
statutory ban does not apply if, upon consummation of the transaction in which
any person becomes an interested stockholder, the interested stockholder owns at
least 85% of the outstanding voting stock of the corporation (excluding shares
held by persons who are both directors and officers or by certain employee stock
plans). A Delaware corporation subject to the Anti-Takeover Law may "opt out" of
the Anti-Takeover Law with an express provision either in its certificate of
incorporation or by-laws resulting from a stockholders' amendment approved by at
least a majority of the outstanding voting shares; such an amendment is
effective following expiration of twelve months from adoption. We have not
"opted out" of the Anti-Takeover Law.
The provisions of the restated certificate of incorporation and by-laws and
Delaware law described above could have the effect of discouraging others from
attempting hostile takeovers of PixTech and, as a consequence, they may also
inhibit temporary fluctuations in the market price of our common stock that
might result from actual or rumored hostile takeover attempts. Such provisions
may also have the effect of preventing changes in our management. It is possible
that such provisions could make it more difficult to accomplish transactions
which stockholders may otherwise deem to be in their best interests.
Transfer Agent
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
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<PAGE>
PLAN OF DISTRIBUTION
To the extent required under the Securities Act, a supplemental prospectus
will be filed, disclosing (a) the name of any broker-dealers; (b) the number of
shares of common stock involved; (c) the price at which such common stock is to
be sold; (d) the commissions paid or discounts or concessions allowed to such
broker-dealers, where applicable; (e) that such broker- dealers did not conduct
any investigation to verify the information set out or incorporated by reference
in this prospectus, as supplemented; and (f) other facts material to the
transaction.
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the common stock may not simultaneously engage in
market making activities with respect to the securities for a period beginning
when the person becomes a distribution participant and ending upon the person's
completion of participation in a distribution, including stabilization
activities in the common stock to effect covering transactions, to impose
penalty bids or to effect passive market making bids. In addition and without
limiting the foregoing, in connection with transactions in the common stock,
PixTech and the selling stockholders will be subject to applicable provisions of
the Exchange Act and the rules and regulations under it, including, without
limitation, Rule 10b-5 and, insofar as PixTech and the selling stockholders are
distribution participants, Regulation M and Rules 100, 101, 102, 103, 104 and
105 thereof. All of the foregoing may affect the marketability of the common
stock.
Kingsbridge
We have been advised by Kingsbridge that it may sell the common stock from
time to time in transactions on the Nasdaq National Market (or any exchange
where the common stock is then listed) in negotiated transactions, or otherwise,
or by a combination of these methods, at fixed prices which may be changed, at
market prices at the time of sale, at prices related to market prices or at
negotiated prices. Kingsbridge may effect these transactions by selling the
common stock to or through broker-dealers, who may receive compensation in the
form of discounts, concessions or commissions from Kingsbridge or the purchasers
of the common stock for whom the broker-dealer may act as an agent or to whom it
may sell the common stock as a principal, or both. The compensation to a
particular broker-dealer may be in excess of customary commissions.
Kingsbridge is an "underwriter" within the meaning of the Securities Act in
connection with the sale of the common stock offered hereby. Assuming that we
are in compliance with the conditions of the equity line agreement, Kingsbridge
must accept puts of shares from us, subject to minimum and maximum aggregate
dollar amounts, during the term of the equity line agreement. Broker-dealers who
act in connection with the sale of the common stock may also be deemed to be
underwriters. Profits on any resale of the common stock as a principal by such
broker-dealers and any commissions received by such broker-dealers may be deemed
to be underwriting discounts and commissions under the Securities Act. Any
broker-dealer participating in such transactions as agent may receive
commissions from Kingsbridge (and, if they act as agent for the purchaser of
such common stock, from such purchaser). Broker-dealers may agree with
Kingsbridge to sell a specified number of shares of common stock at a stipulated
price per share, and, to the extent such a broker- dealer is unable to do so
acting as agent for Kingsbridge, to purchase as principal any unsold common
stock at the price required to fulfill the
61
<PAGE>
broker-dealer commitment to Kingsbridge. Broker-dealers who acquire common stock
as principal may thereafter resell such common stock from time to time in
transactions (which may involve crosses and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market, in negotiated
transactions or otherwise at market prices prevailing at the time of sale or at
negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such common stock commissions computed as described
above.
Kingsbridge will pay all commissions and certain other expenses associated
with the sale of the common stock. The common stock offered hereby is being
registered pursuant to our contractual obligations, and we have agreed to pay
the costs of registering the shares hereunder, including legal fees up to a
maximum of $5,000, commissions, transfer taxes and certain other expenses for
resale of the common stock. We have also agreed to indemnify Kingsbridge with
respect to the common stock offered hereby against certain liabilities,
including, without limitation, certain liabilities under the Securities Act, or,
if such indemnity is unavailable, to contribute toward amounts required to be
paid in respect of such liabilities.
We have also agreed to reimburse Kingsbridge costs and expenses incurred in
connection with this offering. These may include the fees, expenses and
disbursements of counsel for Kingsbridge the preparation of the equity line
agreement and associated documentation and the registration statement of which
this prospectus forms a part, up to a maximum of $5,000. In addition, we have
agreed to reimburse Kingsbridge for expenses incurred in obtaining insurance
against liability under the Securities Act of 1933 and Securities Exchange Act
of 1934, as amended, in an amount initially equal to 3% of each put amount.
The price at which the common stock will be issued by us to Kingsbridge
will be 88-90% of the market price, as defined in the equity line agreement, on
the date we issue shares. Assuming an offering price of $1.6875 per share (based
on the average of the high and low bid prices of the common stock as reported by
the Nasdaq National Market on September 8, 1999), a summary of our potential
expenses in connection with the equity line agreement is as follows:
o discount to Kingsbridge, $0.203;
o warrant to purchase 100,000 shares of common stock exercisable by
Kingsbridge at $2.30 per share;
o costs associated with the preparation of this prospectus,
approximately $90,000; and
o reimbursement for securities liability insurance equal to 3% of each
put amount.
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<PAGE>
Sumitomo
Sumitomo holds a note in the principal amount of $5,000,000, of which
$4,855,364 is outstanding as of August 31, 1999, which is convertible into our
common stock at a price equal to 80% of the market price on the date Sumitomo
decides to convert the note.
Sumitomo may offer the shares of common stock that it receives after
converting its note into shares of common stock, from time to time in
transactions in the over-the-counter market, on any exchange where the common
stock is then listed, with broker-dealers or third-parties other than in the
over-the-counter market or on an exchange (including in block sales), in
connection with short sales, in connection with writing call options or in other
hedging arrangements, or in transactions involving a combination of such
methods.
Sumitomo may sell its shares at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, at negotiated prices
or at fixed prices.
Sumitomo may use dealers, agents or underwriters to sell their shares.
Underwriters may use dealers to sell such shares. If this happens, the dealers,
agents or underwriters may receive compensation in the form of discounts or
commissions from the selling stockholders, purchasers of shares or both (which
compensation to a particular broker might be in excess of customary
compensation).
Sumitomo and any dealers, agents or underwriters that participate with
Sumitomo in the distribution of the shares may be deemed to be "underwriters" as
such term is defined in the Securities Act of 1933. Any commissions paid or any
discounts or concessions allowed to any such persons, and any profits received
on the resale of such shares of common stock offered by this prospectus, may be
deemed to be underwriting commissions or discounts under the Securities Act of
1933.
We have agreed to pay certain expenses of the offering and issuance of the
shares covered by this prospectus, including the printing, legal and accounting
expenses we incur and the registration and filing fees imposed by the SEC or the
Nasdaq National Market. We will not pay brokerage commissions or taxes
associated with sales by Sumitomo or any legal, accounting and other expenses of
Sumitomo.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, a registration statement on Form S-1 under the Securities Act with
respect to the shares of common stock offered by this prospectus. This
prospectus does not contain all of the information set forth in the registration
statement and the exhibits and schedules thereto. For further information with
respect to PixTech and the common stock offered by this prospectus, refer to the
registration statement and the accompanying exhibits and schedules. Statements
contained in this prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each instance you
should refer to the copy of the contract or other document filed as an exhibit
to the registration statement. A copy of the registration statement may be
inspected without charge at the offices of the SEC in Washington, D.C. 20549,
and copies of all or any part of the registration statement may be obtained from
the Public Reference Section of the SEC, Washington, D.C. 20549 upon the payment
of the fees prescribed by the SEC. The SEC maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants, such as us, that file electronically
with the Commission. We also maintain a web site (http://www.pixtech.com).
64
<PAGE>
LEGAL MATTERS
Palmer & Dodge LLP, Boston, Massachusetts, counsel to PixTech, is giving
PixTech an opinion on the validity of the shares covered by this prospectus.
Michael Lytton, a partner at Palmer & Dodge LLP, is our Secretary.
EXPERTS
Ernst & Young, independent auditors, have audited our consolidated
financial statements as of December 31, 1998 and 1997, and for the three years
in the period ended December 31, 1998, and for the period from June 18, 1992
(inception) to December 31, 1998, as set forth in their report (which contain an
explanatory paragraph describing conditions that raise substantial doubt about
the Company's ability to continue as a going concern). We have included our
financial statements in the Prospectus and elsewhere in the registraiton
statement in reliance on Ernst & Young's report, given on their authority as
experts in accounting and auditing.
65
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page(s)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<S> <C>
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year ended December 31, 1998 .......................................... F-2
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six Months ended June 30, 1999 ........................................ F-3
Notes to Unaudited Pro Forma Condensed Consolidated
Statements of Operations .............................................. F-4
PIXTECH, INC
Report of Independent Auditors ............................................. F-5
Consolidated Balance Sheets ................................................ F-6
Consolidated Statements of Comprehensive Operations ........................ F-7
Consolidated Statements of Stockholders' Equity ............................ F-8
Consolidated Statements of Cash Flows ...................................... F-10
Notes to Consolidated Financial Statements ................................. F-11
</TABLE>
F-1
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(all amounts in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
PixTech PixTech
Year Pro Forma Year
Ended Adjustments Ended
--------- ----------- ----------
December December
31, 1998 (Note B) 31, 1998
--------- ----------- ----------
<S> <C> <C> <C>
Revenues
Cooperation and license revenues .................................. $ 1,239 $ -- $ 1,239
Product sales ..................................................... 445 -- 445
Other revenues .................................................... 1,968 -- 1,968
-------- -------- --------
Total revenues ............................................ 3,652 -- 3,652
-------- -------- --------
Cost of revenues
License fees and royalties ........................................ 24 -- 24
-------- -------- --------
Gross margin ............................................................ 3,676 -- 3,676
-------- -------- --------
Operating expenses
Research and development .......................................... (19,414) (8,256) (27,670)
Marketing and sales ............................................... (1,433) (431) (1,864)
Administrative and general expenses ............................... (2,515) (431) (2,946)
-------- -------- --------
(23,362) (9,117) (32,479)
-------- -------- --------
Loss from operations .................................................... (19,686) (9,117) (28,803)
Other income / (expense)
Interest income (expense) net ..................................... (708) (6) (714)
Foreign exchange gains / (losses) ................................. 372 -- 372
-------- -------- --------
(336) (6) (342)
Loss before income tax benefit .......................................... (20,022) (9,123) (29,145)
Income tax benefit ...................................................... 2,159 -- 2,159
-------- -------- --------
Net loss ................................................................ $(17,863) $ (9,123) $(26,986)
======== ======== ========
Dividend accrued to holders of Preferred Stock .......................... (12) -- (12)
-------- -------- --------
Net loss to holders of Common Stock ..................................... $(17,875) $ (9,123) $(26,998)
Net loss per share of Common Stock ................................ $ (1.23) $ (1.25)
Shares of Common Stock used in computing net loss per share ....... 14,548 21,681
</TABLE>
See accompanying notes.
F-2
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(all amounts in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
PixTech PixTech
Six Months Pro Forma Six Months
Ended Adjustments Ended
---------- ----------- ----------
June 30, June 30,
1999 (Note B) 1999
---------- ----------- ----------
<S> <C> <C> <C>
Revenues
Cooperation and license revenues ................................. $ -- $ -- $ --
Product sales .................................................... 339 -- 339
Other revenues ................................................... 2,314 -- 2,314
-------- -------- --------
Total revenues ........................................... 2,653 -- 2,653
-------- -------- --------
Cost of revenues
License fees and royalties ....................................... (172) -- (172)
-------- -------- --------
Gross margin ........................................................... 2,481 -- 2,481
-------- -------- --------
Operating expenses
Research and development ......................................... (12,203) (3,388) (15,591)
Marketing and sales .............................................. (680) (151) (831)
Administrative and general expenses .............................. (1,502) (151) (1,653)
-------- -------- --------
(14,385) (3,691) (18,076)
-------- -------- --------
Loss from operations ................................................... (11,904) (3,691) (15,595)
Other income / (expense)
Interest income (expense) net .................................... (364) 14 (350)
Foreign exchange gains / (losses) ................................ (1,137) -- (1,137)
-------- -------- --------
(1,501) 14 (1,487)
Loss before income tax benefit ......................................... (13,405) (3,678) (17,083)
Income tax benefit ..................................................... -- -- --
-------- -------- --------
Net loss ............................................................... $(13,405) $ (3,678) $(17,083)
======== ======== ========
Dividend accrued to holders of Preferred Stock ......................... (299) -- (299)
-------- -------- --------
Net loss to holders of Common Stock .................................... $(13,704) $ (3,678) $(17,382)
Net loss per share of Common Stock ............................... $ (0.80) $ (0.77)
Shares of Common Stock used in computing net loss per share ...... 16,816 22,294
</TABLE>
See accompanying notes.
F-3
<PAGE>
Notes to Pro Forma Condensed Consolidated Statements of Operations
(all amounts in thousands except share amounts)
(unaudited)
Note A - Basis of presentation
The accompanying unaudited pro forma condensed statements of operations reflect
the acquisition of certain assets of Micron Technology, Inc. ("Micron ")
relating to field emission displays including equipment and other tangible
assets, certain contract rights and cash (the "Micron Assets Acquisition"). The
Micron Assets Acquisition was closed on May 19, 1999 between the Company and
Micron.
These unaudited pro forma condensed statements of operations were derived from
PixTech's audited and unaudited statements of operations for the year ended
December 31, 1998 and for the six-month period ended June 30, 1999,
respectively. The unaudited pro forma condensed consolidated statements of
operations for the year ended December 31, 1998 and for the six-month period
ended June 30, 1999 give effect to the Micron Assets Acquisition as if it had
occurred at the beginning of the period.
The pro forma adjustments for the Micron Assets Acquisition are based upon the
allocation of total cost to the assets acquired and certain operating costs
associated with the acquired assets. The unaudited pro forma condensed
consolidated financial information does not purpose to represent the results of
operations of PixTech that actually would have resulted had the Micron Assets
Acquisition occurred as of the dates indicated, nor should it be taken as
indicative of the future results of operations of PixTech.
It is suggested that these pro forma condensed consolidated statements of
operations be read in conjunction with the historical consolidated financial
statements and footnotes thereto contained herein.
Note B - Pro Forma Condensed Consolidated Statements of Operations - Pro Forma
Adjustments
The unaudited pro forma condensed consolidated statements of operations for the
year ended December 31, 1998 and for the six months ended June 30, 1999 reflect
ongoing expenses associated with Micron Assets Acquisition, as if such assets
had been acquired at the beginning of the periods presented.
These expenses primarily relate to additional research and development personnel
costs in the amount of $2,797 and $1,145, and additional depreciation expense of
the acquired assets of $3,342 and $1,454, respectively for the year ended
December 31, 1998 and for the six months ended June 30, 1999. These expenses
also relate to additional marketing and sales and administrative and general
personnel costs totaling $539 and $157, respectively for the year ended December
31, 1998 and for the six months ended June 30, 1999.
F-4
<PAGE>
INDEPENDENT AUDITORS REPORT
The Board of Directors and Shareholders
PixTech, Inc.
We have audited the accompanying consolidated balance sheets of PixTech,
Inc. (a development stage company) as of December 31, 1997 and 1998 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for the period from June 18, 1992 (date of inception) through December 31,
1998, and for each of the three years in the period ended December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
PixTech, Inc. (a development stage company) as of December 31, 1997 and 1998 and
the consolidated results of its operations and its cash flows for the period
June 18, 1992 (date of inception) through December 31, 1998 and for each of the
three years in the period ended December 31, 1998 in conformity with accounting
principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 19 to the
Financial Statements, the Company has suffered recurring losses from operations
and its financial position raises substantial doubt about its ability to
continue as a going concern. As discussed in note 19 to the Financial
Statements, the Financial Statements do not include any adjustments that might
result from the outcome of this uncertainty.
ERNST & YOUNG AUDIT
REPRESENTED BY: CHRISTINE BLANC-PATIN
Marseilles, France
February 03, 1999
F-5
<PAGE>
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, December 31, June 30, 1999
1997 1998 (unaudited)
----------- ----------- -------------
ASSETS
<S> <C> <C> <C>
Current assets :
Cash & cash equivalent available .......................................... $ 12,428 $ 10,166 $ 7,017
Restricted cash - short term .............................................. 1,259 1,685 2,097
Accounts receivable :
Trade ............................................................... 953 456 213
Other ............................................................... 82 161 109
Inventory ................................................................. 702 980 1,348
Other ..................................................................... 2,166 1,354 1,377
-------- -------- --------
Total current assets .............................................. 17,590 14,802 12,161
Restricted cash - long term ..................................................... 8,816 8,427 6,695
Property, plant and equipment, net .............................................. 9,353 18,826 28,604
Goodwill, net ................................................................... 226 150 114
Deferred tax assets ............................................................. 5,058 4,643 1,287
Other assets - long term ........................................................ 605 546 204
-------- -------- --------
Total assets ...................................................... $ 41,648 $ 47,394 $ 49,065
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt ......................................... $ 1,364 $ 3,410 $ 4,807
Current portion of capital lease obligations .............................. 599 2,189 2,362
Accounts payable .......................................................... 5,053 7,514 7,037
Accrued expenses .......................................................... 1,284 1,544 2,505
-------- -------- --------
Total current liabilities ......................................... 8,300 14,657 16,711
Deferred revenue ................................................................ 2,546 2,162 79
Long term debt, less current portion ............................................ 11,024 8,391 10,075
Capital lease obligation, less current portion .................................. 441 8,399 8,565
Other long term liabilities, less current portion ............................... 557 528 46
-------- -------- --------
Total liabilities ................................................. 22,868 34,137 35,476
======== ======== ========
Stockholders' equity
Convertible preferred stock Series E, $0.01 par value, authorized
shares--500,000; issued and outstanding
shares--none; 367,269, 367,269 respectively ............................ -- 4 4
Common stock, $0.01 par value, authorized shares--30,000,000;
60,000,000 respectively, issued and
outstanding shares--13,762,732; 15,000,329, 22,352,918 respectively ............ 138 150 223
Additional paid-in capital .............................................. 57,067 68,999 83,450
Cumulative other comprehensive income.................................... (2,132) (1,740) (2,527)
Deficit accumulated during development stage ............................ (36,293) (54,156) (67,561)
-------- -------- --------
Total stockholders' equity ...................................... 18,780 13,257 13,589
-------- -------- --------
Total liabilities and stockholders' equity ...................... $ 41,648 $ 47,394 $ 49,065
======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended Six Months Ended Period
December 31, June 30, from June
----------------------------------- ----------------------- 18, 1992
(date of
inception)
through
June 30,
1996 1997 1998 1998 1999 1999
------- ------- ------- ------- ------- --------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenues
Cooperation & license revenues ........... $ 5,440 $ 1,932 $ 1,239 $ 1,001 $ -- $ 26,449
Product sales ............................ 791 745 445 87 339 3,165
Other revenues ........................... 1,413 1,142 1,968 1,543 2,314 8,220
------- ------- ------- ------- ------- --------
Total revenues ................... 7,644 3,819 3,652 2,631 2,653 37,834
------- ------- ------- ------- ------- --------
Cost of revenues
License fees and royalties ............... (45) (181) 24 (201) (172) (1,688)
------- ------- ------- ------- ------- --------
Gross margin ................................... 7,599 3,638 3,676 2,430 2,481 36,146
------- ------- ------- ------- ------- --------
Operating expenses
Research and development:
Acquisition of intellectual
property rights ................... -- -- (125) (125) -- (4,890)
Other ............................... (15,848) (15,497) (19,289) (8,353) (12,203) (84,731)
------- ------- ------- ------- ------- --------
(15,848) (15,497) (19,414) (8,478) (12,203) (89,621)
Marketing & sales ........................ (1,089) (1,496) (1,433) (693) (680) (7,287)
Administrative & general expenses ........ (2,703) (2,419) (2,515) (1,223) (1,502) (14,318)
------- ------- ------- ------- ------- --------
(19,640) (19,412) (23,362) (10,394) (14,385) (111,226)
------- ------- ------- ------- ------- --------
Loss from operations ........................... (12,041) (15,774) (19,686) (7,964) (11,904) (75,080)
Other income / (expense)
Interest income .......................... 428 759 828 464 471 3,319
Interest expense ......................... (362) (289) (1,536) (718) (835) (3,582)
Foreign exchange gains / (losses) ........ 256 54 372 709 (1,137) (111)
------- ------- ------- ------- ------- --------
322 524 (336) 455 (1,501) (374)
Loss before income tax benefit ................. (11,719) (15,250) (20,022) (7,509) (13,405) (75,454)
Income tax benefit ............................. -- 586 2,159 -- -- 7,893
Net loss ....................................... $ (11,719) $ (14,664) $ (17,863) $ (7,509) $ (13,405) $ (67,561)
========= ========= ========= ========= ========= =========
Dividend accrued to holders of Preferred
Stock ...................................... -- -- (12) -- (299) (311)
Net loss to holders of Common Stock ............ $ (11,719) $ (14,664) $ (17,875) $ (7,509) $ (13,704) $ (67,872)
========= ========= ========= ========= ========= =========
Net loss per share of Common Stock ....... $ (1.44) $ (1.12) $ (1.23) $ (0.53) $ (0.80)
========= ========= ========= ========= =========
Shares of Common Stock used in
computing net loss per share ............. 8,137 13,140 14,548 14,301 16,816
Net loss ....................................... $ (11,719) $ (14,664) $ (17,863) $ (7,509) $ (13,405) $ (67,561)
Change in other comprehensive income............ (953) (1,694) 392 (213) (787) (2,527)
Comprehensive net loss ......................... $ (12,672) $ (16,358) $ (17,471) $ (7,722) $ (14,192) $ (70,088)
</TABLE>
See accompanying notes.
F-7
<PAGE>
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 in 1992, 1993 and 1994 ........ 1,557,003 2,368 363,447 589
Issuance of Common stock in 1992 and 1993 .............
Issuance of Common stock under stock option plan
in 1994 and 1995 Purchase of 28,761 shares of
Common stock-- Treasury stock in 1994 ...............
Reissuance of 28,761 shares of Common stock
held in treasury in 1995 ............................
Common stock issued in initial public offering
in 1995, net of issuance costs -- $1,080 ............
Conversion of preferred stock in 1995 ................. (1,557,003) (2,368) (363,447) (589)
Translation adjustment ................................
Net loss from June 18, 1992 (date of inception)
through 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, net of issuance
costs -- $ 796 ....................................
Issuance of Common stock under stock option plan ......
Translation adjustment ................................
Net loss--Year ended December 31, 1997 ................
---------- ---------- ---------- ----------
Balance at December 31, 1997
Common stock issued in private placements, net
of issuance costs -- $44
Issuance of Series E convertible preferred stock,
net of issuance costs -- $ 822 .........................
Issuance of Common stock under stock option plan ......
Translation adjustment ................................
Net loss--Year ended December 31, 1998 ................
---------- ---------- ---------- ----------
Balance at December 31, 1998 .............................
Common stock issued in private placements (unaudited)..
Issuance costs and dividends accrued in relation
to Series E Convertible Preferred stock issued
in December 1998 (unaudited) ........................
Issuance of common stock in connection with the
acquisition of certain assets of Micron Display,
net of issuance costs -- $493 (unaudited) ...........
Issuance of warrants in connection with the
acquisition of certain assets of Micron
Display (unaudited) .................................
Issuance of common stock under stock
option plan (unaudited) .............................
Translation adjustment (unaudited) ....................
Net loss-- Six months ended June 30, 1999 (unaudited)..
---------- ---------- ---------- ----------
Balance at June 30, 1999 (unaudited) ..................... -- -- -- --
========== ========== ========== ==========
<CAPTION>
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 in 1992, 1993 and 1994 ........ 3,044,846 8,615 430,208 1,224
Issuance of Common stock in 1992 and 1993 .............
Issuance of Common stock under stock option plan
in 1994 and 1995 Purchase of 28,761 shares of
Common stock-- Treasury stock in 1994 ...............
Reissuance of 28,761 shares of Common stock
held in treasury in 1995 ............................
Common stock issued in initial public offering
in 1995, net of issuance costs -- $1,080 ............
Conversion of preferred stock in 1995 ................. (3,044,846) (8,615) (430,208) (1,224)
Translation adjustment ................................
Net loss from June 18, 1992 (date of inception)
through 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, net of issuance
costs -- $ 796 ....................................
Issuance of Common stock under stock option plan ......
Translation adjustment ................................
Net loss--Year ended December 31, 1997 ................
---------- ---------- ---------- ----------
Balance at December 31, 1997
Common stock issued in private placements, net
of issuance costs -- $44
Issuance of Series E convertible preferred stock,
net of issuance costs -- $ 822 .........................
Issuance of Common stock under stock option plan ......
Translation adjustment ................................
Net loss--Year ended December 31, 1998 ................
---------- ---------- ---------- ----------
Balance at December 31, 1998 .............................
Common stock issued in private placements (unaudited)..
Issuance costs and dividends accrued in relation
to Series E Convertible Preferred stock issued
in December 1998 (unaudited) ........................
Issuance of common stock in connection with the
acquisition of certain assets of Micron Display,
net of issuance costs -- $493 (unaudited) ...........
Issuance of warrants in connection with the
acquisition of certain assets of Micron
Display (unaudited) .................................
Issuance of common stock under stock
option plan (unaudited) .............................
Translation adjustment (unaudited) ....................
Net loss-- Six months ended June 30, 1999 (unaudited)..
---------- ---------- ---------- ----------
Balance at June 30, 1999 (unaudited) ..................... -- -- -- --
========== ========== ========== ==========
<CAPTION>
Series E
--------
Shares
issued Amount
------ ------
Balance at June 18, 1992
Issuance of convertible preferred stock,
net of issuance costs in 1992, 1993 and 1994 ........
Issuance of Common stock in 1992 and 1993 .............
Issuance of Common stock under stock option plan
in 1994 and 1995 Purchase of 28,761 shares of
Common stock-- Treasury stock in 1994 ...............
Reissuance of 28,761 shares of Common stock
held in treasury in 1995 ............................
Common stock issued in initial public offering
in 1995, net of issuance costs -- $1,080 ............
Conversion of preferred stock in 1995 .................
Translation adjustment ................................
Net loss from June 18, 1992 (date of inception)
through 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, net of issuance
costs -- $ 796 ....................................
Issuance of Common stock under stock option plan ......
Translation adjustment ................................
Net loss--Year ended December 31, 1997 ................
---------- ----------
Balance at December 31, 1997
Common stock issued in private placements, net
of issuance costs -- $44
Issuance of Series E convertible preferred stock,
net of issuance costs -- $ 822 ......................... 367,269 $ 4
Issuance of Common stock under stock option plan ......
Translation adjustment ................................
Net loss--Year ended December 31, 1998 ................
---------- ----------
Balance at December 31, 1998 ............................. 367,269 4
Common stock issued in private placements (unaudited)..
Issuance costs and dividends accrued in relation
to Series E Convertible Preferred stock issued
in December 1998 (unaudited) ........................
Issuance of common stock in connection with the
acquisition of certain assets of Micron Display,
net of issuance costs -- $493 (unaudited) ...........
Issuance of warrants in connection with the
acquisition of certain assets of Micron
Display (unaudited) .................................
Issuance of common stock under stock
option plan (unaudited) .............................
Translation adjustment (unaudited) ....................
Net loss-- Six months ended June 30, 1999 (unaudited)..
---------- ----------
Balance at June 30, 1999 (unaudited) ..................... 367,269 $ 4
========== ==========
</TABLE>
See accompanying notes.
F-8
<PAGE>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (Continued)
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock
------------
Additional
Shares Paid-in
issued Amount Capital
------- ------ -------
<S> <C> <C> <C>
Balance at June 18, 1992
Issuance of convertible preferred stock, net of issuance
costs in 1992, 1993 and 1994...........................................
Issuance of Common stock in 1992 and 1993................................. 132,301 $ 1 $ 96
Issuance of Common stock under stock option plan in 1994 and 1995 84,258 1 31
Purchase of 28,761 shares of Common stock-- Treasury
stock in 1994..............................................................
Reissuance of 28,761 shares of Common stock held in treasury in 1995...... 3
Common stock issued in initial public offering in 1995, net
of issuance costs -- $1,080............................................. 2,500,000 25 20,973
Conversion of preferred stock in 1995..................................... 5,395,504 54 12,742
Translation adjustment....................................................
Net loss from June 18, 1992 (date of inception) through December
31, 1995. 3
---------- ------ -------
Balance at December 31, 1995 8,112,063 81 33,844
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....................................................
Net loss--Year ended December 31, 1996 ..................................
---------- ------ -------
Balance at December 31, 1996 8,141,146 81 34,085
Common stock issued in public offering, net of issuance
costs -- $ 796.. 5,570,819 56 22,958
Issuance of Common stock under stock option plan.......................... 50,767 1 25
Translation adjustment....................................................
Net loss--Year ended December 31, 1997....................................
---------- ------ -------
Balance at December 31, 1997 13,762,732 $138 $57,067
Common stock issued in private placements, net of issuance
costs -- $ 44 1,236,222 12 4,493
Issuance of Series E convertible preferred stock,
net of issuance costs -- $ 822 7,449
Issuance of Common stock under stock option plan.......................... 1,375 1
Translation adjustment ...................................................
Net loss--Year ended December 31, 1998....................................
---------- ------ -------
Balance at December 31, 1998 15,000,329 150 69,011
Common stock issued in private placements (unaudited) 150,000 1 351
Issuance costs and dividends accrued in relation to Series
E Convertible Preferred stock issued in December 1998 (unaudited)....... (36)
Issuance of common stock in connection with the acquisition of certain
assets of Micron Display, net of issuance costs -- $493 (unaudited).......... 7,133,562 71 14,152
Issuance of warrants in connection with the acquisition of
certain assets of
Micron Display (unaudited)................................................... 257
Issuance of common stock under stock option plan (unaudited)............. 69,027 1 26
Translation adjustment (unaudited)........................................
Net loss--Six months ended June 30, 1999 (unaudited)......................
---------- ------ -------
Balance at June 30, 1999 (unaudited) 22,352,918 $223 $83,761
=========== ==== ========
<CAPTION>
Dividends Deficit
accrued to accumulated
holders of Other during
Preferred Comprehensive development
Stock Income stage
----- ---------- -----
<S> <C> <C> <C>
Balance at June 18, 1992
Issuance of convertible preferred stock, net of issuance
costs in 1992, 1993 and 1994...........................................
Issuance of Common stock in 1992 and 1993.................................
Issuance of Common stock under stock option plan in 1994 and 1995
Purchase of 28,761 shares of Common stock-- Treasury
stock in 1994..............................................................
Reissuance of 28,761 shares of Common stock held in treasury in 1995......
Common stock issued in initial public offering in 1995, net
of issuance costs -- $1,080.............................................
Conversion of preferred stock in 1995.....................................
Translation adjustment.................................................... $ 515
Net loss from June 18, 1992 (date of inception) through December
31, 1995. $ (9,910)
---------- ------ -------
Balance at December 31, 1995 515 (9,910)
Issuance of Common stock under stock option plan..........................
Issuance of warrants in connection with
acquisition of the assets of Panocorp
Translation adjustment.................................................... (953)
Net loss--Year ended December 31, 1996 .................................. (11,719)
---------- ------ -------
Balance at December 31, 1996 (438) (21,629)
Common stock issued in public offering, net of issuance
costs -- $ 796..
Issuance of Common stock under stock option plan..........................
