-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EOD59w4jeoOd8UL7BGDKbtkSspIEPW8AI+tte1ofmDLyM7h9qQTre6LWKU+lOFXV HGOmBrhsJtWWzagkszOuDw== 0001125282-01-500893.txt : 20010615 0001125282-01-500893.hdr.sgml : 20010615 ACCESSION NUMBER: 0001125282-01-500893 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20010716 FILED AS OF DATE: 20010614 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMAGIN CORP CENTRAL INDEX KEY: 0001046995 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 880378451 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-15751 FILM NUMBER: 1660679 BUSINESS ADDRESS: STREET 1: 1580 ROUTE 52 STREET 2: SUITE 2000 V6E 2K3 CITY: HOPEWELL JUNCTION STATE: NY ZIP: 12533 BUSINESS PHONE: 9148921900 MAIL ADDRESS: STREET 1: 1580 ROUTE 52 STREET 2: SUITE 2000 V6E 2K3 CITY: HOPEWELL JUNCITON STATE: NY ZIP: 12533 FORMER COMPANY: FORMER CONFORMED NAME: FASHION DYNAMICS CORP DATE OF NAME CHANGE: 19980805 DEF 14A 1 b311989_def14a.txt DEF 14A SCHEDULE 14A (Rule 14a-101) INFORMATION REQUIRED IN PROXY STATEMENT SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 [_] Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) eMagin Corporation (Name of Registrant as Specified in Its Charter) ---------------------------------------------- (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: -------------------------------------------------- 2) Aggregate number of securities to which transaction applies: -------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): -------------------------------------------------- 4) Proposed maximum aggregate value of transaction: -------------------------------------------------- 5) Total fee paid: -------------------------------------------------- [_] Fee paid previously with preliminary materials. -------------------------------------------------- [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. 1) Amount previously paid: -------------------------------------------------- 2) Form, Schedule or Registration Statement no.: -------------------------------------------------- 3) Filing Party: -------------------------------------------------- 4) Date Filed: -------------------------------------------------- [LOGO] NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 16, 2001 To our Stockholders: The 2001 Annual Meeting of Stockholders (the "Annual Meeting") of eMagin Corporation ("eMagin" or the "Company") will be held at the Board Room of the American Stock Exchange, 86 Trinity Place, New York, New York, on Monday, July 16, 2001, beginning at 10:00 a.m. local time, to consider the following proposals: 1) To elect six directors; 2) To ratify the appointment of the Company's independent accountants for 2001; 3) To approve a proposal for the reincorporation of the Company as a Delaware corporation; 4) To approve a proposal to amend eMagin's 2000 Stock Option Plan; 5) To approve a proposal to adopt the eMagin Corporation 2001 Employee Stock Purchase Plan; and 6) To transact such other business as may properly come before the meeting. These proposals are fully set forth in the accompanying Proxy Statement, which you are urged to read thoroughly. For the reasons set forth in the Proxy Statement, your Board of Directors recommends a vote "FOR" each of the proposals. The Company intends to mail the Annual Report, Proxy Statement and Proxy enclosed with this notice on or about June 14, 2001, to all stockholders entitled to vote at the Annual Meeting. If you were a stockholder of record of eMagin common stock (AMEX:EMA) on May 25, 2001, the record date for the Annual Meeting, you are entitled to vote at the meeting and any postponements or adjournments of the meeting. Shareholders are cordially invited to attend the Annual Meeting. However, whether or not you plan to attend the meeting in person, your shares should be represented and voted. After reading the enclosed Proxy Statement, please sign, date, and return promptly the enclosed proxy in the accompanying postpaid envelope we have provided for your convenience to ensure that your shares will be represented. Alternatively, you may wish to provide your response by telephone or electronically through the Internet by following the instructions set out on the enclosed Proxy card. If you do attend the meeting and wish to vote your shares personally, you may revoke your Proxy. Admission to the Annual Meeting will be by ticket only. If you are a registered stockholder planning to attend the meeting, please retain the bottom portion of the card as your admission ticket. Registration will begin at 8:30 a.m., and seating will begin at 9:30 a.m. Stockholders holding stock in brokerage accounts ("street name" holders) will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras, recording devices, and other electronic devices will not be permitted at the meeting. We thank you for your cooperation in returning your proxy as promptly as possible. By Order of the Board of Directors, /s/ Susan K. Jones Executive Vice President and Secretary May 25, 2001, Hopewell Junction, New York - -------------------------------------------------------------------------------- IMPORTANT: Please SIGN, DATE, and RETURN the enclosed Proxy or submit your Proxy by telephone or the Internet immediately whether or not you plan to attend the Annual Meeting. A return envelope, which requires no postage if mailed in the United States, is enclosed for your convenience. - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page INFORMATION ABOUT THE ANNUAL MEETING AND VOTING ..................................... 1 What is the purpose of the Annual Meeting? ....................................... 1 Who is entitled to vote at the meeting? .......................................... 1 Who can attend the meeting? ...................................................... 1 Why is the Company soliciting proxies? ........................................... 2 What constitutes a quorum? ....................................................... 2 How do I vote? ................................................................... 2 Can I vote by telephone or electronically? ....................................... 3 Can I change my vote after I return my Proxy card? ............................... 3 What are the Board's recommendations? ............................................ 3 What vote is required to approve each item? ...................................... 3 INFORMATION ABOUT STOCK OWNERSHIP ................................................... 4 How much stock is owned by 5% stockholders, directors, and executive officers .............................................. 4 INFORMATION ABOUT THE BOARD OF DIRECTORS ............................................ 5 How often did the Board meet during fiscal 2000? ................................. 5 What committees has the Board established? ....................................... 6 How are directors compensated? ................................................... 6 INFORMATION ABOUT THE EXECUTIVE OFFICERS ............................................ 7 Executive Compensation ........................................................... 7 What is the Company's philosophy of executive officer compensation ............... 7 Report of the Compensation Committee of the Board of Directors ................... 7 Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value ................................................... 10 Employment Agreements ............................................................ 11 Report of the Audit Committee of the Board of Directors .......................... 12 Certain relationships and related transactions ................................... 13 Stock performance graph .......................................................... 13 DISCUSSION OF PROPOSAL ITEMS RECOMMENDED BY THE BOARD ............................... 13 ITEM 1--PROPOSAL FOR ELECTION OF DIRECTORS ....................................... 14 ITEM 2--PROPOSAL FOR THE APPOINTMENT OF INDEPENDENT AUDITORS ..................... 15 ITEM 3--PROPOSAL FOR REINCORPORATION IN DELAWARE ................................. 16 ITEM 4--PROPOSAL FOR THE ADOPTION OF AMENDMENTS TO eMAGIN'S 2000 STOCK OPTION PLAN 26 ITEM 5--PROPOSAL FOR THE ADOPTION OF THE 2001 EMPLOYEE STOCK PURCHASE PLAN ....... 29 OTHER MATTERS ....................................................................... 31 ADDITIONAL INFORMATION .............................................................. 31
[LOGO] 2070 Route 52 Hopewell Junction, NY 12533 (845) 892-1900 ---------------------- PROXY STATEMENT ----------------------- This Proxy Statement is solicited on behalf of the Board of Directors and contains information related to the annual meeting (the "Annual Meeting") of stockholders of eMagin Corporation ("eMagin" or the "Company") to be held on Monday, July 16, 2001 beginning at 10:00 am in the Board Room of the American Stock Exchange, 86 Trinity Place, New York, New York, and at any postponements or adjournments thereof. eMagin's 2000 Annual Report is being mailed to stockholders concurrently with this Proxy Statement. The Annual Report is not to be regarded as proxy soliciting material or as a communication by means of which any solicitation of proxies by eMagin is to be made. INFORMATION ABOUT THE ANNUAL MEETING AND VOTING What is the purpose of the Annual Meeting? At our Annual Meeting, stockholders will act upon the matters outlined in the Notice of Annual Meeting on the cover page of this Proxy Statement, including the election of directors, ratification of the appointment of the Company's independent accountants, approval of reincorporation in Delaware, amendment of the eMagin 2000 Stock Option Plan, and adoption of the 2001 Employee Stock Purchase Plan. In addition, management will report on the performance of the Company during fiscal 2000 and respond to questions from stockholders. Who is entitled to vote at the meeting? Stockholders of record at the close of business on May 25, 2001, the record date for the meeting, are entitled to receive notice of and to participate in the Annual Meeting. As of that record date, the Company had outstanding and entitled to vote 25,069,143 shares of common stock. The common stock is the only class of stock of eMagin that is outstanding and entitled to vote at the Annual Meeting. If you were a stockholder of record of common stock on that record date, you will be entitled to vote all of the shares that you held on that date at the meeting, or any postponements or adjournments of the meeting. Each outstanding share of eMagin common stock will be entitled to one vote on each matter. Stockholders who own shares registered in different names or at different addresses will receive more than one Proxy card. You must sign and return each of the Proxy cards received to ensure that all of the shares owned by you are represented at the Annual Meeting. 1 Who can attend the meeting? Only stockholders as of the record date, or their duly appointed proxies, may attend the meeting, and each may be accompanied by one guest. Seating, however, is limited. Admission to the meeting will be on a first-come, first-served basis. Registration will begin at 8:30 a.m., and seating and product demonstrations will begin at 9:00 a.m. Cameras, recording devices and other electronic devices will not be permitted at the meeting. For registered stockholders, the bottom portion of the Proxy card enclosed with the Proxy Statement is their Annual Meeting admission ticket. Beneficial owners with shares held in "street name" (that is, through an intermediary, such as a bank or broker), should request tickets in writing from Investor Relations, eMagin Corporation, 2070 Route 52, Hopewell Junction, NY 12533 (or by facsimile to 845-892-1901) and include proof of ownership, such as a copy of a bank or brokerage firm account statement or a letter from the broker, trustee, bank or nominee holding their stock, confirming beneficial ownership. Please note that if you hold your shares in "street name" you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting. Why is the Company soliciting proxies? Because many of our stockholders are unable to personally attend the Annual Meeting, the Board of Directors of eMagin (the "Board" or the "Board of Directors") solicits the enclosed proxy so that each stockholder is given an opportunity to vote. This proxy enables each stockholder to vote on all matters which are scheduled to come before the meeting. When the Proxy is returned properly executed, the stockholder's shares will be voted according to the stockholder's directions. Stockholders are urged to specify their choices by marking the appropriate boxes on the enclosed Proxy card. What constitutes a quorum? The presence at the meeting, in person or by proxy, of the holders of fifty-one percent (51%) in amount of the aggregate voting power of the common stock of eMagin outstanding on the record date will constitute a quorum permitting the meeting to conduct its business. As noted above, as of the record date, 25,069,143 shares of eMagin common stock, representing the same number of votes, were outstanding. Thus, the presence of the holders of common stock representing at least 12,785,262 votes will be required to establish a quorum. How do I vote? If you complete and properly sign the accompanying Proxy and return it to the Company, it will be voted as you direct. Unless contrary instructions are given, shares will be voted in accordance with the Board of Directors' recommendations on each of the enumerated proposals and in the proxy holders' discretion with regard to any other matters that may be properly presented at the meeting and all matters incident to the conduct of the meeting. If you are a registered stockholder and attend the meeting, you may deliver your completed Proxy card in person. "Street name" stockholders who wish to vote at the meeting will need to obtain a proxy form from the institution that holds their shares. All votes will be tabulated by the inspector of election appointed for the meeting, who will separately tabulate affirmative and negative votes, abstentions and broker non-votes. 2 Can I vote by telephone or electronically? If you are a registered stockholder (that is, if you hold your stock in certificate form), you may vote by telephone, or electronically through the Internet, by following the instructions included with your Proxy card. If your shares are held in "street name," please check your Proxy card or contact your broker or nominee to determine whether you will be able to vote by telephone or electronically. The deadline for voting by telephone or electronically is 11:59 p.m. (Central Time) on July 13, 2001. Can I change my vote after I return my Proxy card? A Proxy may be revoked by giving the Secretary of eMagin written notice of revocation at any time before the voting of the shares represented by the Proxy. A stockholder who attends the meeting may revoke a Proxy at the meeting. Attendance at the meeting will not, by itself, revoke a Proxy. Abstentions and broker non-votes. While the inspectors of election will treat shares represented by Proxies that reflect abstentions or include "broker non-votes" as shares that are present and entitled to vote for purposes of determining the presence of a quorum, abstentions or "broker non-votes" do not constitute a vote "for" or "against" any matter and thus will be disregarded in any calculation of "votes cast." However, abstentions and "broker non-votes" will have the effect of a negative vote if an item requires the approval of a majority of a quorum or of a specified proportion of all issued and outstanding shares. As such, abstentions and broker non-votes will have the same effect as negative votes for the proposal for reincorporation of eMagin in Delaware. What are the Board's recommendations? Unless you give other instructions on your Proxy card, the persons named as proxy holders on the Proxy card will vote in accordance with the recommendations of the Board of Directors. The Board's recommendation is set forth together with the description of each item in this Proxy Statement. In summary, the Board recommends a vote: o for election of the nominated slate of directors (see page 13); o for ratification of the appointment of Arthur Anderson LLP as the Company's independent accountants for fiscal 2001 (see page 15); o for reincorporation of eMagin in Delaware and the effective implementation of a new charter and By-Laws for the Company (see page 16); o for amendment of the eMagin 2000 Stock Option Plan (see page 26); and o for adoption of the 2001 Employee Stock Purchase Plan (see page 28). With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion. What vote is required to approve each item? The election of the directors of the Company requires the affirmative vote of a plurality of the votes cast by stockholders at the Annual Meeting. A properly executed Proxy marked "WITHOLD AUTHORITY" with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although it will be counted for the purposes of determining whether there is a quorum. 3 Ratification of the appointment of Arthur Andersen LLP as the Company's independent public accountants and auditors for fiscal 2001, approval of the amendments to the 2000 Stock Option Plan and the adoption of the 2001 Employee Stock Purchase Plan will each require the affirmative vote of the holders of at least a majority of the shares of common stock outstanding on the record date. Approval of the reincorporation of eMagin as a Delaware corporation will require the affirmative vote of the holders of at least a majority of the shares of common stock outstanding on the record date. INFORMATION ABOUT STOCK OWNERSHIP How much stock is owned by 5% stockholders, directors, and executive officers? The following table sets forth the number of shares known to be owned by all persons who own at least 5% of eMagin's outstanding common stock, the Company's directors, the executive officers named in the summary "Annual Compensation" table on page 10, and the directors and executive officers as a group as of April 1, 2001, unless otherwise noted. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment power with respect to the shares indicated. Common Stock Percentage of Name of Beneficial Owner Beneficially Owned Common Stock - ------------------------ ------------------ ------------ Travelers Insurance Company (1) 7,462,656 29.8% Jack Rivkin (2) 7,462,656 29.8% Gary W. Jones (3) 1,428,264 5.6% Susan K. Jones (3) 1,428,264 5.6% Verus International Ltd. (4) 288,642 * Ajmal Khan (4) 288,642 * N. Damodar Reddy (5) 177,721 * Martin L. Solomon 143,000 * Clive Barton (6) 123,657 * Claude Charles -0- * George Cone (7) 6,800 * Andrew P. Savadelis (8) 58,333 * All Directors and Executive Officers as a Group (9) 9,689,073 38.6% * Less than 1% of the outstanding common stock. 4 (1) Shares are owned by Travelers and its affiliates TRAL and Citicorp. This figure includes warrants held by Travelers and Citicorp to purchase 178,772 and 127,292 shares of common stock respectively. [Address: Citigroup Inc. 399 Park Avenue, New York, NY 10043] (2) Includes 7,462,656 shares owned by Travelers and its affiliates TRAL and Citicorp. This figure includes warrants held by Travelers and Citicorp to purchase 178,772 and 127,292 shares of common stock respectively. Jack Rivkin is an Executive Vice President of Citigroup/Travelers Insurance Company and shares voting power over the shares (3) This figure represents shares owned by Gary Jones and Susan Jones who are married to each other, including 317,563 shares of common stock issuable upon exercise of stock options and warrants to purchase 59,716 shares of common stock, which options and warrants are exercisable within 60 days of April 1, 2001. (4) Mr. Khan is the beneficial owner of the common stock held by Verus International Ltd. (5) Includes 88,691 shares of common stock issuable upon exercise of stock options that are exercisable within 60 days of April 1, 2001. Also includes warrants to purchase 1,728 shares of common stock, which warrants are exercisable within 60 days of April 1, 2001. Mr. Reddy is also the beneficial owner of 53,778 shares of common stock and warrants to purchase 3,046 shares of common stock held through N.D.R. Investments Inc. (6) Includes 123,657 shares of common stock issuable upon exercise of stock options that are exercisable within 60 days of April 1, 2000. (7) Includes 6,800 shares of common stock issuable upon exercise of stock options that are exercisable within 60 days of April 1, 2001. (8) Includes 58,333 shares of common stock issuable upon exercise of stock options that are exercisable within 60 days of April 1,2001. (9) Includes 595,044 shares of common stock issuable upon exercise of stock options that are exercisable within 60 days of April 1, 2001. Also includes warrants to purchase 370,554 shares of common stock, which warrants are exercisable within 60 days of April 1, 2001. INFORMATION ABOUT THE BOARD OF DIRECTORS The Board of Directors oversees our business and affairs and monitors the performance of management. In accordance with corporate governance principles, the Board does not involve itself in day-to-day operations. The directors keep themselves informed through discussions with the Chief Executive Officer, other key executives and by reading the reports and other materials that we send them and by participating in Board and committee meetings. Our directors hold office until their successors have been elected and duly qualified unless the director resigns or by reasons of death or other cause is unable to serve in the capacity of director. Biographical information about our directors is provided in "Item 1 - Proposal for the Election of Directors" on page 13. How often did the Board meet during fiscal 2000? During the fiscal year 2000, the Board of Directors held six meetings. Each director attended more than 75% of the total number of meetings of the Board and committees on which he served. The Board also approved certain actions by unanimous written consent. 