Form 8-K for eMagin Corporation
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): July 21, 2006
eMagin
Corporation
(Exact
name of registrant as specified in its charter)
|
Delaware
|
000-24757
|
56-1764501
|
|
(State
or other jurisdiction
|
(Commission
File Number)
|
(IRS
Employer
|
|
of
incorporation)
|
|
Identification
No.)
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10500
N.E. 8th
Street, Suite 1400, Bellevue, WA 98004
(Address
of principal executive offices and Zip Code)
Registrant's
telephone number, including area code (425)-749-3600
Copies
to:
Richard
A. Friedman, Esq.
Eric
A.
Pinero, Esq.
Sichenzia
Ross Friedman Ference LLP
1065
Avenue of the Americas
New
York,
New York 10018
Phone:
(212) 930-9700
Fax:
(212) 930-9725
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
[
]
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17 CFR 240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17 CFR 240.13e-4(c))
Item
1.01 Entry into a Material Definitive Agreement.
On
July
21, 2006, eMagin Corporation (the “Company”) entered into several Note
Purchase Agreements (the “Purchase Agreements”) to sell to certain qualified
institutional buyers and accredited investors up to $5,970,000 in principal
amount 6% Senior Secured Convertible Notes Due 2007-2008 (the “Notes’), together
with warrants (the “Warrants”) to purchase 15,534,607 shares of the Company’s
common stock, par value $0.001 per share (the “Common Stock”).
50%
of
the aggregate principle amount of each Note matures 1 year after the
date of issuance and the remaining 50% matures 18 months after the date of
issuance. The Notes pay 6% interest quarterly, commencing on September 1, 2006,
and are convertible into shares of Common Stock at a conversion price equal
to
$0.26 per share (the “Conversion Price”). In addition, the Company has the right
to redeem all of the outstanding principal and accrued and unpaid interest
due
under the Notes upon certain conditions, including, but not limited to, that
no
event of default has occurred or is continuing and that there is an effective
registration statement registering the shares underlying the Notes and the
Warrants.
The
Warrants are exercisable into shares of the Company’s Common Stock until July
21, 2011 at an exercise price of $0.36 per share (the “Exercise Price”). The
investors may exercise the Warrants on a cashless basis beginning one year
after
the date of issuance if the shares of Common Stock underlying the Warrants
are
not then registered pursuant to an effective registration statement or if an
event of default, as defined in the Notes, has occurred and is continuing.
The
Conversion Price and the Exercise Price are subject to adjustment for certain
events, including the dividends, distributions or split of the Company’s Common
Stock, or in the event of the Company’s consolidation, merger or reorganization.
In addition, in the Conversion Price and the Exercise Price are also subject
to
adjustment in the event that the Company’s Chief Executive Officer, Chief
Financial Officer or Chief Strategy Officer sells, transfers or disposes
of
shares of Common Stock or securities convertible into the Company’s Common
Stock, other than 50,000 shares of Common Stock in any fiscal quarter which
the
Company’s Chief Financial Officer is permitted to sell on or after January 1,
2007.
In such
event the Conversion and Exercise Prices shall be reduced, if applicable,
to a
price equal to the average of the daily VWAPs for each of the three trading
days
following the date such sale, transfer or disposition is reported, or required
to be reported, on a Form 4 filing with the Securities and Exchange Commission
(the “Commission”); provided,
that,
if
such
an adjustment would
require the Company to seek stockholder approval of the transactions in
accordance with Rule 713 of the American Stock Exchange Company Guide,
then such adjustment shall not reduce the Conversion Price or Exercise
Price to a price lower than the Conversion Price until
such time as stockholder approval is obtained.
The
Company's obligations under the Purchase Agreements and the Notes are secured
by
substantially all of the assets of the Company, and its wholly owned subsidiary,
Virtual Vision, Inc., pursuant to a Pledge and Security Agreement
and a Patent and Trademark Security Agreement, each dated as of July
21, 2006. In addition, the Company entered into a Lockbox Agreement in favor
of
the investors which provides that, in the event of a default of the Company
of
its obligations under the definitive agreements, the Company shall direct its
account and contract debtors to pay funds owed to the Company to an interest
bearing account to be held on behalf of the investors, and to be paid to the
investors as set forth therein.
Under
the
Purchase Agreements, the Company is obligated to file a registration statement
(the "Registration Statement") with the Commission registering the Common Stock
issuable upon conversion of the Notes and exercise of the Warrants. The Company
is obligated to use its best efforts to cause the Registration Statement to
be
filed no later than 30 days after the closing date and to insure that the
registration statement remains in effect until all of the shares of Common
Stock
issuable upon conversion of the Notes and exercise of the Warrants have been
sold. In the event of a default of the Company’s registration obligations under
the Purchase Agreements, including its agreement to file the Registration
Statement with the Commission no later than 30 days after the closing date,
or
if the Registration Statement is not declared effective within 90 days after
the
closing date (120 days if the Registration Statement is reviewed by the
Commission), it is required to pay to the investors, as partial liquidated
damages, for each month that the registration statement has not been filed
or
declared effective, as the case may be, a cash amount equal to 1% of the
liquidated value of the Notes.