Translation adjustment.................................................... (1,694)
Net loss--Year ended December 31, 1997.................................... (14,664)
---------- ------ -------
Balance at December 31, 1997 $(2,132) $(36,293)
Common stock issued in private placements, net of issuance
costs -- $ 44
Issuance of Series E convertible preferred stock,
net of issuance costs -- $ 822 (12)
Issuance of Common stock under stock option plan..........................
Translation adjustment ................................................... 392
Net loss--Year ended December 31, 1998.................................... (17,863)
---------- ------ -------
Balance at December 31, 1998 (12) (1,740) (54,156)
Common stock issued in private placements (unaudited)
Issuance costs and dividends accrued in relation to Series
E Convertible Preferred stock issued in December 1998 (unaudited)....... (299)
Issuance of common stock in connection with the acquisition of certain
assets of Micron Display, net of issuance costs -- $493 (unaudited)..........
Issuance of warrants in connection with the acquisition of
certain assets of
Micron Display (unaudited)...................................................
Issuance of common stock under stock option plan (unaudited).............
Translation adjustment (unaudited)........................................ (787)
Net loss--Six months ended June 30, 1999 (unaudited)...................... (13,405)
---------- ------ -------
Balance at June 30, 1999 (unaudited) (311) $(2,527) $(67,561)
========== ======= =======
<CAPTION>
Treasury
stock Total
----- -----
<S> <C> <C>
Balance at June 18, 1992
Issuance of convertible preferred stock, net of issuance
costs in 1992, 1993 and 1994........................................... $12,796
Issuance of Common stock in 1992 and 1993................................. 97
Issuance of Common stock under stock option plan in 1994 and 1995 32
Purchase of 28,761 shares of Common stock-- Treasury
stock in 1994.............................................................. $(11) (11)
Reissuance of 28,761 shares of Common stock held in treasury in 1995...... 11 14
Common stock issued in initial public offering in 1995, net
of issuance costs -- $1,080............................................. 20,998
Conversion of preferred stock in 1995.....................................
Translation adjustment.................................................... 515
Net loss from June 18, 1992 (date of inception) through December
31, 1995. (9,910)
---------- --------
Balance at December 31, 1995 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)
---------- --------
Balance at December 31, 1996 12,099
Common stock issued in public offering, net of issuance
costs -- $ 796.. 23,014
Issuance of Common stock under stock option plan.......................... 25
Translation adjustment.................................................... (1,694)
Net loss--Year ended December 31, 1997.................................... (14,664)
---------- --------
Balance at December 31, 1997 $18,780
Common stock issued in private placements, net of issuance
costs -- $ 44 4,506
Issuance of Series E convertible preferred stock,
net of issuance costs -- $ 822 7,440
Issuance of Common stock under stock option plan.......................... 1
Translation adjustment ................................................... 392
Net loss--Year ended December 31, 1998.................................... (17,863)
---------- --------
Balance at December 31, 1998 13,257
Common stock issued in private placements (unaudited) 352
Issuance costs and dividends accrued in relation to Series
E Convertible Preferred stock issued in December 1998 (unaudited)....... (335)
Issuance of common stock in connection with the acquisition of certain
assets of Micron Display, net of issuance costs -- $493 (unaudited).......... 14,223
Issuance of warrants in connection with the acquisition of
certain assets of
Micron Display (unaudited)................................................... 257
Issuance of common stock under stock option plan (unaudited)............. 27
Translation adjustment (unaudited)........................................ (787)
Net loss--Six months ended June 30, 1999 (unaudited)...................... (13,405)
---------- --------
Balance at June 30, 1999 (unaudited) -- $13,589
========== =======
</TABLE>
See accompanying notes.
F-9
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Operating activities
Net loss .............................................................. $(11,719) $(14,664) $(17,863)
Adjustments to reconcile net loss to net cash (used) by
operating activities:
Depreciation and amortization ......................................... 3,934 3,741 4,359
Gain on disposal of fixed assets ...................................... (31) -- (12)
Deferred taxes ........................................................ (53) -- 680
"in kind" transactions .............................................. -- -- --
Change in assets and liabilities
Accounts receivable--Trade ........................................ 3,749 672 337
Accounts receivable--Other ........................................ (21) 102 (75)
Inventory ......................................................... (393) (28) (223)
Other assets ...................................................... (280) 115 996
Accounts payable, accrued expenses and other
assets and liabilities (634) 983 2,948
Deferred revenue .................................................. 300 (297) (490)
-------- -------- --------
Net cash used in operating activities ................................. (5,148) (9,376) (9,343)
-------- -------- --------
Investing activities
Additions to property, plant, and equipment ........................... (5,866) (1,165) (1,860)
Reclassification of cash equivalents as restricted cash ............... -- (10,080) (32)
Additions to patents .................................................. (130) -- --
-------- -------- --------
Net cash used in investing activities ................................. (5,996) (11,245) (1,892)
Financing activities
Stock issued .......................................................... 3 21,639 11,906
Proceeds from long-term borrowings .................................... 97 10,000 --
Proceeds from sale leaseback transactions ............................. -- -- --
Payments for equipment purchases financed by accounts
payable ........................................................... (997) -- --
Repayment of long-term borrowings ..................................... (215) (787) (739)
Repayment of capital lease obligations ................................ (876) (576) (1,695)
-------- -------- --------
Net cash provided by (used in) financing activities ................... (1,988) 30,276 9,472
Effect of exchange rates on cash ...................................... (165) (1,493) (499)
-------- -------- --------
Net increase / (decrease) in cash equivalents ......................... (13,297) 8,162 (2,262)
Cash and cash equivalents beginning of period ............................. 17,563 4,266 12,428
-------- -------- --------
Cash and cash equivalents end of period ................................... $ 4,266 $ 12,428 $ 10,166
======== ======== ========
Supplemental disclosures of non cash activities:
Equipment acquired under capitalized leases ............................... -- -- $ 12,048
Equipment purchases financed by accounts payable .......................... -- -- --
Licenses acquired payable over two or three years ......................... -- -- --
Acquisitions of intangible by issuance of warrants ........................ $ 230 -- --
Fixed assets disposed of in like-kind exchange ............................ $ 468 -- --
Fixed assets acquired through like-kind exchange .......................... $ 499 -- --
Supplemental disclosures of cash flow information:
Interest paid ............................................................. $ 52 $ 184 $ 729
<CAPTION>
Period from
June 18, 1999
(date of
inception)
Six months ended through
June 30, June 30,
1998 1999 1999
---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C>
Operating activities
Net loss .............................................................. $ (7,509) $(13,405) $(67,561)
Adjustments to reconcile net loss to net cash (used) by
operating activities:
Depreciation and amortization ......................................... 1,830 2,980 18,905
Gain on disposal of fixed assets ...................................... (12) -- (43)
Deferred taxes ........................................................ 1,693 -- (4,483)
"in kind" transactions .............................................. -- -- 1,420
Change in assets and liabilities
Accounts receivable--Trade ........................................ (638) 242 (102)
Accounts receivable--Other ........................................ (38) 26 346
Inventory ......................................................... (94) (232) (1,250)
Other assets ...................................................... 1,290 2,995 2,427
Accounts payable, accrued expenses and other
assets and liabilities 1,864 1,113 9,760
Deferred revenue .................................................. (1,474) (1,993) 297
-------- -------- --------
Net cash used in operating activities ................................. (3,088) (8,274) (40,284)
-------- -------- --------
Investing activities
Additions to property, plant, and equipment ........................... (602) (396) (19,716)
Reclassification of cash equivalents as restricted cash ............... -- 1,299 (8,813)
Additions to patents .................................................. -- -- (130)
-------- -------- --------
Net cash used in investing activities ................................. (602) 903 (28,659)
Financing activities
Stock issued .......................................................... 3,980 4,198 71,702
Proceeds from long-term borrowings .................................... -- -- 16,287
Proceeds from sale leaseback transactions ............................. -- -- 2,731
Payments for equipment purchases financed by accounts
payable ........................................................... -- -- (3,706)
Repayment of long-term borrowings ..................................... (232) -- (3,815)
Repayment of capital lease obligations ................................ (2,374) (360) (4,362)
-------- -------- --------
Net cash provided by (used in) financing activities ................... 1,373 3,838 78,837
Effect of exchange rates on cash ...................................... (229) 384 (2,877)
-------- -------- --------
Net increase / (decrease) in cash equivalents ......................... (2,546) (3,149) 7,017
Cash and cash equivalents beginning of period ............................. 12,428 10,166 --
-------- -------- --------
Cash and cash equivalents end of period ................................... $ 9,882 $ 7,017 $ 7,017
======== ======== ========
Supplemental disclosures of non cash activities:
Equipment acquired under capitalized leases ............................... $ 10,596 $ 679 $ 13,257
Equipment purchases financed by accounts payable .......................... -- -- $ 920
Licenses acquired payable over two or three years ......................... -- -- $ 3,765
Acquisitions of intangible by issuance of warrants ........................ -- -- $ 230
Fixed assets disposed of in like-kind exchange ............................ -- -- $ 468
Fixed assets acquired through like-kind exchange .......................... -- -- $ 499
Supplemental disclosures of cash flow information:
Interest paid ............................................................. $ 592 $ 728 $ 925
</TABLE>
See accompanying notes.
F-10
<PAGE>
Notes to Consolidated Financial Statements
(Information as of and for the six months
ended June 30, 1998 and 1999 is unaudited)
(all amounts in thousands except share amounts)
1. Organization and Business Activity
PixTech, Inc. was incorporated under the laws of Delaware on October 27,
1993. On November 30, 1993, PixTech, Inc. acquired 100% beneficial ownership of
PixTech S.A., through a share exchange agreement. PixTech S.A. was incorporated
under the laws of France on June 18, 1992. For accounting purposes, the
acquisition has been treated as a recapitalization of PixTech S.A. As used
herein, "the Company" refers to PixTech, Inc. and PixTech S.A.
The Company was founded to improve, utilize and license certain background
technology developed by Laboratoire Electronique de Technologie et
d'Instrumentation ("LETI"), a French government-owned research and development
laboratory in the field of flat panel displays using electron emitters, known as
field emission displays ("FEDs").
The Company has devoted substantially all its efforts to raising capital,
conducting research and development activities, concluding cooperation and
license agreements with certain displays manufacturers, and establishing
manufacturing capabilities for its FEDs. Revenues from principal planned
operations will mainly consist of product sales. As these revenues have not
commenced, PixTech, Inc. is still in a development stage and falls under the
provisions of FAS No. 7 "Accounting and Reporting by Development Stage
Enterprises".
2. Summary of the Significant Accounting Policies
Basis of presentation
The accompanying consolidated financial statements were prepared in
accordance with generally accepted accounting principles in the United States.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities, at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Principles of consolidation
The consolidated financial statements include the accounts of PixTech, Inc.
and its wholly owned subsidiary PixTech S.A. Intercompany accounts and
transactions have been eliminated in consolidation.
Fiscal Year
The Company ends its fiscal year on December 31.
Interim Financial information
The financial information as of June 30, 1999 and for the six months ended
June 30, 1998 and 1999 is unaudited but includes all adjustments consisting only
of normal recurring entries that management considers necessary for fair
presentation. Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for any future
period. The unaudited financial statements as of June 30, 1999 and for the six
months ended June 30, 1998 and 1999 have been prepared in accordance with
genearally accepted accounting principles for intermim financial information.
Accordingly, they do not contain all disclosures required by generally accepted
accounting priciples for complete financial statements.
F-11
<PAGE>
Revenue recognition--Cooperation and License Agreements
The Company has entered into cooperation and license agreements with
certain displays manufacturers. Under these contracts, the Company shares
technology with such members through cross licensing provisions. Each contract
provides for certain fees and royalties to be paid to the Company. The Company
believes that each of the cooperation and license agreements are long-term
construction/production contracts pursuant to SOP 81-1 and that the criteria
have been satisfied to entitle the Company to partially recognize the revenue
under those contracts. Certain fees payable to the Company under these
agreements were milestone-related and were due in accordance with the terms of
each agreement when the milestone is achieved. Once paid, such fees are
irrevocable. The Company recognized this milestone-related revenue only when
each milestone had been fully performed, as agreed by the parties. Costs
incurred under these contracts were considered costs in the period incurred,
regardless of when related revenue is recognized.
Texas Instruments. The Company entered into a Cooperation and License
Agreement with Texas Instruments Incorporated on June 29, 1993. This Agreement
was terminated on July 15, 1996. In 1996, the Company recorded cooperation and
license revenues under this terminated agreement in the amount of $1,336.
Futaba Corporation. The Company entered into a Cooperation and License
Agreement with Futaba Corporation ("Futaba") on November 27, 1993 (the "Futaba
Agreement"). Pursuant to the Futaba Agreement, Futaba agreed to pay the Company
a license fee upon signing the agreement, which was recognized upon execution of
the agreement. Futaba also agreed to a technology transfer fee, payable to the
Company in three installments upon the occurrence of certain milestones, and an
additional fee payable annually upon the achievement of further product
development milestones. Finally, to the extent that Futaba successfully
incorporates the cross-licensed technology into its own products, Futaba must
make royalty payments in connection with the sale of products incorporating the
technology licensed by the Company. At that time, the Company will recognize
royalty revenues.
In order to reach certain specified milestones under the Futaba Agreement,
the Company performed certain services in the field of technology development.
In accordance with the Futaba Agreement, the milestone-related revenues were
recognized when certain milestone were achieved. The cooperation period between
the Company and Futaba expired in January 1997 and the Company will not record
any additional milestone based revenues in the future.
Raytheon Company. The Company entered into a Cooperation and License
Agreement with Raytheon Company ("Raytheon") on June 1, 1994 (the "Raytheon
Agreement"). Pursuant to the Raytheon Agreement, Raytheon agreed to pay the
Company a license fee payable in part upon the signing of the agreement and for
a specified number of months thereafter. Such license fee was recognized when
due. Raytheon also agreed to make two additional payments based on the
achievement of certain milestones. Raytheon also must make royalty payments in
connection with the sale of products incorporating technology licensed to it by
the Company.
In June 1997, the cooperation period between the Company and Raytheon was
extended for a period of two years but no revenue was associated with such
extension. To the extent that Raytheon successfully incorporates the
cross-licensed technology into its own products, the Company will recognize
royalty revenues as Raytheon sells the products. The Company believes that
Raytheon Company may have suspended its internal program to develop FEDs.
Motorola, Inc. The Company entered into a Cooperation and License Agreement
with Motorola, Inc. ("Motorola") on June 13, 1995 (the "Motorola Agreement").
Pursuant to the Motorola Agreement, Motorola agreed to pay the Company a license
fee upon signing the agreement, which was recognized upon execution of the
agreement. Motorola also agreed to a technology transfer fee, payable to the
Company upon the occurrence of certain milestones, and an additional technology
update fee payable annually over a period of three years. Finally, Motorola must
make royalty payments in connection with the sale of its own products
incorporating the technology licensed by the Company.
In order to reach certain of the specified milestones under the Motorola
Agreement, the Company performed services in the field of technology
development. In accordance with the Motorola Agreement, the milestone-related
payments were irrevocable when paid. Cash milestone-related revenues was
recognized when certain milestones were achieved.
F-12
<PAGE>
The cooperation period between the Company and Motorola expired in June
1998 and the Company will not record any additional milestone based revenues in
the future.
To the extent that Motorola successfully incorporates the cross-licensed
technology into its own products, the Company will recognize royalty revenues as
Motorola sells the products.
Revenue Recognition--Product Revenue
Product revenue is recognized upon shipment in the case of standard
deliveries, and upon acceptance by the customer in the case of first delivery of
a specified product.
Revenue Recognition--Grants
The Company recognizes revenue from unconditional grants received from
governmental agencies in the period granted. Revenue from conditional grants
received are recognized when all conditions outlined in the grant have been met.
Foreign Currency Translation
Assets and liabilities of PixTech S.A. are translated into U.S. dollar
equivalents at the rate of exchange in effect on the balance sheet date; income
and expenses are translated at the average rates of exchange prevailing during
the period. The related translation adjustments are reflected in stockholders'
equity. Foreign currency gains or losses resulting from transactions are
included in results of operations, except for transaction gains and losses
attributable to intercompany transactions, and for foreign currency transactions
or cash balances that hedge foreign currency commitments; such transactions and
cash balances are recorded in the same manner as translation adjustments, as
recommended by the Statement of Financial Accounting Standards No 52, "Foreign
currency translation" ("SFAS 52").
Net Income (Loss) Per Share
On December 31, 1997, the Company adopted Statement of Financial Accounting
Standards No 128, "Earnings per Share", ("SFAS 128").
Prior to the adoption of SFAS 128, net income (loss) per share has been
calculated in accordance with the provisions of Accounting Principles Board
Opinion No 15, "Earnings per Share" (APB 15), using the weighted average number
of shares, convertible preferred shares assuming conversion at date of issuance,
and dilutive equivalent shares from stock options and warrants using the
treasury stock method. Net income (loss) per share also reflects for all periods
presented a 2 for 3 reverse stock split which was effective at the closing of
the Company's initial public offering.
Pursuant to SFAS 128, the Company is required to change the method
currently used to compute earnings per share and to restate all prior periods.
SFAS 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Unlike primary earnings per
share, basic earnings per share exclude any dilutive effects of options,
warrants and convertible securities.
There is no impact of Statement 128 on the previous calculation of loss per
share for the financial years ended December 31, 1996, 1997 or 1998. As net
losses have been reported in these periods, the dilutive effects of stock
options, preferred stock and warrants were excluded from the calculation of net
loss per share under APB 15.
F-13
<PAGE>
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income", ("SFAS 130"), effective for the Company for
the first quarter of 1998. SFAS 130 requires that items defined as other
comprehensive income, such as foreign currency translation adjustments, be
separately classified in the financial statements and that the accumulated
balance of other comprehensive income be reported separately from retained
earnings and additional paid-in capital in the equity section of the balance
sheet. The components of comprehensive income for the years ended December 31,
1996, 1997 and 1998 consist solely of foreign currency translation adjustments.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
Investments
The Company accounts for investments in accordance with Statement of
Financial Accounting Standards No 115, "Accounting for Certain Investments in
Debt and Equity Securities". The Company had no investments at December 31, 1997
or December 31, 1998, other than pledged cash (See Note 6--Short term and long
term restricted cash). There were no realized gains or losses on sales of
investments in 1996, 1997 or 1998.
Inventory
Inventory is valued at the lower of cost (first-in, first-out basis) or
market. Inventory consists of raw material and spare parts.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation and
amortization are provided on a straight-line basis over the estimated useful
lives of the assets, generally five years for pilot production equipment and six
years for Unipac volume production equipment, ten years for building
improvements and twenty years for buildings. Equipment financed under capital
leases are depreciated over the shorter of the estimated useful life or the
lease term. Amortization expense is included within depreciation expense.
Impairment of Long-Lived Assets
In January 1996, the Company adopted Statement of Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" ("SFAS 121"), which establishes criteria
for the recognition and measurement of impairment loss associated with
long-lived assets. Adoption of SFAS 121 did not have a material impact on the
Company's financial position or results of operations.
F-14
<PAGE>
Patents and Other Intangible Assets
Patent application and establishment costs are expensed as incurred.
Other intangible assets include primarily goodwill. The carrying value of
goodwill is reviewed on an ongoing basis to assess if facts or circumstances
suggest that the Company's goodwill may be impaired. If this review indicates
that goodwill will not be recoverable, based on the expected future cash flows
to be generated by these assets over their remaining amortization period, the
Company's carrying value of the goodwill is reduced by the estimated shortfall
of discounted cash flows.
Employee Stock Option Plans
In 1996, the Company adopted the disclosure provisions of Statement of
Financial Accounting Standards No 123 ("SFAS 123"), "Accounting for Stock Based
Compensation". As permitted by SFAS 123, the Company has elected to continue to
account for its employee stock option plans and the Employee Stock Purchase
Plans in accordance with the provisions of the Accounting Principles Board
Opinion No 25 "Accounting for Stock Issued to Employees" ("APB 25"). Under APB
25, when the exercise price of the Company's employee stock options is less than
the market price of the underlying shares of the date of grant, compensation
expense is recognized.
Accounting for Income Taxes
The Company uses the liability method in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
Pension Costs
In France, legislation requires that lump sum retirement indemnities be
paid to employees based upon their years of services and compensation at
retirement. The actuarial liability of this unfunded obligation as of December
31, 1997 and December 31, 1998 is $46 and $85, respectively. Pension expense
incurred was $14 in 1996, $14 in 1997 and $35 in 1998.
3. Other current assets
The components of other current assets are as follows :
December 31,
--------------------
1997 1998
------ ------
Value added tax refundable ............... $ 882 $1,141
Grants receivable ........................ 1,210 --
Other .................................... 74 213
------ ------
$2,166 $1,354
====== ======
F-15
<PAGE>
4. Property, Plant and Equipment
The components of Property, Plant and Equipment are as follows:
December 31,
-----------------------
1997 1998
-------- --------
Land ................................... $ 218 $ 232
Buildings and improvements ............. 2,532 2,714
Machinery and equipment ................ 14,941 29,503
Furniture and fixtures ................. 1,089 1,163
-------- --------
18,780 33,612
Less accumulated depreciation .......... (9,427) (14,786)
-------- --------
$ 9,353 $ 18,826
======== ========
In 1994, the Company entered into capital lease agreements for production
equipment. The gross and net book values of equipment financed under capital
leases amounted $3,857 and $947, respectively, at December 31, 1997 and $4,107
and $350, respectively, at December 31, 1998.
Land and buildings with a net book value of $1,100 and $1,123 at December
31, 1997 and December 31, 1998, respectively, have been pledged to guarantee a
$10,000 loan received from Sumitomo Corporation in November 1997. See note
7--Long-term debt.
Pursuant to the Display Foundry Agreement signed in 1997 with Unipac,
volume FEDs production equipment was installed at Unipac's facility. That
equipment was purchased and funded by Unipac, and a portion of it is leased to
PixTech, which amounts to $12,048 as of December 31, 1998. According to
Financial Accounting Standard 13, "Accounting for Leases", PixTech's share of
equipment was recorded as assets under the caption "Property, Plant and
Equipment", in the net amount of $11,061. Depreciation of $988 was recorded
during 1998. As of December 31, 1998, the related capital lease obligation
amounts to $10,125, of which $1,869 has been recorded as current portion. (See
Note 8--Capital leases). As of June 30, 1999, the equipment leased by Unipac to
PixTech amounted to $11,554 and was recorded as assets under the caption
"Property, Plant and Equipment", in the net amount of $11,061. Depreciation of
$941 was recorded during the six-month period ended June 30, 1999. As of June
30, 1999, the related capital lease obligation amounts to $10,286, of which
$1,950 has been recorded as current portion. In connection with the Micron
Transaction (see "Note 20 -- Micron transaction"), production equipment located
in Boise, Idaho, was acquired by the Company in May 1999. This acquisition was
recorded in the amount of $13,316. The estimated fair value of net assets
acquired in the Micron Transaction was approximately $9,157 in excess of the
cost of net assets acquired. The estimated fair value of property, plant and
equipment of $22,473 was proportionally reduced to the extent that the fair
value of net assets acquired exceeded cost, resulting in property plant and
equipment of $13,316 (see "Note 21 -- Subsequent events").
5. Goodwill
On February 20, 1996, the Company acquired substantially all the assets of
PanoCorp, Inc. ("Panocorp"), a research and development company located in
California, in a transaction accounted for as a purchase. The assets of
PanoCorp, Inc., principally including fixed assets valued at $120, were
purchased for $250 in cash plus 150,000 warrants to purchase shares of the
Company's common stock at an exercise price of $11.67 per share. See Note
11--Stockholders' Equity - Warrants.
The fair value of the 150,000 warrants was computed using the Black-Scholes
model. Pursuant to APB Opinion 16, the value of such warrants was estimated at
$230 and the entire transaction generated goodwill of $360. This goodwill is
being amortized over 5 years.
The purchase agreement also calls for the issuance of up to 600,000
additional warrants to the shareholders of PanoCorp, contingent upon the
achievement by the Company of specified technical milestones before end of
February 1999. No such warrants have been issued at December 31, 1998 and, at
that date, no more than 200,000 warrants to purchase shares of the Company's
common stock, at an exercise price of $16.67 per share, may be issued under the
purchase agreement. As of June 30, 1999, no such warrants have been issued or
will be issued in the future under the purchase agreement.
F-16
<PAGE>
6. Short-term and long-term restricted cash
In August 1997, the Company provided Unipac Optoelectronics Corp.
("Unipac"), its Asian manufacturing partner, with a written bank guaranty in an
amount of $10,000 pursuant to the display foundry agreement (the "Foundry
Agreement") signed in May 1997 between the Company and Unipac in order to
implement volume production of FEDs at Unipac's manufacturing line. The Company
granted the issuing banks a security interest in its cash and cash equivalents
for the same amount. The pledged cash and cash equivalents have been recorded as
short-term and long-term restricted cash in the balance sheet. Under certain
conditions of the Foundry Agreement, Unipac can sell certain equipment to the
Company. The payment for such equipment will be secured by Unipac through the
exercise of the bank guaranty. Both the amount of the guaranty to Unipac and the
amount of the security interest to the banks is expected to decrease to match
the net amount of equipment leased by Unipac to the Company.
7. Long-term debt
Long-term debt consists of the following :
December 31,
--------------------
1997 1998
-------- --------
Loan payable (a) ............................. $ 10,000 $ 10,000
Non interest bearing loan from ANVAR (b) ..... 2,004 1,601
Equipment purchase loans (c) ................. 172 93
Loan payable (d) ............................. 45 --
Loan payable (e) ............................. 167 107
-------- --------
12,388 11,801
Less: current portion ........................ (1,364) (3,410)
-------- --------
Total long-term debt, less current portion ... $ 11,024 $ 8,391
======== ========
(a) In November 1997, Sumitomo Corporation ("Sumitomo") granted PixTech a
$10,000 loan repayable over a period of three years. Of this $10,000 amount,
$5,000 represents a straight loan payable in four equal installments every 6
months starting April 7, 1999, bearing interest at prime rate plus 0.75% per
annum. The remaining amount of $5,000 represents a convertible loan payable 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 on
the conversion date. This option becomes exercisable starting April 1999 and
expires November 2000. As part of the Sumitomo Agreement, the loan is partially
secured as follows: (i) the Company pledged certain PixTech S.A. land and
constructions located in Rousset. See Note 4-- Property, plant and equipment ;
(ii) the French atomic energy agency, Commissariat a l'Energie Atomique ("CEA"),
has guaranteed certain contingent payment obligations towards Sumitomo in case
of default by PixTech. See Note 16-- Related parties transactions. In addition,
should the Company default on the repayment of the loan, the Company will remit
to Sumitomo two thirds of any royalty amount received from any licensee until
all obligations to Sumitomo are satisfied.
(b) The Company entered into a development contract with a French Public
agency ANVAR in 1993. Under this agreement, the Company received a non-interest
bearing loan. Repayment of this loan started in 1997.
(c) In 1994, the Company was granted a $686 loan from a supplier of a piece
of particular equipment. This loan is payable in 8 installments of $77,
including interest at 6.50%, over a period of 4 years starting in May 1996.
(d) In 1994, the Company was granted a loan, which bears interest at 5% and
is repayable in 8 installments of approximately $17 over two years starting in
December 1996. As of December 31, 1998, this loan was totally repaid.
(e) In 1995, the Company was granted a bank loan, which bears interest at
6.37% and is repayable in 20 installments of approximately $20 over 5 years
starting in July 1995.
F-17
<PAGE>
Future minimum payments under these obligations are as follows:
At December 31, 1998, due for the years
ending December 31,
1999 ...................................................... $ 3,410
2000 (f) .................................................. 8,391
-------
Total minimum payments .................................... $11,801
-------
At June 30, 1999, due for the years
ending December 31,
1999 ...................................................... $ 2,880
2000 (f) .................................................. 9,223
-------
2001 ...................................................... 767
=======
2002 ...................................................... 777
=======
2003 ...................................................... 205
=======
2004 ...................................................... 198
=======
2005 ...................................................... 834
=======
Total minimum payments .................................... $14,883
=======
(f) Includes the $5,000 convertible loan repayable in November 2000, and
partially or totally convertible into shares of Common Stock of the Company
after April 7, 1999. See note (a) above.
In 1997 and January 1999, the Company entered into two R&D agreements with
French authorities. Under these agreements, the Company expects to benefit from
zero-interest loans totaling approximately $3,000, of which $2,000 were received
during the six-month period ended June 30, 1999, and $800 are expected to be
received in the second half of 1999. As of June 30, 1999, the related long term
debt was recorded in the amount of $2,014.
8. Capital leases
December 31,
1997 1998
-------- --------
Capital lease obligations ............ $ 1,040 $ 10,588
Less: current portion ............... (599) (2,189)
-------- --------
$ 441 $ 8,399
-------- --------
In December 1994, the Company completed several sale-leaseback transactions
whereby equipment with a net book value of $4,219 was financed through three to
five-year capital lease obligations, effective December 1994. At December 31,
1998, the net book value of this equipment was $350.
Pursuant to the Display Foundry Agreement signed in 1997 with Unipac,
PixTech's share of volume FEDs production installed at Unipac's facility is
leased to PixTech. As of December 31, 1998, the related capital lease obligation
amounts to $10,125, of which $1,869 has been recorded as current portion. (See
Note 4--Property, Plant and Equipment).
Future minimum payments under these obligations are as follows:
At December 31, 1998, due for the years ending December 31,
1999 .................................................... $ 2,880
2000 .................................................... 2,511
2001 .................................................... 2,233
2002 .................................................... 2,110
2003 .................................................... 1,987
2004 .................................................... 792
--------
Total minimum payments .................................. 12,513
Less amount representing interest ....................... (1,925)
--------
Present value of minimum capitalized lease payments ..... $ 10,588
--------
F-18
<PAGE>
At June 30, 1999, due for the years ending December 31,
1999 .................................................... $ 1,625
2000 .................................................... 2,938
2001 .................................................... 2,663
2002 .................................................... 2,361
2003 .................................................... 2,224
2004 .................................................... 890
--------
Total minimum payments .................................. 12,701
Less amount representing interest ....................... (1,774)
--------
Present value of minimum capitalized lease payments ..... $ 10,927
--------
9. Commitments and contingencies
Operating leases
The Company is obligated under operating lease agreements for equipment and
manufacturing and office facilities.
The Company leases certain equipment under a cancelable operating lease
with terms of 60 months through 1999. The total amount of the base rent payments
has been charged as an expense on the straight line method over the term of the
lease.
The Company leases its main manufacturing and office facilities under a
non-cancelable operating lease which expires September 2000.
Minimum annual rental commitments under non cancelable leases at December
31, 1998, are as follows :
Year ending December 31,
1999 ............................................... $1,113
2000 ............................................... 768
2001 ............................................... 46
2002 ............................................... 15
2003 ............................................... 14
2004 ............................................... 7
------
Total minimum payments ............................. $1,963
======
Minimum annual rental commitments under non cancelable leases at June 30,
1999, are as follows :
Year ending December 31,
1999 ............................................... $ 183
2000 ............................................... 367
2001 ............................................... 335
2002 ............................................... 126
2003 ............................................... 1
------
Total minimum payments ............................. $1,012
======
Rental expense for all operating leases consisted of the following:
1996 1997 1998
---- ---- ----
Rent expense for operating leases $1,439 $1,245 $1,188
====== ====== ======
License Agreement and Research and Development Agreement with CEA
See Note 16--Related Party Transactions
F-19
<PAGE>
10. Fair Value of Financial Instruments
At December 31, 1997 and 1998, the carrying values of financial instruments
such as cash and cash equivalents, short term investments, accounts receivable
and payable, other receivables and accrued liabilities and the current portion
of long-term debt approximated their market values, based on the short-term
maturities of these instruments.
At December 31, 1998, the fair value of long-term portion of restricted
cash, with total book value of $8,427 was $6,949.
At December 31, 1997 and 1998, the fair values of long-term debt and other
long-term liabilities, with book value of $13,984 and $22,917 were $12,463 and
$16,081, respectively.
Fair value is determined based on expected future cash flows, discounted at
market interest rates, and other appropriate valuation methodologies.
11. Stockholders' Equity
The share amounts and per share dollar amounts included herein reflect the
effect of the 2 for 3 reverse stock split which was effective on July 18, 1995.