5 What committees has the Board established? The Board of Directors has standing Executive, Compensation, and Audit Committees. Information concerning the membership and function of each committee is as follows: BOARD COMMITTEE MEMBERSHIP - -------------------------- ------------- ----------------------- -------------- Executive Compensation Committee Audit Name Committee Committee Claude Charles * Gary W. Jones ** Ajmal Khan * N. Dadomar Reddy * Jack Rivkin * * * Martin Solomon ** - -------------------------- ------------- ----------------------- -------------- * Member of Committee ** Chairman of Committee Executive Committee. The Executive Committee possesses all of the powers of the Board except the power to issue stock, approve mergers with nonaffiliated corporations or declare dividends (except at a rate or in a periodic amount or within a price range established by the Board), and certain other powers specifically reserved by law to the Board. As a practice, the Executive Committee generally defers major corporate decisions to a quorum of the full Board. During the 2000 fiscal year, the Executive Committee held two meetings. Compensation Committee. The Compensation Committee is charged with reviewing the Company's general compensation strategy; establishing salaries and reviewing benefit programs, including pensions, for the Chief Executive Officer and those who report directly to him; reviewing, approving, recommending and administering the Company's incentive compensation and stock option plans and certain other compensation plans; and approving certain employment contracts. The Compensation Committee of the Board of Directors consists entirely of non-employee directors. During the 2000 fiscal year, the Compensation Committee held one meeting. Audit Committee. The Audit Committee is responsible for determining the adequacy of the Company's internal accounting and financial controls, reviewing the results of the audit of the Company performed by the independent public accountants, and recommending the selection of independent public accountants. The functions of the Audit Committee and its activities during fiscal 2000 are described in more detail under the heading "Report of the Audit Committee". During the year, the Board examined the composition of the Audit Committee in light of the adoption by The American Stock Exchange, Inc. (the "Amex") of new rules governing audit committees. Based upon this examination, the Board confirmed that all members of the Audit Committee are "independent" within the meaning of the Amex's new rules. During the 2000 fiscal year, the Audit Committee held three meetings. How are directors compensated? Non-management directors receive options under the 2000 Stock Option Plan (the "2000 Plan"). Under the 2000 Plan, a grant of options to purchase 40,000 shares of common stock will automatically be granted on the date a director is first elected or otherwise validly appointed to the Board with an exercise 6 price per share equal to 100% of the market value of one share on the date of grant. On April 5, 2001, each non-employee director was granted an initial grant of 40,000 options under the plan. Each such option granted will expire ten years after the date of grant and will become exercisable in four equal installments commencing on the date of grant and annually thereafter. In addition to the 40,000 shares of common stock automatically granted upon joining the Board, Directors thereafter receive an annual grant of options to purchase 10,000 shares of common stock at the fair market value as determined on the date of grant, which options will vest on December 31 in the year granted. In addition, each non-management director is reimbursed for ordinary expenses incurred in connection with attendance at such meetings. INFORMATION ABOUT THE EXECUTIVE OFFICERS The executive officers are elected annually by our Board of Directors and hold office until their successors are elected and duly qualified. The current executive officers of the Company are as follows: Name Age Position - ---- --- -------- Gary Jones 46 President, Chief Executive Officer and Director Clive Barton 63 Chief Operating Officer George Cone 66 President, Virtual Vision, a wholly-owned subsidiary of the Company Susan Jones 49 Executive Vice President, Chief Strategy Officer and Secretary Andrew P. Savadelis 43 Executive Vice President and Chief Financial Officer Executive Compensation What is the Company's philosophy of executive officer compensation? The Compensation Committee of the Board of Directors has furnished the following report concerning the philosophy underlying the Company's compensation of executive officers. Report of the Compensation Committee The Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein. The Company's executive compensation program is designed to attract, retain and motivate executive officers capable of leading the Company to meet its business objectives, to align the interests of executive management with those of the stockholders, and to incentivize and reward both short and long 7 term performance based on the success of the Company in meeting its development milestones and business objectives. The Compensation Committee places a particular emphasis on variable, performance based components, such as the bonus potential and stock option awards, the value of which could increase or decrease to reflect changes in corporate and individual performances. Components of Compensation. Each executive officer's compensation package is generally comprised of the following elements: (1) A base salary which is established at levels considered appropriate for the duties and scope of responsibilities of each officer's position; (2) A performance-based annual bonus; (3) Periodic grants of stock options to strengthen the mutuality of interests between the executive officers and the Company's stockholders. Annual or quarterly cash bonuses related to the performance of the Company may be made to executive officers in the sales and marketing functions, and other executive officers in certain other circumstances, for such executive officer's functional area. Executive officers are also eligible to participate in compensation and employee benefits generally available to all employees of the Company, such as health insurance and participation in the eMagin Employee Savings and Protection Plan ("401(k) Plan"). The Compensation Committee believe that this three-part approach best serves the interests of the Company and its stockholders. It enables the Company to meet the requirements of the highly competitive environment in which the Company operates while ensuring that executive officers are compensated in a way that advances both the short- and long-term interests of stockholders. Under this approach, compensation for these officers involves a high proportion of pay that is "at risk"--namely, the annual bonus and stock options. The variable annual bonus is also based, in significant part, on Company performance. Stock options relate a significant portion of long-term remuneration directly to stock price appreciation realized by all of the Company's stockholders. Base Salary. Base salaries for executive officers are set at levels believed by the Committee to be sufficient to attract and retain qualified executive officers based on the stage of development of the Company, the salary levels in effect for comparable positions in similarly situated companies within relevant industries, and internal comparability considerations. Base salaries for the Company's executive officers other than the Chief Executive Officer, as well as changes in such salaries, are based upon recommendations by the Chief Executive Officer, taking into account such factors as competitive industry salaries, a subjective assessment of the nature of the position and the contribution and experience of the officer and the length of the officer's service. All such recommendations are subject to approval or disapproval by the Compensation Committee. Other than provisions provided for in Employment Agreements, changes in base salaries of executives are based on an evaluation of the personal performance of the executive, prevailing market practices, and the performance of the Company as a whole. In determining base salaries, the Compensation Committee not only considers the short term performance of the Company, but also the success of the executive officers in developing and executing the Company's strategic plans, developing management employees and exercising leadership in the development of the Company. Cash-Based Incentive Bonus. The Compensation Committee believes that a portion of the total cash compensation for executive officers should be based on the Company's success in meeting its short term performance objectives and contributions by the executive officers that enable the Company to meet its long term objectives, and has structured the executive compensation program to reflect this philosophy. This approach creates a direct incentive for executive officers to achieve desired short term corporate goals that also further the long term objectives of the Company, and places a significant portion of each executive officer's annual compensation at risk. 8 Stock Options. The Compensation Committee believes that equity participation is a key component of the Company's executive compensation program. Stock options are awarded by the Compensation Committee to executive officers primarily based on potential contributions to the Company's growth and development and marketplace practices. These awards are designed to retain executive officers and to motivate them to enhance stockholder value by aligning the financial interests of executive officers with those of stockholders. Stock options provide an effective incentive for management to create stockholder value over the long term because the full benefits of the option grants cannot be realized unless an appreciation in the price of the Company's common stock occurs over a number of years. Variable Bonus. The Compensation Committee may award annual or interim Special Bonuses in the form of cash, stock options, or restricted stock to executive management and employees for achieving certain milestones, progress made in the staff and organizational development of the Company, and advances in the market acceptance and commercialization of the Company's technology. Compensation of Chief Executive Officer. Mr. Jones's base salary in 2000 was $229,000. The Compensation Committee plans to allocate a bonus for 2000 during 2001, following the one-year anniversary of the employment agreement dated March 16, 2000. Compensation Committee N. Dadomar Reddy Jack Rivkin Compensation Committee interlocks and insider participation N. Dadomar Reddy and Jack Rivkin served as the members of the Compensation Committee during the fiscal year 2000. None of the members of the Compensation Committee is or has been an officer or employee of the Company or any of its subsidiaries. None of the members of the Executive Performance Subcommittee is or has been an officer or employee of the Company or any of its subsidiaries. Summary compensation table for named executive officers The following table provides information about the total compensation for services in all capacities to the Company or its subsidiary for the last three fiscal years of those persons who at December 31, 2000, were (i) the Chief Executive Officer of the Company and (ii) the other four most highly compensated executive officers of the Company (collectively, the "named executive officers"). The Chief Executive Officer and the Board elected to not pay bonuses as part of annual compensation during the early development stage years of the Company. Cash and bonuses for 2000 are being paid in 2001. 9
Annual Compensation Name and Principal Position Year Salary Bonus (1) - --------------------------- ---- ------------- --------- Gary W. Jones................... 2000 227,863 Chief Executive Officer and President 1999 188,377 1998 191,033 Clive Barton..................... 2000 222,740 Chief Operating Officer 1999 186,358 1998 187,998 George Cone...................... 2000 165,859 President, Virtual Vision 1999 156,418 1998 194,004 Susan K. Jones.................. 2000 183,837 Executive Vice President, Chief Strategy Officer, 1999 153,224 Secretary 1998 154,785 Andrew P. Savadelis............. 2000 91,667 (2) 37,500 (2) Executive Vice President and Chief Financial Officer
(1) Bonuses for the year 2000 are being allocated and paid in 2001. (2) Mr. Savadelis was employed for less than a full year in 2000. As such, his salary amount represents salary earned from his start date through the end of the fiscal year. Mr. Savadelis' compensation includes an annual salary of $250,000 and a non-milestone-driven bonus of $150,000 to be paid quarterly in the period from September 11, 2000 to September 10, 2001. $37,500 of the non-milestone-driven bonus was paid to Mr. Savadelis during 2000. In addition, the Company paid relocation assistance in the amount of $50,000 in October, 2000 and may pay an additional $75,000 upon the occurrence of certain relocation events. The Company also is committed to reimburse Mr. Savadelis up to $2,500 per month for twelve months from September 25, 2000 for temporary lodging expenses. 10 Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value The following table provides information regarding the aggregate number of options exercised during the fiscal year ended December 31, 2000 by each of the named executive officers and the number of shares subject to both exercisable and unexercisable stock options as of December 31, 2000. The common stock price at December 31, 2000 was $2.12 per share.
# of Securities Value of Underlying Unexercised Unexercised In-the-money Shares Options at Options at Acquired Value FY-End FY-End ------ on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable ----------- -------- ----------- ------------- ----------- ------------- Gary Jones----------------- - - 78,572 - $31,428 $ - Clive Barton--------------- - 99,189 205,147 39,675 82,058 George Cone---------------- - - 4,432 14,354 1,773 5,741 Susan Jones---------------- - - 196,598 330,670 78,639 132,268 Andrew P. Savadelis-------- - - - 250,000 - -
Employment Agreements In connection with our previous merger with FED Corporation, effective March 16, 2000, we entered into employment agreements with Gary Jones and Susan Jones which provide for annual base salaries of $229,000 and $185,000 respectively and an annual discretionary bonus, as determined by our compensation committee. Effective September 25, 2000, we entered into an employment agreement with Andrew Savadelis with an annual base salary of $250,000. Gary Jones, Susan Jones and Andrew Savadelis are each entitled to severance in the amount of twelve months base salary in the event that they are terminated without cause. Additionally, the employment agreements of the above executive officers include agreements not to compete with us during their term of employment with us and for a period of one year following the qualified termination of their employment. 11 Report of the Audit Committee of the Board of Directors The following Report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Report by reference therein. Role of the Audit Committee: The Audit Committee's primary responsibilities fall into three broad categories: First, the Committee is charged with monitoring the preparation of quarterly and annual financial reports by the Company's management, including discussions with management and the Company's outside auditors about draft annual financial statements and key accounting and reporting matters; Second, the Committee is responsible for matters concerning the relationship between the Company and its outside auditors, including recommending their appointment or removal; reviewing the scope of their audit services and related fees, as well as any other services being provided to the Company; and determining whether the outside auditors are independent (based in part on the annual letter provided to the Company pursuant to Independence Standards Board Standard No. 1); and Third, the Committee oversees management's implementation of effective accounting controls and reviews recommendations of the Company's internal auditing program. The Committee has implemented procedures to ensure that during the course of each fiscal year it devotes the attention that it deems necessary or appropriate to each of the matters assigned to it under the Committee's charter. In overseeing the preparation of the Company's financial statements, the Committee met with both management and the Company's outside auditors, with and without management present, to review and discuss all financial statements prior to their issuance and to discuss significant accounting issues. Management advised the Committee that all financial statements were prepared in accordance with generally accepted accounting principles, and the Committee discussed the statements with both management and the outside auditors. The Committee's review included discussion with the outside auditors of matters required to be discussed pursuant to Statement on Auditing Standards No. 61 (Communication With Audit Committees). With respect to the Company's outside auditors, the Committee, among other things, discussed with Arthur Anderson LLP matters relating to its independence, including the disclosures made to the Committee as required by the Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees). Finally, the Committee continued to monitor the scope and adequacy of the Company's internal auditing program. Audit Fees and All Other Fees: The aggregate fees for the audit of eMagin's annual financial statements and the review of Forms 10-Q for the 2000 fiscal year were $192,000. Aggregate fees billed for all other services rendered by Arthur Anderson LLP for the 2000 fiscal year were $207,200. The Audit Committee has considered whether the provision for services covered by fees other than audit fees is compatible with maintaining the principal accountant's independence. Recommendations of the Audit Committee In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Board approve the inclusion of the Company's audited financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, for filing with the Securities and Exchange Commission. The Audit Committee has also recommended to the Board of Directors, subject to stockholder ratification, the selection of Arthur Andersen LLP as the Company's independent auditors for 2001, and the Board concurred in its recommendation. Members of the Audit Committee: Claude Charles Jack Rivkin Martin Solomon 12 Certain relationships and related transactions The Company entered into a consulting agreement dated January 15, 2000 with a member of its Board of Directors, Mr. Ajmal Khan. Terms of the agreement include monthly payments of $15,000 by the Company to Mr. Khan for consulting services rendered during 2000. Stock performance graph The following graph compares the cumulative total shareholder return on our common stock from the initial listing date of our common stock on the American Stock Exchange on March 28, 2000 through December 30, 2000 to the Russell 2000 Index and an index of peer companies selected by the Company ("Peer Index"). The graph assumes that $100 was invested on March 28, 2000 in the Company's common stock, in the Russell 2000 Index and in the Peer Index, and that all dividends were reinvested. The companies in the Peer Index are as follows: Kopin Corporation, Microvision Corporation, Three Five Systems, Inc., and Universal Display Corporation. These companies are active in the display industry, although some are in later stages of development of their products. The past performance of the Company's common stock is not an indication of future stock performance. We cannot assure you that the price of the Company's common stock will appreciate at any particular rate or at all in future years. Notwithstanding any statement to the contrary in any of the Company's previous or future filings with the Securities and Exchange Commission, the graph shall not be incorporated by reference into any such filings. [PERFORMANCE GRAPH] 3/28/00 12/30/00 ------- -------- eMagin 100 9.24 Russell 2000 100 87.35 Peer Index 100 38.05 This Section is not deemed "soliciting material," is not deemed "filed" with the SEC and is not to be incorporated by reference in any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. DISCUSSION OF PROPOSAL ITEMS RECOMMENDED BY THE BOARD ITEM 1--PROPOSAL FOR ELECTION OF DIRECTORS The current term of office of all of the Company's directors expires at the 2001 Annual Meeting. The Board of Directors proposes that the following nominees, all of whom are currently serving as 13 directors, be re-elected for a new term until their successors are duly elected and qualified. Each of the nominees has consented to serve if elected and management has no reason to believe that any nominee will be unable to serve. If any of them becomes unavailable to serve as a director, the Board may designate a substitute nominee. In that case, the persons named as proxies will vote for the substitute nominee designated by the Board. There are six nominees for the six Board of Director positions presently authorized by the Company's charter and by-laws. Each nominee is currently a director of the Company. The directors standing for election are: Name Age Position - ---- --- -------- Gary W. Jones (1)................ 