In
addition, to further strengthen its management team the Company intends to
add
two new Directors recommended by the new investors and to recruit additional
senior management. Further, the Company agreed to form a management committee
to
oversee its business, with one member to be recommended by the investors, and
the Company’s Chief Executive Officer and Chief Strategy Officer agreed to defer
10% of their compensation until such time as the Company realizes an EBITDA
positive quarter or until the occurrence of certain other events. In
addition, no
later
than 90 days after the closing date, the Company agreed to hold a meeting of
its
stockholders to seek the requisite vote to approve the private placement as
well
as a reverse stock split of the Company’s outstanding shares of Common Stock at
a ratio of not less than one for each ten shares of Common Stock.
Paul
Cronson, a Director, John Atherly, Chief Financial Officer, and Olivier Prache,
Senior Vice President of Display Manufacturing and Development Operations of
the
Company participated in the private placement through the purchase of an
aggregate of $270,000 in principal amount of Notes, together with Warrants
to
purchase an aggregate of 726,921 shares of Common Stock, each on the same terms
and conditions as the other investors.
In
addition to the foregoing, on the same date, the Company entered into an
additional Note Purchase Agreement with Stillwater LLC which provides for the
purchase and sale of an additional Note in the principal amount of up to
$500,000 (the “Stillwater Note”), together with a warrant (the “Stillwater
Warrant”) to purchase 70% of the number of shares issuable upon conversion of
the Stillwater Note, at the sole discretion of the Company by delivery of a
notice to Stillwater on December 14, 2006 for the completion of the purchase
and
sale to occur on December 29, 2006 (the "Closing Date"). The Company’s
ability to require Stillwater to purchase and pay for the Stillwater Note and
Stillwater Warrant shall be reduced by the sum of (i) the additional financing
raised by the Company prior to the Closing Date, and (ii) the aggregate exercise
price paid by Stillwater to the Company upon exercise of all or a portion of
any
Common Stock purchase warrant of the Company owned by Stillwater prior to the
Closing Date, including a warrant to purchase 1,923,076 shares
of
Common Stock which the Company issued to Stillwater on July 21, 2006 (the “July
Warrant”) on similar terms and conditions as the Warrants set forth above,
with an exercise price of $0.26. The
conversion price of the Stillwater Note shall be equal to 100% of the market
price of the Common Stock on December 13, 2006 and the exercise price of the
Stillwater Warrant will be equal to 100% of the market price of the Common
Stock
on December 13, 2006, plus $0.10. Further, the Company is obligated to use
its
best efforts to register the shares underlying the Stillwater Notes,
and the Stillwater Warrants no later than 90 days after the Closing
Date. In the event of a default of the Company’s registration obligations,
including its agreement to file the registration statement with the Commission
no later than 90 days after the closing date, or if the registration statement
is not declared effective within 150 days after the closing date (180 days
if
the registration statement is reviewed by the Commission), it is required to
pay
to Stillwater, as partial liquidated damages, for each month that the
registration statement has not been filed or declared effective, as the case
may
be, a cash amount equal to 1% of the liquidated value of the Stillwater
Note.
The
aggregate commissions and expenses payable in connection with the private
placement were approximately $630,900, which includes an aggregate of $417,900
in sales commissions.
The
Company claims an exemption from the registration requirements of the Act for
the private placement of these securities pursuant to Section 4(2) of the Act
and/or Regulation D promulgated thereunder since, among other things, the
transaction did not involve a public offering, the investors are accredited
investors and/or qualified institutional buyers, the investors had access to
information about the Company and their investment, the investors took the
securities for investment and not resale, and the Company took appropriate
measures to restrict the transfer of the securities.
On
July
24, 2006, the Company issued a press release announcing the entry into the
Note
Purchase Agreement with the investors, a copy of which is attached hereto as
Exhibit 99.1.
In
accordance with General Instruction B.2 of Form 8-K, the information in this
Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to
be
“filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or otherwise subject to the liability of that
section, and shall not be incorporated by reference into any registration
statement or other document filed under the Act or the Exchange Act, except
as
shall be expressly set forth by specific reference in such filing.
Item
2.03 Creation of a Direct Financial Obligation.
See
Item
1.01 above.
See
Item
1.01 above.
Item
9.01 Financial Statements and Exhibits.
| (a) |
Financial
statements of business
acquired.
|
Not
applicable.
| (b) |
Pro
forma financial
information.
|
Not
applicable.
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Exhibit
Number
|
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Description
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10.1
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10.2
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10.3
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10.4
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10.5
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10.6
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10.7
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99.1
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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eMagin
Corporation |
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|
|
| Date: July
25, 2006 |
By: |
/s/ Gary
W.
Jones |
| |
Gary
W. Jones |
| |
Chief
Executive Officer |