Common Stock
On July 18, 1995, the Company sold 2,500,000 shares of common stock for net
proceeds of $20,998 in its initial public offering on Nasdaq.
On February 7, 1997, the Company sold 3,333,000 shares of Common Stock in a
public offering in Europe resulting in net proceeds of $15,927.
In February 1997, the Company sold 463,708 and 1,111,111 shares of the
Company's Common Stock to Motorola, Inc. and to United Microelectronics
Corporation, the parent company of Unipac Optoelectronics Corporation,
respectively, in private placements resulting in net proceeds of $2,086 and
$5,000 respectively.
In March 1998, the Company sold 1,000,000 shares of the Company's Common
Stock to The Kaufmann Fund Inc., in a private placement at a price of $4.00 per
share, resulting in net cash proceeds of $4,000 before expenses payable by the
Company, which amounted to $44.
In March 1998, the Company entered into a license agreement with Coloray
Display Corporation, a California corporation ("Coloray"), providing PixTech
with a worldwide, nonexclusive royalty-free license on certain technologies
related to field emission displays. In consideration of the license and rights
granted to PixTech, the Company paid an amount of $75 and issued 14,000 shares
of the Company's Common Stock, valued at a price of $3.57 per share,
representing a total amount of $50.
In December 1998, the Company sold 222,222 shares of the Company's Common
Stock in a private placement at a price of $2.25 per share, resulting in net
proceeds of $500.
There were 15,000,329 shares of Common Stock outstanding at December 31,
1998.
In January 1999, the Company sold 150,000 shares of the Company's Common
Stock in a private placement at a price of $2.35 per share, resulting in net
proceeds of $352.
In consideration of the Micron Transaction (See "Note 20 -- Micron
transaction"), the Company issued in May 1999 7,133,562 shares of the Company's
Common Stock, representing a total amount of $14,717, and a warrant to purchase
310,000 shares of the Company's Common Stock at an exercise price of
approximately $2.25 per share. The fair value of the 310,000 warrants was
computed using the Black-Scholes model and was estimated at $257. In
consideration of the 7,133,562 shares of Common Stock and 310,000 warrants
issued pursuant to the Micon Transaction, the Company was granted certain
assets, assumed certain liabilities, and received $4.3 million in cash. Cash
flows generated from financing activities in the six-month period ended June 30,
1999 excluded non-cash transactions related to the acquisition of these assets
and the assumption of these liabilites, and resulted in net proceeds to the
Company of $3.8 million (net of issuance costs).
F-20
<PAGE>
Preferred Stock
The Company's Board of Directors has the authority to issue up to 1,000,000
shares of Preferred Stock and to fix the relative rights thereof. In December
1998, 500,000 shares of Preferred Stock were reserved for the issuance of
"Series E Convertible Preferred Stock".
Convertible preferred stock
The Company's Series A to D shares of Convertible Preferred Stock
automatically converted into shares of Common Stock upon the closing of the
Company's initial public offering in 1995.
In December 1998, the Company issued 367,269 Series E shares of Convertible
Preferred Stock. The Preferred Stock was sold in a private placement at a price
of approximately $22.53 per share, resulting in net proceeds of $8,275, before
expenses payable by the Company, which amounted to $822. The amount representing
Preferred Stock sold by the Company is generally convertible into shares of
Common Stock starting from June 21, 1999 at a conversion price equal to the
lesser of approximately $2.25 per share of Common Stock or the average of the
closing price of the Common Stock over the ten trading days immediately
preceding the notice of conversion. In addition to the conversion feature, the
Preferred Stock has a liquidation preference equal to the purchase price of the
preferred stock and a cumulative dividend. The Preferred Stock will
automatically convert into Common Stock on December 22, 2003. The Preferred
Stock is redeemable at the option of the Company at the issue price upon certain
events. The holders of shares of Series E Preferred Stock are entitled to the
number of votes equal to the number of shares of Common Stock into which the
shares of Series E Preferred Stock held by such holder are convertible.
The holders of Series E Preferred Stock are entitled to receive cumulative
dividends. Dividends are calculated on a 6% interest basis per annum, on the
purchase price paid for the Series E Preferred shares for the numbers of days
that the stock price is above $2.253, on a 8% interest basis for the numbers of
days that the stock price is between $1.127 and $2.253, and on a 10% interest
basis for the number of days that the stock price is below $1.127. At December
31, 1998 a dividend of $12 was accrued and recorded against Stockholders'
Equity.
In addition, the Company agreed to reserve, out of the authorized but
unissued shares, 150% of the number of shares of Common Stock that the Series E
Stock is convertible into. As of December 31, 1998, the Series E Stock would
have been convertible into 3,678,199 shares of Common Stock thus requiring the
Company to reserve 5,517,299 shares of the remaining authorized but unissued
shares.
As of June 30, 1999 , there were 367,269 shares of Series E Preferred Stock
outstanding. These shares of Series E Preferred Stock were convertible into
shares of Common Stock. As of June 30, 1999, the Series E Stock, including
accrued dividends, would have been convertible into 5,820,779 shares of Common
Stock using a conversion price of $1.48, equal to the average closing price of
the Company's Common Stock over the 10 trading days ending June 29, 1999.
Consequently, there were 28,173,697 shares of Common Stock or equivalent to
shares of Common Stock outstanding as of June 30, 1999.
In July 1999, 70,000 shares of Series E Preferred Stock were converted into
shares of Common Stock at an average conversion price of $1.47, resulting in the
issuance of1,114,220 shares of the Company's Common Stock (See "Note 21 --
Subsequent events"). As of July 31, 1999, there were 297,269 shares of Series E
Preferred Stock outstanding. These Series E Preferred Shares would have been
convertible into 3,866,213 shares of the Company's Common Stock using a
conversion price of $1.81, equal to the average closing price of the Company's
Common Stock over the 10 trading days ending July 30, 1999. Consequently, there
were 27,333,351 shares of Common Stock or equivalent to shares of Common Stock
outstanding as of July 31, 1999.
F-21
<PAGE>
Stock Options
1993 Stock Option Plan
The Company adopted a stock option plan on November 30, 1993, the "1993
Stock Option Plan" (which was amended and restated in May 1995 and in April
1997), under which options to purchase shares of common stock may be granted to
key employees and consultants of the Company. The plan provides that the option
price shall be determined by the Compensation Committee of the Board of
Directors and that no portion of the option may be exercised beyond ten years
from the date of grant. Options which are outstanding at December 31, 1998,
become exercisable within a certain period of time or when specific milestones
are completed.
The activity under the option plan was as follows:
<TABLE>
<CAPTION>
Weighted
Average
Shares Options Option Price
available outstanding per Share
--------- ----------- ---------
<S> <C> <C> <C>
Balance at December 31, 1995 ............... 544,039 1,228,074
========== ==========
Options granted ........................ (365,850) 365,850 $8.018
Options exercised ...................... -- (29,083) 0.375
Options terminated unexercised ......... 100,567 (100,567) 2.859
---------- ----------
Balance at December 31, 1996 ............... 278,756 1,464,274
========== ==========
Additional shares reserved ............. 800,000
Options granted ........................ (1,121,050) 1,121,050 $4.300
Options exercised ...................... -- (52,989) 0.506
Options terminated unexercised ......... 464,193 (464,193) 7.875
---------- ----------
Balance at December 31, 1997 ............... 421,899 2,068,142
========== ==========
Options granted ........................ (444,960) 444,960 $4.626
Options exercised ...................... -- (1,375) 0.656
Options terminated unexercised ......... 362,535 (362,535) 4.632
---------- ----------
Balance at December 31, 1998 ............... 339,474 2,149,192
========== ==========
</TABLE>
Options to purchase 748,667 shares and 1,125,434 shares were exercisable at
weighted-average exercise prices of $1.110 and $1.886 at December 31, 1997 and
December 31,1998, respectively.
Exercise prices for options outstanding as of December 31, 1998 ranged from
$0.375 to $9.750. The weighted average remaining contractual life of those
options is 7.369 years.
Pro forma information regarding net loss and loss per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of SFAS 123. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following average assumptions for all three years:
risk-free interest rates of 3%; dividend yields of 0%; volatility factors of the
expected market price of the Company's shares of Common Stock of 0.74 ; and a
weighted-average expected life of the option of 4 years.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information follows (in thousands except for loss per share
information) :
---------------------------------------------------------------------
1996 1997 1998
---------------------------------------------------------------------
Pro forma net loss $ (11,869) $ (14,865) $ (18,690)
Pro forma loss per share $ (1.46) $ (1.13) $ (1.29)
---------------------------------------------------------------------
The weighted-average fair value of options granted during 1996, 1997 and
1998 were $3.84, $2.52 and $2.82, respectively.
F-22
<PAGE>
Director Stock Option Plan
In May 1995, the Company adopted the 1995 Director Stock Option Plan (the
"Director Stock Plan"), which provides for the issuance of up to 50,000 shares
of the Company's stock. The Director Stock Plan provides for an automatic grant
of options to purchase the Company's stock at its fair market value to the
non-employee directors of the Company upon election or re-election to the Board
of Directors.
The activity under the option plan was as follows:
<TABLE>
<CAPTION>
Weighted Average
Option
Shares Options Price
available outstanding per Share
--------- ----------- ---------
<S> <C> <C> <C>
Balance at December 31, 1995 ................ 50,000 --
======
Options granted ......................... (6,000) 6,000 $ 8.625
------- ------
Balance at December 31, 1996 ................ 44,000 6,000
======= ======
Options granted ......................... (12,000) 12,000 $ 3.910
------- ------
Balance at December 31, 1997 ................ 32,000 18,000
======= ======
Options granted ......................... (12,000) 12,000 $ 4.646
Options terminated unexercised .......... 14,000 (14,000) $ 5.962
------- ------
Balance at December 31, 1998 ................ 34,000 16,000
======= ======
</TABLE>
As of December 31, 1998 and at the date of grant, the exercise prices of each
stock option grant under the Director Stock Plan was above the Company's stock
price. Therefore, no compensation expense was incurred.
Warrants
In December 1994, in connection with various equipment leases, the Company
entered into a warrant agreement. Under this agreement, the Company granted a
right to purchase 62,500 shares of Common Stock of the Company at a purchase
price of $2.88 per share. No value was ascribed to the warrant. This warrant
expires on July 18, 2000.
In February 1996, in order to finance partially the purchase of PanoCorp
assets, the Company granted 150,000 warrants to purchase shares of the Company's
common stock at an exercise price of $11.67 per share. See Note 5--Goodwill.
In February 1997, in connection with the purchase of 463,708 shares of the
Company's Common Stock, 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 have expired unexercised on December 31, 1998.
Employee Stock Purchase Plan
In May 1995, the Company adopted an employee stock purchase plan (the
"Purchase Plan") under which employees may purchase shares of Common Stock at a
discount from fair market value. 100,000 shares of Common Stock are reserved for
issuance under the Purchase Plan. To date, no shares have been issued under the
Purchase Plan. Rights to purchase Common Stock under the Purchase Plan are
granted at the discretion of the Compensation Committee, which determines the
frequency and duration of individual offerings under the Plan and the dates when
the stock may be purchased. Eligible employees, which represent all full-time
employees (as defined by the Purchase Plan), participate voluntarily and may
withdraw from any offering at any time before the stock is purchased. The
purchase price per share of Common Stock in an offering is 85% of the lesser of
its fair market value at the beginning of the offering period or on the
applicable exercise date and may be paid through payroll deductions, periodic
lump sum payments or a combination of both. The Purchase Plan terminates on May
9, 2005.
F-23
<PAGE>
Shares available for issuance
At December 31, 1998, 2,851,166 shares of Common Stock are reserved for
shares issuable under the Purchase Plan or upon exercise of stock options and
warrants. In addition, 5,517,299 shares of Common Stock are reserved for shares
issuable upon conversion of the Convertible Preferred Stock. Therefore, on
December 31, 1998, out of the 30,000,000 authorized shares of Common Stock,
6,631,206 shares were available for issuance by the Company.
12. Other and deferred revenues
Other revenues and deferred revenues include the following:
<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1997 1998
----------------------- ------------------------
Other Deferred Other Deferred
<S> <C> <C> <C> <C>
Grant from French Ministry of Industry (a) ............... $ 663 $1,210 $1,211 $ --
Grant from French local authorities (b) .................. 144 913 290 1,396
Grant from European Union, Esprit Program (c) ............ -- 423 96 766
Insurance refund (d) ..................................... 292 -- -- --
Other(e) ................................................. 43 -- 371 --
------ ------ ------ ------
TOTAL .................................................... $1,142 $2,546 $1,968 $2,162
====== ====== ====== ======
</TABLE>
(a) In December 1994, the Company was awarded a grant from the French
Ministry of Industry to support manufacturing of Field Emission
Displays. The total contribution of the French Ministry of Industry
amounted to $2,674. The Company recognized as income $800 in 1996,
$663 in 1997, and $1,211 in 1998, as all conditions of the grant were
met.
(b) PixTech SA was awarded certain incentives to establish its
manufacturing facilities in Montpellier, France. These incentives are
partially subject to maintaining an operating facility in this
location for a certain period of time. In 1998, no revenue was
recognized in relation to these incentives. Revenue is deferred until
all conditions are met. In 1998, revenue recognized in the amount of
$290 was related to various incentives granted by French local
authorities.
(c) In February 1997, the Company entered into an R&D agreement with the
European Union for 18 months starting February 1, 1997. The
contribution of the European Union to the costs incurred by the
Company amounts to $800 over the period. The Company received $423 and
$293 from this contribution in 1997 and in 1998, respectively. This
contribution was not recognized as income in 1997 nor in 1998 as all
conditions stipulated in the agreement were not met. In 1998, revenue
recognized in the amount of $96 is related to another R&D agreement
entered into in 1993 with the European Union. The total contribution
of the European Union amounted to $546. The Company received $330 in
1994, $120 in 1995 and $96 in 1998 from this contribution. This
contribution was recognized as income ratably over the contract period
as required costs were incurred to meet the conditions of the grant,
at which point such portion of the contribution is irrevocable as
stipulated in the agreement.
(d) 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 1997.
(e) Amounts relating to payments received by the Company from entities
primarily for the performance of miscellaneous services, including
$200 in 1998 related to the favorable settlement of a tax dispute.
F-24
<PAGE>
13. Income Taxes
Income (loss) before income tax benefit consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
France $(10,556) $(13,567) $(16,614)
Rest of world ................................. (1,161) (1,683) (3,408)
-------- -------- --------
Income (loss) before income tax benefit $(11,719) $(15,250) $(20,022)
======== ======== ========
</TABLE>
The income tax benefit consists of the following:
December 31,
-----------------------------------
1996 1997 1998
------- ------- ------
Deferred:
France ..................... -- $ 586 $2,159
Rest of world .............. -- -- --
------ ------ ------
-- $ 586 $2,159
====== ====== ======
A reconciliation of income taxes computed at the French statutory rate
(36.66%) to the income tax benefit is as follows :
<TABLE>
<CAPTION>
December 31,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Income taxes computed at the French
statutory rate ................................ $ 4,297 $ 6,354 $ 7,341
Operating losses not utilized .................... (4,297) (6,354) (7,341)
Research credits ................................. -- 586 2,159
------- ------- -------
Total ............................................ -- 586 2,159
======= ======= =======
</TABLE>
No U.S. income tax expense was realized and no U.S. income taxes were paid
in periods ended December 31, 1996, 1997 and 1998.
Deferred taxes reflect the net tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the
Company's deferred taxes consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C
Deferred tax assets:
Net operating loss carryforwards ...................... $ 6,788 $ 12,058 $ 18,108
Deferred revenue ...................................... 1,201 355 75
Research credit carryforwards ......................... 8,193 8,000 6,448
-------- -------- --------
16,181 20,413 24,631
Deferred tax liabilities:
Revenue not currently taxable ......................... -- -- --
Deferred revenue ...................................... -- (412) (760)
Deferred expense ...................................... (145) (165) (53)
-------- -------- --------
Total deferred tax assets ......................... 16,039 19,835 23,818
Valuation allowance ....................................... (10,869) (14,777) (19,175)
-------- -------- --------
Deferred tax assets ....................................... $ 5,167 $ 5,058 $ 4,643
======== ======== ========
</TABLE>
Net operating loss carryforwards can be credited against future income in
France. Net operating loss carryforward of: $5,585 expire in 2000, $5,951 in
2001, $10,658 in 2002, $15,451 in 2003 and $11,735 can be carried forward
indefinitely.
F-25
<PAGE>
Research credit carryforwards derive from the Company's subsidiary PixTech
SA. In France, research credit carryforwards are calculated following certain
rules defined by the Tax administration. The Company is entitled to full payment
by the Tax administration of these research credit carryforwards if they are not
credited against income tax liabilities within a period of three financial
years. The Company collected $29 representing income tax benefit recorded in
1992, and $2,840 representing income tax benefit recorded in 1993 and 1994, in
1997 and 1998 respectively.
14. Industry and Geographic information
The Company adopted Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information", ("SFAS
131"), effective for the Company for fiscal years beginning after December 15,
1997. SFAS 131 requires that public business enterprises report certain
information about operating segments in their financial statements, and about
their products and services, the geographic area in which they operate, and
their major customers. As the Company operates in one single reportable segment,
the development, manufacturing and licensing of flat panel displays using
electron emitters, the adoption of SFAS 131 has no effect on the Company's
consolidated operating results or financial condition.
15. Significant customers and suppliers
Historically, the Company derived its revenues principally from cooperation
and license agreements with certain display manufacturers. Net revenues from
cooperation and license agreements represented approximately 75%, 50% and 34% of
the Company's net revenues for the fiscal years 1996, 1997 and 1998,
respectively. The Company does not expect any significant additional milestone
related revenues to be directly derived from existing cooperation and license
agreements.
In 1998, product revenues primarily reflected the shipment of displays to
the Company's first volume customer, Zoll Medical Inc.
Umipac is the Company's only contract manufacturer. During the six-month
period ended June 30, 1999, unit shipments from Taiwan represented 17% of total
product shipments. In the future, the Company expects that the products that
will be manufactured at Unipac and sold to its customers will represent the
majority of its revenues. The Company's reliance on a single contract
manufacturer will involve several risks, including a protential inability to
obtain an adequate supply of required products and a potential reduced control
over the prices.
16. Related Party transactions
CEA License Agreement
In September 1992, the Company entered into a license agreement with CEA.
CEA holds a controlling interest in CEA Industrie, a shareholder of the Company.
Under this agreement, CEA granted to the Company a royalty bearing, worldwide,
exclusive license to all patents held by CEA in the field of FEDs, with a right
to sublicense these patents under certain conditions. The consideration for this
license is a payment of license fees and royalties based on the Company's sales
and the license fees and royalties collected by the Company. No expense was
recorded in 1993 and 1994 with respect to license fees and royalties due to CEA.
In 1995, $1,000 was accrued in respect of license fees and royalties due to CEA
in 1996. In order for the Company to maintain an exclusive license, it was
required to make minimum royalty payments beginning in 1996. An amount of $45
payable to CEA in 1997 was accrued in 1996. By paying the remaining amount due
to LETI, the Company will fulfill the minimum royalty obligations to LETI
through 1998.
In 1997, an amendment to the LETI License Agreement was signed between the
CEA and the Company (the "1997 CEA Amendment") for a period of three years, in
return for CEA guarantying certain contingent payment obligations towards
Sumitomo. See Note 7-- Long term debt. The royalty rates and minimum payments
from the Company to CEA were increased for a period of three years. In addition,
the Company gave a security interest to CEA on all its patents during the term
of the amendment. An amount of $109 and $308 was accrued respectively in 1997
and in 1998, which included a minimum royalty obligation of $100 and $288
respectively, pursuant to the 1997 CEA Amendment.
F-26
<PAGE>
CEA R&D Agreement
In September 1992, the Company entered into a three-year renewable R&D
agreement with CEA, under which CEA, through its laboratory LETI, performs
certain research and development activities for the benefit of the Company. This
program is expected to be extended for a third three-year period ending on
January 1, 2002, subject to further extension by mutual agreement of the
parties. The consideration received by the CEA for this R&D activity in 1998
amounted to approximately $848.
In connection with the above R&D agreement with CEA, the Company expensed
$644 , $637 and $848 in 1996, 1997 and 1998, respectively, included in research
and development costs.
17. License
In connection with the Company's license of its technology to a display
manufacturer, the Company acquired a worldwide, non-exclusive royalty-free
license to such licensee's background FED technology, as well as a right to
grant royalty-free sublicenses to certain other companies. The Company was
obligated to pay certain license fees in connection with the acquisition of
these rights from such licensee; these payments to the licensee were $650 in
1995 and $650 in 1996. In 1997, the Company recorded cooperation and license
revenues in the amount of $707, in consideration of the cancellation of same
amount which had been included in accounts payable in relation to accrued
license fees due this licensee.
In connection with the Company's license of its technology to another
display manufacturer, the Company also acquired a worldwide, non-exclusive
license, without the right to sublicense, to certain technology of such
licensee. The Company was obligated to pay certain license fees in connection
with the acquisition of these rights; these payments to the licensee were $1,000
in 1995, $1,000 in 1996. The remaining license fees payable to this licensee in
the amount of $1,400 were canceled in 1997, as consideration for the purchase by
such licensee of shares of the Company's Common Stock in February 1997.
In March 1998, the Company entered into a license agreement with Coloray,
providing PixTech with a worldwide, nonexclusive royalty-free license on certain
technologies related to field emission displays. In consideration of the license
and rights granted to PixTech, the Company paid an amount of $75 and issued
14,000 shares of the Company's Common Stock, valued at a price of $3.57 per
share, representing a total amount of $50 (See Note 11--Stockholders' Equity).
18. Litigation
The Company has received correspondence from Futaba Corporation and its
legal counsel since January 1998 alleging the following : (i) Pixtech is
infringing one or more patents owned by Futaba relating to the construction and
manufacture of its displays that are not expressly included under the license
agreement between Futaba and Pixtech, (ii) PixTech's use of terms such as
"alliance" and "partners" in describing the nature of its contractual
relationships with Motorola, Raytheon and Futaba in reports filed with the SEC
is misleading and (iii) certain provisions in the Foundry Agreement with Unipac
constitute an impermissible sublicense of Futaba technology. PixTech does not
believe such claims have any merit and has denied each of the allegations in
correspondences with Futaba and its counsel and is in discussions with Futaba
concerning their allegations. Futaba has also claimed that the Company
improperly supplied certain Futaba proprietary information to Unipac, and that
Unipac has in turn disclosed such information to a third party vendor. If Futaba
were to prevail on all of these claims, PixTech may be required, among other
adverse consequences, to modify the construction and manufacture of its displays
and may, as a result, be materially adversely affected.
To the Company's knowledge, there are no other exceptional facts or
litigation that could have or that have in the recent past had any significant
impact on its business, results, financial situation, or assets and liabilities.
F-27
<PAGE>
19. Financial position
During 1998, the Company has incurred losses in the amount of $17,875, and
used cash in operating activities of $9,343, which has adversely affected the
Company's liquidity. At December 31,1998, the Company had net working capital of
$145 and a deficit accumulated during the development stage of $54,156. These
conditions raise substantial doubt about its ability to continue as a going
concern. The Company intends to improve its liquidity and financial position
through capital increases expected to take place in 1999. There can be no
assurance that funds will be available through capital increases when needed or
on terms acceptable to the Company. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
During the six months ended June 30, 1999, the Company has continued to
experience losses and has used cash in operating activities, which has adversely
affected the Company's liquidity. At June 30,1999, the Company had net working
deficit of $4,550 and a deficit accumulated during the development stage of
$67,561. The Company intends to improve its liquidity and financial position
through capital increases expected to take place in 1999. There can be no
assurance that additional funds will be available through capital increases when
needed or on terms acceptable to the Company.
20. Micron transaction
On March 19, 1999, the Company entered into a definitive agreement to
purchase certain assets of Micron Technology, Inc. relating to field emission
displays including equipment and other tangible assets, certain contract rights
and cash (the "Micron Transaction"). The Micron Transaction was closed on May
19, 1999 between the Company and Micron and was accounted for as an acquisition
of assets. The financial statements as of June 30, 1999 reflect the acquisition
of assets for a cost of $17,932 and the assumption of certain liabilities in the
amount of $2,958, in consideration of the issuance of 7,133,562 shares of the
Company's Common Stock, representing a total amount of $14,717, and a warrant to
purchase 310,000 shares of the Company's Common Stock. The fair value of the
310,000 warrants was computed using the Black-Scholes model and was estimated at
$257. The estimated fair value of net assets acquired in the Micron Transaction
was approximately $9,157 in excess of the cost of net assets acquired.
Consequently, the estimated fair value of property, plant and equipment of
$22,473 was proportionally reduced to the extent that the fair value of net
assets acquired exceeded cost resulting in property plant and equipment of
$13,316 In addition, the Company received cash in the amount of $4,350.
Therefore, of the assets acquired for $17,932, $13,316 was reflected under the
caption "Property, Plant and Equipment", and $4,350 under the caption "Cash
available".
The enclosed unaudited pro forma financial information presents the
combined results of operations for the year ended December 31, 1998 and for the
six months ended June 30, 1999 as if the transaction had been completed at the
beginning of the periods indicated, after giving effect to certain adjustments,
including additional personnel costs and depreciation expenses. The pro forma
financial information does not necessarily reflect the results of operations
that would have occured had the the transaction been completed at the beginning
of the periods indicated, and may not be indicative of the future results.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Year ended December Six months ended June
31, 1998 30, 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss ..................................... $(26,986) $(17,083)
- ----------------------------------------------------------------------------------------------------------
Net loss to holders of common stock .......... (26,998) (17,382)
- ----------------------------------------------------------------------------------------------------------
Net loss per share of common stock ........... $ (1.25) $ (0.77)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
21. Subsequent events
In July 1999, 70,000 shares of Series E Preferred Stock were converted into
shares of Common Stock at an average conversion price of $1.47, resulting in the
issuance of1,114,220 shares of the Company's Common Stock. As of July 31, 1999,
there were 297,269 shares of Series E Preferred Stock outstanding. These Series
E Preferred Shares would have been convertible into 3,866,213 shares of the
Company's Common Stock using a conversion price of $1.81, equal to the average
closing price of the Company's Common Stock over the 10 trading days ending July
30, 1999. Consequently, there were 27,333,351 shares of Common Stock or
equivalent to shares of Common Stock outstanding as of July 31, 1999.
F-28
<PAGE>
On August 9, 1999, the Company entered into a private equity line agreement
with Kingsbridge Capital Ltd (the "Kingsbridge Agreement"). Under the terms of
the equity line, PixTech has the irrevocable right, subject to certain
conditions, to draw up to $15 million cash in exchange for PixTech's common
stock, in increments over a two-year period. Such conditions include limitations
depending on the volume and the market price of PixTech's common stock. The
Company may begin to make draws under the facility upon registration of the
shares for resale with the Securities and Exchange Commission. Shares will be
issued at a 10% discount to the market price at the time of any draw, if the
market is at or above $3.00, or at a 12% discount if the stock price is below
$3.00. Under the terms of the equity line, the Company also issued a warrant to
Kingsbridge to purchase 100,000 shares of PixTech's common stock at an exercise
price of $2.30 per share.
F-29
<PAGE>
Part II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 13. Other Expenses of Issuance and Distribution.
The following expenses incurred in connection with the sale of the
securities being registered will be borne by PixTech (also referred to as the
"Company"). Other than the registration fee, the amounts stated below are
estimates.
Registration Fee.......................................................$ 7,600
Legal Fees and Expenses................................................$ 50,000
Nasdaq Listing Fees....................................................$ 17,500
Printing and Engraving Expenses........................................$ 5,000
Accounting Fees and Expenses...........................................$ 5,000
Other..................................................................$ 4,900
TOTAL.......................................................$ 90,000
========
The selling stockholders will bear the expense of their own legal counsel
and miscellaneous fees and expenses, if any.
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law permits us to indemnify
our directors, officers, employees and agents against actual and reasonable
expenses (including attorneys' fees) incurred by them in connection with any
action, suit or proceeding brought against them by reason of their status or
service as a director, officer, employee or agent by or on behalf of us, and
against expenses (including attorneys' fees), judgments, fines and settlements
actually and reasonably incurred by him in connection with any such action, suit
or proceeding, if (i) he acted in good faith and in a manner he reasonably
believed to be in or not opposed to our best interests, and (ii) in the case of
a criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Except as ordered by a court, no indemnification shall be made in
connection with any proceeding brought by or in the right of the corporation
where the person involved is adjudged to be liable to us.
Article FIFTH of our Restated Certificate of Incorporation provides that we
shall, to the fullest extent permitted by the General Corporation Law of the
State of Delaware, as amended from time to time, indemnify each person who was
or is a party to any action, suit or proceeding by reason of the fact that he is
or was, or has agreed to become a director or officer of PixTech. The
indemnification provided for in Article FIFTH is expressly not exclusive of any
other rights to which those seeking indemnification may be entitled under any
law, agreement or vote of shareholders or directors or otherwise, and shall
inure to the benefit of the heirs, executors and administrators of such persons.
Article FIFTH also permits the Board of Directors to authorize the grant of
indemnification rights to our other employees and agents and such rights may be
equivalent to, or greater or less than, those set forth in Article FIFTH.
II-1
<PAGE>
Article V, Section 1 of our Restated by-laws provides that we shall have
the power to purchase and maintain insurance on behalf of its officers,
directors, employees and agents, against any liability asserted against and
incurred by such persons in any such capacity.
We have entered into indemnification agreements with each of our directors
and have obtained insurance covering our officers and directors against certain
losses and insuring us against certain of its obligations to indemnify its
directors and officers.
Pursuant to the Delaware General Corporation Law, Article FIFTH of our
Certificate of Incorporation eliminates a director's personal liability for
monetary damages to us and our shareholders for breach of fiduciary duty as a
director, except in circumstances involving a breach of the director's duty of
loyalty to us or our shareholders, acts or omissions not in good faith,
intentional misconduct, knowing violations of the law, self-dealing or the
unlawful payment of dividends or repurchase of stock.
We believe that courts in Europe and the US may have jurisdiction in an
action against us, our directors or officers. Such jurisdiction will be
delivered by the laws of the jurisdiction in effect at that time.
Item 15 Recent Sale of Unregistered Securities.
Since August, 1996, we have sold and issued the following unregistered
securities:
In February 1997, we sold 463,708 shares of common stock to Motorola, Inc.
("Motorola") and 1,111,111 shares of common stock to United Microelectronics
Corporation ("UMC"). The offering price was $4.50 per share, and these offerings
resulted in net proceeds to us of $7,086,000. As consideration for the common
stock, Motorola paid $686,000 in cash and UMC paid $5,000,000 in cash and an
additional $1,400,000 due from Motorola was paid by the forgiveness of
obligations in such amount from PixTech, S.A. to Motorola. In addition, Motorola
received warrants to purchase 463,708 shares of the our common stock at a price
of $5.50 per share, which expired on December 31, 1998.
On December 22, 1998, we sold 367,269 shares of our series E preferred
stock to certain investors at a price of approximately $22.53 per share and an
aggregate offering price of $8,275,000. In addition, on December 22, 1998, we
sold 222,222 shares of its common stock to certain investor at a price of
approximately $2.25 per share and an aggregate offering price of $500,000.
In January 1999, we sold 150,000 shares of common stock in a private
placement at a price of $2.35 per share, resulting in net proceeds of $352,000.
In May 1999, we issued 7,133,562 shares of common stock and a warrant to
purchase 310,000 shares of our common stock to Micron Technology, Inc. in a
private placement, in consideration of the acquisition of assets from Micron
Technology, Inc. for $17.9 million, including cash for $4.4 million and the
assumption of certain liabilities in the amount of $2.9 million. The warrant may
be exercised until May 19, 2001, and has an exercise price of $2.25313 per
share.
II-2
<PAGE>
No underwriter was engaged in connection with the foregoing issuance of
securities. The above described issuances of common stock, series E preferred
stock, and warrants to purchase common stock were made in reliance upon Section
4(2) of the Securities Act as transactions not involving any public offering and
Regulations D and S promulgated under it. We have reason to believe that all of
the foregoing purchasers were familiar with or had access to information
concerning our operations and financial conditions, and all of those individuals
were acquiring the shares for investment and not with a view to the distribution
thereof. At the time of issuance, all of the foregoing shares of common stock
and series E preferred stock were deemed to be restricted securities for
purposes of the Act and the certificates representing such securities bore
legends to that effect.