46 President, Chief Executive Officer and Director Claude Charles (2)............... 63 Director Ajmal Khan (1)................... 38 Director N. Damodar Reddy (3)............. 60 Director Jack Rivkin (1), (2), (3)........ 59 Director Martin L. Solomon (2)............ 64 Director (1) Member of the Executive Committee (2) Member of the Audit Committee (3) Member of the Compensation Committee THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES LISTED BELOW: Gary W. Jones...............................................Director since 1992 Mr. Jones is a co-founder of the Company and has served as Chairman, Chief Executive Officer, and President since 1992. Mr. Jones has over 20 years of experience in both public and private companies in the areas of business development, high volume manufacturing, product development, research, and marketing. Prior to founding FED Corporation, the Company's Delaware operating subsidiary, Mr. Jones served as Director of the Device Development and Processing division at MCNC Center for Microelectronics from 1985 to 1992. From 1977 to 1985 Mr. Jones managed both semiconductor manufacturing and research and development programs at Texas Instruments. Mr. Jones has been a director, a member of the Executive Committee of the Board, and Chairman of the Technology Committee of the United States Display Consortium since 1995. Mr. Jones received a B.S. in electrical engineering and physics from Purdue University. Claude Charles............................................ Director since 2000 Mr. Charles has served as President of Great Tangley Corporation since 1999. From 1996 to 1998 Mr. Charles was Chairman of Equinox Group Holdings. Mr. Charles has also served as a director and in 14 senior executive positions at Peregrine Investment Holdings from 1990 to 1995, SG Warburg and Co. Ltd. from 1978 to 1982, Trident International Finance Ltd. from 1973 to 1978 and Dow Banking Corporation from 1965 to 1973. Mr. Charles received a B.S. in economics from the Wharton School at the University of Pennsylvania in 1957 and a M.S. in international finance from Columbia University. Ajmal Khan................................................ Director since 2000 Mr. Khan is President and CEO of Verus International Group Limited, an investment firm, and has served as its President and Chief Executive Officer since its inception in 1998. Mr. Khan has served on the boards of directors of Booktech.com Inc. and Wireless Internet Inc. since 2000. N. Damodar (Dan) Reddy.................................... Director since 1995 Mr. Reddy is the co-founder of Alliance Semiconductor, where he has served as Chairman of the Board, CEO, and President since 1985. From 1983 to 1985 Mr. Reddy served as President and CEO of Modular Semiconductor, Inc., and from 1980 to 1983 he served as manager of Advanced CMOS Technology Development at Synertek, Inc., a subsidiary of Honeywell, Inc. Mr. Reddy holds an M.S. in electrical engineering from North Dakota State University and an MBA from Santa Clara University. Jack Rivkin............................................... Director since 1996 Mr. Rivkin is an Executive Vice President of Citigroup Investments, Inc. He was Vice Chairman and Director of Global Research at Smith Barney from March 1993 to October 1995. Mr. Rivkin serves on the board of directors of On2 Technologies, Inc, Enherent Corp., and a number of private companies. Mr. Rivkin holds an engineering degree in metallurgy from the Colorado School of Mines and an MBA from Harvard University. Martin L. Solomon......................................... Director since 2000 Mr. Solomon is interim co-Chairman and co-CEO of Hexcel Corporation. He served as Chairman, President, and Chief Executive Officer of American Country Holdings, Inc., a property and casualty insurance holding company, from 1997 to February 2001. He is a director of American Country Holdings, Inc., XTRA Corporation, Hexcel Corporation, Telephone and Data Systems, Inc., and MFN Corporation. Mr. Solomon holds a B.A. degree from Cornell University and attended New York University's Graduate School of Business Administration. ITEM 2--PROPOSAL FOR THE APPOINTMENT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY. Arthur Andersen LLP, independent certified public accountants, audited the financial statements of eMagin Corporation for the 2000 fiscal year. Representatives of Arthur Andersen LLP are expected to attend the Annual Meeting of stockholders and will have the opportunity to make a statement if they desire to do so and are expected to be available to answer appropriate questions. The Audit Committee and the Board of Directors have selected Arthur Andersen LLP as the independent auditors of the Company for the fiscal year ending December 31, 2001. 15 The appointment of the Company's independent auditors requires the receipt of the affirmative vote of a majority of the shares of the Company's common stock present in person or by proxy and voting at the Annual Meeting. For purposes of determining the number of shares voting, only votes cast "for" or "against" are included. Abstentions and broker non-votes are not included. ITEM 3--PROPOSAL FOR REINCORPORATION IN DELAWARE Introduction For the reasons set forth beginning on page 18 of this Proxy Statement, the Board of Directors believes that it is advisable and in the best interests of eMagin and its stockholders to change the state of incorporation of the Company from Nevada to Delaware (the "Proposed Reincorporation"). The Proposed Reincorporation will be accomplished by merging eMagin into its wholly-owned Delaware subsidiary, also named "eMagin Corporation". Throughout this section of the Proxy Statement, eMagin as currently incorporated in Nevada will be referred to as "eMagin-Nevada" and eMagin as reincorporated in Delaware (which reincorporation is subject to approval by the stockholders at the Annual Meeting) will be referred to as "eMagin-Delaware". THE BOARD RECOMMENDS A VOTE "FOR" THIS ITEM 3. THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THIS ITEM. STOCKHOLDERS ARE URGED TO READ CAREFULLY THIS SECTION OF THIS PROXY STATEMENT, INCLUDING THE RELATED APPENDICES REFERENCED BELOW AND ATTACHED TO THIS PROXY STATEMENT, BEFORE VOTING ON THE PROPOSED REINCORPORATION. The Proposed Reincorporation will be effected by merging (the "Merger") eMagin-Nevada into its currently existing wholly-owned subsidiary incorporated in the State of Delaware under the name "eMagin Corporation" (the "Delaware Subsidiary"). Upon completion of the Merger, eMagin-Nevada, as a corporate entity, will cease to exist and eMagin-Delaware will succeed to the assets and liabilities of eMagin-Nevada and will continue to operate the business of eMagin under its current name, "eMagin Corporation". As provided by the Agreement and Plan of Merger, in the form attached hereto as Exhibit A (the "Merger Agreement"), each outstanding share of eMagin-Nevada common stock, $0.001 par value per share, will be automatically converted into one share of eMagin-Delaware common stock, $0.001 par value per share, at the effective time of the Merger. Each stock certificate representing issued and outstanding shares of eMagin-Nevada common stock will continue to represent the same number of shares of eMagin-Delaware common stock. DO NOT SEND IN ANY OF YOUR STOCK CERTIFICATES REPRESENTING SHARES OF eMAGIN COMMON STOCK, AS IT WILL NOT BE NECESSARY FOR STOCKHOLDERS TO EXCHANGE THEIR EXISTING eMAGIN-NEVADA STOCK CERTIFICATES FOR eMAGIN-DELAWARE STOCK CERTIFICATES. HOWEVER, STOCKHOLDERS MAY REQUEST THAT THEIR CERTIFICATES BE EXCHANGED IF THEY SO CHOOSE. DELIVERY OF THE eMAGIN-NEVADA COMMON STOCK CERTIFICATES WILL CONSTITUTE DELIVERY FOR TRANSACTIONS IN SHARES OF eMAGIN-DELAWARE COMMON STOCK AFTER THE EFFECTIVE DATE OF THE MERGER. 16 eMagin-Nevada common stock is listed for trading on the Amex and, after the Merger, eMagin-Delaware common stock will continue to be listed for trading on the Amex under the same symbol ("EMA") as the shares of eMagin-Nevada common stock are currently traded, and the shares of eMagin-Delaware common stock will continue to be represented by the same CUSIP number as that is currently used for eMagin-Nevada common stock. There will be no interruption in the trading of eMagin's common stock as a result of the Proposed Reincorporation. As of the date the Board resolved to undertake the Proposed Reincorporation, the closing price of eMagin-Nevada common stock on the American Stock Exchange was $3.09 per share. The Proposed Reincorporation will effectively result in the implementation of a new certificate of incorporation and by-laws for eMagin, as the existing certificate of incorporation and by-laws of the Delaware Subsidiary (the "Delaware Charter" and "Delaware By-Laws") will continue as the certificate of incorporation and by-laws of eMagin-Delaware and will replace the current articles of association and by-laws of eMagin-Nevada (the "Nevada Charter" and "Nevada By-Laws") as the charter and by-laws of eMagin. As a Delaware corporation, eMagin-Delaware will be subject to the Delaware General Corporation Law (the "Delaware Law"). eMagin-Nevada is subject to the corporation laws of Nevada set out in the Nevada Revised Statutes (the "Nevada Law"). Differences between the Delaware Charter and Delaware By-Laws, on the one hand, and the Nevada Charter and Nevada By-Laws, on the other hand, must be viewed in the context of the differences between the Delaware Law and the Nevada Law. These differences are discussed below under "Comparison of the Charters and By-Laws of eMagin-Nevada and eMagin-Delaware and Significant Differences between the Corporation Laws of Nevada and Delaware". Under the Nevada Law, the affirmative vote of the holders of a majority of the outstanding shares of eMagin-Nevada common stock is required for approval of the Merger Agreement and the other terms of the Proposed Reincorporation. The Proposed Reincorporation has been approved by the members of eMagin's Board of Directors, who unanimously recommend a vote in favor of the Proposed Reincorporation. If approved by the stockholders, it is anticipated that the Merger will become effective under the Merger Agreement (the "Effective Time") at 11:59 p.m., Nevada time, on July 16, 2001. However, as described in the Merger Agreement, the Merger (and thus the Proposed Reincorporation) may be abandoned or the Merger Agreement may be amended by the Board either before or after stockholder approval has been obtained (except that the principal terms may not be amended without stockholder approval) and prior to the Effective Time if, in the opinion of the Board, circumstances arise that make it inadvisable to proceed with the Proposed Reincorporation under the original terms of the Merger Agreement. Because eMagin's common stock is traded on the American Stock Exchange, stockholders of eMagin-Nevada will have no appraisal rights under Nevada Law with respect to the Merger. The discussion below is qualified in its entirety by reference to the Merger Agreement, the Delaware Charter and the Delaware By-Laws, copies of which are attached to this Proxy Statement as Exhibits A, B and C and by the applicable provisions of Nevada Law and Delaware Law. APPROVAL BY STOCKHOLDERS OF THE PROPOSED REINCORPORATION WILL ALSO CONSTITUTE APPROVAL OF THE MERGER AGREEMENT AND THE ADOPTION OF THE DELAWARE CHARTER AND THE DELAWARE BY-LAWS AS THE CHARTER AND BY-LAWS OF eMAGIN, AND ALL PROVISIONS THEREOF. NO CHANGE IN THE CORPORATE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, FISCAL YEAR, ASSETS, LIABILITIES, EMPLOYEE BENEFIT PLANS OR LOCATION OF PRINCIPAL FACILITIES OF eMAGIN WILL OCCUR AS A RESULT OF THE PROPOSED REINCORPORATION. 17 Principal reasons for the Reincorporation Proposal As eMagin continues to plan for the future, the Board of Directors and management believe that it is essential to be able to draw upon well-established principles of corporate governance in making legal and business decisions. For many years, Delaware has followed a policy of encouraging incorporation in that state and, in furtherance of that policy, has been a leader in adopting, construing, and implementing comprehensive, flexible corporate laws responsive to the legal and business needs of corporations organized under its laws. As such, many corporations have initially chosen Delaware, or chosen to reincorporate in Delaware, in a manner similar to that proposed by eMagin under the Reincorporation Proposal. Although the provisions of Nevada Law are similar in a number of respects to those of Delaware Law, the Board of Directors and management of eMagin believe that there is a certain lack of predictability under Nevada Law resulting from the limited body of case law interpreting Nevada Law. eMagin has first-hand experience of the benefits of Delaware incorporation through the management and operation of the Delaware Subsidiary and believes that stockholders will benefit from the responsiveness of Delaware Law to their needs and to those of the corporation they own. The Board of Directors believes that the principal reasons for considering the Reincorporation Proposal are: o the development in Delaware over the last century of a well-established body of case law construing the Delaware Law, which provides businesses with a greater measure of predictability than exists in any other jurisdiction; the certainty afforded by the well-established principles of corporate governance under the Delaware Law are of benefit to eMagin and its stockholders and should increase eMagin's ability to attract and retain outstanding directors and officers; o the Delaware Law itself, which is generally acknowledged to be the most advanced and flexible corporate statute in the country; o the Delaware Court of Chancery, which brings to its handling of complex corporate issues a level of experience, a speed of decision and a degree of sophistication and understanding unmatched by any other court in the country, and the Delaware Supreme Court, the only appeals court, which is highly regarded and currently consists primarily of former Vice Chancellors and corporate practitioners; and o the Delaware General Assembly, which each year considers and adopts statutory amendments that have been proposed by the Corporation Law Section of the Delaware bar to meet changing business needs. o the Merger of eMagin and the Delaware Subsidiary will benefit eMagin by simplifying the corporate structure of the business and reducing the administrative burden of maintaining a separate corporate presence in Nevada. o the Proposed Reincorporation will make the Delaware Charter and Delaware By-Laws the new charter and by-laws of the Company, which contain provisions that the Board of Directors and management believe are more appropriate for a public company the size of eMagin. The Proposed Reincorporation will effect a change in the legal domicile of eMagin and other changes of a legal nature described in this Proxy Statement. The Proposed Reincorporation will not result in a change in the corporate name, board members, business, management, fiscal year, assets, liabilities, employee benefit plans or location of principal facilities of eMagin. As a result of the Proposed 18 Reincorporation, the authorized capital of eMagin will be increased to 100,000,000 shares of common stock and 10,000,000 shares of preferred stock, par value $0.001 per share. No additional shares of common stock and no shares of preferred stock will be issued by eMagin in connection with the Proposed Reincorporation or the Merger. The directors elected at the Annual Meeting to serve on the Board of eMagin-Nevada will become the directors of eMagin-Delaware and will be classified into three classes as set forth in the Delaware Charter and as further described below under "Comparison of Charters and By-Laws of eMagin-Nevada and eMagin-Delaware and Significant Differences between the Corporation Laws of Nevada and Delaware". All employee benefit, stock option and employee stock purchase plans of eMagin-Nevada will become eMagin-Delaware plans, and each option or right issued by such plans will automatically be converted into an option or right to purchase the same number of shares of eMagin-Delaware common stock, at the same price per share, upon the same terms and subject to the same conditions. Stockholders should note that approval of the Proposed Reincorporation will also constitute approval of these plans continuing as eMagin-Delaware plans. Other employee benefit arrangements of eMagin-Nevada will also be continued by eMagin-Delaware upon the terms and subject to the conditions currently in effect. As noted above, after the Merger, the shares of eMagin's common stock will continue to be traded, without interruption, on the American Stock Exchange and under the same symbol ("EMA"). eMagin believes that the Proposed Reincorporation will not affect any of its material contracts with any third parties and that eMagin-Nevada's rights and obligations under such material contractual arrangements will continue as rights and obligations of eMagin-Delaware. Comparison of the charters and by-laws of eMagin-Nevada and eMagin-Delaware and significant differences between the corporation laws of Nevada and Delaware The charters and by-laws of eMagin-Nevada and eMagin-Delaware as well as the corporation laws of Nevada and Delaware differ in some respects. As noted above, the differences in the charters and by-laws must also be viewed in the context of the differences between the Nevada Law and the Delaware Law. While it is impractical to summarize all of these differences, a summary of the significant differences that could affect the rights of the stockholders of eMagin is set forth below. o Authorized Capital Stock. Under the Nevada Charter, eMagin-Nevada currently has authority to issue 76,350,000 shares of common stock, $0.001 par value per share. eMagin-Nevada does not have any authorized preferred stock. Under the Delaware Charter, eMagin-Delaware currently has authority to issue 100,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share, the preferences and characteristics of which, including, without limitation, dividend or interest rates, conversion prices, voting rights, redemption prices, and similar matters are determined by the Board of Directors of eMagin-Delaware, without requiring any stockholder vote. In the event of a tender offer or other attempt to gain control of eMagin which the Board of Directors does not approve, it might be possible for the Board to authorize the issuance of a series of preferred stock with rights and preferences which could impede the completion of such transaction. However, eMagin does not at present have any arrangements, commitments or understandings to issue any preferred stock, and the Board does not intend to issue any preferred stock except on terms which the Board deems to be in the best interests of eMagin and its stockholders. 