On August 9, 1999, we entered into the equity line agreement with
Kingsbridge, pursuant to which we may issue and sell, from time to time, shares
of its common stock for cash consideration up to an aggregate of $15 million.
Pursuant to the requirements of the equity line agreement, we have filed this
Registration Statement in order to permit the investor to resell to the public
any shares that it acquires pursuant to the equity line agreement. Commencing as
of the date this Registration Statement is declared effective by the Securities
and Exchange Commission and continuing for a period of 24 months thereafter, the
Company may from time to time at its sole discretion, and subject to certain
restrictions set forth in the equity line agreement, sell, or put, shares of its
common stock to the investor at a price equal to 88-90 percent of the then
current average market price of our common stock, as determined under the equity
line agreement. Puts can be made every 20 trading days in amounts ranging from a
minimum of $125,000 to a maximum of $1,300,000, depending on the trading volume
and the market price of the common stock at the time of each put. We are
required to put at least $5,000,000 worth of our common stock to Kingsbridge
over the life of the equity line agreement. To date, no shares of common stock
have been issued under the equity line agreement.
In conjunction with the equity line agreement, in August, 1999, we issued
to Kingsbridge a warrant which entitles the holder to purchase 100,000 shares of
our common stock at a price of $2.30 per share. The warrant is exercisable at
any time ending in February, 2003. The warrant contains provisions that protect
against dilution by adjustment of the exercise price and the number of shares
issuable thereunder upon the occurrence of certain events, such as a merger,
stock split or reverse stock split, stock dividend or recapitalization. The
exercise price of the warrant is payable either (i) in cash or (ii) by a
"cashless exercise", in which that number of shares of common stock underlying
the warrant having a fair market value at the time of exercise equal to the
aggregate exercise price are cancelled as payment of the exercise price.
II-3
<PAGE>
Item 16. Exhibits.
EXHIBIT INDEX
Number Footnote Description
- ------ -------- -----------
1.1 17 Equity Line Agreement
2.1 15 Acquisition Agreement between Micron Technology, Inc.
and the Registrant dated March 19, 1999.
2.2 15 Amendment Number 1 to Acquisition Agreement between
Micron Technology, Inc. and the Registrant dated April
23, 1999.
2.3 15 Amendment Number 2 to Acquisition Agreement between
Micron Technology, Inc. and the Registrant dated May 17,
1999, 1999.
3.1 1 Restated Certificate of Incorporation of Registrant.
3.2 2 Restated By-Laws of Registrant.
3.3 14 Certificate of Designations of PixTech, Inc.
3.4 18 Certificate of Amendment of Restated Certificate of
Incorporation of Registrant
4.1 3 Specimen certificate for shares of Common Stock of the
Registrant.
4.2 3 Warrant to purchase 62,500 shares of Common Stock of the
Registrant issued to Comdisco, Inc.
4.3 6 Warrant to purchase 150,000 shares of Common Stock of
the Registrant issued to PanoCorp Display Systems, Inc.
4.4 8 Warrant to purchase 463,708 shares of Common Stock of
the Registrant issued to Motorola, Inc.
4.5 10 Convertible Note issued by PixTech, Inc. to Sumitomo
Corporation dated October 27, 1997
4.6 19 Warrant to purchase 310,000 shares of Common Stock of
the Registrant issued to Micron Technology, Inc.
4.7 17 Warrant to purchase 100,000 shares of Common Stock of
the Registrant issued to Kingsbridge Capital Limited.
5.1 17 Opinion of Palmer & Dodge LLP as to the legality of the
securities being
II-4
<PAGE>
registered hereunder.
10.1 3,4,5 License Agreement in the Field of Flat Microtip Screens
dated as of September 17, 1992 between the Registrant
and the Commissariat a l'Energie Atomique (the "CEA"),
as amended.
10.2 3,4,5 Research and Development Agreement in the Field of Flat
Microtip Screens dated September 17, 1992 between the
Registrant and the CEA.
10.3 3,5 Cooperation and License Agreement dated June 29, 1993
between the Registrant and Texas Instruments
Incorporated.
10.4 3,5 Cooperation and License Agreement dated November 27,
1993 between the Registrant and Futaba Corporation.
10.5 3,5 License Agreement dated November 27, 1993 between the
Registrant and Futaba Corporation.
10.6 3,5 Cooperation and License Agreement dated June 1, 1994
between the Registrant and Raytheon Company.
10.7 3 ESPRIT Project: 8730 Active Interest for Multimedia with
Field Emission Display dated December 1, 1993 among the
Registrant and other project participants.
10.8 3 Master Lease Agreement dated December 12, 1994 between
COMDISCO France S.A. and PixTech France.
10.9 3 Purchase Agreement dated December 23, 1994 between
COMDISCO France S.A. and PixTech France.
10.10 3 Guarantee dated November 29, 1994 between the Registrant
and COMDISCO.
10.11 3 Leaseback Agreement dated April 5, 1995 between COMDISCO
France S.A. and PixTech France.
10.12 3,4 Contract between L'Agence Nationale de Valorisation de
la Recherche and PixTech France dated March 3, 1993.
10.13 3,4 Loan agreement between the Banque Worms and PixTech
France dated December 13, 1994, as amended.
10.14 3 Amended and Restated 1993 Stock Option Plan.
10.15 3 1995 Director Stock Option Plan.
II-5
<PAGE>
10.16 3 1995 Employee Stock Purchase Plan.
10.17 3 Amended and Restated Investor Rights and Stockholder
Voting Agreement dated as of December 24, 1993, as
amended, among the Registrant and certain of its
stockholders.
10.18 3,4 Real Estate Agreement between PixTech France and IBM
France dated February 15, 1994 for space located in
Montpellier, France.
10.19 3,4,5 Agreement of State Support of Technical Development and
Research dated December 30, 1994 between PixTech France
and the Ministry of Industry, Postal Services and
Telecommunications and Foreign Trade.
10.20 3 Form of Indemnification Agreement between the Registrant
and each of its directors.
10.21 3,5 Cooperation and License Agreement dated as of June 12,
1995 between the Registrant and Motorola, Inc.
10.22 6 Lease dated as of July 31, 1995 between the Registrant,
as Lessee, and Pecton Court Associates as Lessor.
10.23 6 Lease dated as of March 1, 1996, between the Registrant,
as Lessee, and Frank Deverse as Lessor.
10.24 6 Registration Rights Agreement between the Registrant and
Panocorp Display Systems, Inc. dated February 20, 1996.
10.25 5,7 Termination Agreement dated July, 15, 1996 between the
Registrant and Texas Instrument Incorporated
10.26 5 Amendment No. 1, dated February 6, 1997, to the
Cooperation and License Agreement between the Registrant
and Motorola.
10.27 8 Stock Purchase Agreement dated February 14, 1997,
between the Registrant and United Microelectronics
Corporation
10.28 8 Stock and Warrant Purchase Agreement dated February 6,
1997 between the Registrant and Motorola, Inc.
10.29 9 Foundry Agreement between PixTech, S.A. and Unipac
Optoelectronics Corporation dated May 22, 1997.
10.30 9 Distribution and Financing Agreement between Sumitomo
Corporation, PixTech Inc. and PixTech S.A. dated as of
July 21, 1997
II-6
<PAGE>
10.31 9 Cross-Licensing Period Extension between Raytheon
Company and Pixel International, S.A. (now PixTech S.A.)
dated as of September 4, 1997.
10.32 9 Amendment No 14 to the License Agreement on the
Microtips Display between PixTech, Inc. and the
Commissariat a l'Energie Atomique (the "CEA")
10.33 9 Credit Agreement between Sumitomo Corporation and
PixTech, Inc. dated as of July 21, 1997
10.34 10 License Agreement, dated March 16, 1998, between the
Registrant and Coloray Display Corporation
10.35 11 Stock Issuance Agreement, dated March 16, 1998, between
the Registrant and Standard Energy Company
10.36 12 Stock Purchase Agreement, dated March 27, 1998, between
the Registrant and Kaufmann Fund Inc.
10.37 13 Preferred Stock Purchase Agreement among PixTech Inc.,
The Kaufmann Fund, Inc., Wingate Capital Ltd., Fisher
Capital Ltd., The Atherton Co. And Banque Generale de
Luxembourg, fonds Interselex Equity Easdaq dated as of
December 22, 1998
10.38 15 Employment Agreement of Jean-Luc Grand-Clement dated
January 19, 1999.
10.39 15 Employment Agreement of Michel Garcia dated September 9,
1992.
10.40 15 Employment Agreement of Francis Courreges dated June 28,
1993.
10.41 15 Amendment No. 1 to Employment Agreement of Francis
Courreges dated September 27, 1996.
10.42 15 Employment Agreement of Yves Morel dated March 16, 1994.
10.43 15 Employment Agreement of Jean-Jacques Louart dated April
7, 1997.
10.44 16 Lease Agreement, dated as of May 19, 1999, between the
Registrant and Micron Technology, Inc.
10.45 16 Employment Agreement of James J. Cathey dated May 20,
1999.
10.46 18 Patent Cross License Agreement dated May 19, 1999
between the Registrant and Micron Technology, Inc.
II-7
<PAGE>
10.47 20 Investor Rights Agreement dated as of May 19, 1999
between the Registrant and Micron Technology, Inc.
10.48 17 Private Equity Line Agreement by and between Kingsbridge
Capital Limited and PixTech, Inc. dated as of August 9,
1999.
10.49 17 Registration Rights Agreement dated as of August 9, 1999
be and between PixTech, Inc. and Kingsbridge Capital
Limited.
11.1 3 Statement re: computation of per share earnings--Pro
Forma.
12.1 3 Statement re: computation of ratios
21.1 3 Subsidiaries of the Registrant.
23.1 17 Consent of Ernst & Young.
23.2 17 Consent of Palmer & Dodge LLP (contained in Exhibit
5.1).
24.1 17 Power of Attorney (set forth on the signature page to
this Registration Statement).
(1) Filed as Exhibit 3.2 to the PixTech, Inc. Registration Statement on Form S-1
(Commission File No. 33-93024) and incorporated herein by reference.
(2) Filed as Exhibit 3.4 to the PixTech, Inc. Registration Statement on Form S-1
(Commission File No. 33-93024) and incorporated herein by reference.
(3) Filed as an exhibit with the same number to the PixTech, Inc. Registration
Statement on Form S-1 (Commission File No. 33-93024) and incorporated herein by
reference.
(4) English translation filed.
(5) Certain confidential material contained in the document has been omitted and
filed separately with the Securities and Exchange Commission pursuant to Rule
406 of the Securities Act of 1933, as amended.
(6) Filed as an exhibit with the same number to the PixTech, Inc. Form 10-K for
the fiscal year ended December 31, 1995 and incorporated herein by reference.
(7) Filed as Exhibit 10 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended June 30, 1996 and incorporated herein by reference.
(8) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-K for
the fiscal year ended December 31, 1996 and incorporated herein by reference.
II-8
<PAGE>
(9) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-K for
the fiscal year ended December 31, 1997 and incorporated herein by reference.
(10) Filed as Exhibit 10.1 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended March 31, 1998 and incorporated herein by reference.
(11) Filed as Exhibit 10.2 to the PixTech, Inc. Form 10-Q for the fiscal quarter
ended March 31, 1998 and incorporated herein by reference.
(12) Filed as Exhibit 10.13 to the PixTech, Inc. Form 10-Q for the fiscal
quarter ended March 31, 1998 and incorporated herein by reference.
(13) Filed as Exhibit 1.1 to the PixTech, Inc. Current Report on Form 8-K filed
January 7, 1999 and incorporated herein by reference.
(14) Filed as Exhibit 2.1 to the PixTech, Inc. Current Report on Form 8-K filed
January 7, 1999 and incorporated herein by reference.
(15) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-Q for
the fiscal quarter ended March 31, 1999 and incorporated herein by reference.
(16) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-Q for
the fiscal quarter ended June 30, 1999 and incorporated herein by reference.
(17) Filed herewith.
(18) Filed as an Exhibit with the same number to the PixTech, Inc. Form 10-Q/A
for the fiscal quarter ended June 30, 1999 filed with the Commission on August
24, 1999 and incorporated herein by reference.
(19) Filed as Exhibit 3 to Micron Technology, Inc.'s Schedule 13D filed with the
Commission on May 28, 1999 and incorporated herein by reference.
(20) Filed as Exhibit 2 to Micron Technology, Inc.'s Schedule 13D filed with the
Commission on May 28, 1999 and incorporated herein by reference.
II-9
<PAGE>
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represents a
fundamental change in the information set forth in this Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referred to in Item 15 hereof, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses
II-10
<PAGE>
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify that
it has reasonable grounds to believe that it meets all of the requirements for
filing on Form S-1 and has duly caused this Amendment to Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized on this
13th day of September, 1999.
PIXTECH, INC
By: /s/ Dieter Mezger _____________________________________
Dieter Mezger
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of PixTech, Inc., hereby
severally constitute and appoint Dieter Mezger, Yves Morel, or Marc A.
Rubenstein, and each of them singly, our true and lawful attorneys-in-fact, with
full power to them in any and all capacities, to sign any and all amendments to
this Registration Statement on Form S-1 (including any post-effective amendments
thereto), and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dieter Mezger President and Chief Executive Officer September 13, 1999
- -------------------------- (Principal Executive Officer) and
Dieter Mezger Director
/s/ Jean-Luc Grand-Clement Chairman of the Board September 13, 1999
- --------------------------
Jean-Luc Grand-Clement
/s/ Yves Morel Chief Financial Officer (Principal September 13, 1999
- -------------------------- Financial Officer)
Yves Morel
/s/ Cathie Tomao Controller (Principal September 13, 1999
- -------------------------- Accounting Officer)
Cathie Tomao
/s/John Hawkins Director September 13, 1999
- --------------------------
John Hawkins
/s/ William G. Schmidt Director September 13, 1999
- --------------------------
William G. Schmidt
</TABLE>
II-12
EXECUTION COPY
WARRANT
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED
OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT FROM, OR
NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE
BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A PRIVATE EQUITY
LINE AGREEMENT, DATED AS OF AUGUST 9, 1999, BETWEEN PIXTECH, INC. AND
KINGSBRIDGE CAPITAL LIMITED. A COPY OF THE PORTION OF THE AFORESAID AGREEMENT
EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM PIXTECH, INC.'S EXECUTIVE
OFFICES.
August 9, 1999
Warrant to Purchase up to 100,000 Shares of Common Stock of Pixtech, Inc.
Pixtech, Inc., a Delaware corporation (the "Company"), hereby agrees that
Kingsbridge Capital Limited (the "Investor") or any other Warrant Holder is
entitled, on the terms and conditions set forth below, to purchase from the
Company at any time during the Exercise Period up to 100,000 fully paid and
nonassessable shares of Common Stock, par value $.01 per share, of the Company
(the "Common Stock"), as the same may be adjusted from time to time pursuant to
Section 6 hereof, at the Exercise Price (hereinafter defined), as the same may
be adjusted pursuant to Section 6 hereof. The resale of the shares of Common
Stock or other securities issuable upon exercise or exchange of this Warrant is
subject to the provisions of the Registration Rights Agreement (as defined
below).
Section 1. Definitions.
"Agreement" shall mean the Private Equity Line Agreement, dated the date
hereof, between the Company and the Investor.
"Capital Shares" shall mean the Common Stock and any shares of any other
class of common stock whether now or hereafter authorized, having the right to
participate in the distribution of earnings and assets of the Company.
"Date of Exercise" shall mean the date that the advance copy of the
Exercise Form is sent by facsimile to the Company, provided that the original
Warrant and Exercise Form are received by the Company within reasonable time
thereafter. If the Warrant Holder has not
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sent advance notice by facsimile, the Date of Exercise shall be the date the
original Exercise Form is received by the Company.
"Exercise Period" shall mean that period beginning on the earlier of (i)
the 181st day after the Subscription Date and (ii) the Effective Date and
continuing until the expiration of the three-year period thereafter; provided
that such period shall be extended one day for each day after such 181st day
after the Subscription Date, that a Registration Statement is not effective
during the period such Registration Statement is required to be effective
pursuant to the Registration Rights Agreement.
"Exercise Price" shall mean two dollars and thirty cents ($2.30).
"Per Share Warrant Value" shall mean the difference resulting from
subtracting the Exercise Price from the Bid Price of one share of Common Stock
on the Trading Day next preceding the Date of Exercise.
"Registration Rights Agreement" shall mean the registration rights
agreement, dated the date hereof between the Company and the Investor.
"Subscription Date" shall mean the date on which the Agreement is executed
and delivered by the parties hereto.
"Warrant Holder" shall mean the Investor or any assignee or transferee of
all or any portion of this Warrant; and
other capitalized terms used but not defined herein shall have their
respective meanings set forth in the Agreement.
Section 2. Exercise; Cashless Exercise.
(a) Method of Exercise. This Warrant may be exercised in whole or in part
(but not as to a fractional share of Common Stock), at any time and from time to
time during the Exercise Period, by the Warrant Holder by (i) surrender of this
Warrant, with the form of exercise attached hereto as Exhibit A duly executed by
the Warrant Holder (the "Exercise Notice"), to the Company at the address set
forth in Section 13 hereof, accompanied by payment of the Exercise Price
multiplied by the number of shares of Common Stock for which this Warrant is
being exercised (the "Aggregate Exercise Price") or (ii) telecopying an executed
and completed Exercise Notice to the Company and delivering to the Company
within three business days thereafter the original Exercise Notice, this Warrant
and the Aggregate Exercise Price. Each date on which an Exercise Notice is
received by the Company in accordance with clause (i) and each date on which the
Exercise Notice is telecopied to the Company in accordance with clause (ii)
above shall be deemed an "Exercise Date".
(b) Payment of Aggregate Exercise Price. Subject to paragraph (c) below,
payment of the Aggregate Exercise Price shall be made by check or bank draft
payable to the order of the Company or by wire transfer to an account designated
by the Company. If the amount of the payment received by the Company is less
than the Aggregate Exercise Price, the Warrant Holder will be notified of the
deficiency and shall make payment in that amount within five (5) business days.
In the event the payment exceeds the Aggregate Exercise Price, the Company will
refund the excess to the Warrant Holder within three (3) business days of
receipt.
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(c) Cashless Exercise. If a Registration Statement is not effective for the
resale of the Warrant Shares by the Warrant Holder, as an alternative to payment
of the Aggregate Exercise Price in accordance with paragraph (b) above, the
Warrant Holder may elect to effect a cashless exercise by so indicating on the
Exercise Notice and including a calculation of the number of shares of Common
Stock to be issued upon such exercise in accordance with the terms hereof (a
"Cashless Exercise"). In the event of a Cashless Exercise, the Warrant Holder
shall surrender this Warrant for that number of shares of Common Stock
determined by (i) multiplying the number of Warrant Shares for which this
Warrant is being exercised by the Per Share Warrant Value and (ii) dividing the
product by the Bid Price of one share of the Common Stock on the Trading Day
next preceding the Date of Exercise.
(d) Replacement Warrant. In the event that the Warrant is not exercised in
full, the number of Warrant Shares shall be reduced by the number of such
Warrant Shares for which this Warrant is exercised, and the Company, at its
expense, shall forthwith issue and deliver to or upon the order of the Warrant
Holder a new Warrant of like tenor in the name of the Warrant Holder or as the
Warrant Holder may request, reflecting such adjusted number of Warrant Shares.
Section 3. Ten Percent Limitation. The Warrant Holder may not exercise this
Warrant such that the number of Warrant Shares to be received pursuant to such
exercise aggregated with all other shares of Common Stock then owned by the
Warrant Holder beneficially or deemed beneficially owned by the Warrant Holder
would result in the Warrant Holder owning more than 9.9% of all of such Common
Stock as would be outstanding on such Closing Date, as determined in accordance
with Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder. As of any date prior to the Date of Exercise, the aggregate number
of shares of Common Stock into which this Warrant is exercisable, together with
all other shares of Common Stock then beneficially owned (as such term is
defined in Rule 16a-1 under the Exchange Act) by such Warrant Holder and its
affiliates, shall not exceed 9.9% of the total outstanding shares of Common
Stock as of such date.
Section 4. Delivery of Stock Certificates.
(a) Subject to the terms and conditions of this Warrant, as soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within three (3) Trading Days thereafter, the Company at its expense
(including, without limitation, the payment by it of any applicable issue taxes)
will cause to be issued in the name of and delivered to the Warrant Holder, or
as the Warrant Holder may lawfully direct, a certificate or certificates for the
number of validly issued, fully paid and non-assessable Warrant Shares to which
the Warrant Holder shall be entitled on such exercise, together with any other
stock or other securities or property (including cash, where applicable) to
which the Warrant Holder is entitled upon such exercise in accordance with the
provisions hereof; provided, however, that any such delivery to a location
outside of the United States shall be made within five (5) Trading Days after
the exercise of this Warrant in full or in part.
(b) This Warrant may not be exercised as to fractional shares of Common
Stock. In the event that the exercise of this Warrant, in full or in part, would
result in the issuance of any fractional share of Common Stock, then in such
event the Warrant Holder shall receive in cash an amount equal to the Bid Price
of such fractional share within three (3) Trading Days.
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Section 5. Representations, Warranties and Covenants of the Company.
(a) The Company shall take all necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation for the legal and
valid issuance of this Warrant and the Warrant Shares to the Warrant Holder.
(b) From the date hereof through the last date on which this Warrant is
exercisable, the Company shall take all steps reasonably necessary and within
its control to insure that the Common Stock remains listed or quoted on the
Principal Market.
(c) The Warrant Shares, when issued in accordance with the terms hereof,
will be duly authorized and, when paid for or issued in accordance with the
terms hereof, shall be validly issued, fully paid and non-assessable.
(d) The Company has authorized and reserved for issuance to the Warrant
Holder the requisite number of shares of Common Stock to be issued pursuant to
this Warrant. The Company shall at all times reserve and keep available, solely
for issuance and delivery as Warrant Shares hereunder, such shares of Common
Stock as shall from time to time be issuable as Warrant Shares.
Section 6. Adjustment of the Exercise Price. The Exercise Price and,
accordingly, the number of Warrant Shares issuable upon exercise of the Warrant,
shall be subject to adjustment from time to time upon the happening of certain
events as follows; provided, however, that nothing contained in this Section 6
shall be construed to require such adjustment to the exercise price of this
Warrant for the payment of any placement agent, in Capital Stock or otherwise,
in consideration of the transactions contemplated by the Agreement:
(a) Reclassification, Consolidation, Merger or Mandatory Share Exchange. If
the Company, at any time while this Warrant is unexpired and not exercised in
full, (i) reclassifies or changes its Outstanding Capital Shares (other than a
change in par value, or from par value to no par value per share, or from no par
value per share to par value or as a result of a subdivision or combination of
outstanding securities issuable upon exercise of the Warrant) or (ii)
consolidates, merges or effects a mandatory share exchange with or into another
corporation (other than a merger or mandatory share exchange with another
corporation in which the Company is a continuing corporation and that does not
result in any reclassification or change, other than a change in par value, or
from par value to no par value per share, or from no par value per share to par
value, or as a result of a subdivision or combination of Outstanding Capital
Shares issuable upon exercise of the Warrant) at any time while this Warrant is
unexpired and not exercised in full, then in any such event the Company, or such
successor or purchasing corporation, as the case may be, shall, without payment
of any additional consideration therefore, amend this Warrant or issue a new
Warrant providing that the Warrant Holder shall have rights not less favorable
to the holder than those then applicable to this Warrant and to receive upon
exercise under such amendment of this Warrant or new Warrant, in lieu of each
share of Common Stock theretofore issuable upon exercise of the Warrant
hereunder, the kind and amount of shares of stock, other securities, money or
property receivable upon such reclassification, change, consolidation, merger,
mandatory share exchange, sale or transfer by the holder of one share of Common
Stock issuable upon exercise of the Warrant had the Warrant been exercised
immediately prior to such reclassification, change, consolidation, merger,
mandatory share exchange or sale or transfer. Such amended Warrant shall provide
for
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<PAGE>
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 6.1. The provisions of this subsection
(a) shall similarly apply to successive reclassifications, changes,
consolidations, mergers, mandatory share exchanges and sales and transfers.
(b) Subdivision or Combination of Shares. If the Company, at any time while
this Warrant is unexpired and not exercised in full, shall subdivide its Common
Stock, the Exercise Price shall be proportionately reduced as of the effective
date of such subdivision, or, if the Company shall take a record of holders of
its Common Stock for the purpose of so subdividing, as of such record date,
whichever is earlier. If the Company, at any time while this Warrant is
unexpired and not exercised in full, shall combine its Common Stock, the
Exercise Price shall be proportionately increased as of the effective date of
such combination, or, if the Company shall take a record of holders of its
Common Stock for the purpose of so combining, as of such record date, whichever
is earlier.
(c) Stock Dividends. If the Company, at any time while this Warrant is
unexpired and not exercised in full, shall pay a dividend in its Capital Shares,
or make any other distribution of its Capital Shares, then the Exercise Price
shall be adjusted, as of the date the Company shall take a record of the holders
of its Capital Shares for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such payment or
other distribution), to that price determined by multiplying the Exercise Price
in effect immediately prior to such payment or other distribution by a fraction:
1. the numerator of which shall be the total number of Outstanding Capital
Shares immediately prior to such dividend or distribution, and
2. the denominator of which shall be the total number of Outstanding
Capital Shares immediately after such dividend or distribution. The provisions
of this subsection (c) shall not apply under any of the circumstances for which
an adjustment is provided in subsections (a) or (b).
(d) Issuance of Additional Capital Shares. If the Company, at any time
while this Warrant is unexpired and not exercised in full, shall issue any
additional Capital Shares ("Additional Capital Shares"), otherwise than as
provided in the foregoing subsections (a) through (c) above, at a price per
share less, or for other consideration lower, than the Bid Price in effect
immediately prior to such issuance, or without consideration, then upon such
issuance the Exercise Price shall be reduced to that price determined by
multiplying the Exercise Price in effect immediately prior to such event by a
fraction:
1. the numerator of which shall be the number of Outstanding Capital Shares
immediately prior to the issuance of the Additional Capital Shares plus the
number of Capital Shares that the aggregate consideration for the total number
of such Additional Capital Shares so issued would purchase at the then effective
Bid Price, and
2. the denominator of which shall be the number of Outstanding Capital
Shares immediately after the issuance of the Additional Capital Shares. The
provisions of this subsection (d) shall not apply under any of the circumstances
for which an adjustment is provided in subsections (a), (b) or (c).
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The provisions of this subsection (d) shall not apply to the issuance of any
Additional Capital Shares that are issued pursuant to the exercise of any
warrants, options or other subscription or purchase rights or pursuant to the
exercise of any conversion or exchange rights in any convertible or exchangeable
securities or in connection with any merger, equipment or other leasing
arrangement, or collaboration or other transaction not primarily intended to be
a financing transaction.
(e) Issuance of Warrants, Options or Other Rights. If the Company, at any
time while this Warrant is unexpired and not exercised in full, shall issue any
warrants, options or other rights to subscribe for or purchase any Additional
Capital Shares, other than employee stock option and stock purchase plans
granted in the ordinary course of business, and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant to
such warrants, options or other rights shall be less than the Bid Price in
effect immediately prior to such issuance, then, upon the issuance of such
warrants, options or other rights, the Exercise Price shall be adjusted as
provided in subsection (d) hereof on the basis that:
1. the maximum number of Additional Capital Shares issuable on the date of
determination (subject to adjustment on the date(s) of exercise) pursuant to all
such warrants, options or other rights shall be deemed to have been issued as of
the date of actual issuance of such warrants, options or other rights, and
2. the aggregate consideration for such maximum number of Additional
Capital Shares issuable pursuant to such warrants, options or other rights,
shall be deemed to be the consideration received by the Company for the issuance
of such warrants, options, or other rights plus the minimum consideration to be
received by the Company for the issuance of Additional Capital Shares pursuant
to such warrants, options, or other rights.
In the event that the Exercise Price is adjusted pursuant to this Section
6(e), and any warrants, options or other rights that were the basis of such
adjustment expire, are redeemed, are cancelled or otherwise no longer provide
the holders thereof with any right to purchase Additional Capital Shares, the
Exercise Price shall be re-adjusted to such price that the Exercise Price would
have been but for such adjustment.
(f) Issuance of Convertible or Exchangeable Securities. If the Company, at
any time while this Warrant is unexpired and not exercised in full, shall issue
any securities convertible into or exchangeable for Capital Shares and the
consideration per share for which Additional Capital Shares may at any time
thereafter be issuable pursuant to the terms of such convertible or exchangeable
securities shall be less than the Bid Price in effect immediately prior to such
issuance, then, upon the issuance of such convertible or exchangeable
securities, the Exercise Price shall be adjusted as provided in subsection (d)
hereof on the basis that:
1. the maximum number of Additional Capital Shares necessary on the date of
determination (subject to adjustment on the date(s) of conversion or exchange)
to effect the conversion or exchange of all such convertible or exchangeable
securities shall be deemed to have been issued as of the date of issuance of
such convertible or exchangeable securities, and
2. the aggregate consideration for such maximum number of Additional
Capital Shares shall be deemed to be the consideration received by the Company
for the issuance of such convertible or exchangeable securities plus the minimum
consideration received by the
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<PAGE>
Company for the issuance of such Additional Capital Shares pursuant to the terms
of such convertible or exchangeable securities.
No adjustment of the Exercise Price shall be made under this subsection (f)
upon the issuance of any convertible or exchangeable securities that are issued
pursuant to the exercise of any warrants, options or other subscription or
purchase rights therefor, if the issuance of such warrants, options or other
rights was subject to subsection (e) hereof.
In the event that the Exercise Price is adjusted pursuant to this Section
6(f), and any convertible or exchangeable securities that were the basis of such
adjustment expire, are redeemed, are cancelled or otherwise no longer provide
the holders thereof with any right to purchase Additional Capital Shares, the
Exercise Price shall be re-adjusted to such price that the Exercise Price would
have been but for such adjustment.
(g) Adjustment of Number of Shares. Upon each adjustment of the Exercise
Price pursuant to any provisions of this Section 6.1, the number of Warrant
Shares issuable hereunder at the option of the Warrant Holder shall be
calculated, to the nearest one hundredth of a whole share, multiplying the
number of Warrant Shares issuable prior to an adjustment by a fraction:
1. the numerator of which shall be the Exercise Price before any adjustment
pursuant to this Section 6.1; and
2. the denominator of which shall be the Exercise Price after such
adjustment.
(h) Liquidating Dividends, Etc. If the Company, at any time while this
Warrant is unexpired and not exercised in full, makes a distribution of its
assets or evidences of indebtedness to the holders of its Capital Shares as a
dividend in liquidation or by way of return of capital (other than dividends
paid or distributions made in respect of preferred stock) or other than as a
dividend payable out of earnings or surplus legally available for dividends
under applicable law or any distribution to such holders made in respect of the
sale of all or substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections (a) through (g)) while
an exercise is pending, then the Warrant Holder shall be entitled to receive
upon such exercise of the Warrant in addition to the Warrant Shares receivable
in connection therewith, and without payment of any consideration other than the
Exercise Price, an amount in cash equal to the value of such distribution per
Capital Share multiplied by the number of Warrant Shares that, on the record
date for such distribution, are issuable upon such exercise of the Warrant (with
no further adjustment being made following any event which causes a subsequent
adjustment in the number of Warrant Shares issuable), and an appropriate
provision therefor shall be made a part of any such distribution. The value of a
distribution that is paid in other than cash shall be determined in good faith
by the Board of Directors of the Company.
(i) Other Provisions Applicable to Adjustments Under this Section. The
following provisions will be applicable to the making of adjustments in any
Exercise Price hereinabove provided in this Section 6.1:
1. Computation of Consideration. To the extent that any Additional Capital
Shares or any convertible or exchangeable securities or any warrants, options or
other rights to
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subscribe for or purchase any Additional Capital Shares or any convertible or
exchangeable securities shall be issued for a cash consideration, the
consideration received by the Company therefor shall be deemed to be the amount
of the cash received by the Company therefor, or, if such Additional Capital
Shares or convertible or exchangeable securities are offered by the Company for
subscription, the subscription price, or, if such Additional Capital Shares or
convertible or exchangeable securities are sold to or through underwriters or
dealers for public offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or incurred by the
Company for and in the underwriting of, or otherwise in connection with the
issue thereof. To the extent that such issuance shall be for a consideration
other than cash, then, the amount of such consideration shall be deemed to be
the fair value of such consideration at the time of such issuance as determined
in good faith by the Company's Board of Directors. The consideration for any
Additional Capital Shares issuable pursuant to any warrants, options or other
rights to subscribe for or purchase the same shall be the consideration received
by the Company for issuing such warrants, options or other rights, plus the
additional consideration payable to the Company upon the exercise of such
warrants, options or other rights. The consideration for any Additional Capital
Shares issuable pursuant to the terms of any convertible or exchangeable
securities shall be the consideration paid or payable to the Company in respect
of the subscription for or purchase of such convertible or exchangeable
securities, plus the additional consideration, if any, payable to the Company
upon the exercise of the right of conversion or exchange in such convertible or
exchangeable securities. In case of the issuance at any time of any Additional
Capital Shares or convertible or exchangeable securities in payment or
satisfaction of any dividend upon any class of stock preferred as to dividends
in a fixed amount, the Company shall be deemed to have received for such
Additional Capital Shares or convertible or exchangeable securities a
consideration equal to the amount of such dividend so paid or satisfied.
2. Readjustment of Exercise Price. Upon the expiration of the right to
convert or exchange any convertible or exchangeable securities, or upon the
expiration of any rights, options or warrants, the issuance of which convertible
or exchangeable securities, rights, options or warrants effected an adjustment
in Exercise Price, if any such convertible or exchangeable securities shall not
have been converted or exchanged, or if any such rights, options or warrants
shall not have been exercised, the number of Capital Shares deemed to be issued
and Outstanding by reason of the fact that they were issuable upon conversion or
exchange of any such convertible or exchangeable securities or upon exercise of
any such rights, options, or warrants shall no longer be computed as set forth
above, and such Exercise Price shall forthwith be readjusted and thereafter be
the price that it would have been (but reflecting any other adjustments in the
Exercise Price made pursuant to the provisions of this Section 6.1 after the
issuance of such convertible or exchangeable securities, rights, options or
warrants) had the adjustment of the Exercise Price made upon the issuance or
sale of such convertible or exchangeable securities or issuance of rights,
options or warrants been made on the basis of the issuance only of the number of
Additional Capital Shares actually issued upon conversion or exchange of such
convertible or exchangeable securities, or upon the exercise of such rights,
options or warrants, and thereupon only the number of Additional Capital Shares
actually so issued, if any, shall be deemed to have been issued and only the
consideration actually received by the Company (computed as set forth in
sub-subsection (1. hereof) shall be deemed to have been received by the Company.
If the purchase price provided for in any rights, options or warrants, or the
additional consideration (if any) payable upon the conversion or exchange of any
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convertible or exchangeable securities, or the rate at which any convertible or
exchangeable securities are convertible into or exchangeable for Capital Shares
changes at any time (other than under or by reason of provisions designed to
protect against dilution), the Exercise Price in effect at the time of the
change shall be adjusted to the Exercise Price that would have been in effect at
such time had such rights, options, warrants or convertible or exchangeable
securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.
(j) In the event the Company shall, at a time while the Warrant is
unexpired and outstanding, take any action which pursuant to subsections (a)
through (h) of this Section 6.1 may result in an adjustment of the Exercise
Price, the Company shall give to the Warrant Holder at its last address known to
the Company written notice of such action ten (10) days in advance of its
effective date in order to afford to the Warrant Holder an opportunity to
exercise the Warrant prior to such action becoming effective.
Section 6.1 Notice of Adjustments. Whenever the Exercise Price or number of
Warrant Shares shall be adjusted pursuant to Section 6.1 hereof, the Company
shall promptly make a certificate signed by its President or a Vice President
and by its Treasurer or Assistant Treasurer or its Secretary or Assistant
Secretary, setting forth in reasonable detail the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Company's
Board of Directors made any determination hereunder), and the Exercise Price and
number of Warrant Shares purchasable at that Exercise Price after giving effect
to such adjustment, and shall promptly cause copies of such certificate to be
mailed (by first class and postage prepaid) to the Holder of the Warrant. In the
event the Company shall, at a time while the Warrant is unexpired and not
exercised in full, take any action that pursuant to subsections (a) through (g)
of Section 6.1 may result in an adjustment of the Exercise Price, the Company
shall give to the Holder of the Warrant at its last address known to the Company
written notice of such action ten (10) days in advance of its effective date in
order to afford to the Holder of the Warrant an opportunity to exercise the
Warrant prior to such action becoming effective.
Section 7. No Impairment. The Company will not, by amendment of its
Articles of Incorporation or By-Laws or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms of this Warrant, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the Warrant Holder
against impairment. Without limiting the generality of the foregoing, the
Company (a) will not increase the par value of any Warrant Shares above the
amount payable therefor on such exercise, and (b) will take all such action as
may be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares on the exercise of
this Warrant.
Section 8. Rights As Stockholder. Prior to exercise of this Warrant, the
Warrant Holder shall not be entitled to any rights as a stockholder of the
Company with respect to the Warrant Shares, including (without limitation) the
right to vote such shares, receive dividends or other distributions thereon or
be notified of stockholder meetings. However, in the event of any taking by the
Company of a record of the holders of any class of securities for the
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purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Company
shall mail to each Warrant Holder, at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or right, and the amount
and character of such dividend, distribution or right.
Section 9. Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of the
Warrant and, in the case of any such loss, theft or destruction of the Warrant,
upon delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such Warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
Section 10. Choice of Law. This Agreement shall be construed under the laws
of the State of Delaware.
Section 11. Entire Agreement; Amendments. This Warrant, the Registration
Rights Agreement, and the Agreement contain the entire understanding of the
parties with respect to the matters covered hereby and thereby. No provision of
this Warrant may be waived or amended other than by a written instrument signed
by the party against whom enforcement of any such amendment or waiver is sought.
Section 12. Restricted Securities.
(a) Registration or Exemption Required. This Warrant has been issued in a
transaction exempt from the registration requirements of the Securities Act in
reliance upon the provisions of Section 4(2) promulgated by the SEC under the
Securities Act. This Warrant and the Warrant Shares issuable upon exercise of
this Warrant may not be resold except pursuant to an effective registration
statement or an exemption to the registration requirements of the Securities Act
and applicable state laws.
(b) Legend. Any replacement Warrants issued pursuant to Section 2 hereof
and any Warrant Shares issued upon exercise hereof, shall bear the following
legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION WHICH IS EXEMPT
FROM, OR NOT SUBJECT TO,
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SUCH REGISTRATION. THE HOLDER OF THIS CERTIFICATE IS THE BENEFICIARY
OF CERTAIN OBLIGATIONS OF THE COMPANY SET FORTH IN A PRIVATE EQUITY
LINE AGREEMENT, DATED AS OF AUGUST 5, 1999, BETWEEN PIXTECH, INC. AND
KINGSBRIDGE CAPITAL LIMITED. A COPY OF THE PORTION OF THE AFORESAID
AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED FROM THE
COMPANY'S EXECUTIVE OFFICES."
Removal of such legend shall be in accordance with the legend removal
provisions in the Agreement.
(c) No Other Legend or Stock Transfer Restrictions. No legend other than
the one specified in Section 12(b) has been or shall be placed on the share
certificates representing the Warrant Shares and no instructions or "stop
transfer orders," so called, "stock transfer restrictions" or other restrictions
have been or shall be given to the Company's transfer agent with respect thereto
other than as expressly set forth in this Section 12 and as may be required
under Delaware law for corporations with more than one class of stock
outstanding.
(d) Assignment. Assuming the conditions of Section 12(a) above regarding
registration or exemption have been satisfied, the Warrant Holder may sell,
transfer, assign, pledge or otherwise dispose of this Warrant, in whole or in
part, provided, however, that any partial sale, transfer, assignment, pledge or
other disposition shall be in respect of at least 25,000 Warrant Shares. The
Warrant Holder shall deliver a written notice to Company, substantially in the
form of the Assignment attached hereto as Exhibit B, indicating the person or
persons to whom the Warrant shall be assigned and the respective number of
warrants to be assigned to each assignee. The Company shall effect the
assignment within ten (10) days, and shall deliver to the assignee(s) designated
by the Warrant Holder a Warrant or Warrants of like tenor and terms for the
appropriate number of shares.
(e) Investor's Compliance. Nothing in this Section 12 shall affect in any
way the Investor's obligations under any agreement to comply with all applicable
securities laws upon resale of the Common Stock.
Section 13. Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing and
shall be (i) personally served, (ii) deposited in the mail, registered or
certified, return receipt requested, postage prepaid, (iii) delivered by
reputable air courier service with charges prepaid, or (iv) transmitted by hand
delivery, telegram or facsimile, addressed as set forth below or to such other
address as such party shall have specified most recently by written notice. Any
notice or other communication required or permitted to be given hereunder shall
be deemed effective (a) upon hand delivery or delivery by facsimile (with
accurate confirmation generated by the transmitting facsimile machine) at the
address or number designated below (if delivered on a business day during normal
business hours where such notice is to be received), or the first business day
following such delivery (if delivered other than on a business day during normal
business hours where such notice is to be received) or (b) on the second
business day following the date of mailing by express courier service, fully
prepaid, addressed to such address, or upon actual receipt of such mailing,
whichever shall first occur. The addresses for such communications shall be as
set forth in the Agreement.
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Section 14. Miscellaneous. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. The headings in this Warrant are for purposes of reference only, and
shall not limit or otherwise affect any of the terms hereof. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.
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IN WITNESS WHEREOF, this Warrant was duly executed by the undersigned,
thereunto duly authorized, as of the date first set forth above.
PIXTECH, INC.
By: /s/ Dieter Mezger
------------------------
Name:
President and Chief Executive Officer
Attested:
By:
--------------------
Name:
Title:
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EXHIBIT A TO THE WARRANT
EXERCISE FORM
PIXTECH, INC.
The undersigned hereby irrevocably exercises the right to purchase
__________________ shares of Common Stock of Pixtech, Inc., a Delaware
corporation, evidenced by the attached Warrant, and herewith makes payment of
the Exercise Price with respect to such shares in full in the form of [cash or
certified check in the amount of $___________], [______] Warrant Shares, which
represent the amount of Warrant Shares as provided in the attached Warrant to be
canceled in connection with such exercise], all in accordance with the
conditions and provisions of said Warrant.
The undersigned requests that stock certificates for such Warrant Shares be
issued, and a Warrant representing any unexercised portion hereof be issued,
pursuant to this Warrant in the name of the registered Holder and delivered to
the undersigned at the address set forth below.
Dated:_______________________________________
_____________________________________________
Signature of Registered Holder
Name of Registered Holder (Print)
_____________________________________________
Address
14
<PAGE>
NOTICE
The signature to the foregoing Exercise Form must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
15
<PAGE>
EXHIBIT B TO THE WARRANT
ASSIGNMENT
(To be executed by the registered Warrant Holder desiring to transfer the
Warrant)
FOR VALUED RECEIVED, the undersigned Warrant Holder of the attached Warrant
hereby sells, assigns and transfers unto the persons below named the right to
purchase ______________ shares of the Common Stock of Pixtech, Inc. evidenced by
the attached Warrant and does hereby irrevocably constitute and appoint
______________________ attorney to transfer the said Warrant on the books of the
Company, with full power of substitution in the premises.
Dated:
_________________________________________
Signature
16
<PAGE>
Fill in for new Registration of Warrant:
_________________________________________
Name
_________________________________________
Address
_________________________________________
Please print name and address of assignee
(including zip code number)
17
<PAGE>
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
18
[LETTERHEAD OF PALMER & DODGE LLP]
September 10, 1999
PixTech, Inc.
Avenue Olivier Perroy
13790 Rousset
FRANCE
Ladies and Gentlemen:
We are rendering this opinion in connection with the Registration Statement
on Form S-1 (the "Registration Statement") filed by PixTech, Inc. (the
"Company") with the Securities and Exchange Commission under the Securities Act
of 1933, as amended, on or about the date hereof. The Registration Statement
relates to 16,100,000 shares of the Company's Common Stock, $0.01 par value per
share, consisting of 15,000,000 shares of Common Stock issuable pursuant to a
Private Equity Line Agreement (the "Put Shares"), 1,000,000 shares of Common
Stock issuable upon conversion of an outstanding Convertible Note in the
principal amount of $5,000,000 dated as of October 27, 1997 (the "Note Shares")
and 100,000 shares of Common Stock issuable upon exercise of an outstanding
Warrant (the "Warrant Shares"), for resale by certain stockholders of the
Company listed therein.
We have acted as your counsel in connection with the preparation of the
Registration Statement and are familiar with the proceedings taken by the
Company in connection with the authorization of the issuance and sale of the Put
Shares, the Note Shares and the Warrant Shares. We have examined all such
documents as we consider necessary to enable us to render this opinion.
Based upon the foregoing, we are of the opinion that, upon issuance
pursuant to each of their respective terms, the Put Shares, the Note Shares and
the Warrant Shares will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as a part of the
Registration Statement and to the reference to our firm under Item 5 thereof.
Very truly yours,
/s/ Palmer & Dodge LLP
PALMER & DODGE LLP
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EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of August
9, 1999 is made and entered into by and between PIXTECH, INC., a Delaware
corporation (the "Company"), and KINGSBRIDGE CAPITAL LIMITED (the "Investor").
WHEREAS, the Company and the Investor have entered into that certain
Private Equity Line Agreement, dated as of the date hereof (the "Equity Line
Agreement"), pursuant to which the Company will issue, from time to time, to the
Investor up to $15,000,000 worth of shares of Common Stock, par value $.01 per
share, of the Company (the "Common Stock");
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investor entering into the Investment Agreement, the Company has issued to the
Investor a warrant dated as of the date hereof, exercisable from time to time
within three (3) years following the six-month anniversary of the date of
issuance (the "Warrant") for the purchase of an aggregate of up to 100,000
shares of Common Stock at a price specified in such Warrant;
WHEREAS, pursuant to the terms of, and in partial consideration for, the
Investor's agreement to enter into the Investment Agreement, the Company has
agreed to provide the Investor with certain registration rights with respect to
the Registrable Securities;
NOW, THEREFORE, in consideration of the premises, the representations,
warranties, covenants and agreements contained herein, in the Warrant, and in
the Investment Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, intending to be legally
bound hereby, the parties hereto agree as follows (capitalized terms used herein
and not defined herein shall have the respective meanings ascribed to them in
the Investment Agreement):
ARTICLE I
REGISTRATION RIGHTS
Section 1.1. REGISTRATION STATEMENTS.
(a) Filing of Registration Statement. Subject to the terms and conditions
of this Agreement, the Company shall file with the SEC within sixty (60) days
following the Subscription Date a registration statement on Form S-1 under the
Securities Act or such other form as the SEC deems appropriate (the
"Registration Statement") for the registration of the resale by the Investor of
the Registrable Securities.
(b) Effectiveness of the Registration Statement. The Company shall use its
best efforts to have the Registration Statement declared effective by the SEC by
no later than one hundred fifty (150) days after Subscription Date and to ensure
that the Registration Statement remains in effect throughout the term of this
Agreement as set forth in Section 4.2, subject to the terms and conditions of
this Agreement.
(c) Failure to Obtain Effectiveness of Registration Statement. In the event
the Company fails for any reason to obtain the effectiveness of a Registration
Statement within the time period set forth in Section 1.1(b), the Company shall
pay to the Investor, within three (3)
<PAGE>
Trading Days of the later to occur of (i) the date by which such Registration
Statement was required to have been declared effective and (ii) the termination
of the Equity Line Agreement by the Investor, $75,000 in immediately available
funds into an account designated by the Investor. Such payment shall be made by
wire transfer of immediately available funds to an account designated by the
Investor.
(d) Failure to Maintain Effectiveness of Registration Statement. In the
event the Company fails to maintain the effectiveness of a Registration
Statement (or the underlying prospectus) throughout the period set forth in
Section 4.2, other than temporary suspensions as set forth in Section 1.1(e),
and the Investor holds any Registrable Securities at any time during the period
of such ineffectiveness (an "Ineffective Period"), the Company shall pay to the
Investor in immediately available funds into an account designated by the
Investor an amount equal to one percent (1%) of the aggregate Purchase Price of
all of the Registrable Securities then held by the Investor (as certified by the
Investor in writing to the Company) for the each of the seven-calendar-day
periods (or portion thereof) of an Ineffective Period. In the event that any
Ineffective Period shall extend beyond thirty (30) consecutive days and the
Investor does not hold any Registrable Securities at any time during such
Ineffective Period but the Investor has neither exercised nor transferred the
Warrant, the Company shall pay to the Investor in immediately available funds
into an account designated by the Investor an amount equal to one percent (1%)
of the average closing trade price of the Common Stock in respect of the
underlying Warrant Shares for the each of the seven-calendar-day periods (or
portion thereof) of such Ineffective Period beyond such thirty (30) day period.
Any of such payments shall be made on the first Trading Day after the earliest
to occur of (i) the expiration of the Commitment Period, (ii) the expiration of
an Ineffective Period, (iii) the expiration of the first thirty (30) calendar
days of an Ineffective Period and (iv) the expiration of each additional thirty
(30) calendar-day period during an Ineffective Period.
(e) Deferral or Suspension During a Blackout Period. Sections 1.1 (c) and
(d) notwithstanding, if the Company shall furnish to the Investor notice signed
by the President and Chief Executive Officer of the Company stating that the
Board of Directors of the Company has, by duly authorized resolution, determined
in good faith that it would be seriously detrimental to the Company and its
shareholders for the Registration Statement to be filed (or remain in effect)
and it is therefore essential to defer the filing of such Registration Statement
(or temporarily suspend the effectiveness of such Registration Statement or use
of the related prospectus) (a "Blackout Notice"), the Company shall have the
right (i) immediately to defer such filing for a period of not more than sixty
(60) days beyond the date by which such Registration Statement was otherwise
required hereunder to be filed or (ii) suspend such effectiveness for a period
of not more than sixty (60) days (any such deferral or suspension period of up
to sixty (60) days, a "Blackout Period"). The Investor acknowledges that it
would be seriously detrimental to the Company and its shareholders for such
Registration Statement to be filed (or remain in effect) during a Blackout
Period and therefore essential to defer such filing (or suspend such
effectiveness) during such Blackout Period and agrees to cease any disposition
of the Registrable Securities during such Blackout Period. The Company may not
utilize any of its rights under this Section 1.1(e) to defer the filing of a
Registration Statement (or suspend its effectiveness) more than twice in any
twelve (12) month period. Following such deferral or suspension, the Investor
shall be entitled to such additional number of shares of Common Stock as set
forth in Section 2.6 of the Investment Agreement.
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<PAGE>
(f) Liquidated Damages. The Company and the Investor hereto acknowledge and
agree that the sums payable under subsections 1(c) or 1(d) above shall
constitute liquidated damages and not penalties. The parties further acknowledge
that (i) the amount of loss or damages likely to be incurred is incapable or is
difficult to precisely estimate, (ii) the amounts specified in such subsections
bear a reasonable proportion and are not plainly or grossly disproportionate to
the probable loss likely to be incurred in connection with any failure by the
Company to obtain or maintain the effectiveness of a Registration Statement,
(iii) one of the reasons for the Company and the Investor reaching an agreement
as to such amounts was the uncertainty and cost of litigation regarding the
question of actual damages, and (iv) the Company and the Investor are
sophisticated business parties and have been represented by sophisticated and
able legal and financial counsel and negotiated this Agreement at arm's length.
ARTICLE II
REGISTRATION PROCEDURES
Section 2.1. FILINGS; INFORMATION. The Company will effect the registration and
sale of such Registrable Securities in accordance with the intended methods of
disposition thereof. Without limiting the foregoing, the Company in each such
case will do the following as expeditiously as possible, but in no event later
than the deadline, if any, prescribed therefor in this Agreement:
(a) The Company shall (i) prepare and file with the SEC a Registration
Statement on Form S-1 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies, that counsel for the Company shall
deem appropriate and which form shall be available for the sale of the
Registrable Securities to be registered thereunder in accordance with the
provisions of this Agreement and in accordance with the intended method of
distribution of such Registrable Securities); (ii) use reasonable best efforts
to cause such filed Registration Statement to become and remain effective
(pursuant to Rule 415 under the Securities Act or otherwise); (iii) prepare and
file with the SEC such amendments and supplements to such Registration Statement
and the prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective for the time period prescribed by Section
1.1(b); and (iv) comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during such period in accordance with the intended methods of disposition by the
Investor set forth in such Registration Statement.
(b) The Company shall file all necessary amendments to the Registration
Statement in order to effectuate the purpose of this Agreement, the Investment
Agreement, and the Warrant.
(c) If so requested by the managing underwriters, if any, or the holders of
a majority in aggregate principal amount of the Registrable Securities being
sold in connection with the filing of a Registration Statement under the
Securities Act for the offering on a continuous or delayed basis in the future
of all of the Registrable Securities (a "Shelf Registration"), the Company shall
(i) promptly incorporate in a prospectus supplement or post-effective amendment
such information as the managing underwriters, if any, and such holders agree
should be included therein, and (ii) make all required filings of such
prospectus supplement or post-effective amendment as soon as practicable after
the Company has received
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<PAGE>
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment; provided, however, that the Company shall not be
required to take any action pursuant to this Section 2.1(c)(ii) that would, in
the opinion of counsel for the Company, violate applicable law.
(d) In connection with the filing of a Shelf Registration, the Company
shall, whether or not an underwriting agreement is entered into and whether or
not the registration is an underwritten registration, (i) make such
representations and warranties to the holders of such Registrable Securities and
the underwriters, if any, with respect to the business of the Company (including
with respect to businesses or assets acquired or to be acquired by the Company),
and the Registration Statement, prospectus and documents, if any, incorporated
or deemed to be incorporated by reference therein, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings, and confirm such representations and warranties if and
when requested; (ii) if an underwriting agreement is entered into, it shall
contain indemnification provision and procedures no less favorable to the
selling holders of such Registrable Securities and the underwriters, if any,
than those set forth herein (or such other provisions and procedures acceptable
to the holders of a majority in aggregate principal amount of Registrable
Securities covered by such Registration Statement and the managing underwriters,
if any); and (iii) deliver such documents and certificates as may be reasonably
requested by the holders of a majority in aggregate principal amount of the
Registrable Securities being sold, their counsel and the managing underwriters,
if any, to evidence the continued validity of their representations and
warranties made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in the underwriting agreement or other agreement
entered into by the Company.
(e) Five (5) Trading Days prior to filing the Registration Statement or
prospectus, or any amendment or supplement thereto (excluding amendments deemed
to result from the filing of documents incorporated by reference therein), the
Company shall deliver to the Investor and one firm of counsel representing the
Investor, in accordance with the notice provisions of Section 4.8, copies of the
Registration Statement as proposed to be filed, together with exhibits thereto,
which documents will be subject to the reasonable review by the Investor and
such counsel, and thereafter deliver to the Investor and such counsel, in
accordance with the notice provisions of Section 4.8, such number of copies of
the Registration Statement, each amendment and supplement thereto (in each case
including all exhibits thereto), the prospectus included in the Registration
Statement (including each preliminary prospectus) and such other documents or
information as the Investor or counsel may reasonably request in order to
facilitate the disposition of the Registrable Securities.
(f) The Company shall deliver, in accordance with the notice provisions of
Section 4.8, to each seller of Registrable Securities covered by the
Registration Statement such number of conformed copies of the Registration
Statement and of each amendment and supplement thereto (in each case including
all exhibits and documents incorporated by reference), such number of copies of
the prospectus contained in the Registration Statement (including each
preliminary prospectus and any summary prospectus) and any other prospectus
filed under Rule 424 promulgated under the Securities Act relating to such
seller's Registrable Securities, and such other documents, as such seller may
reasonably request to facilitate the disposition of its Registrable Securities.
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(g) After the filing of the Registration Statement, the Company shall
promptly notify the Investor of any stop order issued or threatened by the SEC
in connection therewith and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.
(h) The Company shall use its reasonable best efforts to (i) register or
qualify, to the extent necessary, the Registrable Securities under such other
securities or blue sky laws of such jurisdictions in the United States as the
Investor may reasonably (in light of its intended plan of distribution) request,
and (ii) cause the Registrable Securities to be registered with or approved by
such other governmental agencies or authorities in the United States as may be
necessary by virtue of the business and operations of the Company and do any and
all other acts and things that may be reasonably necessary or advisable to
enable the Investor to consummate the disposition of the Registrable Securities;
provided, however, that the Company will not be required to qualify generally to
do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (h), subject itself to taxation in any such
jurisdiction, or consent or subject itself to general service of process in any
such jurisdiction.
(i) The Company shall immediately notify the Investor upon the occurrence
of any of the following events in respect of the Registration Statement or
related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request by the SEC or any other federal or state governmental
authority for additional information, amendments or supplements to the
Registration Statement or related prospectus; (ii) the issuance by the SEC or
any other federal or state governmental authority of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (iii) receipt of any notification with respect to
the suspension of the qualification or exemption from qualification of any of
the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in the Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the Registration Statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the Registration
Statement or prospectus supplement would be appropriate. If the Company has
delivered a preliminary or final prospectus to the Investor and, after having
made such delivery, the Registration Statement is amended or the prospectus is
supplemented pursuant to this Section, the Company shall promptly notify the
Investor and, if requested by the Company, the Investor shall immediately cease
making offers of Registerable Securities and shall return all prospectuses to
the Company. The Company shall promptly provide the Investor with revised
prospectuses and, following the receipt thereof by the Investor, the Investor
shall be free to resume making offers of the Registerable Securities.
(j) The Company shall enter into customary agreements and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities (whereupon the Investor may, at its
option, require that any or all of the
5
<PAGE>
representations, warranties and covenants of the Company also be made to and for
the benefit of the Investor).
(k) The Company shall make available to the Investor (and will deliver to
Investor's counsel), subject to restrictions imposed by the United States
federal government or any agency or instrumentality thereof, copies of all
correspondence between the SEC and the Company, its counsel or its auditors
concerning the Registration Statement and will also make available for
inspection by the Investor and any attorney, accountant or other professional
retained by the Investor (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the Company's officers
and employees to supply all information reasonably requested by any Inspectors
in connection with the Registration Statement. Records that the Company
determines, in good faith, to be confidential and that it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in the Registration Statement or (ii) the disclosure or release of
such Records is requested or required pursuant to oral questions,
interrogatories, requests for information or documents or a subpoena or other
order from a court of competent jurisdiction or other process; provided,
however, that prior to any disclosure or release pursuant to clause (ii), the
Inspectors shall provide the Company with prompt notice of any such request or
requirement so that the Company may seek an appropriate protective order or
waive such Inspectors' obligation not to disclose such Records; and, provided,
further, that if failing the entry of a protective order or the waiver by the
Company permitting the disclosure or release of such Records, the Inspectors,
upon advice of counsel, are compelled to disclose such Records, the Inspectors
may disclose that portion of the Records that counsel has advised the Inspectors
that the Inspectors are compelled to disclose. The Investor agrees that
information obtained by it solely as a result of such inspections (not including
any information obtained from a third party who, insofar as is known to the
Investor after reasonable inquiry, is not prohibited from providing such
information by a contractual, legal or fiduciary obligation to the Company)
shall be deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Company or its affiliates unless
and until such information is made generally available to the public. The
Investor further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake appropriate action
to prevent disclosure of the Records deemed confidential.
(l) To the extent required by law or reasonably necessary to effect a sale
of Registrable Securities in accordance with prevailing business practices at
the time of any sale of Registrable Securities pursuant to a Registration
Statement, the Company shall deliver to the Investor a signed counterpart,
addressed to the Investor, of (1) an opinion or opinions of counsel to the
Company, and (2) a comfort letter or comfort letters from the Company's
independent public accountants, each in customary form and covering such matters
of the type customarily covered by opinions or comfort letters, as the case may
be, as the Investor therefor reasonably requests.
(m) The Company shall otherwise comply with all applicable rules and
regulations of the SEC, including, without limitation, compliance with
applicable reporting requirements under the Exchange Act.
6
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(n) The Company shall appoint a transfer agent and registrar for all of the
Registrable Securities covered by such Registration Statement not later than the
effective date of such Registration Statement.
(o) The Company may require the Investor to promptly furnish in writing to
the Company such information as may be legally required in connection with such
registration including, without limitation, all such information as may be
requested by the SEC or the National Association of Securities Dealers. The
Investor agrees to provide such information requested in connection with such
registration within ten (10) business days after receiving such written request
and the Company shall not be responsible for any delays in obtaining or
maintaining the effectiveness of the Registration Statement caused by the
Investor's failure to timely provide such information.
Section 2.2. REGISTRATION EXPENSES. In connection with each Registration
Statement, the Company shall pay all registration expenses incurred in
connection with the registration thereunder (the "Registration Expenses"),
including, without limitation: (i) all registration, filing, securities exchange
listing and fees required by the National Association of Securities Dealers,
(ii) all registration, filing, qualification and other fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) all word processing, duplicating, printing,
messenger and delivery expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred by the Company in connection with the listing of the Registrable
Securities, (vi) reasonable fees and disbursements of counsel for the Company
and customary fees and expenses for independent certified public accountants
retained by the Company (including the expenses of any special audits or comfort
letters or costs associated with the delivery by independent certified public
accountants of such special audit(s) or comfort letter(s) requested pursuant to
Section 2.1(l) hereof), (vii) the fees and expenses of any special experts
retained by the Company in connection with such registration, (viii) all
reasonable fees and expenses of one firm of counsel for the Investor retained as
the Investor's counsel with respect to such Registration Statement up to an
amount of $5,000, unless a greater amount is required due the nature of the
review performed by Investor's counsel (an estimate of such greater fees and
expenses of such firm of counsel to be provided to the Company prior to the
undertaking of such counsel's review), (ix) premiums and other costs of policies
of insurance against liabilities arising out of any public offering of the
Registrable Securities being registered, and (x) any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding
underwriting fees, discounts, transfer taxes or commissions, if any,
attributable to the sale of Registrable Securities, which shall be payable by
each holder of Registrable Securities pro rata on the basis of the number of
Registrable Securities of each such holder that are included in a registration
under this Agreement.
ARTICLE III
INDEMNIFICATION AND CONTRIBUTION
Section 3.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Investor, its partners, Affiliates, officers, directors,
employees and duly authorized agents, and each Person or entity, if any, who
controls the
7
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Investor within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, together with the partners, Affiliates, officers, directors,
employees and duly authorized agents of such controlling Person or entity
(collectively, the "Controlling Persons"), from and against any loss, claim,
damage, liability, costs and expenses (including, without limitation, reasonable
attorneys' fees and disbursements and costs and expenses of investigating and
defending any such claim) (collectively, "Damages"), joint or several, and any
action or proceeding in respect thereof to which the Investor, its partners,
affiliates, officers, directors, employees and duly authorized agents, and any
Controlling Person, may become subject under the Securities Act or otherwise, as
incurred, insofar as such Damages (or actions or proceedings in respect thereof)
arise out of, or are based upon, any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement, or in any
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement relating to the Registrable Securities or arises out of, or are based
upon, any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and shall reimburse the Investor, its partners, affiliates, officers, directors,
employees and duly authorized agents, and each such Controlling Person, for any
legal and other expenses reasonably incurred by the Investor, its partners,
affiliates, officers, directors, employees and duly authorized agents, or any
such Controlling Person, as incurred, in investigating or defending or preparing
to defend against any such Damages or actions or proceedings; provided, however,
that the Company shall not be liable to the extent that any such Damages arise
out of the Investor's failure to send or give a copy of the final prospectus or
supplement to the persons asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such person if such
statement or omission was corrected in such final prospectus or supplement;
provided, further, that the Company shall not be liable to the extent that any
such Damages arise out of or are based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such Registration
Statement, or any such preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to the Company by the Investor or any other person
who participates as an underwriter in the offering or sale of such securities,
in either case, specifically stating that it is for use in the preparation
thereof.