19 o Size of the Board of Directors. The Nevada Law and the Delaware Law each provide that the number of directors of a corporation or the range of authorized directors is fixed by or in the manner provided for in the by-laws of the corporation, unless otherwise provided in the charter. The Nevada By-Laws provide that the number of directors of eMagin-Nevada shall be no less than one director. The Delaware Charter provides that the number of directors of eMagin-Delaware shall be between three and nine, with the exact number thereof specified by a resolution of the Board of Directors. The Board of Directors of eMagin-Delaware have specified by resolution that initial number of directors of eMagin-Delaware, after giving effect to the Proposed Reincorporation, shall be six. It is contemplated that, immediately after giving effect to the Proposed Reincorporation, the directors of eMagin-Delaware will be the directors of eMagin-Nevada elected at the Annual Meeting. o Classified Board of Directors. Under the Nevada Law and the Delaware Law, directors of corporations are generally elected annually. Both the Nevada Law and the Delaware Law permit corporations to adopt in their charter provisions for the classification of the Board of Directors into classes of directors who are elected on a rotating basis. The Delaware Law provides that a corporation may establish up to three classes of directors, with the number of directors comprising each class being as nearly equal as possible. The Nevada Law provides that a corporation may establish up to four classes of directors, with the number of directors comprising each class being as nearly equal as possible. Directors of eMagin-Nevada are elected annually. The Board of Directors of eMagin-Delaware is divided into three classes serving rotating three year terms. After giving effect to the Proposed Reincorporation, the directors of eMagin Nevada elected at the Annual Meeting will be divided into three classes with each class serving rotating terms in compliance with the requirements set out in the eMagin-Delaware Charter. o Removal of Directors. The Nevada Law provides that directors may be removed by a two-thirds vote of the outstanding shares. The Delaware Law provides that, generally, directors may be removed with or without cause by a vote of a majority of the outstanding shares, but that, in cases where the Board of Directors is classified, a director may be removed only for cause, unless otherwise specified in its charter. The Board of Directors of eMagin-Delaware is classified and the Delaware Charter provides that the directors of eMagin-Delaware may be removed only for cause and only by the affirmative vote of two-thirds of the outstanding shares. o Power to Call Special Stockholders Meetings. Under the Nevada Law, a special meeting of stockholders may be called in the manner specified in the by-laws of the corporation. The Nevada By-Laws provide that special meetings of stockholders may be called by the president, or the Board of Directors, or by an affirmative vote or written consent of the holders of 51% of the outstanding shares. The Delaware Law provides that special meetings of stockholders may be called by the Board of Directors or such other persons as may be authorized to do so by the corporation's certificate of incorporation or by-laws. The Delaware Charter provides that a special meeting of the stockholders may be called only by the Chairman of the Board or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of directors which the Corporation would have if there were no vacancies. Pursuant to the Delaware Charter, the stockholders of eMagin-Delaware do not have the right to call a special meeting of the Corporation. o No right to act by written consent. Under the Nevada Law, unless otherwise provided in a corporation's articles of incorporation or by-laws, any action required or permitted to be taken 20 at a meeting of stockholders may be taken without a meeting if a written consent thereto is signed by stockholders holding at least a majority of the voting power, except that if a different proportion of voting power is required for such an action at a meeting, then that proportion of written consents is required. The Nevada By-Laws do not contain a prohibition on the taking of stockholder actions by written consent. Under the Delaware Law, unless otherwise provided in a corporation's certificate of incorporation, any action required to be taken at an annual or special meeting of the stockholders may be taken in the absence of a meeting, without prior notice and without a vote. The Delaware Charter prohibits the taking of stockholder actions by written consent. o Stockholder vote for mergers and other corporate reorganizations. In general, both jurisdictions require authorization by an absolute majority of outstanding shares entitled to vote thereon, as well as approval by the Board of Directors with respect to the terms of a merger or a sale of substantially all of the assets of the corporation. Neither the Nevada Law nor the Delaware Law requires stockholder approval by the stockholders of a surviving corporation in a merger or consolidation so long as the surviving corporation issues no more than 20% of its voting stock in the transaction. o Tender Offer and Business Combination Statutes. Section 203 of the Delaware Law regulates unsolicited takeovers by providing that an "interested stockholder", defined as a stockholder owning 15% or more of the corporation's voting stock or an affiliate or associate thereof, may not engage in a "business combination" transaction, defined to include a merger, consolidation or a variety of self-dealing transactions, with the corporation for a period of three years from the date on which such stockholder became an "interested stockholder" unless (i) prior to such date the corporation's board of directors approved either the "business combination" transaction or the transaction in which the stockholder became an "interested stockholder", (ii) the stockholder, in a single transaction in which he became an "interested stockholder", acquires at least 85% of the voting stock outstanding at the time the transaction commenced (excluding shares owned by certain employee stock plans and persons who are directors and also officers of the corporation) or (iii) on or subsequent to such date, the "business combination" transaction is approved by the corporation's board of directors and authorized at an annual or special meeting of the corporation's stockholders, by the affirmative vote of at least two-thirds of the outstanding voting stock not owned by the "interested stockholder". A Delaware corporation may elect not to be governed by Section 203 of the Delaware Law by an express provision to that effect in its certificate of incorporation, but eMagin-Delaware has not made such election. Accordingly, eMagin-Delaware will be subject to Section 203. Nevada Law regulates hostile takeovers of publicly traded corporations by providing that an "interested stockholder", defined as a stockholder owning 10% or more of the corporation's voting stock or an affiliate or associate thereof, may not engage in a "business combination" with the corporation for a period of three years from the date on which such stockholder became an "interested stockholder" unless (i) prior to such date the corporation's board of directors approved either the "business combination" transaction or the transaction in which the stockholder became an "interested stockholder" or (ii) no earlier than three years after such stockholder became an "interested stockholder" the majority of the outstanding voting power approves the "business combination." Nevada Law further regulates tender offers and business combinations involving certain Nevada corporations by providing that any acquisition by a person, either directly or indirectly, of ownership of, or the power to direct the voting of, 20% or more ("Control Shares") of the outstanding voting securities of a corporation is a "Control Share Acquisition". These provisions apply only to "issuing corporations", which are (i) 21 corporations with at least 200 stockholders, at least 100 or more of which are located in Nevada, and (ii) which do business in Nevada. eMagin-Nevada is not an "issuing corporation" under Nevada Law. A Control Share Acquisition must be approved by a majority of each class of outstanding voting securities of such corporation excluding the shares held or controlled by the person seeking approval before the Control Shares may be voted. A special meeting of stockholders must be held by the corporation to approve a Control Share Acquisition within 50 days after a request for such meeting is submitted by the person seeking to acquire control. If the Control Shares are accorded full voting rights and the acquiring person has acquired Control Shares with a majority or more of the voting power of the Corporation, all stockholders who have not voted in favor of granting full voting rights to the Control Shares would have dissenters rights. Nevada Law provides that a corporation may elect out of the Control Share protections by expressly specifying so in its articles or bylaws. eMagin-Nevada has not elected out of these provisions. o Advance Notice of Stockholder Proposals and Nominations. The eMagin-Delaware Charter contains a provision requiring that stockholders desiring to include a proposal or business on the agenda for an annual meeting of stockholders must submit a timely notice thereof in writing to the Secretary of eMagin-Delaware. To be timely, such notice must be received by eMagin-Delaware (i) not less than ninety days in advance of an annual meeting if such meeting is to be held on or after the one-year anniversary of the previous year's annual meeting, or (ii) for any other annual meeting, on or before the fifteenth day following the date that public disclosure of the date of such meeting is made by press release or filing with the Securities and Exchange Commission. The eMagin-Delaware Charter also contains a provision providing that a stockholder may nominate one or more persons for election as director(s) at a meeting only if notice thereof is provided to the Secretary of eMagin-Delaware not later than (i) with respect to an election at an annual meeting of stockholders, not less than ninety days in advance of such annual meeting if such meeting is to be held on or after the one-year anniversary of the previous year's annual meeting, or for any other annual meeting, on or before the later of (x) the fifteenth day following the date that public disclosure of the date of such meeting is made by press release or filing with the Securities and Exchange Commission and (y) the date which is ninety days before the date of such meeting, and (ii) with respect to an election of directors to be held at a special meeting of stockholders, the close of business for the seventh day following the date on which notice of such meeting is first given to stockholders by press release or filing with the Securities and Exchange Commission. The eMagin-Nevada Charter and By-Laws do not include similar provisions. eMagin believes the above Delaware Charter provisions are appropriate in order to give eMagin adequate time to consider and respond to stockholder proposals and nominations and to ensure that stockholders receive value maximization for their shares. o Amendment of Charter and By-Laws. Delaware Law and Nevada Law permit a corporation to amend its charter in any respect provided the amendment contains only provisions that would be lawful in an original charter filed at the time of amendment. To amend a charter the Board of Directors must adopt a resolution presenting the proposed amendment. In addition, a majority of the shares entitled to vote, as well as a majority of shares by class of each class entitled to vote, must approve the amendment to make it effective. When the substantive rights of a class of shares will be affected by an amendment, the holders of those shares are entitled to vote as a class even if the shares are non-voting shares. When only one or more series in a class of shares, and not the entire class, will be adversely affected by an amendment, only the affected series may vote as a class. Under Delaware Law, the right to vote as a class may be limited in certain circumstances. Delaware Law provides that, in its resolution proposing an 22 amendment, the Board of Directors may include a provision allowing the Board to abandon the amendment, without concurrence by stockholders, after the amendment has received stockholder approval but before its filing with the Secretary of State. Delaware Law provides that the power to amend the by-laws rests with the stockholders entitled to vote, although the charter may confer the power to amend the by-laws upon the Board of Directors. Delaware Law also provides that the fact that the charter confers such power upon the Board of Directors neither limits nor divests the stockholders of the power to amend the by-laws. Nevada Law and the eMagin-Nevada By-Laws allow the Board of Directors by unanimous consent, or the stockholders by a consent in writing signed by the holders of 51% of the outstanding common stock, to make amendments to the eMagin-Nevada By-Laws. The eMagin-Delaware Charter authorizes the Board of Directors of eMagin-Delaware to make, alter or repeal the eMagin-Delaware By-Laws, except as may be otherwise provided in the eMagin-Delaware By-Laws. The eMagin-Delaware By-Laws provide that the stockholders of eMagin-Delaware may, by a vote of at least two-thirds of the shares of the voting stock, amend, repeal or adopt new by-laws. The eMagin-Delaware Charter expressly reserves the right of eMagin-Delaware to amend, alter or repeal any charter provision and also provides that certain articles of the eMagin-Delaware Charter may not be amended without the affirmative vote of stockholders holding shares representing 66 2/3% of the votes entitled to be cast on such matters. o Personal Liability of Directors. Under the Delaware Law, directors are jointly and severally liable to a corporation for violations of statutory provisions relating to the purchase or redemption of a corporation's own shares or the payment of dividends, for a period of six years from the date of such unlawful act. A director who was either absent or dissented from the taking of such action may exonerate himself from liability by causing his dissent to be entered in the corporation's minutes. Under the Nevada Law, directors are jointly and severally liable to the corporation for violations of statutory provisions relating to the purchase of a corporation's own shares, the payment of dividends, the distribution of assets in liquidation or any loans or guarantees made to a director, until the repayment thereof. Under the Nevada Law, absent directors are not liable as long as they did not vote for or assent to any of the illegal acts and, unlike the Delaware Law, the Nevada Law allows a director who was present at a meeting which approved an illegal act to avoid liability, even if he did not register his dissent in the minutes of the meeting, by voting against the illegal act and registering his dissent at a later time in a separate writing filed with the secretary of the meeting. o Indemnification. Delaware and Nevada have similar laws with respect to indemnification by a corporation of its officers, directors, employees and other agents. For example, the laws of both states permit corporations to adopt a provision in the charter eliminating the liability of a director (and also an officer in the case of Nevada) to the corporation or its stockholders for monetary damages for breach of the director's fiduciary duty of care (and the fiduciary duty of loyalty as well in the case of Nevada). There are nonetheless certain additional differences between the laws of the two states respecting indemnification and limitation of liability. The Delaware Charter and Delaware By-Laws eliminate the liability of directors to the fullest extent permissible under the Delaware Law. The Nevada Charter and Nevada By-Laws likewise eliminate the liability of directors and officers to the fullest extent permissible under the Nevada Law. Under the Nevada Law, such provision may not eliminate or limit director or officer liability for: (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law; or (b) the payment of unlawful dividends or distributions. Under the 23 Delaware Law, such provision may not eliminate or limit director monetary liability for: (a) breaches of the director's duty of loyalty to the corporation or its stockholders; (b) acts or omissions not in good faith or involving intentional misconduct or knowing violations of law; (c) the payment of unlawful dividends or unlawful stock repurchases or redemptions; or (d) transactions in which the director received an improper personal benefit. The limitation of liability provisions permissible under the Delaware Law and the Nevada Law may not limit a director's liability for violation of, or otherwise relieve a corporation or its directors from the necessity of complying with, federal or state securities laws, or affect the availability of non-monetary remedies such as injunctive relief or rescission. The Nevada Law and the Delaware Law require indemnification when the individual has successfully defended the action on the merits or otherwise. The Nevada Law generally permits indemnification of expenses incurred in the defense or settlement of a derivative or third-party action, provided there is a determination by a disinterested quorum of the directors, by independent legal counsel, or by a majority vote of a quorum of the stockholders that indemnification is proper in the circumstances. Without court approval, however, no indemnification may be made in respect of any derivative action in which such person is adjudged liable for negligence or misconduct in the performance of his or her duty to the corporation. The Delaware Law generally permits indemnification of expenses incurred in the defense or settlement of a derivative or third-party action, provided there is a determination by a disinterested quorum of the directors, by independent legal counsel or by a majority vote of a quorum of the stockholders that the person seeking indemnification acted in good faith and in a manner reasonably believed to be in or not opposed to the best interests of the corporation. Without court approval, however, no indemnification may be made in respect of any derivative action in which such person is adjudged liable for negligence or misconduct in the performance of his or her duty to the corporation. o Inspection of Stockholders List. The Nevada Law permits any person who has been a stockholder of record for at least six months, or any person holding at least 5% of all outstanding shares, to inspect the stockholders' list of a corporation for a purpose reasonably related to such person's interest as a stockholder. The Delaware Law permits any stockholder to inspect a corporation's stockholders' list for a purpose reasonably related to such person's interest as a stockholder and, during the ten days preceding a stockholders' meeting, for any purpose germane to that meeting. o Payment of Dividends. The Nevada Law permits the payment of dividends if, after the dividends have been paid, the corporation is able to pay its debts as they become due in the usual course of business (the equity test for insolvency), and the corporation's total assets are not less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the dividend payment, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the dividend (the balance sheet test for insolvency). In addition, the Nevada Law generally provides that a corporation may redeem or repurchase its shares only if the same equity and balance sheet tests for insolvency are satisfied. The Delaware Law permits the payment of dividends out of surplus or, if there is no surplus, out of net profits for the current and preceding fiscal years (provided that the amount of capital of the corporation is not less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets). 