Section 3.2. CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt by
any person or entity in respect of which indemnity may be sought pursuant to
Section 3.1 (an "Indemnified Party") of notice of any claim or the commencement
of any action, the Indemnified Party shall, if a claim in respect thereof is to
be made against the person or entity against whom such indemnity may be sought
(the "Indemnifying Party"), notify the Indemnifying Party in writing of the
claim or the commencement of such action. In the event an Indemnified Party
shall fail to give such notice as provided in this Section 3.2 and the
Indemnifying Party to whom notice was not given was unaware of the proceeding to
which such notice would have related and was materially prejudiced by the
failure to give such notice, the indemnification provided for in Section 3.1
shall be reduced to the extent of any actual prejudice resulting from such
failure to so notify the Indemnifying Party; provided, however, that the failure
to notify the Indemnifying Party shall not relieve the Indemnifying Party from
any liability that it may have to an Indemnified Party otherwise than under
Section 3.1. If any such claim or action shall be brought against an Indemnified
8
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Party, and it shall notify the Indemnifying Party thereof, the Indemnifying
Party shall be entitled to participate therein, and, to the extent that it
wishes, jointly with any other similarly notified Indemnifying Party, to assume
the defense thereof with counsel reasonably satisfactory to the Indemnified
Party. After notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such claim or action, the Indemnifying Party
shall not be liable to the Indemnified Party for any legal or other expenses
subsequently incurred by the Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation; provided, however, that
the Indemnified Party shall have the right to employ separate counsel to
represent the Indemnified Party and its Controlling Persons who may be subject
to liability arising out of any claim in respect of which indemnity may be
sought by the Indemnified Party against the Indemnifying Party, but the fees and
expenses of such counsel shall be for the account of such Indemnified Party,
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) in the reasonable judgment of
the Company and such Indemnified Party, representation of both parties by the
same counsel would be inappropriate due to actual or potential conflicts of
interest between them, it being understood, however, that the Indemnifying Party
shall not, in connection with any one such claim or action or separate but
substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Indemnified Parties, or for fees
and expenses that are not reasonable. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
claim or pending or threatened proceeding in respect of which the Indemnified
Party is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such claim or proceeding. Whether or not the defense of any claim or action
is assumed by the Indemnifying Party, such Indemnifying Party will not be
subject to any liability for any settlement made without its consent, which
consent will not be unreasonably withheld.
Section 3.3. OTHER INDEMNIFICATION. Indemnification similar to that specified in
the preceding paragraphs of this Article 3 (with appropriate modifications)
shall be given by the Company with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority other than the Securities Act. The provisions of this
Article III shall be in addition to any other rights to indemnification,
contribution or other remedies which an Indemnified Party may have pursuant to
law, equity, contract or otherwise.
Section 3.4. CONTRIBUTION. If the indemnification and reimbursement obligations
provided for in any section of this Article III is unavailable or insufficient
to hold harmless the Indemnified Parties in respect of any Damages referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Damages as between the Company on the one hand and the
Investor on the other, in such proportion as is appropriate to reflect the
relative fault of the Company and of the Investor in connection with such
statements or omissions, as well as other equitable considerations. The relative
fault of the Company on the one hand and of the Investor on the other shall be
determined by reference to, among
9
<PAGE>
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Investor agree that it would not be just and equitable if
contribution pursuant to this Section 3.4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of the Damages referred to
in the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses reasonably incurred
by such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 3.4, the
Investor shall in no event be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities of the
Investor were sold to the public (less underwriting discounts and commissions)
exceeds the amount of any damages which the Investor has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
ARTICLE IV
MISCELLANEOUS
Section 4.1. NO OUTSTANDING REGISTRATION RIGHTS. The Company represents and
warrants to the Investor that, except as disclosed in the SEC Documents, there
is not in effect on the date hereof any agreement by the Company pursuant to
which any holders of securities of the Company have a right to cause the Company
to register or qualify such securities under the Securities Act or any
securities or blue sky laws of any jurisdiction.
Section 4.2. TERM. The registration rights provided to the holders of
Registrable Securities hereunder shall terminate at such time as all Registrable
Securities have been issued and have ceased to be Registrable Securities.
Notwithstanding the foregoing, paragraphs (c) and (d) of Section 1.1, Article
III, Section 4.8, and Section 4.9 shall survive the termination of this
Agreement.
Section 4.3. RULE 144. The Company will file in a timely manner, information,
documents and reports in compliance with the Securities Act and the Exchange Act
and will, at its expense, promptly take such further action as holders of
Registrable Securities may reasonably request to enable such holders of
Registrable Securities to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act ("Rule 144"), as such Rule may be amended from time
to time, or (b) any similar rule or regulation hereafter adopted by the SEC. If
at any time the Company is not required to file such reports, it will, at its
expense, forthwith upon the written request of any holder of Registrable
Securities , make available adequate current public information with respect to
the Company within the meaning of paragraph (c)(2) of Rule 144 or such other
information as necessary to permit sales pursuant to Rule 144. Upon the request
of the Investor, the Company will deliver to the
10
<PAGE>
Investor a written statement, signed by the Company's principal financial
officer, as to whether it has complied with such requirements.
Section 4.4. CERTIFICATE. The Company will, at its expense, forthwith upon the
request of any holder of Registrable Securities, deliver to such holder a
certificate, signed by the Company's principal financial officer, stating (a)
the Company's name, address and telephone number (including area code), (b) the
Company's Internal Revenue Service identification number, (c) the Company's
Commission file number, (d) the number of shares of each class of Stock
outstanding as shown by the most recent report or statement published by the
Company, and (e) whether the Company has filed the reports required to be filed
under the Exchange Act for a period of at least ninety (90) days prior to the
date of such certificate and in addition has filed the most recent annual report
required to be filed thereunder.
Section 4.5. AMENDMENT AND MODIFICATION. Any provision of this Agreement may be
waived, provided that such waiver is set forth in a writing executed by both
parties to this Agreement. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of the holders of a majority
of the then outstanding Registrable Securities. Notwithstanding the foregoing,
the waiver of any provision hereof with respect to a matter that relates
exclusively to the rights of holders of Registrable Securities whose securities
are being sold pursuant to a Registration Statement and does not directly or
indirectly affect the rights of other holders of Registrable Securities may be
given by holders of at least a majority of the Registrable Securities being sold
by such holders; provided that the provisions of this sentence may not be
amended, modified or supplemented except in accordance with the provisions of
the immediately preceding sentence. No course of dealing between or among any
Person having any interest in this Agreement will be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations of
any person under or by reason of this Agreement.
Section 4.6. SUCCESSORS AND ASSIGNS; ENTIRE AGREEMENT. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns. The Investor may
assign its rights under this Agreement to any subsequent holder the Registrable
Securities, provided that the Company shall have the right to require any holder
of Registrable Securities to execute a counterpart of this Agreement as a
condition to such holder's claim to any rights hereunder. This Agreement,
together with the Investment Agreement and the Warrant(s) sets forth the entire
agreement and understanding between the parties as to the subject matter hereof
and merges and supersedes all prior discussions, agreements and understandings
of any and every nature among them.
Section 4.7. SEPARABILITY. In the event that any provision of this Agreement or
the application of any provision hereof is declared to be illegal, invalid or
otherwise unenforceable by a court of competent jurisdiction, the remainder of
this Agreement shall not be affected except to the extent necessary to delete
such illegal, invalid or unenforceable provision unless that provision held
invalid shall substantially impair the benefits of the remaining portions of
this Agreement.
11
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Section 4.8. NOTICES. All notices, demands, requests, consents, approvals, and
other communications required or permitted hereunder shall be in writing and
shall be (i) deposited in the mail, registered or certified, return receipt
requested, postage prepaid, (ii) delivered by reputable air courier service with
charges prepaid, or (iii) transmitted by hand delivery, telegram or facsimile,
addressed as set forth below or to such other address as such party shall have
specified most recently by written notice. Any notice or other communication
required or permitted to be given hereunder shall be deemed effective (a) upon
hand delivery or delivery by facsimile, with accurate confirmation generated by
the transmitting facsimile machine, at the address or number designated below
(if delivered on a business day during normal business hours where such notice
is to be received), or the first business day following such delivery (if
delivered other than on a business day during normal business hours where such
notice is to be received) or (b) on the second business day following the date
of mailing by express courier service, fully prepaid, addressed to such address,
or upon actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall be as set forth in the Equity Line
Agreement
Section 4.9. GOVERNING LAW. This Agreement shall be construed under the laws of
the State of Delaware, without giving effect to provisions regarding conflicts
of law or choice of law.
Section 4.10.HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not constitute a part of this Agreement, nor shall they
affect their meaning, construction or effect.
Section 4.11.COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original instrument and all
of which together shall constitute one and the same instrument.
Section 4.12.FURTHER ASSURANCES. Each party shall cooperate and take such action
as may be reasonably requested by another party in order to carry out the
provisions and purposes of this Agreement and the transactions contemplated
hereby.
Section 4.13.ABSENCE OF PRESUMPTION. This Agreement shall be construed without
regard to any presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
Section 4.14.REMEDIES. In the event of a breach or a threatened breach by any
party to this Agreement of its obligations under this Agreement, any party
injured or to be injured by such breach will be entitled to specific performance
of its rights under this Agreement or to injunctive relief, in addition to being
entitled to exercise all rights provided in this Agreement and granted by law.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being agreed by the parties that the remedy at law, including
monetary damages, for breach of any such provision will be inadequate
compensation for any loss and that any defense or objection in any action for
specific performance or injunctive relief that a remedy at law would be adequate
is waived.
12
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IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
PIXTECH, INC.
By: /s/ Dieter Mezger
------------------------------------------
Name:
President and Chief Executive Officer
KINGSBRIDGE CAPITAL LIMITED
By: /s/ Valentine O'Donoghue
------------------------------------------
Valentine O'Donoghue
Director
----------------------------------------------------------
PRIVATE EQUITY LINE AGREEMENT
by and between
KINGSBRIDGE CAPITAL LIMITED
and
PIXTECH, INC.
dated as of August 9, 1999
------------------------------------------------------------
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TABLE OF CONTENTS
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Page
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ARTICLE I......................................................................................1
Section 1.1 [RESERVED]....................................................................1
Section 1.2...............................................................................1
Section 1.3...............................................................................1
Section 1.4...............................................................................1
Section 1.5...............................................................................1
Section 1.6...............................................................................1
Section 1.7...............................................................................2
Section 1.8...............................................................................2
Section 1.9...............................................................................2
Section 1.10..............................................................................2
Section 1.11..............................................................................2
Section 1.12..............................................................................2
Section 1.13..............................................................................2
Section 1.14..............................................................................2
Section 1.15..............................................................................2
Section 1.16..............................................................................2
Section 1.18..............................................................................2
Section 1.19..............................................................................2
Section 1.20..............................................................................2
Section 1.21..............................................................................2
Section 1.22..............................................................................2
Section 1.23..............................................................................2
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Section 1.24..............................................................................3
Section 1.25..............................................................................3
Section 1.26..............................................................................3
Section 1.27..............................................................................3
Section 1.28..............................................................................3
Section 1.29..............................................................................3
Section 1.30..............................................................................3
Section 1.31..............................................................................3
Section 1.32..............................................................................3
Section 1.33..............................................................................3
Section 1.34..............................................................................3
Section 1.35..............................................................................3
Section 1.36..............................................................................4
Section 1.37..............................................................................4
Section 1.38..............................................................................4
Section 1.39..............................................................................4
Section 1.40..............................................................................4
Section 1.41..............................................................................4
Section 1.42..............................................................................4
Section 1.43..............................................................................4
Section 1.44..............................................................................4
Section 1.45..............................................................................4
Section 1.46..............................................................................4
Section 1.47..............................................................................4
Section 1.48..............................................................................5
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Section 1.49..............................................................................5
Section 1.50..............................................................................5
ARTICLE II.....................................................................................5
Section 2.1 Investments...................................................................5
Section 2.2 Mechanics.....................................................................6
Section 2.3 Closings......................................................................6
Section 2.4 Termination of Investment Obligation..........................................6
Section 2.5 The Warrant...................................................................7
Section 2.6 Blackout Shares...............................................................7
Section 2.7 Liquidated Damages............................................................7
ARTICLE III....................................................................................7
Section 3.1 Intent.......................................................................8
Section 3.2 Sophisticated Investor.......................................................8
Section 3.3 Authority....................................................................8
Section 3.4 Not an affiliate.............................................................8
Section 3.5 Organization and Standing....................................................8
Section 3.6 Absence of Conflicts.........................................................8
Section 3.7 Disclosure; Access to Information............................................8
Section 3.8 Manner of Sale...............................................................8
ARTICLE IV.....................................................................................8
Section 4.1 Organization of the Company..................................................9
Section 4.2 Authority....................................................................9
Section 4.3 Capitalization...............................................................9
Section 4.4 Common Stock.................................................................9
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<TABLE>
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Section 4.5 SEC Documents................................................................9
Section 4.6 Exemption from Registration; Valid Issuances.................................10
Section 4.7 No General Solicitation or Advertising in Regard to this Transaction........10
Section 4.8 Corporate Documents.........................................................10
Section 4.9 No Conflicts.................................................................10
Section 4.10 No Material Adverse Change..................................................11
Section 4.11 No Undisclosed Liabilities..................................................11
Section 4.12 No Undisclosed Events or Circumstances......................................11
Section 4.13 No Integrated Offering......................................................11
Section 4.14 Litigation and Other Proceedings............................................11
Section 4.15 No Misleading or Untrue Communication.......................................11
Section 4.16 Material Non-Public Information.............................................11
ARTICLE V.....................................................................................12
ARTICLE VI....................................................................................12
Section 6.1 Registration Rights..........................................................12
Section 6.2 Reservation of Common Stock..................................................12
Section 6.3 Listing of Common Stock......................................................12
Section 6.4 Exchange Act Registration....................................................12
Section 6.5 Legends......................................................................12
Section 6.6 Corporate Existence..........................................................13
Section 6.7 Additional SEC Documents.....................................................13
Section 6.8 Notice of Certain Events Affecting Registration; Suspension of Right
to Make a Put.......................................................................13
Section 6.9 Expectations Regarding Put Notices...........................................13
Section 6.10 Consolidation; Merger......................................................13
</TABLE>
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<TABLE>
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Section 6.11 Issuance of Put Shares, Warrant Shares and Blackout Shares..................13
Section 6.12 Legal Opinion on Subscription Date..........................................14
Section 6.13 No Other Equity Lines.......................................................14
ARTICLE VII...................................................................................14
Section 7.1 Conditions Precedent to the Obligation of the Company to Issue and
Sell Common Stock...................................................................14
Section 7.2 Conditions Precedent to the Right of the Company to Deliver a Put
Notice and the Obligation of the Investor to Purchase Put Shares....................14
Section 7.3 Due Diligence Review; Non-Disclosure of Non-Public Information...............16
ARTICLE VIII..................................................................................17
Section 8.1 Legends.....................................................................17
Section 8.2 No Other Legend or Stock Transfer Restrictions...............................18
Section 8.3 Investor's Compliance.......................................................18
ARTICLE IX....................................................................................18
Section 9.1 Indemnification..............................................................18
Section 9.2 Method of Asserting Indemnification Claims...................................19
ARTICLE X.....................................................................................22
Section 10.1 Fees and Expenses...........................................................22
Section 10.2 Reporting Entity for the Common Stock.......................................22
Section 10.3 Brokerage...................................................................22
Section 10.4 Notices.....................................................................22
Section 10.5 Assignment..................................................................23
Section 10.6 Amendment; No Waiver........................................................24
Section 10.7 Annexes and Exhibits; Entire Agreement......................................24
Section 10.8 Termination; Survival.......................................................24
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Section 10.9 Severability................................................................24
Section 10.10 Title and Subtitles........................................................24
Section 10.11 Counterparts...............................................................24
Section 10.12 Choice of Law..............................................................24
</TABLE>
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EXECUTION COPY
PRIVATE EQUITY LINE AGREEMENT
by and between
KINGSBRIDGE CAPITAL LIMITED
and
PIXTECH, INC.
dated as of August 9, 1999
This PRIVATE EQUITY LINE AGREEMENT is entered into as of the 9th day of
August, 1999 (this "Agreement"), by and between KINGSBRIDGE CAPITAL LIMITED (the
"Investor"), an entity organized and existing under the laws of the British
Virgin Islands, and PIXTECH, INC. a corporation organized and existing under the
laws of the State of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investor,
from time to time as provided herein, and the Investor shall purchase, up to
$15,000,000 of the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions of
Section 4(2) ("Section 4(2)") and Regulation D ("Regulation D") of the United
States Securities Act of 1933, as amended and the rules and regulations
promulgated thereunder (the "Securities Act"), and/or upon such other exemption
from the registration requirements of the Securities Act as may be available
with respect to any or all of the investments in Common Stock to be made
hereunder from time to time.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 [RESERVED]
Section 1.2 "Average Daily Trading Volume" shall mean, with respect to any
date, the average of the daily trading volumes for the Common Stock on the
Principal Market for twenty-six (26) of the thirty (30) Trading Days immediately
preceding such date, after removing the Trading Days with the two (2) highest
trading volumes and the Trading Days with the two (2) lowest trading volumes.
Section 1.3 "Bid Price" shall mean, with respect to any Trading Day, the
closing bid price on such Trading Day (as reported by Nasdaq) of the Common
Stock on the Principal Market.
Section 1.4 "Blackout Shares" shall have the meaning assigned to them in
Section 2.6.
Section 1.5 "Capital Shares" shall mean the Common Stock and any shares of
any other class of common stock whether now or hereafter authorized, having the
right to participate in the distribution of dividends (as and when declared) and
assets (upon liquidation of the Company).
Section 1.6 "Closing" shall mean one of the closings of a purchase and sale
of the Common Stock pursuant to Section 2.1.
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Section 1.7 "Closing Date" shall mean, with respect to a Closing, the
second Trading Day following the Put Date related to such Closing, provided all
conditions to such Closing have been satisfied on or before such Trading Day.
Section 1.8 "Commitment Period" shall mean the period commencing on the
earlier to occur of (i) the Effective Date or (ii) such earlier date as the
Company and the Investor may mutually agree in writing, and expiring on the
earlier to occur of (x) the date on which the Investor shall have purchased Put
Shares pursuant to this Agreement for an aggregate Purchase Price equal to the
Maximum Commitment Amount, (y) the date this Agreement is terminated pursuant to
Section 2.4, or (z) the date occurring twenty four (24) months from the date of
commencement of the Commitment Period.
Section 1.9 "Common Stock" shall mean the Company's common stock, $0.01 par
value per share.
Section 1.10 "Common Stock Equivalents" shall mean any securities that are
convertible into or exchangeable for Common Stock or any warrants, options or
other rights to subscribe for or purchase Common Stock or any such convertible
or exchangeable securities.
Section 1.11 "Condition Satisfaction Date" shall have the meaning set forth
in Section 7.2 of this Agreement.
Section 1.12 "Damages" shall mean any loss, claim, damage, liability, costs
and expenses (including, without limitation, reasonable attorneys' fees and
disbursements and costs and expenses of expert witnesses and investigation).
Section 1.13 "Discount" shall mean with respect to any Put (i) if the
closing trade price of the Common Stock shall be equal to or greater than three
dollars ($3.00) per share on the applicable Put Date ten percent (10%) or (ii)
if the closing trade price of the Common Stock shall be less than three dollars
($3.00) per share on the applicable Put Date twelve percent (12%).
Section 1.14 "Effective Date" shall mean the date on which the SEC first
declares effective a Registration Statement registering resale of the
Registrable Securities as set forth in Section 7.2(a).
Section 1.15 "Escrow Agreement" shall mean the escrow agreement in the form
of Exhibit A entered into pursuant to Section 7.2(o) hereof.
Section 1.16 "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended and the rules and regulations promulgated thereunder.
Section 1.18 "Investment Amount" shall mean the dollar amount (within the
range specified in Section 2.2) to be invested by the Investor to purchase Put
Shares with respect to any Put Notice as provided by the Company to the Investor
in accordance with Section 2.2 hereof.
Section 1.19 "Legend" shall have the meaning specified in Section 8.1.
Section 1.20 "Market Price" on any given date shall mean the average of the
closing trade prices of the Common Stock over the Valuation Period. "Closing
trade price" shall mean the closing price of the Common Stock (as reported by
Bloomberg L.P.) at the end of any Trading Day.
Section 1.21 "Maximum Commitment Amount" shall mean $15,000,000.
Section 1.22 "Minimum Commitment Amount" shall mean $5,000,000.
Section 1.23 "Material Adverse Effect" shall mean any effect on the
business, operations, properties or financial condition of the Company that is
material and adverse to the Company or to the Company and such other entities
controlled by the Company, taken as a whole, and/or any condition,
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circumstance, or situation that would prohibit or otherwise interfere with the
ability of the Company to enter into and perform its obligations under any of
(i) this Agreement, (ii) the Registration Rights Agreement, (iii) the Escrow
Agreement and (iv) the Warrant.
Section 1.24 "Maximum Put Amount" shall mean with respect to any Put the
amount determined in accordance with the table set forth on Annex A hereto.
Section 1.25 "Minimum Put Amount" shall mean $125,000.
Section 1.26 "NASD" shall mean the National Association of Securities
Dealers, Inc.
Section 1.27 "Outstanding" when used with reference to Common Shares or
Capital Shares (collectively the "Shares"), shall mean, at any date as of which
the number of such Shares is to be determined, all issued and outstanding
Shares, and shall include all such Shares issuable in respect of outstanding
scrip or any certificates representing fractional interests in such Shares;
provided, however, that "Outstanding" shall not refer to any such Shares then
directly or indirectly owned or held by or for the account of the Company.
Section 1.28 "Person" shall mean an individual, a corporation, a
partnership, an association, a trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
Section 1.29 "Principal Market" shall mean the Nasdaq National Market, the
Nasdaq SmallCap Market, the American Stock Exchange or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.
Section 1.30 "Purchase Price" shall mean, with respect to a Put, the Market
Price on the applicable Put Date (or such other date on which the Purchase Price
is calculated in accordance with the terms and conditions of this Agreement)
less the product of the Discount and the Market Price.
Section 1.31 "Put" shall mean each occasion the Company elects to exercise
its right to tender a Put Notice requiring the Investor to purchase a specified
amount of the Company's Common Stock, subject to the terms and conditions of
this Agreement.
Section 1.32 "Put Date" shall mean the Trading Day during the Commitment
Period that a Put Notice to sell Common Stock to the Investor is deemed
delivered pursuant to Section 2.2(b) hereof.
Section 1.33 "Put Notice" shall mean a written notice to the Investor
setting forth the Investment Amount that the Company intends to require the
Investor to purchase pursuant to the terms of this Agreement.
Section 1.34 "Put Shares" shall mean all shares of Common Stock issued or
issuable pursuant to a Put that has been exercised or may be exercised in
accordance with the terms and conditions of this Agreement.
Section 1.35 "Registrable Securities" shall mean the (i) Put Shares, (ii)
the Warrant Shares, (iii) the Blackout Shares and (iv) any securities issued or
issuable with respect to any of the foregoing by way of exchange, stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (w) the Registration Statement has been declared
effective by the SEC and all Registrable Securities have been disposed of
pursuant to the Registration Statement, (x) all Registrable Securities have been
sold under circumstances under which all of the applicable conditions of Rule
144 (or any similar provision then in force) under the Securities Act ("Rule
144") are met, (y) such time as all Registrable Securities have been otherwise
transferred to holders who may trade such shares without restriction under the
Securities Act,
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and the Company has delivered a new certificate or other evidence of ownership
for such securities not bearing a restrictive legend or (z) in the opinion of
counsel to the Company, which counsel shall be reasonably acceptable to the
Investor, all Registrable Securities may be sold without registration or the
need for an exemption from any registration requirements and without any time,
volume or manner limitations pursuant to Rule 144(k) (or any similar provision
then in effect) under the Securities Act.
Section 1.36 "Registration Rights Agreement" shall mean the registration
rights agreement in the form of Exhibit B hereto.
Section 1.37 "Registration Statement" shall mean a registration statement
on Form S-3 (if use of such form is then available to the Company pursuant to
the rules of the SEC and, if not, on such other form promulgated by the SEC for
which the Company then qualifies and which counsel for the Company shall deem
appropriate and which form shall be available for the resale of the Registrable
Securities to be registered thereunder in accordance with the provisions of this
Agreement, the Registration Rights Agreement, and the Warrant and in accordance
with the intended method of distribution of such securities), for the
registration of the resale by the Investor of the Registrable Securities under
the Securities Act.
Section 1.38 "Regulation D" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.39 "SEC" shall mean the Securities and Exchange Commission.
Section 1.40 "Section 4(2)" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.41 "Securities Act" shall have the meaning set forth in the
recitals of this Agreement.
Section 1.42 "SEC Documents" shall mean the Company's latest Form 10-K as
of the time in question, all Forms 10-Q and 8-K filed thereafter, and the Proxy
Statement for its latest fiscal year as of the time in question until such time
the Company no longer has an obligation to maintain the effectiveness of a
Registration Statement as set forth in the Registration Rights Agreement.
Section 1.43 "Subscription Date" shall mean the date on which this
Agreement is executed and delivered by the parties hereto.
Section 1.44 "Trading Cushion" shall mean the mandatory fifteen (15)
Trading Days between Put Dates.
Section 1.45 "Trading Day" shall mean any day during which the Principal
Market shall be open for business.
Section 1.46 "Underwriter" shall mean any underwriter (but not including
the Investor) participating in any disposition of the Registrable Securities on
behalf of the Investor pursuant to the Registration Statement.
Section 1.47 "Valuation Event" shall mean an event in which the Company at
any time during a Valuation Period takes any of the following actions:
(a) subdivides or combines its Common Stock;
(b) pays a dividend in its Capital Stock or makes any other distribution of
its Capital Shares, except for dividends paid or distributions made in
respect of preferred stock;
(c) issues any additional Capital Shares ("Additional Capital Shares"),
otherwise than as provided in the foregoing Subsections (a) and (b) above,
at a price per share less,
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or for other consideration lower than, the Bid Price in effect immediately
prior to such issuance, or without consideration;
(d) issues any warrants, options or other rights to subscribe for or
purchase any Additional Capital Shares and the price per share for which
Additional Capital Shares may at any time thereafter be issuable pursuant
to such warrants, options or other rights shall be less than the average of
the Bid Prices for the day preceding the issue dae, the issue date and the
day following the issue date;
(e) issues any securities convertible into or exchangeable for Capital
Shares and the consideration per share for which Additional Capital Shares
may at any time thereafter be issuable pursuant to the terms of such
convertible or exchangeable securities shall be less than the Bid Price in
effect immediately prior to such issuance;
(f) makes a distribution of its assets or evidences of indebtedness to the
holders of its Capital Shares as a dividend in liquidation or by way of
return of capital (except for dividends paid or distributions made in
respect of preferred stock) or other than as a dividend payable out of
earnings or surplus legally available for dividends under applicable law or
any distribution to such holders made in respect of the sale of all or
substantially all of the Company's assets (other than under the
circumstances provided for in the foregoing subsections (a) through (e); or
(g) takes any action affecting the number of Outstanding Capital Shares,
other than an action described in any of the foregoing Subsections (a)
through (f) hereof, inclusive, which in the opinion of the Company's Board
of Directors, determined in good faith, would have a materially adverse
effect upon the rights of the Investor at the time of a Put or exercise of
the Warrant.
Section 1.48 "Valuation Period" shall mean the period of five (5) Trading
Days during which the Purchase Price of the Common Stock is valued, which period
shall be with respect to the Purchase Price on any Put Date, the two (2) Trading
Day preceding and the two (2) Trading Days following the Trading Day on which
the applicable Put Notice is deemed to be delivered, as well as the Trading Day
on which such notice is deemed to be delivered; provided, however, that if a
Valuation Event occurs during any Valuation Period, a new Valuation Period shall
begin on the Trading Day immediately after the occurrence of such Valuation
Event and end on the fifth Trading Day thereafter.
Section 1.49 "Warrant" shall mean the Warrant issued by the Company to the
Investor pursuant to Section 2.5 hereof in further consideration of the
Investor's obligations hereunder.
Section 1.50 "Warrant Shares" shall mean all shares of Common Stock issued
or issuable pursuant to exercise of the Warrant.
ARTICLE II
PURCHASE AND SALE OF COMMON STOCK; TERMINATION OF
OBLIGATIONS; WARRANT; BLACKOUT SHARES
Section 2.1 Investments.
(a) Puts. Upon the terms and conditions set forth herein (including,
without limitation, the provisions of Article VII hereof), on any Trading
Day during the Commitment Period the Company may exercise a Put by the
delivery of a Put Notice. The number of Put Shares that the Investor shall
receive pursuant to such Put shall be determined by dividing the Investment
Amount specified in the Put Notice by the Purchase Price with respect to
such Put Date rounded down to the nearest whole share.
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(b) Minimum Amount of Puts. The Company shall, in accordance with Section
2.2(a), issue and sell Put Shares to the Investor and the Investor shall
purchase Put Shares from the Company totaling (in aggregate Purchase
Prices) at least the Minimum Commitment Amount. If the Company for any
reason fails to issue and deliver such Put Shares during the Commitment
Period, on the first Trading Day after the expiration of the Commitment
Period, the Company shall wire to the Investor a sum in immediately
available funds equal to the product of (X) the Minimum Commitment Amount
minus the aggregate Investment Amounts of the Put Shares delivered to the
Investor hereunder and (Y) the Discount.
(c) Maximum Amount of Puts. Unless the Company obtains the requisite
approval of its shareholders in accordance with the corporate laws of
Delaware and the applicable rules of the Principal Market (unless a waiver
is obtained therefrom), no more than 19.9% of the Outstanding shares of
Common Stock may be issued and sold pursuant to Puts.
Section 2.2 Mechanics.
(a) Put Notice. At any time during the Commitment Period, the Company may
deliver a Put Notice to the Investor, subject to the conditions set forth
in Section 7.2; provided, however, the Investment Amount for each Put as
designated by the Company in the applicable Put Notice shall be neither
less than the Minimum Put Amount nor more than the Maximum Put Amount.
(b) Date of Delivery of Put Notice. A Put Notice shall be deemed delivered
on (i) the Trading Day it is received by facsimile or otherwise by the
Investor if such notice is received prior to 12:00 noon New York time, or
(ii) the immediately succeeding Trading Day if it is received by facsimile
or otherwise after 12:00 noon New York time on a Trading Day or at any time
on a day which is not a Trading Day.
Section 2.3 Closings. On each Closing Date for a Put, (i) the Company shall
deliver into escrow one or more certificates, at the Investor's option,
representing the Put Shares to be purchased by the Investor pursuant to Section
2.1 herein, registered in the name of the Investor and (ii) the Investor shall
deliver into escrow the Investment Amount specified in the Put Notice by wire
transfer of immediately available funds to the account provided for in the
Escrow Agreement. In addition, on or prior to such Closing Date, each of the
Company and the Investor shall deliver to the other all documents, instruments
and writings required to be delivered or reasonably requested by either of them
pursuant to this Agreement in order to implement and effect the transactions
contemplated herein. Payment of the Investment Amount to the Company and
delivery of such certificate(s) to the Investor shall occur out of escrow in
accordance with the Escrow Agreement; provided, however, that to the extent the
Company has not paid the fees, expenses and disbursements of the Investor's
counsel in accordance with Section 10.1, the amount of such fees, expenses and
disbursements shall be paid in immediately available funds, at the direction of
the Investor, to Investor's counsel with no reduction in the number of Put
Shares issuable to the Investor on such Closing Date; provided, further, that so
long as the Investor shall maintain professional liability, errors and omissions
liability and/or directors' and officers' liability insurance ("Private Equity
Insurance") for its activities related to the Put Shares, the Warrant Shares or
the Blackout Shares, three percent (3%) of such Investment Amount shall be
retained by the Investor in respect of premium for such Private Equity
Insurance. Notwithstanding the immediately preceding proviso, in the event that
the premium charged to the Investor in respect of the Private Equity Insurance
is reduced, the amount of the Purchase Price retained by the Investor shall be
reduced proportionately.