24 Surplus is the excess, if any, of the stockholders' equity over stated capital of a corporation. In addition, the Delaware Law generally provides that a corporation may redeem or repurchase its shares only if such redemption or repurchase would not impair the capital of the corporation. The ability of a Delaware corporation to pay dividends on, or to make repurchases or redemptions of, its shares is dependent on the financial status of the corporation standing alone and not on a consolidated basis. In determining the amount of surplus of a Delaware corporation, the assets of the corporation, including stock of subsidiaries owned by the corporation, must be valued at their fair market value as determined by the Board of Directors, without regard to their historical book value. Some of the provisions in the Delaware Charter and Delaware By-Laws, in conjunction with the Delaware Law, alter the rights of stockholders and the power of management, as compared with provisions in the Nevada Charter and Nevada By-Laws, in conjunction with Nevada Law. Some of these alterations could effect stockholder participation in important corporate decisions and may have "anti-takeover" implications, some of which may make unsolicited corporate takeovers harder to accomplish and some of which may make it more difficult for an acquiring person to obtain control of the Company by means of an unsolicited merger, tender offer, or other acquisition bid. However, the intent of these changes is not to prevent offers to acquire eMagin from being made. Rather, in the opinion of the Board of Directors and management, the effects of these alterations would grant to stockholders the assurance that they will have adequate time to evaluate an unsolicited takeover proposal from a third party, that the opportunity will be afforded to their Board of Directors to negotiate with such third party so as to ascertain the best terms that such party or some other interested party is prepared to offer and, most importantly, that the interests of all stockholders will be taken into account in connection with any takeover proposal and the probability will be increased that all stockholders will be treated equally regarding the price to be offered for their shares if the implementation of the takeover proposal is approved. eMagin has not restated its charter and by-laws since its initial date of incorporation in January, 1996, as "Fashion Dynamics Corp." In the opinion of the Board of Directors and management, many of the provisions currently found in the Company's charter and by-laws are no longer appropriate for a growing public company such as eMagin. Many of the changes in moving to the Delaware Charter and Delaware By-Laws, including changes which may discourage unfriendly takeover attempts of the Company as described above, involve updating and conforming the provisions of the Company's charter and by-laws to provisions often found in the charter and by-laws of public companies. Most of the alterations to the Company charter and by-laws that will effectively result from the Proposed Reincorporation could have been implemented in the past either by amendment of the Nevada Charter following stockholder approval, or by amendment of the Nevada By-Laws by the Board without stockholder approval or by a vote of the stockholders. While the Proposed Reincorporation is not being proposed in response to any present attempt, known to the Board, to acquire control of eMagin, to obtain representation on the Board, or to take significant corporate action that would materially affect the governance of eMagin, in the opinion of management and the Board these changes will improve the ability of the Company to respond to such attempts in order to better protect stockholder value. No appraisal or dissenters rights in respect of the Merger The Company's stockholders will have no appraisal rights in connection with the Merger due to a Nevada statutory exemption for companies whose securities trade on a national securities exchange. As noted above, eMagin-Nevada common stock is listed on the AMEX and after the Merger, the shares of eMagin-Delaware common stock will be listed on the AMEX. 25 Certain United States federal income tax consequences of the Proposed Reincorporation For United States federal income tax purposes (i) the Merger will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, (ii) no gain or loss will be recognized by Company stockholders as a consequence of the Merger, (iii) a stockholder's aggregate tax basis in eMagin-Delaware common stock after the Merger will be the same as such holder's aggregate tax basis in the shares of eMagin-Nevada common stock immediately prior to the Merger, (iv) a stockholder's holding period in eMagin-Delaware common stock received in the Merger will include the period in which the eMagin- Nevada common stock was held, provided the eMagin-Nevada common stock was held as a capital asset at the time of the Merger, and (v) no gain or loss will be recognized by eMagin-Nevada or eMagin-Delaware as a consequence of the Merger. Vote required The affirmative vote of the holders of a majority of the outstanding shares of common stock will be required to approve the reincorporation of eMagin into Delaware. As a result, abstentions and broker non-votes will have the same effect as negative votes. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS ITEM 3. THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THIS ITEM. ITEM 4--PROPOSAL FOR THE ADOPTION OF AMENDMENTS TO eMAGIN'S 2000 STOCK OPTION PLAN On May 17, 2001, the Board of Directors approved an amendment to eMagin's 2000 Stock Option Plan (the "2000 Plan") to increase the number of shares of common stock available for issuance thereunder by 2,000,000 shares from 3,900,000 shares to 5,900,000 shares. The Board of Directors is asking stockholders to approve this amendment. Below is a summary of certain important features of the 2000 Plan. This summary is qualified in its entirety by reference to the full text of the 2000 Plan The 2000 Plan is intended to provide a means to attract, retain and motivate selected employees of eMagin and non-employee directors of eMagin. The 2000 Plan provides for the grant to eligible employees of incentive stock options ("ISO"), non-qualified stock options ("NQSO"), stock appreciation rights, restricted shares and other share based awards (collectively, "Awards"). The portion of the 2000 Plan applicable to employees is administered by the Compensation Committee of the Board of Directors of eMagin or such other committee designated by the Board (the "Compensation Committee"), which consists exclusively of directors who are "disinterested persons" who are non-employee directors within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934. The Compensation Committee has the full and final authority to select employees to whom awards may be granted, to determine the type of awards to be granted to such employees and to make all administrative determinations required by the 2000 Plan. The Compensation Committee also has authority to waive conditions relating to an award or accelerate vesting of awards. The 2000 Plan also provides for certain grants of NQSO's to non-employee directors, and, in the case of such grants, is intended to operate automatically and not require administration. There are presently five non-employee directors, and approximately 85 employees (representing all employees of the Company and its subsidiaries), all of whom are eligible to participate in the 2000 Plan. 26 While eMagin has no current intention to grant Awards other than stock options, the Board of Directors believes that the ability to utilize different types of equity compensation will give eMagin the flexibility needed to effectively adapt to changes in the labor market and in equity compensation practices. For a discussion of options granted under the 2000 Plan to executive officers and directors of eMagin, see "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-end Option Value" and "How directors are compensated" discussions above. Prior to amendment, an aggregate of 3,900,000 shares have been reserved for issuance under the 2000 Plan, subject to anti-dilution adjustments in the event of certain changes in eMagin's capital structure. If an Award expires or is canceled without having been fully exercised or vested, the unvested or canceled shares will again be available for grants of Awards under the 2000 Plan. As of May 1, 2001 approximately 2,929,758 shares are subject to options currently outstanding under the 2000 Plan with 970,242 shares remaining for option award allocations under the Plan. The number of shares available for grant under the 2000 Plan (and outstanding Awards) will be adjusted as appropriate to reflect any stock splits, stock dividends, recapitalizations, reorganizations or other changes to the capital structure of eMagin. The maximum number of shares for which stock options and stock appreciation rights may be granted to any one participant during any calendar year is 500,000. A stock option that is intended to be an ISO under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") may not be granted to any participant who, at the time of the grant, owns more than 10% of the total combined voting power of all classes of our capital stock or any of our subsidiaries, unless (1) the option price for such stock option is at least 110% of the fair market value of a share on the date of the grant and (2) the term of that stock option does not exceed the day preceding the fifth anniversary of the grant date. The grant of an option under the 2000 Plan will generally not result in taxable income at the time of grant for the optionee or an income tax deduction for eMagin. The optionee will not have taxable income upon exercising an ISO (except that alternative minimum tax may apply), and eMagin will receive no deduction when the ISO is exercised. Upon the exercise of a NQSO, the optionee will recognize ordinary income in the amount by which the fair market value on the date of exercise exceeds the option price. The Company generally will be entitled to a tax deduction for a NQSO Award in an amount equal to the ordinary income realized by the participant at the time the participant recognizes such income. Unless otherwise determined by the Compensation Committee, Awards are not transferable or assignable. The Board may amend or discontinue the 2000 Plan at any time; provided that, with certain limited exceptions described in the 2000 Plan, the Board may not increase the total number of shares reserved for issuance under the plan or change the maximum number of shares for which awards may be granted to any one participant without stockholder approval. In addition, no amendment or discontinuation may impair any of the rights or obligations of any participant under any outstanding award without such participant's consent. The 2000 Plan should allow certain stock options, stock appreciation rights and other stock-based awards to be treated as qualified performance-based compensation under Section 162(m) of the Code. However, the Compensation Committee may, from time to time, award compensation that is not deductible under Section 162(m). The adoption of the amendment to the 2000 Plan requires the affirmative vote of not less than a majority of the votes entitled to be cast by all shares of common stock which are present in person or by 27 proxy and are entitled to vote at the Annual Meeting. If the adoption of the amendment is not so approved, the authorized shares available for grant under the 2000 Plan will not change. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO ADOPT THE AMENDMENT TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE 2000 PLAN. In the event this Item 4 is not approved by the stockholders, eMagin's management believes that it will negatively affect eMagin's ability to retain current personnel and attract additional highly qualified personnel in the future. ITEM 5--PROPOSAL FOR THE ADOPTION OF THE 2001 EMPLOYEE STOCK PURCHASE PLAN On May 18, 2001, the Board of Directors of eMagin adopted the eMagin Corporation Employee Stock Purchase Plan (the "Stock Purchase Plan), subject to approval by eMagin's stockholders. The following is a general description of the essential features of the Stock Purchase Plan. Stockholders should read the text of the Stock Purchase Plan, attached hereto as Exhibit D for a comprehensive statement of the plan's legal terms and conditions. The purpose of the Stock Purchase Plan is to give employees of eMagin and its participating subsidiaries an opportunity to purchase common stock on favorable terms through payroll deductions thereby increasing their proprietary interest in the success of eMagin. The number of shares of common stock available for issuance under the Stock Purchase Plan will be 750,000 shares, subject to adjustment for certain changes in eMagin's capital, as described below. This number of shares available under the plan will be automatically increased on each of January 1, 2003, January 1, 2004, and January 1, 2005, by a number of shares equal to the lesser of (a) 2% of the total number of shares of common stock outstanding on each such date and (b) 250,000 shares. The Stock Purchase Plan is intended to qualify as an employee stock purchase plan under Section 423 of the Code so that eMagin's participating employees may enjoy certain tax advantages, as described below in "Certain Federal Income Tax Consequences". The Stock Purchase Plan will be administered by the Compensation Committee. In general, any person who has been an employee prior to a given offering period (generally each January 1 and July 1) who is scheduled to work more than five months per calendar year and more than 20 hours per week on a regular basis is eligible to participate in the Stock Purchase Plan. Common stock will be purchased for each participant in the Stock Purchase Plan as of the last day of each accumulation period (generally June 30 and December 31) within an offering period with the money deducted from their paychecks during the accumulation period. Offering periods under the Stock Purchase Plan will begin on January 1 and July 1 of each calendar year while the Stock Purchase Plan is in effect, and each offering period is 24 months in length, unless the Compensation Committee determines otherwise. The first offering period, however, will begin on July 16, 2001 and will end on June 30, 2003, if the Stock Purchase Plan is approved by eMagin's stockholders. The purchase price per share of common stock will be the lesser of (a) 85% of the fair market value (i.e. the last transaction or closing price, as applicable) of a share of common stock on the last trading day of the accumulation period or (b) 85% of the fair market value of a share of common stock on the last trading day prior to the beginning of the Offering Period, or on July 13, 2001 in the case of the first offering period. A participant may elect to have payroll deductions made under the Stock Purchase Plan for the purchase of common stock in an amount not to exceed 15% of the participant's compensation. 28 Compensation for purposes of the Stock Purchase Plan generally means total cash compensation, inclusive of overtime, bonuses, or shift premiums or, plus the participants pre-tax contributions under any Internal Revenue Code Section 401(k) or 125 plan of the company or its subsidiaries. Contributions to the Stock Purchase Plan will be on an after-tax basis. A participant may terminate his or her payroll deductions at any time. A stock purchase bookkeeping account will be established for each participant in the Stock Purchase Plan. Amounts deducted from participants' paychecks will be credited to their bookkeeping accounts. No interest will accrue with respect to any amounts credited to the bookkeeping accounts. As of the last day of each Accumulation Period, the amount credited to a participant's stock purchase account will be used to purchase the largest number of whole shares of common stock possible at the price determined as described above. In general, however, a participant will not be permitted to purchase in any calendar year under the Stock Purchase Plan common stock with a fair market value in excess of $25,000, determined as of the beginning of the applicable offering period. Participants also will not be permitted to purchase more than 25,000 shares of common stock during any accumulation period. The common stock will be purchased directly from eMagin. No brokerage or other fees will be charged to participants. Any balance remaining in the participant's account will be returned to the participant; however, any excess balance attributable to the inability to purchase a fractional share will be retained in the participant's account for subsequent purchases under the Stock Purchase Plan or may be withdrawn by the participant. A participant may withdraw from participation in the Stock Purchase Plan at any time during an offering period by written notice to eMagin. Upon withdrawal, a participant's bookkeeping account balance will be distributed in cash as soon as practicable and no shares of common stock will be purchased during the accumulation period. If a participant terminates employment with eMagin, that participant will be considered withdrawn from the plan. Rights to purchase shares of common stock under the Stock Purchase Plan are exercisable only by the participant and are not transferable. In the event of certain changes in number of outstanding shares of the common stock, such as a stock dividend or other change in the number of shares effected without receipt or payment of consideration by eMagin, the aggregate number of shares of common stock offered under the Stock Purchase Plan, the 25,000 share limit on shares that can be purchased by a single participant during any accumulation period and the price of shares under any outstanding participant elections will be proportionately adjusted by the Compensation Committee. Immediately prior to a corporate reorganization, as defined in the Stock Purchase Plan, the offering period and accumulation period then in progress will terminate, and shares will be purchased using amounts then outstanding in the participants' bookkeeping accounts under the Stock Purchase Plan, unless the Stock Purchase Plan is assumed or continued by the surviving corporation or its parent corporation. The Board of Directors of eMagin may amend, suspend, or terminate the Stock Purchase Plan at any time, except that certain amendments may be made only with the approval of the stockholders of eMagin. Certain federal income tax consequences of the Stock Purchase Plan The following is a summary of certain of the federal income tax consequences to participants in the Stock Purchase Plan and to eMagin, based upon current provisions of the Code and the regulations and rulings thereunder. This summary is not intended to be exhaustive, and does not address the consequences under state or local or any other applicable tax laws. Participants in the Stock Purchase Plan will not recognize taxable income at the time a purchase right is granted to them at the beginning of an offering period or when they purchase common stock. 29 However, participants will be taxed on amounts withheld from their compensation under the Stock Purchase Plan as if actually received, and eMagin will generally be entitled to a corresponding income tax deduction. If a participant disposes of the common stock purchased pursuant to the Stock Purchase Plan after one year from the date of purchase and two years from the beginning of the applicable offering period, the participant must include in gross income as compensation (as ordinary income and not as capital gain) for the taxable year of disposition an amount equal to the lesser of (a) the excess of the fair market value of the common stock at the beginning of the applicable Offering Period over the purchase price computed on the first day of the Offering Period or (b) the excess of the fair market value of the common stock at the time of disposition over their purchase price. Thus, if the one and two year holding periods described above are met, a participant's ordinary income will be limited to the discount available to the participant on the first day of the applicable Offering Period. If the amount realized upon such a disposition by way of sale or exchange of the common stock exceeds the purchase price plus the amount, if any, included in income as ordinary income, such excess will be long-term capital gain. If the participant disposes of the common stock for less than the purchase price paid, he or she will recognize no ordinary income, and the participant will have a capital loss equal to the difference between the amount realized upon such disposition and the purchase price. If the one and two year holding periods described above are met, eMagin will not be entitled to any income tax deduction. If a participant disposes of common stock purchased pursuant to the Stock Purchase Plan within one year from the date of purchase or two years from the beginning of the Offering Period, the participant will recognize ordinary income at the time of disposition which will equal the excess, if any, of the fair market value of the common stock on the date the participant purchased the common stock over the purchase price paid for the common stock. The Company will generally be entitled to a corresponding income tax deduction. The excess, if any, of the amount recognized on a subsequent disposition of such common stock over their fair market value on the date of purchase will be short-term capital gain, unless the participant's holding period for the common stock (which will begin at the time of the participant's purchase of the common stock) is more than one year. If the participant disposes of the common stock for less than the fair market value of the common stock on the date of purchase, the difference will be a capital loss. New plan benefits Participation in the Stock Purchase Plan is voluntary. Accordingly, at this time eMagin cannot determine the amount of shares of common stock that will be acquired by participants or the dollar value of any such participation. As of June 1, 2001 there are approximately 85 employees (representing all of the employees of the Company and its subsidiaries) who would be eligible to participate in the Stock Purchase Plan if the plan had been in effect on that date. The Stock Purchase Plan requires the receipt of the affirmative vote of a majority of the shares of the common stock present in person or by proxy and voting at the Annual Meeting. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE STOCK PURCHASE PLAN. OTHER MATTERS The Board of Directors knows of no other business which will be presented at the Annual Meeting. If any other matters properly come before the meeting, the persons named in the enclosed proxy will vote the shares represented thereby in accordance with their judgment on such matters. 30 ADDITIONAL INFORMATION Annual Reports and Form 10-K. Additional copies of eMagin's Annual Report and Form 10-K for the fiscal year ended December 30, 2000 may be obtained without charge by writing to the Secretary, eMagin Corporation, 2070 Route 52, Hopewell Junction, NY 12533. eMagin's Annual Report and Form 10-K can also be found on eMagin's website: www.eMagin.com. Stockholders Proposals for the 2002 Annual Meeting. Whether or not the reincorporation of the Company in Delaware is approved, to be considered for inclusion in eMagin's Proxy Statement and Proxy card for the 2002 Annual Meeting under the Securities and Exchange Commission's Rule 14a-8, proposals of stockholders intended to be presented at the 2002 Annual Meeting must be received by the Secretary, at the Company's principal executive office at 2070 Route 52, Hopewell Junction, NY 12533, no later than Thursday March 7, 2002. Proxy Solicitation Costs. The proxies being solicited hereby are being solicited by the Company. The Company will bear the entire cost of solicitation of proxies, including preparation, assembly, printing and mailing of this Proxy Statement, the Proxy card and any additional information furnished to stockholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of common stock beneficially owned by others to forward to such beneficial owners. We have retained Morrow and Company, 445 Park Avenue, 5th Floor, New York, NY 10022, to aid in the solicitation. For these services, we will pay Morrow and Company a fee of $10,000 and reimburse it for certain out-of-pocket disbursements and expenses. Officers and regular employees of the Company may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, telex, facsimile or electronic means. We will, upon request, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material to the beneficial owners of stock. By Order of the Board of Directors, /s/ Gary W. Jones President and Chief Executive Officer 31 EX-99.1 2 b311989_ex99-1.txt AGREEMENT AND PLAN OF MERGER - -------------------------------------------------------------------------------- EXHIBIT A AGREEMENT AND PLAN OF MERGER by and between eMAGIN CORPORATION a Nevada corporation and eMAGIN CORPORATION a Delaware corporation Dated as of May [__], 2001 - -------------------------------------------------------------------------------- TABLE OF CONTENTS Page ARTICLE I MERGER .......................................................................3 Section 1.1. Merger.................................................3 Section 1.2. Filing and Effectiveness...............................3 Section 1.3. Effect of the Merger...................................3 ARTICLE II CHARTER DOCUMENTS, DIRECTORS AND OFFICERS.....................................4 Section 2.1. Certificate of Incorporation...........................4 Section 2.2. By-Laws................................................4 Section 2.3. Directors And Officers.................................4 ARTICLE III MANNER OF CONVERSION OF STOCK.................................................5 Section 3.1. Emagin-Nevada Common Stock.............................5 Section 3.2. Emagin-Delaware Common Stock...........................5 Section 3.3. Exchange Of Certificates...............................5 ARTICLE IV CONDITIONS....................................................................6 Section 4.1. Conditions to Obligations of eMagin-Delaware...........6 Section 4.2. Conditions To Obligations Of Emagin-Nevada.............6 ARTICLE V GENERAL.......................................................................7 Section 5.1. Further Assurances.....................................7 Section 5.2. Covenants of eMagin-Delaware...........................7 Section 5.3. Abandonment............................................7 Section 5.4. Amendment..............................................7 Section 5.5. Registered Office......................................7 Section 5.6. Agreement..............................................8 Section 5.7. Governing Law..........................................8 Section 5.8. Counterparts...........................................8 (i) Page AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER dated as of May ___, 2001 (the "Agreement") is entered into by and between eMagin Corporation, a Nevada corporation ("eMagin-Nevada ") with its principal address at 2070 Route 52, Hopewell Junction, New York 12533, and eMagin Corporation, a Delaware corporation ("eMagin-Delaware") with its principal address at 2070 Route 52, Hopewell Junction, New York 12533. eMagin-Delaware and eMagin-Nevada are sometimes referred to herein as the "Constituent Corporations." W I T N E S S E T H : - - - - - - - - - - WHEREAS, eMagin-Nevada is a corporation duly organized and existing under the laws of the State of Nevada and has an authorized capital of 76,350,000 shares of common stock, $0.001 par value. As of the date hereof, 25,069,143 shares of eMagin-Nevada common stock were issued and outstanding and no shares of preferred stock were issued and outstanding. WHEREAS, eMagin-Delaware is a corporation duly organized and existing under the laws of the State of Delaware and has an authorized capital of 110,000,000 shares, consisting of 100,000,000 shares of common stock, par value $.001 per share and 10,000,000 shares of series preferred stock, par value $.001 per share. As of the date hereof, 1000 shares of eMagin-Delaware common stock were issued and outstanding, all of which are held by eMagin-Nevada and no shares of series preferred stock were issued and outstanding. WHEREAS, the Boards of Directors of each of eMagin-Nevada and eMagin-Delaware have determined that it is advisable and in the best interests of each of eMagin-Nevada and eMagin-Delaware and their respective stockholders that eMagin-Nevada merge with and into eMagin-Delaware upon the terms and conditions herein provided for the purpose of effecting the reincorporation of eMagin-Nevada in the State of Delaware. WHEREAS, the Boards of Directors of eMagin-Nevada and eMagin-Delaware have, by appropriate resolutions, approved and adopted this Agreement and directed that it be submitted to the stockholders of eMagin-Nevada and eMagin-Delaware, respectively, for adoption, in each case with a recommendation that the stockholders vote in favor of the approval of this Agreement and the Merger. WHEREAS, the Board of Directors of eMagin-Nevada, acting on behalf of eMagin-Nevada in its capacity as sole stockholder of eMagin-Delaware, by appropriate resolutions duly authorized, has approved and adopted this Agreement. NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein, eMagin-Delaware and eMagin-Nevada hereby agree, subject to the terms and conditions hereinafter set forth, as follows: (ii) Page ARTICLE I MERGER Section 1.1. Merger. In accordance with the provisions of this Agreement, the Delaware General Corporation Law and the Nevada Revised Statutes, at the Effective Time (as defined below) eMagin-Nevada shall be merged with and into eMagin-Delaware (the "Merger"), the separate existence of eMagin-Nevada shall cease and eMagin-Delaware shall survive the Merger and shall continue to be governed by the laws of the State of Delaware, and eMagin-Delaware shall be, and is herein sometimes referred to as, the "Surviving Corporation," and the name of the Surviving Corporation shall be "eMagin Corporation". Section 1.2. Filing and Effectiveness. The Merger shall become effective at the later time (the "Effective Time") of (a) 11:59 p.m., July 16, 2001, and (y) such date and time as the following actions shall have been completed: (a) This Agreement and the Merger shall have been adopted and approved by the stockholders of eMagin-Nevada representing a majority of the shares of common stock outstanding and entitled to vote in accordance with the requirements of the Nevada Revised Statutes; (b) All of the conditions precedent to the consummation of the Merger specified in this Agreement shall have been satisfied or duly waived by the party entitled to satisfaction thereof; (c) An executed Certificate of Merger, in a form acceptable to the Secretary of State of the State of Delaware, shall have been filed with the State of Delaware; and (d) An executed Articles of Merger, in a form acceptable to the Secretary of State of the State of Nevada, shall have been filed with the State of Nevada. Section 1.3. Effect of the Merger. Upon the Effective Time of the Merger, the separate existence of eMagin-Nevada shall cease and eMagin-Delaware, as the Surviving Corporation, (i) shall continue to possess all of its assets, rights, powers and property as constituted immediately prior to the Effective Time of the Merger, (ii) shall be subject to all actions previously taken by its and eMagin-Nevada's Boards of Directors, (iii) shall succeed, without other transfer, to all of the assets, rights, powers and property of eMagin-Nevada in the manner as more fully set forth in Section 259 of the Delaware General Corporation Law, (iv) shall continue to be subject to all of its debts, liabilities and obligations as constituted immediately prior to the Effective Time of the Merger, and (v) shall succeed, without other transfer, to all of the debts, liabilities and obligations of eMagin-Nevada in the same manner as if eMagin-Delaware had itself incurred them, all as more fully provided under the applicable provisions of the Delaware General Corporation Law and the Nevada Revised Statutes. (iii) Page ARTICLE II CHARTER DOCUMENTS, DIRECTORS AND OFFICERS Section 2.1. Certificate of Incorporation. The Certificate of Incorporation of eMagin-Delaware as in effect immediately prior to the Effective Time of the Merger shall continue in full force and effect as the Certificate of Incorporation of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law. Section 2.2. By-Laws. The By-Laws of eMagin-Delaware as in effect immediately prior to the Effective Time of the Merger shall continue in full force and effect as the By-Laws of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law. Section 2.3. Directors And Officers. The directors and officers of eMagin-Nevada immediately prior to the Effective Time of the Merger shall be the directors and officers of the Surviving Corporation until their respective successors shall have been duly elected and qualified or until as otherwise provided by law, or the Certificate of Incorporation or By-Laws of the Surviving Corporation. The directors of eMagin-Nevada immediately prior to the Effective Time of the Merger shall be divided into three classes, with the number of directors compromising each such class being as nearly equal as possible, and with each class serving as directors of the Surviving Corporation for rotating terms commencing at the Effective Time. For greater certainty, if the current Board of Directors of eMagin-Nevada are re-elected by the eMagin-Nevada stockholders at the 2001 Annual Meeting, then such Directors shall be divided into three classes, with each class serving as directors of the Surviving Corporation for rotating terms commencing at the Effective Time with terms expiring in 2002, 2003, and 2004. ARTICLE III MANNER OF CONVERSION OF STOCK Section 3.1. Emagin-Nevada Common Stock. Upon the Effective Time of the Merger, each share of eMagin-Nevada common stock, $0.001 par value, issued and outstanding immediately prior thereto shall, by virtue of the Merger and without any action by the Constituent Corporations, the holder of such shares or any other person, be changed and converted into and exchanged for one fully paid and nonassessable share of common stock, $0.001 par value, of the Surviving Corporation. Section 3.2. Emagin-Delaware Common Stock. Upon the Effective Time of the Merger, each share of common stock, $0.001 par value, of eMagin-Delaware issued and outstanding immediately prior thereto shall, by virtue of the Merger and without any action by eMagin-Delaware, the holder of such shares or any other person, be canceled and returned to the status of authorized but unissued shares. (iv) Page Section 3.3. Exchange Of Certificates. (a) After the Effective Time of the Merger, each holder of an outstanding certificate representing shares of eMagin-Nevada common stock may be asked to surrender the same for cancellation to an exchange agent, whose name will be delivered to such holders prior to any requested exchange (the "Exchange Agent"), and each such holder shall be entitled to receive in exchange therefor a certificate or certificates representing the number of shares of the Surviving Corporation's common stock into which such holders' shares of eMagin-Nevada common stock were converted as herein provided. Unless and until so surrendered, each outstanding certificate theretofore representing shares of eMagin-Nevada common stock shall be deemed for all purposes to represent the number of whole shares of the Surviving Corporation's common stock into which such shares of eMagin-Nevada common stock were converted in the Merger. (b) The registered owner on the books and records of the Surviving Corporation or the Exchange Agent of any shares of stock represented by such outstanding certificate shall, until such certificate shall have been surrendered for transfer or conversion or otherwise accounted for to the Surviving Corporation or the Exchange Agent, have and be entitled to exercise any voting and other rights with respect to and to receive dividends and other distributions upon the shares of common stock of the Surviving Corporation represented by such outstanding certificate as provided in this Article III. (c) Each certificate representing common stock of the Surviving Corporation so issued in the Merger shall bear the same legends, if any, with respect to the restrictions on transferability as the certificates of eMagin-Nevada so converted and given in exchange therefor, unless otherwise determined by the Board of Directors of the Surviving Corporation in compliance with applicable laws. (d) If any certificate for shares of eMagin-Delaware common stock is to be issued in a name other than that in which the certificate surrendered in exchange therefor is registered, it shall be a condition of issuance thereof that the certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer, that such transfer otherwise be proper and that the person requesting such transfer pay to eMagin-Delaware or the Exchange Agent any transfer or other taxes payable by reason of the issuance of such new certificate in a name other than that of the registered holder of the certificate surrendered or establish to the satisfaction of eMagin-Delaware that such tax has been paid or is not payable. ARTICLE IV CONDITIONS Section 4.1. Conditions to Obligations of eMagin-Delaware. The obligation of eMagin-Delaware to consummate the Merger is subject to the fulfillment, prior to or at the Effective Time, subject to the provisions of Section 5.3, of each of the following conditions: (a) This Agreement shall have been approved by the duly adopted resolution of the Board of Directors of eMagin-Nevada, acting in its capacity as sole stockholder of eMagin-Delaware, or by the act of a duly authorized officer (v) Page of eMagin-Nevada otherwise authorized to vote the shares of stock of eMagin-Delaware owned by eMagin-Nevada. (b) All consents, authorizations, orders or approvals of any governmental commission, board, other regulatory body or any third party required in connection with the execution, delivery and performance of this Agreement shall have been obtained. (c) Any obligations of eMagin-Nevada to be performed pursuant to this Agreement prior to the Effective Time shall have been performed in all material respects. Section 4.2. Conditions To Obligations Of Emagin-Nevada. The obligation of eMagin-Nevada to consummate the Merger is subject to the fulfillment, prior to or at the Effective Time, subject to the provisions of Section 5.3, of each of the following conditions: (a) This Agreement and the Merger shall have been approved by the affirmative vote of the holders of at least a majority of the issued and outstanding shares of stock of eMagin-Nevada having power to vote. (b) All consents, authorizations, orders or approvals of any governmental commission, board, other regulatory body or any third party required in connection with the execution, delivery and performance of this Agreement shall have been obtained. (c) Any obligations of eMagin-Delaware to be performed pursuant to this Agreement prior to the Effective Time shall have been performed in all material respects. ARTICLE V GENERAL Section 5.1. Further Assurances. From time to time, as and when required by eMagin-Delaware or by its successors or assigns, there shall be executed and delivered on behalf of eMagin-Nevada such deeds and other instruments, and there shall be taken or caused to be taken by eMagin-Delaware and eMagin-Nevada such further and other actions, as shall be appropriate or necessary in order to vest or perfect in or conform of record or otherwise by eMagin Delaware the title to and possession of all the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of eMagin-Nevada and otherwise to carry out the purposes of this Agreement, and the officers and directors of eMagin-Delaware are fully authorized in the name and on behalf of eMagin-Nevada or otherwise to take any and all such action and to execute and deliver any and all such deeds and other instruments. Section 5.2. Covenants of eMagin-Delaware. eMagin-Delaware covenants and agrees that it will, on or before the Effective Time of the Merger take such other actions as may be required by Delaware law or Nevada law to accomplish the Merger, including appointing an agent for service of process in the State of Nevada if and to the extent required under provisions of Nevada law. (vi) Section 5.3. Abandonment. At any time before the filing of a Certificate of Merger with the Secretary of State of the State of Delaware and Articles of Merger with the Secretary of State of the State of Nevada, this Agreement may be terminated and the Merger may be abandoned for any reason whatsoever by the Board of Directors of either eMagin-Nevada or eMagin-Delaware, or both, notwithstanding the approval of this Agreement by the stockholders of eMagin-Nevada or by the sole stockholder of eMagin-Delaware, or by both. Section 5.4. Amendment. The Boards of Directors of the Constituent Corporations may amend this Agreement at any time prior to the filing of Articles of Merger and a Certificate of Merger with the Secretaries of State of the States of Nevada and Delaware, respectively, provided that an amendment made subsequent to the adoption and approval of this Agreement and the Merger by the stockholders of either Constituent Corporation shall not: (i) alter or change the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of all or any of the shares of any class or series thereof of such Constituent Corporation, (ii) alter or change any term of the Certificate of Incorporation of the Surviving Corporation to be effected