Section 2.4 Termination. The Investor may, at its sole discretion,
terminate this Agreement and its obligation to purchase shares of Common Stock
hereunder (including with respect to any Put,
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notice of which has been given but the applicable Closing Date has not yet
occurred) in the event that (i) the Registration Statement is not declared
effective within (90) days following the date required therefor in the
Registration Rights Agreement; (ii) there shall occur any stop order or
suspension of the effectiveness of the Registration Statement for an aggregate
of thirty (30) Trading Days during the Commitment Period, for any reason other
than deferrals or suspension during a Blackout Period in accordance with the
Registration Rights Agreement or as a result of corporate developments
subsequent to the Subscription Date that would require such Registration
Statement to be amended to reflect such event in order to maintain its
compliance with the disclosure requirements of the Securities Act or (iii) the
Company shall at any time fail to comply with the requirements of Section 6.3,
6.4, 6.5 or 6.6. The Company may, in its sole discretion, terminate this
Agreement and its rights and obligations hereunder in the event that (X) the
Company shall have made Puts to the Investor and the aggregate of the Investment
Amounts in respect of such Puts shall be equal to or greater than the Minimum
Commitment Amount or (Y) the Company shall have made Puts to the Investor and
the aggregate of the Investment Amounts in respect of such Puts shall be less
than the Minimum Commitment Amount provided that the Company shall have paid to
the Investor by wire transfer of immediately available funds the amount set
forth in Section 2.1(b).
Section 2.5 The Warrant. On the Subscription Date, the Company shall issue
the Warrant to the Investor. The Warrant shall be delivered by the Company to
the Investor upon execution of this Agreement by the parties hereto. The Warrant
Shares shall be registered for resale pursuant to the Registration Rights
Agreement.
Section 2.6 Blackout Shares. In the event that, (a) the Company delivers a
Blackout Notice to the Investor of a Blackout Period in accordance with the
Registration Rights Agreement, and (b) the Bid Price on the Trading Day
immediately preceding such Blackout Period ("Old Bid Price") is greater than the
Bid Price on the first Trading Day following such Blackout Period that the
Investor may sell its Registrable Securities pursuant to an effective
Registration Statement ("New Bid Price"), then the Company shall issue to the
Investor the number of additional shares of Registrable Securities (the
"Blackout Shares") equal to the difference between (X) the product of the number
of Registrable Securities held by Investor immediately prior to the Blackout
Period multiplied by the Old Bid Price, divided by the New Bid Price, and (Y)
the number of Registrable Securities held by Investor immediately prior to the
Blackout Period; provided, however, that for purposes of clauses (X) and (Y) of
this Section 2.6, the number of Registrable Securities held by the Investor
immediately prior to the Blackout Period shall be deemed to be equal to the
lesser of (I) the actual number of Registrable Securities then held by the
Investor and (II) 1,000,000 Registrable Securities.
Section 2.7 Liquidated Damages. The parties hereto acknowledge and agree
that the sum payable under Section 2.1(b) and the requirement to issue Blackout
Shares under Section 2.6 above shall give rise to liquidated damages and not
penalties. The parties further acknowledge that (a) the amount of loss or
damages likely to be incurred is incapable or is difficult to precisely
estimate, (b) the amounts specified in such Sections bear a reasonable
proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred by the Investor in connection with the failure by the
Company to make Puts with aggregate Purchase Prices totaling at least the
Minimum Commitment Amount or in connection with a Blackout Period under the
Registration Rights Agreement, and (c) the parties are sophisticated business
parties and have been represented by sophisticated and able legal and financial
counsel and negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants to the Company that:
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Section 3.1 Intent. The Investor is entering into this Agreement for its
own account and the Investor has no present arrangement (whether or not legally
binding) or intent at any time to sell the Common Stock to or through any person
or entity; provided, however, that by making the representations herein, the
Investor does not agree to hold the Common Stock for any minimum or other
specific term and reserves the right to dispose of the Common Stock at any time
in accordance with federal and state securities laws applicable to such
disposition.
Section 3.2 Sophisticated Investor. The Investor is a sophisticated
investor (as described in Rule 506(b)(2)(ii) of Regulation D) and an accredited
investor (as defined in Rule 501 of Regulation D), and Investor has such
experience in business and financial matters that it is capable of evaluating
the merits and risks of an investment in Common Stock. The Investor acknowledges
that an investment in the Common Stock is speculative and involves a high degree
of risk.
Section 3.3 Authority. Each of this Agreement, the Registration Rights
Agreement, and the Escrow Agreement has been duly authorized by all necessary
corporate action and no further consent or authorization of the Company, or its
Board of Directors or stockholders is required. Each of this Agreement, the
Registration Rights Agreement, and the Escrow Agreement was validly executed and
delivered by the Investor and each is a valid and binding agreement of the
Investor enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 3.4 Not an affiliate. The Investor is not an officer, director or
"affiliate" (as that term is defined in Rule 405 of the Securities Act) of the
Company.
Section 3.5 Organization and Standing. Investor is duly organized, validly
existing, and in good standing under the laws of the British Virgin Islands.
Section 3.6 Absence of Conflicts. The execution and delivery of this
Agreement and any other document or instrument contemplated hereby, and the
consummation of the transactions contemplated thereby, and compliance with the
requirements thereof, will not (a) violate any law, rule, regulation, order,
writ, judgment, injunction, decree or award binding on Investor, or, to the
Investor's knowledge, (b) violate any provision of any indenture, instrument or
agreement to which Investor is a party or is subject, or by which Investor or
any of its assets is bound, (c) conflict with or constitute a material default
thereunder, (d) result in the creation or imposition of any lien pursuant to the
terms of any such indenture, instrument or agreement, or constitute a breach of
any fiduciary duty owed by Investor to any third party, or (e) require the
approval of any third-party (that has not been obtained) pursuant to any
material contract to which Investor is subject or to which any of its assets,
operations or management may be subject.
Section 3.7 Disclosure; Access to Information. Investor has received all
documents, records, books and other information pertaining to Investor's
investment in the Company that have been requested by Investor. The Investor has
reviewed or received copies of the SEC Documents.
Section 3.8 Manner of Sale. At no time was Investor presented with or
solicited by or through any leaflet, public promotional meeting, television
advertisement or any other form of general solicitation or advertising.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investor that:
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Section 4.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Except as set
forth in the SEC Documents, the Company does not own more than fifty percent
(50%) of the outstanding capital stock of or control any other business entity.
The Company is duly qualified as a foreign corporation to do business and is in
good standing in every jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, other than
those in which the failure so to qualify would not have a Material Adverse
Effect.
Section 4.2 Authority. (i) The Company has the requisite corporate power
and authority to enter into and perform its obligations under this Agreement,
the Registration Rights Agreement, the Warrant and the Escrow Agreement and to
issue the Put Shares, the Warrant, the Warrant Shares and the Blackout Shares;
(ii) the execution and delivery of this Agreement and the Registration Rights
Agreement, and the execution, issuance and delivery of the Warrant, by the
Company and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action and no
further consent or authorization of the Company or its Board of Directors or
stockholders is required; and (iii) each of this Agreement and the Registration
Rights Agreement has been duly executed and delivered, and the Warrant has been
duly executed, issued and delivered, by the Company and constitute valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application.
Section 4.3 Capitalization. As of August 2, 1999, the authorized capital
stock of the Company consisted of 60,000,000 shares of Common Stock, of which
23,467,138 were issued and outstanding and 1,000,000 shares of Preferred Stock,
$.01 par value, of which 500,000 has been designated Series E Preferred Stock,
of which 297, 289 were issued and outstanding. Except as set forth on Schedule
4.3 hereof, there are no options, warrants, or rights to subscribe to,
securities, rights or obligations convertible into or exchangeable for or giving
any right to subscribe for any shares of capital stock of the Company. All of
the outstanding shares of Common Stock of the Company have been duly and validly
authorized and issued and are fully paid and nonassessable. [COMPANY TO PROVIDE
INFORMATION AND SCHEDULE]
Section 4.4 Common Stock. The Company has registered its Common Stock
pursuant to Section 12(b) or 12(g) of the Exchange Act and is in full compliance
with all reporting requirements of the Exchange Act, and the Company has
maintained all requirements for the continued listing or quotation of its Common
Stock, and such Common Stock is currently listed or quoted on the Principal
Market. As of the date hereof, the Principal Market is the Nasdaq National
Market ("Nasdaq").
Section 4.5 SEC Documents. The Company has delivered or made available to
the Investor true and complete copies of the SEC Documents (including, without
limitation, proxy information and solicitation materials). The Company has not
provided to the Investor any information that, according to applicable law, rule
or regulation, should have been disclosed publicly prior to the date hereof by
the Company, but which has not been so disclosed. As of their respective dates,
the SEC Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and other federal, state
and local laws, rules and regulations applicable to such SEC Documents, and none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form and substance in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto. Such
financial statements have been prepared in accordance
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with generally accepted accounting principles applied on a consistent basis
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto or (ii) in the case of unaudited
interim statements, to the extent they may not include footnotes or may be
condensed or summary statements) and fairly present in all material respects the
financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
Section 4.6 Exemption from Registration; Valid Issuances. The sale and
issuance of the Warrant, the Warrant Shares, the Put Shares and any Blackout
Shares in accordance with the terms and on the bases of the representations and
warranties set forth in this Agreement, may and shall be properly issued
pursuant to Rule 4(2), Regulation D and/or any applicable state law. When issued
and paid for as herein provided, the Put Shares, the Warrant Shares and any
Blackout Shares shall be duly and validly issued, fully paid, and nonassessable.
Neither the sales of the Put Shares, the Warrant, the Warrant Shares or any
Blackout Shares pursuant to, nor the Company's performance of its obligations
under, this Agreement, the Registration Rights Agreement, or the Warrant shall
(i) result in the creation or imposition of any liens, charges, claims or other
encumbrances upon the Put Shares, the Warrant Shares, any Blackout Shares or any
of the assets of the Company, or (ii) entitle the holders of Outstanding Capital
Shares to preemptive or other rights to subscribe to or acquire the Capital
Shares or other securities of the Company. The Put Shares, the Warrant Shares
and any Blackout Shares shall not subject the Investor to personal liability by
reason of the ownership thereof.
Section 4.7 No General Solicitation or Advertising in Regard to this
Transaction. Neither the Company nor any of its affiliates nor any distributor
or any person acting on its or their behalf (i) has conducted or will conduct
any general solicitation (as that term is used in Rule 502(c) of Regulation D)
or general advertising with respect to any of the Put Shares, the Warrant, the
Warrant Shares or any Blackout Shares, or (ii) made any offers or sales of any
security or solicited any offers to buy any security under any circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.8 Corporate Documents. The Company has furnished or made
available to the Investor true and correct copies of the Company's Certificate
of Incorporation, as amended and in effect on the date hereof (the
"Certificate"), and the Company's By-Laws, as amended and in effect on the date
hereof (the "By-Laws").
Section 4.9 No Conflicts. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby, including without limitation the issuance of the Put
Shares, the Warrant, the Warrant Shares and the Blackout Shares do not and will
not (i) result in a violation of the Certificate or By-Laws or (ii) except as
set forth on Schedule 4.9, conflict with, or constitute a material default (or
an event that with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, any material agreement, indenture, instrument or any "lock-up"
or similar provision of any underwriting or similar agreement to which the
Company is a party, or (iii) result in a violation of any federal, state, local
or foreign law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations) applicable to the Company or by which
any property or asset of the Company is bound or affected (except for such
conflicts, defaults, terminations, amendments, accelerations, cancellations and
violations as would not, individually or in the aggregate, have a Material
Adverse Effect) nor is the Company otherwise in violation of, conflict with or
in default under any of the foregoing; provided, however, that for purposes of
the Company's representations and warranties as to violations of foreign law,
rule or regulation referenced in clause (iii), such representations and
warranties are made only to the best of the Company's knowledge insofar as the
execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby are or may
be affected by the status of the Investor under or pursuant to any such foreign
law, rule or regulation. The business of the Company is not being conducted in
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violation of any law, ordinance or regulation of any governmental entity, except
for possible violations that either singly or in the aggregate do not and will
not have a Material Adverse Effect. The Company is not required under federal,
state or local law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement or issue and sell the Common Stock or the Warrant in
accordance with the terms hereof (other than any SEC, NASD or state securities
filings that may be required to be made by the Company subsequent to any
Closing, any registration statement that may be filed pursuant hereto, and any
shareholder approval required by the rules applicable to companies whose common
stock trades on Nasdaq); provided that, for purposes of the representation made
in this sentence, the Company is assuming and relying upon the accuracy of the
relevant representations and agreements of the Investor herein.
Section 4.10 No Material Adverse Change. Since September 31, 1998, no event
has occurred that would have a Material Adverse Effect on the Company, except as
disclosed in the SEC Documents.
Section 4.11 No Undisclosed Liabilities. The Company has no liabilities or
obligations that are material, individually or in the aggregate, and that are
not disclosed in the SEC Documents or otherwise publicly announced, other than
those incurred in the ordinary course of the Company's businesses since
September 31, 1998, and which, individually or in the aggregate, do not or would
not have a Material Adverse Effect on the Company.
Section 4.12 No Undisclosed Events or Circumstances. Since September 31,
1998, no event or circumstance has occurred or exists with respect its
businesses, properties, operations or financial condition, that, under
applicable law, rule or regulation, requires public disclosure or announcement
prior to the date hereof by the Company but which has not been so publicly
announced or disclosed in the SEC Documents.
Section 4.13 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, other than pursuant to this Agreement, under circumstances
that would require registration of the Common Stock under the Securities Act.
Section 4.14 Litigation and Other Proceedings. Except as may be set forth
in the SEC Documents, there are no lawsuits or proceedings pending or to the
best knowledge of the Company threatened, against the Company, nor has the
Company received any written or oral notice of any such action, suit, proceeding
or investigation, which might have a Material Adverse Effect. Except as set
forth in the SEC Documents, no judgment, order, writ, injunction or decree or
award has been issued by or, so far as is known by the Company, requested of any
court, arbitrator or governmental agency which might result in a Material
Adverse Effect.
Section 4.15 No Misleading or Untrue Communication. The Company and any
duly authorized Person representing the Company in connection with the
transactions contemplated by this Agreement, have not made, at any time, any
oral communication in connection with the offer or sale of the same which
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements, in the light of the
circumstances under which they were made, not misleading.
Section 4.16 Material Non-Public Information. The Company is not in
possession of, nor has the Company or its agents disclosed to the Investor, any
material non-public information that (i) if disclosed, would, or could
reasonably be expected to have, a material effect on the price of the Common
Stock or (ii) according to applicable law, rule or regulation, should have been
disclosed publicly by the Company prior to the date hereof but which has not
been so disclosed.
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ARTICLE V
COVENANTS OF THE INVESTOR
Section 5.1 Compliance with Law. The Investor's trading activities with
respect to shares of the Company's Common Stock will be in compliance with all
applicable state and federal securities laws, rules and regulations and the
rules and regulations of the Principal Market on which the Company's Common
Stock is listed.
Section 5.2 Limitation on Short Sales. The Investor and its affiliates
shall not engage in short sales of the Company's Common Stock; provided,
however, that the Investor may enter into any short sale or other hedging or
similar arrangement it deems appropriate with respect to Put Shares after it
receives a Put Notice with respect to such Put Shares so long as such sales or
arrangements do not involve more than the number of such Put Shares (as
determined by the Investor as of the date of such Put Notice).
ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the Registration
Rights Agreement to remain in full force and effect and the Company shall comply
in all respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof, the Company
has available and the Company shall reserve and keep available at all times,
free of preemptive rights, shares of Common Stock for the purpose of enabling
the Company to satisfy any obligation to issue the Put Shares, the Warrant
Shares and the Blackout Shares; such amount of shares of Common Stock to be
reserved shall be calculated based upon the Bid Price on the Subscription Date
for the Put Shares under the terms and conditions of this Agreement and the
Exercise price of the Warrant and a good faith estimate by the Company in
consultation with the investor of the number of Blackout Shares that will need
to be issued. The number of shares so reserved from time to time, as theretofore
increased or reduced as hereinafter provided, may be reduced by the number of
shares actually delivered hereunder.
Section 6.3 Listing of Common Stock. The Company shall maintain the listing
of the Common Stock on a Principal Market, and as soon as practicable (but in
any event prior to the commencement of the Commitment Period) will cause the Put
Shares and the Warrant Shares to be listed on the Principal Market. The Company
further shall, if the Company applies to have the Common Stock traded on any
other Principal Market, include in such application the Put Shares, the Warrant
Shares and any Blackout Shares, and shall take such other action as is necessary
or desirable in the opinion of the Investor to cause the Common Stock to be
listed on such other Principal Market as promptly as possible. The Company shall
take use its best efforts to continue the listing and trading of its Common
Stock on the Principal Market (including, without limitation, maintaining
sufficient net tangible assets) and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules of
the NASD and the Principal Market.
Section 6.4 Exchange Act Registration. The Company shall cause its Common
Stock to continue to be registered under Section 12(g) or 12(b) of the Exchange
Act, will comply in all respects with its reporting and filing obligations under
said Act, and will not take any action or file any document (whether or not
permitted by said Act or the rules thereunder) to terminate or suspend such
registration or to terminate or suspend its reporting and filing obligations
under said Act.
Section 6.5 Legends. The certificates evidencing the Put Shares, the
Warrant Shares and the Blackout Shares shall be free of legends, except as
provided for in Article VIII and as may be required under Delaware law for
corporations with more than one class of stock outstanding.
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Section 6.6 Corporate Existence. The Company shall take all steps necessary
to preserve and continue the corporate existence of the Company.
Section 6.7 Additional SEC Documents. The Company shall deliver to the
Investor, as and when the originals thereof are submitted to the SEC for filing,
copies of all SEC Documents so furnished or submitted to the SEC.
Section 6.8 Notice of Certain Events Affecting Registration; Suspension of
Right to Make a Put. The Company shall immediately notify the Investor upon the
occurrence of any of the following events in respect of a registration statement
or related prospectus in respect of an offering of Registrable Securities: (i)
receipt of any request for additional information by the SEC or any other
federal or state governmental authority during the period of effectiveness of
the registration statement or for amendments or supplements to the registration
statement or related prospectus; (ii) the issuance by the SEC or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose; (iii) receipt of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; (iv) the happening of any event
that makes any statement made in such Registration Statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires the making of any
changes in the registration statement, related prospectus or documents so that,
in the case of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
that in the case of the related prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; and (v) the Company's
reasonable determination that a post-effective amendment to the registration
statement would be appropriate, and the Company shall promptly make available to
the Investor any such supplement or amendment to the related prospectus. The
Company shall not deliver to the Investor any Put Notice during the continuation
of any of the foregoing events.
Section 6.9 Expectations Regarding Put Notices. Within ten (10) days after
the commencement of each calendar quarter occurring subsequent to the
commencement of the Commitment Period, the Company undertakes to notify the
Investor as to its reasonable expectations as to the dollar amount it intends to
raise during such calendar quarter, if any, through the issuance of Put Notices.
Such notification shall constitute only the Company's good faith estimate with
respect to such calendar quarter and shall in no way obligate the Company to
raise such amount during such calendar quarter or otherwise limit its ability to
deliver Put Notices during such calendar quarter. The failure by the Company to
comply with this provision can be cured by the Company's notifying the Investor
at any time as to its reasonable expectations with respect to the current
calendar quarter.
Section 6.10 Consolidation; Merger. The Company shall not, at any time
after the date hereof, effect any merger or consolidation of the Company with or
into, or a transfer of all or substantially all of the assets of the Company to,
another entity unless the resulting successor or acquiring entity (if not the
Company) assumes by written instrument the obligation to deliver to the Investor
such shares of stock and/or securities as the Investor is entitled to receive
pursuant to this Agreement and the Warrant.
Section 6.11 Issuance of Put Shares, Warrant Shares and Blackout Shares.
The sale of the Put Shares, the issuance of the Warrant Shares pursuant to
exercise of the Warrant and the issuance of any Blackout Shares shall be made in
accordance with the provisions and requirements of Regulation D and any
applicable state law. Issuance of the Warrant Shares pursuant to exercise of the
Warrant through a cashless exercise shall be made in accordance with the
provisions and requirements of Section 3(a)(9) under the Securities Act and any
applicable state law.
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Section 6.12 Legal Opinion on Subscription Date. The Company's general or
outside counsel shall deliver to the Investor on the Subscription Date an
opinion in the form of Exhibit E, except for paragraph 6 thereof.
Section 6.13 No Other Equity Lines. The Company shall refrain from entering
into any other agreements, arrangements or understandings granting to the
Company the right to put shares of its securities to one or more investors
through private placements.
ARTICLE VII
CONDITIONS TO DELIVERY OF
PUT NOTICES AND CONDITIONS TO CLOSING
Section 7.1 Conditions Precedent to the Obligation of the Company to Issue
and Sell Common Stock. The obligation hereunder of the Company to issue and sell
the Put Shares to the Investor incident to each Closing is subject to the
satisfaction, at or before each such Closing, of each of the conditions set
forth below.
(a) Accuracy of the Investor's Representation and Warranties. The
representations and warranties of the Investor shall be true and correct in
all material respects as of the date of this Agreement and as of the date
of each such Closing as though made at each such time.
(b) Performance by the Investor. The Investor shall have performed,
satisfied and complied in all respects with all covenants, agreements and
conditions required by this Agreement to be performed, satisfied or
complied with by the Investor at or prior to such Closing.
Section 7.2 Conditions Precedent to the Right of the Company to Deliver a
Put Notice and the Obligation of the Investor to Purchase Put Shares. The right
of the Company to deliver a Put Notice and the obligation of the Investor
hereunder to acquire and pay for the Put Shares incident to a Closing is subject
to the satisfaction, on (i) the applicable Put Date and (ii) the applicable
Closing Date (each a "Condition Satisfaction Date"), of each of the following
conditions:
(a) Registration of the Registrable Securities with the SEC. As set forth
in the Registration Rights Agreement, the Company shall have filed with the
SEC a Registration Statement with respect to the resale of the Registrable
Securities by the Investor that shall have been declared effective by the
SEC prior to the first Put Date, but in no event later than one hundred
fifty (150) days after Subscription Date.
(b) Effective Registration Statement. As set forth in the Registration
Rights Agreement, the Registration Statement shall have previously become
effective and shall remain effective on each Condition Satisfaction Date
and (i) neither the Company nor the Investor shall have received notice
that the SEC has issued or intends to issue a stop order with respect to
the Registration Statement or that the SEC otherwise has suspended or
withdrawn the effectiveness of the Registration Statement, either
temporarily or permanently, or intends or has threatened to do so (unless
the SEC's concerns have been addressed and the Investor is reasonably
satisfied that the SEC no longer is considering or intends to take such
action), and (ii) no other suspension of the use or withdrawal of the
effectiveness of the Registration Statement or related prospectus shall
exist.
(c) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct as
of each
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Condition Satisfaction Date as though made at each such time (except for
representations and warranties specifically made as of a particular date).
(d) Performance by the Company. The Company shall have performed, satisfied
and complied in all respects with all covenants, agreements and conditions
required by this Agreement, the Registration Rights Agreement and the
Warrant to be performed, satisfied or complied with by the Company at or
prior to each Condition Satisfaction Date.
(e) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
adopted by any court or governmental authority of competent jurisdiction
that prohibits the transactions contemplated by this Agreement or otherwise
has a Material Adverse Effect, and no actions, suits or proceedings shall
be in progress, pending or threatened by any Person, that seek to enjoin or
prohibit the transactions contemplated by this Agreement or otherwise could
reasonably be expected to have a Material Adverse Effect. For purposes of
this paragraph (e), no proceeding shall be deemed pending or threatened
unless one of the parties has received written or oral notification thereof
prior to the applicable Closing Date.
(f) No Suspension of Trading In or Delisting of Common Stock. The trading
of the Common Stock shall not have been suspended by the SEC, the Principal
Market or the NASD and the Common Stock shall have been approved for
listing or quotation on and shall not have been delisted from the Principal
Market (including, without limitation, delisted to the Nasdaq Bulletin
Board). The issuance of shares of Common Stock with respect to the
applicable Closing, if any, shall not violate the shareholder approval
requirements of the Principal Market.
(g) Legal Opinion. The Company shall have caused to be delivered to the
Investor, within five (5) Trading Days of the Effective Date, an opinion of
the Company's independent or general counsel in the form of Exhibit E
hereto, addressed to the Investor.
(h) Ten Percent Limitation. On each Closing Date, the number of Put Shares
then to be purchased by the Investor shall not exceed the number of such
shares that, when aggregated with all other shares of Registerable
Securities then owned by the Investor beneficially or deemed beneficially
owned by the Investor, would result in the Investor owning no more than
9.9% of all of such Common Stock as would be outstanding on such Closing
Date, as determined in accordance with Section 16 of the Exchange Act and
the regulations promulgated thereunder. In the event that the number of Put
Shares to be purchased by the Investor is limited by the provisions of this
Section 7.2(h), then the Company shall no longer have any obligation with
respect to the Minimum Commitment Amount under Section 2.1(b). For purposes
of this Section, in the event that the amount of Common Stock outstanding
as determined in accordance with Section 16 of the Exchange Act and the
regulations promulgated thereunder is greater on a Closing Date than on the
date upon which the Put Notice associated with such Closing Date is given,
the amount of Common Stock outstanding on such Closing Date shall govern
for purposes of determining whether the Investor, when aggregating all
purchases of Common Stock made pursuant to this Agreement and, if any,
Warrant Shares and Blackout Shares, would own more than 9.9% of the Common
Stock following such Closing Date.
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(i) Intentionally Omitted.
(j) Minimum Average Daily Trading Volume. The Average Daily Trading Volume
for the Common Stock with respect to the applicable Put Date and Closing
Date equals or exceeds 25,000 shares.
(k) No Knowledge. The Company shall have no knowledge of any event more
likely than not to have the effect of causing such Registration Statement
to be suspended or otherwise ineffective (which event is more likely than
not to occur within the fifteen Trading Days following the Trading Day on
which such Notice is deemed delivered).
(l) Trading Cushion. The Trading Cushion shall have elapsed since the
immediately preceding Put Date.
(m) Shareholder Vote. The issuance of shares of Common Stock with respect
to the applicable Closing, if any, shall not violate the shareholder
approval requirements of the Principal Market.
(n) Escrow Agreement. The parties hereto shall have entered into the Escrow
Agreement.
(o) Other. On each Condition Satisfaction Date, the Investor shall have
received and been reasonably satisfied with such other certificates and
documents as shall have been reasonably requested by the Investor in order
for the Investor to confirm the Company's satisfaction of the conditions
set forth in this Section 7.2., including, without limitation, a
certificate in substantially the form and substance of Exhibit F hereto,
executed in either case by an executive officer of the Company and to the
effect that all the conditions to such Closing shall have been satisfied as
at the date of each such certificate.
Section 7.3 Due Diligence Review; Non-Disclosure of Non-Public Information.
(a) The Company shall make available for inspection and review by the
Investor, advisors to and representatives of the Investor (who may or may
not be affiliated with the Investor and who are reasonably acceptable to
the Company), any Underwriter, any Registration Statement or amendment or
supplement thereto or any blue sky, NASD or other filing, all financial and
other records, all SEC Documents and other filings with the SEC, and all
other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review, and cause the
Company's officers, directors and employees to supply all such information
reasonably requested by the Investor or any such representative, advisor or
Underwriter in connection with such Registration Statement (including,
without limitation, in response to all questions and other inquiries
reasonably made or submitted by any of them), prior to and from time to
time after the filing and effectiveness of the Registration Statement for
the sole purpose of enabling the Investor and such representatives,
advisors and Underwriters and their respective accountants and attorneys to
conduct initial and ongoing due diligence with respect to the Company and
the accuracy of the Registration Statement.
(b) Each of the Company, its officers, directors, employees and agents
shall in no event disclose non-public information to the Investor, advisors
to or representatives of the Investor unless prior to disclosure of such
information the Company identifies such information as being non-public
information and provides the Investor, such advisors and representatives
with the opportunity to accept or refuse to accept such non-public
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information for review. The Company may, as a condition to disclosing any
non-public information hereunder, require the Investor's advisors and
representatives to enter into a confidentiality agreement in form
reasonably satisfactory to the Company and the Investor.
(c) Nothing herein shall require the Company to disclose non-public
information to the Investor or its advisors or representatives, and the
Company represents that it does not disseminate non-public information to
any investors who purchase stock in the Company in a public offering, to
money managers or to securities analysts; provided, however, that
notwithstanding anything herein to the contrary, the Company shall, as
hereinabove provided, immediately notify the advisors and representatives
of the Investor and any Underwriters of any event or the existence of any
circumstance (without any obligation to disclose the specific event or
circumstance) of which it becomes aware, constituting non-public
information (whether or not requested of the Company specifically or
generally during the course of due diligence by such persons or entities),
which, if not disclosed in the prospectus included in the Registration
Statement would cause such prospectus to include a material misstatement or
to omit a material fact required to be stated therein in order to make the
statements, therein, in light of the circumstances in which they were made,
not misleading. Nothing contained in this Section 7.3 shall be construed to
mean that such persons or entities other than the Investor (without the
written consent of the Investor prior to disclosure of such information)
may not obtain non-public information in the course of conducting due
diligence in accordance with the terms and conditions of this Agreement and
nothing herein shall prevent any such persons or entities from notifying
the Company of their opinion that based on such due diligence by such
persons or entities, that the Registration Statement contains an untrue
statement of a material fact or omits a material fact required to be stated
in the Registration Statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not
misleading.
ARTICLE VIII
LEGENDS
Section 8.1 Legends. Each of the Warrant and, unless otherwise provided
below, each certificate representing Registrable Securities will bear the
following legend (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND SUCH OTHER SECURITIES LAWS. NEITHER THIS SECURITY
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT
FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS
CERTIFICATE IS THE BENEFICIARY OF CERTAIN OBLIGATIONS OF THE COMPANY
SET FORTH IN A PRIVATE EQUITY LINE AGREEMENT BETWEEN PIXTECH, INC. AND
KINGSBRIDGE CAPITAL LIMITED DATED AS OF AUGUST 5, 1999. A COPY OF THE
PORTION
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OF THE AFORESAID AGREEMENT EVIDENCING SUCH OBLIGATIONS MAY BE OBTAINED
FROM THE COMPANY'S EXECUTIVE OFFICES.
As soon as practicable after the execution and delivery hereof, but in any
event within 5 Trading Days hereafter, the Company shall issue to the transfer
agent for its Common Stock (and to any substitute or replacement transfer agent
for its Common Stock upon the Company's appointment of any such substitute or
replacement transfer agent) instructions in substantially the form of Exhibit G
hereto, with a copy to the Investor. Such instructions shall be irrevocable by
the Company from and after the date hereof or from and after the issuance
thereof to any such substitute or replacement transfer agent, as the case may
be, except as otherwise expressly provided in the Registration Rights Agreement.
It is the intent and purpose of such instructions, as provided therein, to
require the transfer agent for the Common Stock from time to time upon transfer
of Registrable Securities by the Investor to issue certificates evidencing such
Registrable Securities free of the Legend during the following periods and under
the following circumstances and without consultation by the transfer agent with
the Company or its counsel and without the need for any further advice or
instruction or documentation to the transfer agent by or from the Company or its
counsel or the Investor:
(a) At any time after the Effective Date, upon surrender of one or more
certificates evidencing Common Stock that bear the Legend, to the extent
accompanied by a notice requesting the issuance of new certificates free of
the Legend to replace those surrendered; provided that (i) the Registration
Statement shall then be effective and (ii) if reasonably requested by the
transfer agent the Investor confirms to the transfer agent that the
Investor has complied with the prospectus delivery requirement under
applicable federal law.
(b) At any time upon any surrender of one or more certificates evidencing
Registrable Securities that bear the Legend, to the extent accompanied by a
notice requesting the issuance of new certificates free of the Legend to
replace those surrendered together with an opinion of counsel to the effect
that either (i) the Investor is permitted to dispose of such Registrable
Securities without limitation as to amount or manner of sale pursuant to
Rule 144(k) under the Securities Act or (ii) the Investor has sold, pledged
or otherwise transferred or agreed to sell, pledge or otherwise transfer
such Registrable Securities in a manner other than pursuant to an effective
registration statement, to a transferee who shall upon such transfer be
entitled to freely tradeable securities.
Section 8.2 No Other Legend or Stock Transfer Restrictions. No legend other
than the one specified in Section 8.1 has been or shall be placed on the share
certificates representing the Common Stock and no instructions or "stop
transfers orders," so called, "stock transfer restrictions," or other
restrictions have been or shall be given to the Company's transfer agent with
respect thereto other than as expressly set forth in this Article VIII and as
may be required under Delaware law for corporations with more than one class of
stock outstanding.
Section 8.3 Investor's Compliance. Nothing in this Article VIII shall
affect in any way the Investor's obligations under any agreement to comply with
all applicable securities laws upon resale of the Common Stock.
ARTICLE IX
INDEMNIFICATION
Section 9.1 Indemnification. (i) The Company agrees to indemnify and hold
harmless the Investor, its partners, affiliates, officers, directors, employees,
and duly authorized agents, and each Person or entity, if any, who controls the
Investor within the meaning of Section 15 of the Securities Act
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or Section 20 of the Exchange Act, together with the Controlling Persons (as
defined in the Registration Rights Agreement) from and against any Damages,
joint or several, and any action in respect thereof to which the Investor, its
partners, affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Company contained in this Agreement, as such Damages are incurred, except to the
extent that such damages result solely from the Investor's failure to perform
any covenant or agreement contained in this Agreement, provided, however, that
the Company shall not be liable in any such case to the extent that any such
Damages arise out of or are based upon information furnished to the Company by
or on behalf of the Investor in writing and (ii) the Investor agrees to
indemnify and hold harmless the Company, its partners, affiliates, officers,
directors, employees and duly authorized agents and its Controlling Persons (as
defined in the Registration Rights Agreement) from and against any Damages,
joint or several, and any action in respect thereof to which the Company, its
partners, affiliates, officers, directors, employees, and duly authorized
agents, and any such Controlling Person becomes subject to, resulting from,
arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Investor contained in this Agreement; provided, however, that the
indemnification obligation of the Investor under this Section 9.1 shall not
exceed an aggregate maximum amount of $500,000.
Section 9.2 Method of Asserting Indemnification Claims. All claims for
indemnification by any Indemnified Party (as defined below) under Section 9.1
shall be asserted and resolved as follows:
(a) In the event any claim or demand in respect of which any person
claiming indemnification under any provision of Section 9.1 (an
"Indemnified Party") might seek indemnity under Section 9.1 is asserted
against or sought to be collected from such Indemnified Party by a person
other than the Company, the Investor or any affiliate of the Company or (a
"Third Party Claim"), the Indemnified Party shall deliver a written
notification, enclosing a copy of all papers served, if any, and specifying
the nature of and basis for such Third Party Claim and for the Indemnified
Party's claim for indemnification that is being asserted under any
provision of Section 12.2 against any person (the "Indemnifying Party"),
together with the amount or, if not then reasonably ascertainable, the
estimated amount, determined in good faith, of such Third Party Claim (a
"Claim Notice") with reasonable promptness to the Indemnifying Party. If
the Indemnified Party fails to provide the Claim Notice with reasonable
promptness after the Indemnified Party receives notice of such Third Party
Claim, the Indemnifying Party shall not be obligated to indemnify the
Indemnified Party with respect to such Third Party Claim to the extent that
the Indemnifying Party's ability to defend has been irreparably prejudiced
by such failure of the Indemnified Party. The Indemnifying Party shall
notify the Indemnified Party as soon as practicable within the period
ending thirty (30) calendar days following receipt by the Indemnifying
Party of either a Claim Notice or an Indemnity Notice (as defined below)
(the "Dispute Period") whether the Indemnifying Party disputes its
liability or the amount of its liability to the Indemnified Party under
Section 9.1 and whether the Indemnifying Party desires, at its sole cost
and expense, to defend the Indemnified Party against such Third Party
Claim.
(i) If the Indemnifying Party notifies the Indemnified Party within
the Dispute Period that the Indemnifying Party desires to defend the
Indemnified Party with respect to the Third Party Claim pursuant to
this Section 9.2(a), then the Indemnifying Party shall have the right
to defend, with counsel reasonably satisfactory to the Indemnified
Party, at the sole cost and expense of the Indemnifying Party, such
Third Party Claim by all appropriate proceedings, which proceedings
shall be vigorously and diligently prosecuted by the
19
<PAGE>
Indemnifying Party to a final conclusion or will be settled at the
discretion of the Indemnifying Party (but only with the consent of the
Indemnified Party in the case of any settlement that provides for any
relief other than the payment of monetary damages or that provides for
the payment of monetary damages as to which the Indemnified Party
shall not be indemnified in full pursuant to Section 9.1). The
Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof; provided,
however, that the Indemnified Party may, at the sole cost and expense
of the Indemnified Party, at any time prior to the Indemnifying
Party's delivery of the notice referred to in the first sentence of
this clause (i), file any motion, answer or other pleadings or take
any other action that the Indemnified Party reasonably believes to be
necessary or appropriate to protect its interests; and provided
further, that if requested by the Indemnifying Party, the Indemnified
Party will, at the sole cost and expense of the Indemnifying Party,
provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party elects to contest.
The Indemnified Party may participate in, but not control, any defense
or settlement of any Third Party Claim controlled by the Indemnifying
Party pursuant to this clause (i), and except as provided in the
preceding sentence, the Indemnified Party shall bear its own costs and
expenses with respect to such participation. Notwithstanding the
foregoing, the Indemnified Party may take over the control of the
defense or settlement of a Third Party Claim at any time if it
irrevocably waives its right to indemnity under Section 9.1 with
respect to such Third Party Claim.
(ii) If the Indemnifying Party fails to notify the Indemnified Party
within the Dispute Period that the Indemnifying Party desires to
defend the Third Party Claim pursuant to Section 9.2(a), or if the
Indemnifying Party gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, or if the Indemnifying
Party fails to give any notice whatsoever within the Dispute Period,
then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party, the Third Party Claim by
all appropriate proceedings, which proceedings shall be prosecuted by
the Indemnified Party in a reasonable manner and in good faith or will
be settled at the discretion of the Indemnified Party (with the
consent of the Indemnifying Party, which consent will not be
unreasonably withheld). The Indemnified Party will have full control
of such defense and proceedings, including any compromise or
settlement thereof; provided, however, that if requested by the
Indemnified Party, the Indemnifying Party will, at the sole cost and
expense of the Indemnifying Party, provide reasonable cooperation to
the Indemnified Party and its counsel in contesting any Third Party
Claim which the Indemnified Party is contesting. Notwithstanding the
foregoing provisions of this clause (ii), if the Indemnifying Party
has notified the Indemnified Party within the Dispute Period that the
Indemnifying Party disputes its liability or the amount of its
liability hereunder to the Indemnified Party with respect to such
Third Party Claim and if such dispute is resolved in favor of the
Indemnifying Party in the manner provided in clause (iii) below, the
Indemnifying Party will not be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to this clause (ii) or of
the Indemnifying Party's participation therein at the Indemnified
Party's request, and the Indemnified Party shall reimburse the
Indemnifying Party in full for all reasonable costs and expenses
incurred by the Indemnifying Party in connection with such litigation.
The Indemnifying Party may participate in, but not control,
20
<PAGE>
any defense or settlement controlled by the Indemnified Party pursuant
to this clause (ii), and the Indemnifying Party shall bear its own
costs and expenses with respect to such participation.
(iii) If the Indemnifying Party notifies the Indemnified Party that it
does not dispute its liability or the amount of its liability to the
Indemnified Party with respect to the Third Party Claim under Section
9.1 or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes its liability or the amount of
its liability to the Indemnified Party with respect to such Third
Party Claim, the Loss in the amount specified in the Claim Notice
shall be conclusively deemed a liability of the Indemnifying Party
under Section 9.1 and the Indemnifying Party shall pay the amount of
such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed its liability or the amount of its liability
with respect to such claim, the Indemnifying Party and the Indemnified
Party shall proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within the
Resolution Period, such dispute shall be resolved by arbitration in
accordance with paragraph (c) of this Section 9.2.
(b) In the event any Indemnified Party should have a claim under Section
9.1 against the Indemnifying Party that does not involve a Third Party
Claim, the Indemnified Party shall deliver to the Indemnifying Party a
written notification of a claim for indemnity under Section 9.1 specifying
the nature of and basis for such claim, together with the amount or, if not
then reasonably ascertainable, the estimated amount, determined in good
faith, of such claim (an "Indemnity Notice") with reasonable promptness to
the Indemnifying Party. The failure by any Indemnified Party to give the
Indemnity Notice shall not impair such party's rights hereunder except to
the extent that the Indemnifying Party demonstrates that it has been
irreparably prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim or the amount of the
claim described in such Indemnity Notice or fails to notify the Indemnified
Party within the Dispute Period whether the Indemnifying Party disputes the
claim or the amount of the claim described in such Indemnity Notice, the
Loss in the amount specified in the Indemnity Notice will be conclusively
deemed a liability of the Indemnifying Party under Section 9.1 and the
Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its
liability or the amount of its liability with respect to such claim, the
Indemnifying Party and the Indemnified Party shall proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through
negotiations within the Resolution Period, such dispute shall be resolved
by arbitration in accordance with paragraph (c) of this Section 9.2.
(c) Any dispute under this Agreement or the Warrant shall be submitted to
arbitration (including, without limitation, pursuant to this Section 12.3)
and shall be finally and conclusively determined by the decision of a board
of arbitration consisting of three (3) members (the "Board of Arbitration")
selected as hereinafter provided. Each of the Indemnified Party and the
Indemnifying Party shall select one (1) member and the third member shall
be selected by mutual agreement of the other members, or if the other
members fail to reach agreement on a third member within twenty (20) days
after their selection, such third member shall thereafter be selected by
the American Arbitration Association upon application made to it for such
purpose by the Indemnified Party. The Board of Arbitration shall meet on
consecutive business days in New York County, New York or such other place
as a majority of the members of the Board of Arbitration determines more
appropriate, and shall reach and render a decision in writing (concurred
21
<PAGE>
in by a majority of the members of the Board of Arbitration) with respect
to the amount, if any, which the Indemnifying Party is required to pay to
the Indemnified Party in respect of a claim filed by the Indemnified Party.
In connection with rendering its decisions, the Board of Arbitration shall
adopt and follow such rules and procedures as a majority of the members of
the Board of Arbitration deems necessary or appropriate. To the extent
practical, decisions of the Board of Arbitration shall be rendered no more
than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision
to be delivered to the Indemnified Party and the Indemnifying Party. Any
decision made by the Board of Arbitration (either prior to or after the
expiration of such thirty (30) calendar day period) shall be final, binding
and conclusive on the Indemnified Party and the Indemnifying Party and
entitled to be enforced to the fullest extent permitted by law and entered
in any court of competent jurisdiction. Each party to any arbitration shall
bear its own expense in relation thereto, including but not limited to such
party's attorneys' fees, if any, and the expenses and fees of the Board of
Arbitration shall be divided between the Indemnifying Party and the
Indemnified Party in the same proportion as the portion of the related
claim determined by the Board of Arbitration to be payable to the
Indemnified Party bears to the portion of such claim determined not to be
so payable.
ARTICLE X
MISCELLANEOUS
Section 10.1 Fees and Expenses. Each of the Company and the Investor agrees
to pay its own expenses incident to the performance of its obligations
hereunder, except that the Company shall pay the fees, expenses and
disbursements of the Investor's counsel in an amount not to exceed $25,000 for
the preparation, negotiation, execution and delivery of this Agreement, the
Registration Rights Agreement, the Escrow Agreement and the Warrant.
Section 10.2 Reporting Entity for the Common Stock. The reporting entity
relied upon for the determination of the trading price or trading volume of the
Common Stock on any given Trading Day for the purposes of this Agreement shall
be Nasdaq or any successor thereto. The written mutual consent of the Investor
and the Company shall be required to employ any other reporting entity or the
Principal Market.
Section 10.3 Brokerage. Each of the parties hereto represents that it has
had no dealings in connection with this transaction with any finder or broker
who will demand payment of any fee or commission from the other party. The
Company on the one hand, and the Investor, on the other hand, agree to indemnify
the other against and hold the other harmless from any and all liabilities to
any persons claiming brokerage commissions or finder's fees on account of
services purported to have been rendered on behalf of the indemnifying party in
connection with this Agreement or the transactions contemplated hereby.
Section 10.4 Notices. All notices, demands, requests, consents, approvals,
and other communications required or permitted hereunder shall be in writing
and, unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice given in accordance herewith. Any notice or
other communication required or permitted to be given hereunder shall be deemed
effective (a) upon hand delivery or delivery by facsimile, with accurate
confirmation generated by the transmitting facsimile machine, at the address or
number designated below (if delivered on a business day during
22
<PAGE>
normal business hours where such notice is to be received), or the first
business day following such delivery (if delivered other than on a business day
during normal business hours where such notice is to be received) or (b) on the
second business day following the date of mailing by express courier service,
fully prepaid, addressed to such address, or upon actual receipt of such
mailing, whichever shall first occur. The addresses for such communications
shall be:
If to the Company:
Pixtech, Inc.
Avenue Olivier Perroy
13790 Rousset, France
Attention: Yves Morel
Chief Financial Officer
Telephone: (011) 33-4-42-29-1000
Facsimile:
with a copy to:
Palmer & Dodge, LLP
One Beacon Street
Boston, Massachusetts, 02108
Attention: Michael Lytton, Esq. and Marc A. Rubenstein, Esq.
Telephone: (617) 573-0100
Facsimile: (617) 227-4420
if to the Investor:
Adam Gurney
Kingsbridge Capital Limited
c/o Kingsbridge Corporate Services Limited
Main Street
Kilcullen, County Kildare
Republic of Ireland
Telephone: 011-353-45-481-811
Facsimile: 011-353-45-482-003
with a copy (which shall not constitute notice) to:
Rogers & Wells LLP
200 Park Avenue, 52nd Floor
New York, NY 10166
Attention: Keith M. Andruschak, Esq.
Telephone: (212) 878-8000
Facsimile: (212) 878-8375
Either party hereto may from time to time change its address or facsimile number
for notices under this Section by giving at least ten (10) days' prior written
notice of such changed address or facsimile number to the other party hereto.
Section 10.5 Assignment. Neither this Agreement nor any rights of the
Investor or the Company hereunder may be assigned by either party to any other
person. Notwithstanding the foregoing, (a) the provisions of this Agreement
shall inure to the benefit of, and be enforceable by, any transferee of any of
the Common Stock purchased or acquired by the Investor hereunder with respect to
the Common
23
<PAGE>
Stock held by such person, and (b) the Investor's interest in this Agreement may
be assigned at any time, in whole or in part, to any other person or entity
(including any affiliate of the Investor) upon the prior written consent of the
Company, which consent shall not to be unreasonably withheld.
Section 10.6 Amendment; No Waiver. No party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth in this Agreement or therein. Except as expressly
provided in this Agreement, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by both parties hereto. The failure of the either party to insist on
strict compliance with this Agreement, or to exercise any right or remedy under
this Agreement, shall not constitute a waiver of any rights provided under this
Agreement, nor estop the parties from thereafter demanding full and complete
compliance nor prevent the parties from exercising such a right or remedy in the
future.
Section 10.7 Annexes and Exhibits; Entire Agreement. All annexes and
exhibits to this Agreement are incorporated herein by reference and shall
constitute part of this Agreement. This Agreement, the Warrant, the Registration
Rights Agreement and the Escrow Agreement set forth the entire agreement and
understanding of the parties relating to the subject matter hereof and thereof
and supersede all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written, relating to the
subject matter hereof.
Section 10.8 Termination; Survival. This Agreement shall terminate on the
earlier of (i) twenty four (24) months after the commencement of the Commitment
Period (ii) such date that the Investor terminates this Agreement pursuant to
Section 2.4 hereof and (iii) the date on which the Company has made Puts with an
aggregate Investment Amount equal to the Maximum Commitment Amount; provided,
however, that the provisions of Articles VI, VIII, IX and X, and of Section
2.1(b) and Section 7.3, shall survive the termination of this Agreement.
Section 10.9 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 10.10 Title and Subtitles. The titles and subtitles used in this
Agreement are used for the convenience of reference and are not to be considered
in construing or interpreting this Agreement.
Section 10.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which may be executed by less than all of the parties and
shall be deemed to be an original instrument which shall be enforceable against
the parties actually executing such counterparts and all of which together shall
constitute one and the same instrument.
Section 10.12 Choice of Law. This Agreement shall be construed under the
laws of the State of Delaware.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Private Equity Line
Agreement to be executed by the undersigned, thereunto duly authorized, as of
the date first set forth above.
KINGSBRIDGE CAPITAL LIMITED
By: /s/ Valentine O'Donoghue
----------------------------------
Valentine O'Donoghue
Director
PIXTECH, INC.
By: /s/ Dieter Mezger
----------------------------------
Name:
President and Chief Executive Officer
25
<PAGE>
ANNEX A
MAXIMUM PUT AMOUNT
The Maximum Put Amount with respect to a Put shall be determined based upon
the Average Daily Trading Volume of shares of Common Stock with respect to the
relevant Put Date and the Market Price as of such Put Date of shares of Common
Stock on such Put Date as follows:
===============================================================
Average Daily Trading Volume
=================---------------------------------------------------------------
Market Price ($ 25,000-40,000 40,001-55,000 55,001-75,000 75,000-above
per share)
================================================================================
1.00-1.25 $125,000 $160,000 $230,000 $337,500
- --------------------------------------------------------------------------------
1.26-1.40 $140,000 $250,000 $300,000 $475,000
- --------------------------------------------------------------------------------
1.41-1.625 $165,000 $300,000 $400,000 $550,000
- --------------------------------------------------------------------------------
1.626-1.875 $200,000 $400,000 $500,000 $650,000
- --------------------------------------------------------------------------------
1.876-2.125 $250,000 $500,000 $600,000 $750,000
- --------------------------------------------------------------------------------
2.126-2.375 $325,000 $600,000 $700,000 $850,000
- --------------------------------------------------------------------------------
2.376-2.625 $400,000 $700,000 $850,000 $1,000,000
- --------------------------------------------------------------------------------
2.626-3.00 $500,000 800,000 1,000,000 1,150,000
- --------------------------------------------------------------------------------
3.00-Above $650,000 $950,000 $1,150,000 $1,300,000
================================================================================
<PAGE>
EXHIBIT A
FORM OF ESCROW AGREEMENT
To be mutually agreed upon by the parties hereto
<PAGE>
EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
To be mutually agreed upon by the parties hereto
<PAGE>
EXHIBIT C
FORM OF WARRANT
To be mutually agreed upon by the parties hereto
<PAGE>
EXHIBIT D
[RESERVED]
<PAGE>
EXHIBIT E
FORM OF OPINION OF THE COMPANY'S INDEPENDENT COUNSEL
[Date]
Kingsbridge Capital Limited
PO Box 3340
Barclays House
Wickhams Cay, Road Town, Tortola
British Virgin Islands
Re: Private Equity Line Agreement Between Kingsbridge Capital Limited and
[ISSUER]
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section [6.12] [7.2(g)] of the
Private Equity Line Agreement by and between Kingsbridge Capital Limited, a
British Virgin Islands entity (the "Investor") and [ISSUER]., a Delaware
corporation (the "Company"), dated as of [DATE] (the "Equity Line Agreement"),
which provides for the issuance and sale by the Company of up to $15,000,000
worth of shares of Common Stock of the Company (upon the terms and subject to
the conditions contained therein) (the "Put Shares"), certain additional shares
upon the occurrence of certain events as set forth in Section 2.6 thereof (the
"Blackout Shares"), and a warrant to purchase 100,000 shares of Common Stock of
the Company (the "Warrant", and the shares of Common Stock issued or issuable
pursuant to exercise of the Warrant, the "Warrant Shares"). All terms used
herein have the meanings defined for them in the Equity Line Agreement unless
otherwise defined herein.
We have acted as counsel for the Company in connection with the negotiation
of the Equity Line Agreement, the Warrant, the Registration Rights Agreement
between the Investor and the Company, dated as of [DATE] (the "Registration
Rights Agreement"), and the Escrow Agreement between the Investor, the Company
and [ESCROW AGENT], dated as of [DATE] (the "Escrow Agreement", and together
with the Equity Line Agreement and the Registration Rights Agreement, the
"Agreements"). As counsel, we have made such legal and factual examinations and
inquires as we have deemed advisable or necessary for the purpose of rendering
this opinion. In addition, we have examined, among other things, originals or
copies of such corporate records of the Company, certificates of public
officials and such other documents and questions of law that we consider
necessary or advisable for the purpose of rendering this opinion. In such
examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us as
copies thereof, the legal capacity of natural persons, and the due execution and
delivery of all documents (except as to due execution and delivery by the
Company) where due execution and delivery are a prerequisite to the
effectiveness thereof.
As used in this opinion, the expression "to our knowledge" refers to the
current actual knowledge of the attorneys of this firm who have worked on
matters for the Company solely in connection with the Agreements and the Warrant
and the transactions contemplated thereby.
For purposes of this opinion, we have assumed that you have all requisite
power and authority, and have taken any and all necessary corporate action, to
execute and deliver the Agreements, and we are assuming that the representations
and warranties made by the Investor in the Agreements and pursuant thereto are
true and correct.
The opinions hereinafter expressed are subject to the following
qualifications:
<PAGE>
[QUALIFICATIONS TO BE NEGOTIATED]
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation validly existing and in good standing under
the laws of the State of Delaware and has all requisite power and authority
(corporate and other) to carry on its business and to own, lease and operate its
properties and assets as described in the Company's SEC Documents. To our
knowledge, the Company does not own more than fifty percent (50%) of the
outstanding capital stock of or control any other business entity.
2. The Company has the requisite corporate power and authority to enter
into and perform its obligations under the Agreements and the Warrant and to
issue the Put Shares, the Warrant, the Warrant Shares and the Blackout Shares.
The execution and delivery of the Agreements, and the execution, issuance and
delivery of the Warrant, by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company or its
Board of Directors or stockholders is required. Each of the Agreements has been
duly executed and delivered, and the Warrant has been duly executed, issued and
delivered, by the Company and each of the Agreements and the Warrant constitutes
valid and binding obligations of the Company enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
3. The execution, delivery and performance of the Agreements and the
Warrant by the Company and the consummation by the Company of the transactions
contemplated thereby, including without limitation the issuance of the Put
Shares, the Warrant, the Warrant Shares and the Blackout Shares, do not and will
not (i) result in a violation of the Company's Articles or By-Laws; (ii) to our
knowledge, conflict with, or constitute a material default (or an event that
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any material agreement, indenture, instrument or any "lock-up" or similar
provision of any underwriting or similar agreement known to us to which the
Company is a party, except for such conflicts, defaults, terminations,
amendments, accelerations and cancellations as would not, individually or in the
aggregate, have a Material Adverse Effect; or (iii) result in a violation of any
federal or state law, rule or regulation applicable to the Company or by which
any property or asset of the Company is bound or affected, except for such
violations as would not, individually or in the aggregate, have a Material
Adverse Effect. To our knowledge, the Company is not in violation of any terms
of its Articles or Bylaws.
4. The issuance of the Put Shares, the Warrant and the Blackout Shares in
accordance with the Equity Line Agreement, and the issuance of the Warrant
Shares in accordance with the Warrant, will be exempt from registration under
the Securities Act of 1933 and will be in compliance with [STATE] state
securities laws. When so issued, the Put Shares, the Blackout Shares and the
Warrant Shares will be duly and validly issued, fully paid and nonassessable,
and free of any liens, encumbrances and preemptive or similar rights contained
in the Company's Articles of Incorporation (the "Articles") or Bylaws or, to our
knowledge, in any agreement to which the Company is party.
5. To our knowledge, except as disclosed in the SEC Documents, there are no
claims, actions, suits, proceedings or investigations that are pending against
the Company or its properties, or against any officer or director of the Company
in his or her capacity as such, nor has the Company received any written threat
of any such claims, actions, suits, proceedings, or investigations which are
required to be and have not been disclosed in the SEC Documents.
<PAGE>
[6. Nothing has come to our attention that has caused us to believe that
the Registration Statement and the Prospectus at the time the Registration
Statement became effective and as of the date of the filing with the Commission
of the Company's most recent Annual Report on Form 10-K or Quarterly Report on
Form 10-Q incorporated by reference into such Registration Statement contained
an untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; however,
we express no opinion with respect to the financial statements and the notes
thereto and the schedules and other financial and statistical data derived
therefrom included in the Registration Statement or the Prospectus.] [For
Opinion pursuant to Section 7.2(g).]
This opinion is furnished to the Purchaser solely for its benefit in
connection with the transactions described above and may not be relied upon by
any other person or for any other purpose without our prior written consent.
Very truly yours,
[OUTSIDE COUNSEL TO THE ISSUER]
<PAGE>
EXHIBIT F
COMPLIANCE CERTIFICATE
PIXTECH, INC.
The undersigned, _________________., hereby certifies, with respect to
shares of common stock of Pixtech Corporation (the "Company") issuable in
connection with the Put Notice, dated _____________ (the "Notice"), delivered
pursuant to Article II of the Private Equity Line Agreement, dated as of [DATE],
by and between the Company and Kingsbridge Capital Limited (the "Agreement"), as
follows:
1. The undersigned is the duly elected President and Chief Executive
Officer of the Company.
2. The representations and warranties of the Company set forth in Article V
of the Agreement are true and correct in all material respects as though made on
and as of the date hereof.
3. The Company has performed in all material respects all covenants and
agreements to be performed by the Company on or prior to the Closing Date
related to the Notice and has complied in all material respects with all
obligations and conditions contained in Article VII of the Agreement.
The undersigned has executed this Certificate this ____ day of ________,
199_.
------------------------------------
President and Chief Executive Officer
<PAGE>
EXHIBIT G
INSTRUCTIONS TO TRANSFER AGENT
PIXTECH, INC.
July ___, 1999
[Name, address and phone and facsimile number of Transfer Agent]
Dear Sirs:
Reference is made to the Private Equity Line Agreement (the "Agreement"),
dated as of[DATE] between Kingsbridge Capital Limited (the "Investor") and
[ISSUER] (the "Company"). Pursuant to the Agreement, subject to the terms and
conditions set forth in the Agreement the Investor has agreed to purchase from
the Company and the Company has agreed to sell to the Investor from time to time
during the term of the Agreement shares of Common Stock of the Company, $.01 par
value per share (the "Common Stock"). As a condition to the effectiveness of the
Agreement, the Company has agreed to issue to you, as the transfer agent for the
Common Stock (the "Transfer Agent"), these instructions relating to the Common
Stock to be issued to the Investor (or a permitted assignee) pursuant to the
Agreement. All terms used herein and not otherwise defined shall have the
meaning set forth in the Agreement.
1. ISSUANCE OF COMMON STOCK WITHOUT THE LEGEND
Pursuant to the Agreement, the Company is required to prepare and file with
the Commission, and maintain the effectiveness of, a registration statement or
registration statements registering the resale of the Common Stock to be
acquired by the Investor under the Agreement. The Company will advise the
Transfer Agent in writing of the effectiveness of any such registration
statement promptly upon its being declared effective. The Transfer Agent shall
be entitled to rely on such advice and shall assume that the effectiveness of
such registration statement remains in effect unless the Transfer Agent is
otherwise advised in writing by the Company and shall not be required to
independently confirm the continued effectiveness of such registration
statement. In the circumstances set forth in the following two paragraphs, the
Transfer Agent shall deliver to the Investor certificates representing Common
Stock not bearing the Legend without requiring further advice or instruction or
additional documentation from the Company or its counsel or the Investor or its
counsel or any other party (other than as described in such paragraphs).
At any time after the effective date of the applicable registration
statement (provided that the Company has not informed the Transfer Agent in
writing that such registration statement is not effective or not required to be
supplemented or amended) upon any surrender of one or more certificates
evidencing Common Stock which bear the Legend, to the extent accompanied by a
notice requesting the issuance of new certificates free of the Legend to replace
those surrendered, the Transfer Agent shall deliver to the Investor the
certificates representing the Common Stock not bearing the Legend, in such names
and denominations as the Investor shall request, provided that:
(a) in connection with such event, if so requested by the Transfer Agent,
the Investor (or its permitted assignee) shall confirm in writing to the
Transfer Agent that the Investor has complied with the prospectus delivery
requirement under the Securities Act;
<PAGE>
(b) if so requested by the Transfer Agent, the Investor (or its permitted
assignee) shall represent that it is permitted to dispose thereof with
limitation as to amount of manner of sale pursuant to Rule 144(k) under the
Securities Act; or
(c) the Investor, its permitted assignee, or either of their brokers
confirms to the transfer agent that (i) the Investor has held the shares of
Common Stock for at least one year, (ii) counting the shares surrendered as
being sold upon the date the unlegended Certificates would be delivered to
the Investor (or the Trading Day immediately following if such date is not
a Trading Day), the Investor will not have sold more than the greater of
(a) ____ percent (___%) of the total number of outstanding shares of Common
Stock or (b) the average weekly trading volume of the Common Stock for the
preceding four weeks during the three months ending upon such delivery date
(or the Trading Day immediately following if such date is not a Trading
Day), and (iii) the Investor has complied with the manner of sale and
notice requirements of Rule 144 under the Securities Act.
Any advice, notice or instructions to the Transfer Agent required or
permitted to be given hereunder may be transmitted via facsimile to the Transfer
Agent's facsimile number of (___)-___-____.
2. MECHANICS OF DELIVERY OF CERTIFICATES REPRESENTING COMMON STOCK
In connection with any Closing pursuant to which the Investor acquires
Common Stock under the Agreement, the Transfer Agent shall deliver certificates
representing Common Stock (with or without the Legend, as appropriate) as
promptly as practicable, but in no event later than three business days, after
such Closing.
3. FEES OF TRANSFER AGENT; INDEMNIFICATION
The Company agrees to pay the Transfer Agent for all fees incurred in
connection with these Irrevocable Instructions. The Company agrees to indemnify
the Transfer Agent and its officers, employees and agents, against any losses,
claims, damages or liabilities, joint or several, to which it or they become
subject based upon the performance by the Transfer Agent of its duties in
accordance with the Irrevocable Instructions.
4. THIRD PARTY BENEFICIARY
The Company and the Transfer Agent acknowledge and agree that the Investor
is an express third party beneficiary of these Irrevocable Instructions and
shall be entitled to rely upon, and enforce, the provisions hereof.
<PAGE>
PIXTECH, INC.
By:____________________________________
Name
Title
AGREED:
[NAME OF TRANSFER AGENT]
By:__________________________
Name:
Title:
<PAGE>
Schedule 4.3
Capitalization
1. The Company has reserved 5,509,035 shares of its Common Stock for conversion
of the Company's Series E Preferred Stock into Common Stock.
2. The Company has reserved 62,500 shares of its Common Stock for conversion of
a certain warrant issued to Comdisco.
3. The Company has reserved 150,000 shares of its Common Stock for conversion of
a certain warrant issued to PanoCorp, Inc.
4. As of March 10, 1999 the Company has reserved 3,077,302 shares of its Common
Stock for conversion of a convertible note issued to Sumitomo Corporation.
5. The Company has reserved 5,156,372 shares of its Common Stock pursuant to the
Company's 1993 Stock Option Plan, of which 167,706 shares have been issued as of
March 1, 1999.
6. The Company has reserved 50,000 shares of its Common Stock pursuant to which
the company's 1995 Director Stock Option Plan, of which no shares have been
issued as of March 1, 1999.
7. The Company has reserved 100,000 shares of its Common Stock pursuant to the
Company's 1993 Employee Stock Purchase Plan, of which no shares have been issued
as of March 1, 1999.
<PAGE>
Schedule 4.9
No Conflict
1. The company must obtain a waiver from Sumitomo Corporation pursuant to
Section 10.11 of the Credit Agreement dated as of July 21, 1997 by and between
Sumitomo Corporation and the Company.
2. The Company must obtain a waiver from Micron Technology, Inc. pursuant to
Section 2.9 of the Investor Rights Agreement dated as of May 19, 1999 by and
among Micron Technology, Inc. and the Company.
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 3, 1999, in the Registration Statement
(Form S-1) and related Prospectus of PixTech, Inc. for the registration of
16,100,000 shares of its common stock.
/s/ Ernst & Young Audit
ERNST & YOUNG AUDIT
Represented by: Christine Blanc-Patin
Marseilles, France
September 13, 1999