by the Merger, or (iii) alter or change any of the terms and conditions of this Agreement, if in the case of clause (ii) or (iii) such alteration or change would adversely affect the holders of any class of shares or series thereof of such Constituent Corporation. Section 5.5. Registered Office. The registered office of the Surviving Corporation in the State of Delaware is located at the Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of Newcastle, and the Corporation Trust Company, Inc. is the registered agent of the Surviving Corporation at such address. Section 5.6. Agreement. Executed copies of this Agreement will be on file at the principal place of business of the Surviving Corporation at 2070 Route 52, Hopewell Junction, NY 12533, and copies thereof will be furnished to any stockholder and to any creditor of either Constituent Corporation, upon request and without cost. Section 5.7. Governing Law. This Agreement shall in all respects be construed, interpreted and enforced in accordance with and governed by the laws of the State of Delaware and, to the extent applicable, the merger provisions of the Nevada Revised Statutes. Section 5.8. Counterparts. In order to facilitate the filing and recording of this Agreement, the same may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. (vii) Page IN WITNESS WHEREOF, this Agreement is hereby executed on behalf of each of such two corporations and attested by their respective officers thereunto duly authorized. eMAGIN CORPORATION, a Delaware corporation By: -------------------------------------- Name: Title: eMAGIN CORPORATION, a Nevada corporation By: -------------------------------------- Name: Title: (viii) EX-99.2 3 b311989_ex99-2.txt AMENDED AND RESTATED CERTIFICATE OF INCORPORATION EXHIBIT B. AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF EMAGIN CORPORATION a Delaware Corporation (Incorporated under the name FED Corporation on November 30, 1993) EMAGIN CORPORATION, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "DGCL"), incorporated under the name "FED Corporation" on November 30, 1993, DOES HEREBY CERTIFY THAT: FIRST: The Board of Directors of the Corporation, by unanimous written consent pursuant to section 141(f) of the DGCL, duly adopted resolutions proposing and approving the Amended and Restated Certificate of Incorporation of the Corporation, declaring its advisability and directing that such Amended and Restated Certificate of Incorporation be submitted to the stockholders of the Corporation to consider and adopt the same. SECOND: Pursuant to Section 228 of the DGCL, the adoption of the Amended and Restated Certificate of Incorporation was consented to in writing by a majority of the holders of the voting power of all shares of capital stock of the Corporation entitled to vote thereon, and by a majority of the holders of each outstanding class of capital stock of the Corporation entitled to vote thereon. B-1 THIRD: The Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of the DGCL. FOURTH: Pursuant to Sections 245(b) and 242 of the DGCL, the Certificate of Incorporation, as amended, of eMagin Corporation, a Delaware corporation (the "Corporation"), is hereby restated and amended to read in its entirety as follows: AMENDED AND RESTATED CERTIFICATE OF INCORPORATION ONE: Name. The name of the Corporation is "eMagin Corporation". TWO: Registered Agent. The registered office of the Corporation in the State of Delaware is located at 1209 Orange Street in the City of Wilmington and the County of Newcastle. The name of the registered agent of the Corporation in the State of Delaware at such address is the Corporation Trust Company. THREE: Purpose. The purpose of the Corporation is to engage, directly or indirectly, in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as from time to time in effect. FOUR: Capital Stock. The total authorized capital stock of the Corporation shall be 110,000,000 shares consisting of 100,000,000 shares of Common Stock, par value $0.001 per share and 10,000,000 shares of Series Preferred Stock, par value $0.001 per share. The preferences, relative, participating, optional or other special rights, qualifications, limitations, restrictions, voting powers and privileges of each class of the Corporation's capital stock shall be as follows: A. Series Preferred Stock. The Series Preferred Stock may be issued in one or more series as shall from time to time be created and authorized to be issued by the Board of Directors as hereinafter provided. (a) The Board of Directors is hereby expressly authorized, by resolution or resolutions from time to time adopted providing for the issuance of any series of the Series Preferred Stock, to the extent not fixed by the provisions hereinafter set forth or otherwise provided by law, to determine that any series of the Series Preferred Stock shall be without voting powers and to fix and state the voting powers, full or limited, if any, the designations, powers, preferences and relative, participating, optional and other special rights, if any, of the shares of each series of the Series Preferred Stock, and B-2 the qualifications, limitations and restrictions thereof, including (but without limiting the generality of the foregoing) any of the following: (1) the number of shares to constitute such series and the distinctive name and serial designation thereof; (2) the annual dividend rate or rates and the date on which the first dividend on shares of such series shall be payable and all subsequent dividend payment dates; (3) whether dividends are to be cumulative or non-cumulative, the participating or other special rights, if any, with respect to the payment of dividends and the date from which dividends on all shares of such series issued prior to the record date for the first dividend shall be cumulative; provided that, such dividends shall be cumulative only if and to the extent set forth in a certificate filed pursuant to law; (4) whether any series shall be subject to redemption and, if so, the manner of redemption and the redemption price or prices for such series, which may consist of a redemption price or scale of redemption prices applicable only to redemption for a sinking fund (which terms as used in this clause shall include any fund or provisions for the periodic purchase or retirement of shares), and a different redemption price or scale of redemption prices applicable to any other redemption; (5) whether or not the shares of such series shall be subject to the operation of a purchase, retirement or sinking fund, and, if so, whether such purchase, retirement or sinking fund shall be cumulative or non-cumulative, the extent to and the manner in which such fund shall be applied to the purchase or redemption of the shares of such series for retirement or for other corporate purposes and the terms and provisions relative to the operation thereof; (6) the terms, if any, upon which shares of such series shall be convertible into, or exchangeable for, or shall have rights to purchase or other privileges to acquire shares of stock of any other class or of any other series of the same or any other class, including the price or prices or the rate or rates of conversion, exchange, purchase or acquisition and the terms of adjustment, if any; (7) the limitations and restrictions, if any, to be effective while any shares of such series are outstanding upon the payment of dividends or making of other distributions on, and upon the purchase, redemption, or other acquisition of, the Common Stock or any other series or class of stock of the Corporation ranking junior to the shares of such series, either as to dividends or upon liquidation; and (8) the conditions or restrictions, if any, upon the creation of indebtedness of the Corporation or upon the issue of any additional stock of any class (including additional shares of such series or of any other series of the Series Preferred Stock) ranking on a parity with or prior to the shares of such series either as to dividends or upon liquidation. (b) Each share of each series of the Series Preferred Stock shall have the same relative rights and be identical in all respects with all the other shares of the same series, except that shares of any one series issued at B-3 different times may differ as to the dates, if any, from which dividends thereon shall be cumulative. Except as otherwise provided by law or specified in this Article FOUR any series of the Series Preferred Stock may differ from any other series with respect to any one or more of the voting powers, designations, powers, preferences and relative, participating, optional and other special rights, if any, and the qualifications, limitations and restrictions thereof. (c) Before any dividends on any class of stock of the Corporation ranking junior to the Series Preferred Stock (other than dividends payable in shares of any class of stock of the Corporation ranking junior to the Series Preferred Stock) shall be declared or paid or set apart for payment, the holders of shares of each series of the Series Preferred Stock shall be entitled to such cash dividends, but only when and as declared by the Board of Directors out of funds legally available therefor, as they may be entitled to in accordance with the resolution or resolutions adopted by the Board of Directors providing for the issuance of such series, payable on such dates as may be fixed in such resolution or resolutions. (d) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation shall be made to or set apart for the holders of shares of any class of stock of the Corporation ranking junior to the Series Preferred Stock, the holders of the shares of each series of the Series Preferred Stock shall be entitled to receive payment of the amount per share fixed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of the shares of such series, plus an amount equal to all dividends accrued thereon to the date of final distribution to such holders. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of the Series Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid, then such assets, or the proceeds thereof, shall be distributed among such holders ratably in accordance with the respective amounts which would be payable on such shares if all amounts payable thereon were paid in full. For the purposes of this paragraph (d), the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property or assets of the Corporation or a consolidation or merger of the Corporation with one or more corporations shall not be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary. (e) The term "junior stock", as used in relation to the Series Preferred Stock, shall mean the Common Stock and any other class of stock of the Corporation hereafter authorized which by its terms shall rank junior to the Series Preferred Stock as to dividends and as to the distribution of assets on liquidation. (f) Before the Corporation shall issue any shares of the Series Preferred Stock of any series authorized as hereinbefore provided, a certificate setting forth a copy of the resolution or resolutions with respect to such series adopted by the Board of Directors of the Corporation pursuant to the foregoing authority vested in said Board of Directors shall be made, filed and recorded in accordance with the then applicable requirements, if any, of the laws of the State of Delaware, or, if no certificate is then so required, such certificate shall be signed and acknowledged on behalf of the Corporation by its President or a Vice-President and attested by its Secretary or an Assistant B-4 Secretary and such certificate shall be filed and kept on file at the registered office of the Corporation in the State of Delaware and in such other place or places as the Board of Directors shall designate. (g) Shares of any series of the Series Preferred Stock which shall be issued and thereafter acquired by the Corporation through purchase, redemption, conversion or otherwise, shall return to the status of authorized but unissued shares of the Series Preferred Stock of the same series unless otherwise provided in the resolution or resolutions of the Board of Directors. Unless otherwise provided in the resolution or resolutions of the Board of Directors providing for the issuance thereof, the number of authorized shares of stock of any such series may be increased or decreased (but not below the number of shares thereof then outstanding nor in such manner as to exceed the number of shares authorized in Section Four) by resolution or resolutions of the Board of Directors and the filing of a certificate complying with the requirements referred to in subparagraph (f) above. In case the number of shares of any such series of the Series Preferred Stock shall be decreased, the shares representing such decrease shall, unless otherwise provided in the resolution or resolutions of the Board of Directors providing for the issuance thereof, resume the status of authorized but unissued shares of the Series Preferred Stock, undesignated as to series. B. Common Stock. Subject to the requirements of law, this Amended and Restated Certificate of Incorporation, as amended from time to time, and the resolution or resolutions of the Board of Directors creating or modifying any series of the Series Preferred Stock, the holders of Common Stock shall (i) in the event of any liquidation, dissolution or other winding up of the Corporation, whether voluntary or involuntary, and after all holders of the Series Preferred Stock shall have been paid in full the amounts to which they respectively shall be entitled, be entitled to receive all the remaining assets of the Corporation of whatever kind, such assets to be distributed pro rata to the holders of the Common Stock; and (ii) after payment in full of all dividends to which holders of the Series Preferred Stock shall be entitled, be entitled to receive such dividends as and when the same may be declared from time to time by the Board of Directors of the Corporation out of funds legally available therefor. Except as otherwise required by law and the provisions of this Amended and Restated Certificate of Incorporation and except as provided by the resolution or resolutions of the Board of Directors creating or amending any series of the Series Preferred Stock, the holders of the Common Stock of the Corporation possess full voting power for the election of Directors and for all other purposes, and each holder thereof shall be entitled to one vote for each share held by such holder. FIVE: Term. The Corporation is to have perpetual existence. SIX: Board of Directors. B-5 (a) All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of, a Board of Directors consisting of not less than three (3) nor more than nine (9) persons. The exact number of Directors within the minimum and maximum limitations specified in the preceding sentence shall be fixed from time to time by the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors. (b) Classified Board. The Board of Directors shall be divided into three classes, each such class as nearly equal in number as the then-authorized number of Directors constituting the Board of Directors permits, with the term of office of one class expiring each year. Following approval of this Amended and Restated Certificate of Incorporation, the stockholders shall elect the one class of Directors for a term expiring at the annual meeting of stockholders to be held in 2002, another class of Directors for a term expiring at the annual meeting of stockholders to be held in 2003, and another class of Directors for a term expiring at the annual meeting of stockholders to be held in 2004. Thereafter, each Director shall serve for a term ending at the third annual meeting of stockholders of the Corporation following the annual meeting at which such Director was elected. Members of each class shall hold office until their successors are elected and qualified. At each succeeding annual meeting of the stockholders of the Corporation, the successors of the class of Directors whose term expires at that meeting shall be elected by a plurality vote of all votes cast at such meeting to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. (c) Vacancies. Subject to the rights of the holders of any Series Preferred Stock then outstanding, newly created directorships resulting from any increase in the authorized number of Directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the Directors then in office, and Directors so chosen shall hold office for a term expiring at the annual meeting of stockholders at which the term of the class to which they have been elected expires. No decrease in the number of Directors constituting the Board of Directors or amendment to this Certificate of Incorporation shall shorten the term of any incumbent Director. (d) Removal. Subject to the rights of the holders of any Series Preferred Stock then outstanding, any Director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 662/3% of the voting power of all of the shares of the Corporation entitled to vote for the election of Directors. SEVEN: Director Nomination Procedure; Annual Meeting Business. (a) Director Nomination Procedure. Nominations for the election of Directors may be made by the affirmative vote of a majority of the Board of Directors or a duly authorized committee thereof or by any holder of record of shares of capital stock of the Corporation entitled to vote generally for the election of Directors; provided that any stockholder may nominate one or more persons for election as Directors at a meeting only if written notice of such stockholder's intention to make such nomination or nominations has been B-6 given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (i) with respect to an election to be held at an annual meeting of stockholders, not less than ninety (90) days in advance of such annual meeting if such annual meeting is to be held on or after the one-year anniversary of the previous year's annual meeting, or for any other annual meeting, on or before the later of (x) the close of business on the fifteenth day following the date on which notice of the meeting is first given to stockholders and (y) the date which is ninety (90) days before the date of such annual meeting, and (ii) with respect to an election to be held at a special meeting of stockholders for the election of Directors, the close of business on the seventh day following the date on which notice of the meeting is first given to stockholders. For the purposes of this paragraph (a) of this Article SIX, the date notice of a meeting is deemed to have been first given shall include, but not be limited to, the date on which disclosure of the date of the meeting is first made in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) (or the rules and regulations thereunder) of the Securities Exchange Act of 1934, as amended. Each such notice to the Secretary shall set forth the following information: (i) the name and address of record of the stockholder who intends to make the nomination, (ii) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote generally for the election of Directors at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice, (iii) the name, age, business and residential addresses and principal occupation or employment of each nominee, (iv) a description of all arrangements or understandings between the stockholder and each proposed nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder, (v) such other information regarding each proposed nominee as would be required to be included in a proxy statement filed pursuant to the rules and regulations of the Securities and Exchange Commission and (vi) the written consent of each proposed nominee to serve as a Director of the Corporation if so elected. The Corporation may require the proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a Director of the Corporation. The presiding officer of the meeting may, if the facts warrant, determine that a nomination was not made in accordance with the foregoing procedure, and if such officer should so determine, such officer shall so declare to the meeting and the defective nomination shall be disregarded. (b) Annual Meeting Business. At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the meeting by a stockholder. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be received at the principal executive offices of the Corporation (i) not less than ninety (90) days in advance of a meeting if such meeting is to be held on or after the one-year anniversary of the previous year's annual meeting, and (ii) with respect to any other annual B-7 meeting of stockholders, the later of (x) the close of business on the fifteenth day following the date on which notice of the meeting is first given to stockholders and (y) the date which is ninety (90) days before the date of such annual meeting. For the purposes of this paragraph (b) of this Article SEVEN, the date of public disclosure of a meeting shall include, but not be limited to, the date on which disclosure of the date of the meeting is first made in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) (or the rules and regulations thereunder) of the Securities Exchange Act of 1934, as amended. A stockholder's notice to the Secretary of the Corporation shall set forth as to each matter the stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name, age and business and residential addresses, as they appear on the Corporation's records, of the stockholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. Notwithstanding anything in the Bylaws of the Corporation to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth herein. The Chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions hereof, and if the Chairman should so determine, the Chairman shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. EIGHT: By-laws. In furtherance and not in limitation of the powers conferred by statute, and except as otherwise provided herein or in the By-laws of the Corporation, the Board of Directors is expressly authorized to make, alter or repeal the By-laws of the Corporation. NINE: Meetings. Special meetings of stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or by the Board of Directors pursuant to a resolution adopted by a majority of the total number of Directors which the Corporation would have if there were no vacancies, and such special meeting may not be called by any other person or persons. TEN: Limitation on Actions by Consent. No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken by written consent without a meeting, except that any such action may be taken without prior notice and without a vote, if a consent in writing, setting forth that action so taken shall be signed by all the stockholders of the Corporation entitled to vote thereon. B-8 ELEVEN: Indemnification. The Directors of the Corporation shall be protected from personal liability, through indemnification or otherwise, to the fullest extent permitted under the General Corporation Law of the State of Delaware as from time to time in effect. (a) A Director of the Corporation shall under no circumstances have any personal liability to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director except for those breaches and acts or omissions with respect to which the General Corporation Law of the State of Delaware, as from time to time amended, expressly provides that this provision shall not eliminate or limit such personal liability of Directors. Neither the modification or repeal of this paragraph (a) of Article ELEVEN nor any amendment to said General Corporation Law that does not have retroactive application shall limit the right of Directors hereunder to exculpation from personal liability for any act or omission occurring prior to such amendment, modification or repeal. (b) The Corporation shall indemnify each Director and Officer of the Corporation to the fullest extent permitted by applicable law, except as may be otherwise provided in the Corporation's By-laws, and in furtherance hereof the Board of Directors is expressly authorized to amend the Corporation's By-laws from time to time to give full effect hereto, notwithstanding possible self interest of the Directors in the action being taken. Neither the modification or repeal of this paragraph (b) of Article ELEVEN nor any amendment to the General Corporation Law of the State of Delaware that does not have retroactive application shall limit the right of Directors and Officers to indemnification hereunder with respect to any act or omission occurring prior to such modification, amendment or repeal. TWELVE: Amendments. The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. Notwithstanding anything to the contrary set forth herein, Articles SIX, SEVEN, EIGHT, NINE, TEN and this Article TWELVE may not be amended without the affirmative vote of shareholders holdings shares representing 66 2/3 % of the votes entitled to be cast in respect thereof. B-9 IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate to be duly executed this [__] day of [_______], 2001. _____________________________ By: Title: B-10 EX-99.3 4 b311989_ex99-3.txt AMENDED AND RESTATED BY-LAWS OF EMAGIN CORPORATION EXHIBIT C AMENDED AND RESTATED BY-LAWS OF EMAGIN CORPORATION a Delaware corporation (the "Corporation") ARTICLE I OFFICES Section 1.1. Registered Office. The registered office of the Corporation in the State of Delaware is located at the Corporation Trust Company, 1209 Orange Street, City of Wilmington, County of Newcastle. Section 1.2. Principal Office. The principal office of the Corporation will be: eMagin Corporation, 2070 Route 52, Hopewell Junction, NY 12533 or at such other place as the Board of Directors may from time to time determine. Section 1.3. Other Offices. The Company may also have offices at such other places as the Board of Directors may from time to time determine or the business of the Company may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 2.1. Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held within or without the State of Delaware or by means of remote communication within or without the State of Delaware, at such place and time as the Board of Directors may designate in the call or in a waiver of notice thereof for the purpose of electing Directors and for the transaction of such other business as may properly be brought before the meeting in accordance with applicable law and the Amended and Restated Certificate of Incorporation. Section 2.2. Special Meetings. Special Meetings of the stockholders may be called as set out in Article NINE of the Amended and Restated Certificate of Incorporation and at such times and at such place either within or without the State of Delaware as may be stated in the call or in a waiver of notice thereof. C-1 Section 2.3. Notice of Meetings. Notice of the time, place and purpose of every meeting of stockholders shall be delivered personally or mailed not less than ten (10) days nor more than sixty (60) days previous thereto to each stockholder of record entitled to vote, at such stockholder's post office address appearing upon the records of the Corporation or at such other address as shall be furnished in writing by him or her to the Corporation for such purpose. If a stockholder has provided his or her electronic address to the Corporation, notice may be given in accordance with Section 232 of the Delaware General Corporation Law. Such further notice shall be given as may be required by law or by these By-Laws or by the Amended and Restated Certificate of Incorporation. Business transacted at any Special Meeting shall be expressly limited to the purposes stated in the notice calling such meeting. If a meeting of stockholders is adjourned for more than 120 days after the date fixed for the original meeting, or if a new record date is fixed for the adjourned meeting, or if the date, time and place for the adjourned meeting is not announced prior to adjournment, then notice of the adjourned meeting of stockholders shall be given as in the case of any original meeting; otherwise, it is not necessary to give any notice of the adjourned meeting of stockholders other than by announcement at the meeting at which the adjournment is taken. A stockholder's attendance at a meeting constitutes a waiver by such stockholder of (a) objection to lack of notice or defective notice of the meeting, unless the stockholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (b) objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the notice of the meeting, unless the stockholder objects to considering the matter before it is voted upon. Section 2.4. Quorum. The holders of record of at least a majority of the shares of the stock of the Corporation, issued and outstanding and entitled to vote, present in person or by proxy, shall, except as otherwise provided by law or by these By-Laws, constitute a quorum at all meetings of the stockholders; if there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time until a quorum shall have been obtained. Section 2.5. Organization of Meetings. Meetings of the stockholders shall be presided over by the Chairman of the Board, if there be one, or if the Chairman of the Board is not present by such Officer or Director of the Corporation as may be designated in writing or by electronic means by the Chairman of the Board, or the Chief Executive Officer, or if the Chief Executive Officer is not present, by a chairman to be chosen at the meeting. The Secretary of the Corporation, or in the Secretary of the Corporation's absence, an Assistant Secretary, shall act as Secretary of the meeting, if present. Section 2.6. Conduct of Meetings. The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting pursuant to Section 2.5 of this Article II (the "Presiding Person"). The Board of Directors may, to the extent not prohibited by law, adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the Presiding Person over any C-2 meeting of stockholders shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the Presiding Person, may to the extent not prohibited by law include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the Presiding Person shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. Section 2.7. Voting. At each meeting of stockholders, except as otherwise provided by statute or the Amended and Restated Certificate of Incorporation, every holder of record of stock entitled to vote shall be entitled to one vote in person or by proxy for each share of such stock standing in his or her name on the records of the Corporation. Elections of Directors shall be determined by a plurality of the votes cast and, except as otherwise provided by statute, the Certificate of Incorporation, or these By-Laws, all other action shall be determined by a majority of the votes cast at such meeting. Each proxy to vote shall be in writing and signed by the stockholder or by such stockholder's duly authorized attorney. The Corporation shall have the right, but not the obligation, to request evidence of the authority of any person purporting to execute any proxy on behalf of any stockholder, such evidence to be reasonably satisfactory to the Corporation or the Inspectors of Election, if any are appointed pursuant to this Article. At all elections of Directors, the voting shall be by ballot or in such other manner as may be determined by the stockholders present in person or by proxy entitled to vote at such election. With respect to any other matter presented to the stockholders for their consideration at a meeting, stockholders entitled to vote and representing twenty-five percent (25%) or more of the votes entitled to be cast at such meeting may, on any question, demand a vote by ballot. Section 2.8. Stockholder's List. A complete list of the stockholders entitled to vote at each such meeting, arranged in alphabetical order, with the postal address of each, and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary and shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, at the principal office of the Corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 2.9. Inspectors of Election. The Board of Directors in advance of any meeting of stockholders may appoint one or more Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the Presiding Person may, and on the request of any stockholder entitled to vote shall, appoint one or more Inspectors of Election. Each Inspector of Election, before entering upon the discharge of his or her duties, shall take and sign an oath or affirmation faithfully to execute the duties of Inspector of Election at such meeting with strict impartiality and according to C-3 the best of his or her ability. If appointed, Inspectors of Election shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. ARTICLE III DIRECTORS Section 3.1. General Powers. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be managed under the direction of the Board of Directors. The Board of Directors shall be constituted as set out in the Amended and Restated Certificate of Incorporation. Section 3.2. Time and Place of Meetings; Notice. Meetings of the Board of Directors shall be held at such place either within or without the State of Delaware, as may from time to time be fixed by resolution of the Board, or as may be specified in the call or in a waiver of notice thereof. Meetings of the Board of Directors may also be effectuated by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other during the meeting. Participation by such means shall constitute presence in person at such meeting. Special meetings may be held at any time upon the call of the Chairman of the Board, if one be elected, or the Chief Executive Officer. Written notice may be by mail (in which case it shall be deemed received within five days after its deposit in the U.S. mail if mailed with first class postage), private carrier, personal delivery, telegraph, facsimile, or electronic mail or other electronic means and shall be effective when served not less than two business days before such meeting. A meeting of the Board may be held without notice immediately after the annual meeting of stockholders at the same place at which such meeting was held. Any meeting may be held without notice, if all Directors are present, or if notice is waived in writing, either before or after the meeting, by those not present. For all purposes of these By-Laws a business day shall be any day other than a Saturday, Sunday or any day when banks in the States of New York are permitted or required to be closed. Section 3.3. Quorum; Majority Vote. Not less than majority of the members of the Board of Directors then holding office shall constitute a quorum for the transaction of business, but if at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum shall have been obtained. A majority of the Directors present, even if less than a quorum, may adjourn a meeting and continue it at a later time. Notice of the adjourned meeting or the business to be transacted shall not be necessary. At any adjourned meeting at which a quorum is present, any business may be transacted which could have been transacted at the meeting as originally called. Section 3.4. Committees. The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an Executive Committee, an Audit Committee, a Compensation Committee and one or more other committees, each of which must have two (2) or more members and must be governed by the same rules regarding meetings, action without meetings, notice, waiver of notice, quorum and voting requirements as applied to the Board of Directors; provided, that to the extent that the Board of Directors is appointing a special committee to consider an extraordinary transaction, such C-4 committee may be comprised of less than two (2) members if fewer than two (2) members are available or willing to serve on such committee. Each such Committee, to the extent provided in such resolution, shall have and may exercise all the authority of the Board of Directors in the management of the Corporation, except no such committee shall have the authority to: (a) authorize or approve a distribution except according to a general formula or method prescribed by the Board of Directors; (b) approve or propose to stockholders action which the Delaware General Corporation Law requires to be approved by stockholders; (c) fill vacancies on the Board of Directors or any of its committees; (d) amend the Amended and Restated Certificate of Incorporation; (e) adopt, amend or repeal the By-Laws; (f) approve a plan of merger not requiring stockholder approval; or (g) authorize or approve the issuance or sale or contract for the sale of shares of the Corporation, or determine the designation and relative rights, preferences and limitation on a class or series of shares, except that the Board of Directors may authorize a committee, or a senior executive officer of the Corporation to do so within limits specifically prescribed by the Board of Directors. A majority of the full Board shall have power at any time to change the membership of any such committee, to fill vacancies in it, or to dissolve it. Section 3.5. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent or consents thereto is signed by all members of the Board, or of such committee as the case may be, and such written consent or consents is filed with the minutes of proceedings of the Board or committee. Signed consent by facsimile shall constitute prima facie evidence of written consent. Section 3.6. Compensation. The Board of Directors may determine, from time to time, the amount of compensation which shall be paid to its members. The Board of Directors shall also have power, in its discretion, to allow a fixed sum and to pay expenses, if any, for attendance at each regular or special meeting of the Board, or of any committee of the Board. In addition, the Board of Directors shall also have power, in its discretion, to provide for and pay to Directors rendering services to the Corporation not ordinarily rendered by Directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time. Section 3.7. Resignation. Any director of the Corporation may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board or the Secretary. ARTICLE IV OFFICERS Section 4.1. Titles and Election. The officers of the Corporation chosen by the Board shall be a Chief Executive Officer (who shall either be the Chairman of the Board or the President), a Treasurer and a Secretary. The Board of Directors may elect a Chairman of the Board from among its members who, when present, shall preside at all meetings of the Board of Directors and who shall have such other powers as the Board may determine. Officers may also include a C-5 President, one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers and agents as the Board of Directors shall deem necessary, and may define their powers and duties. Any number of offices may be held by the same person. Section 4.2. Terms of Office. Officers shall hold office until their successors are chosen and qualify or until such officer's earlier death, incapacity, resignation or removal. Officers of the Corporation shall be appointed by the Board of Directors provided that the Board of Directors may authorize a duly appointed officer to appoint one or more other officers and assistant officers, other than appointment of the Chief Executive Officer, the Chairman of the Board or the President. Section 4.3. Removal. Any officer may be removed, either with or without cause, at any time, by a written resolution adopted by a two-thirds majority of the full Board of Directors. Such removal shall be without prejudice to the contract rights, if any, of the person so removed. Section 4.4. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors, the Chairman of the Board, the Chief Executive Officer or to the Secretary. Such resignation shall be without prejudice to the contract rights, if any of the person resigning, shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4.5. Vacancies. If the office of any officer or agent becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the Directors may choose a successor, who shall hold office for the unexpired term in respect of which such vacancy occurred. Section 4.6. Chairman of the Board. The Chairman of the Board of Directors, if one be elected, shall preside at all meetings of the Board of Directors and of the stockholders, and the Chairman shall have and perform such other duties as from time to time may be assigned to the Chairman by the Board of Directors. Section 4.7. Chief Executive Officer. If there is a Chairman of the Board and the Board of Directors designates the Chairman of the Board as the Chief Executive Officer, then the Chairman of the Board shall be the Chief Executive Officer of the Corporation. Otherwise, the President shall be the Chief Executive Officer of the Corporation. Subject to the direction and control of the Board of Directors the Chief Executive Officer shall supervise and control the management of the Corporation, shall appoint and discharge employees and agents of the Corporation, fix their compensation and shall have the duties and authority normally incident to the position of chief executive officer of a corporation and such other duties and authority as may be prescribed by the Board of Directors or as provided for elsewhere in the By-Laws. Section 4.8. President. Unless there is appointed a Chairman of the Board who is also designated the Chief Executive Officer, the President shall be the Chief Executive Officer of the Corporation and shall have all of the duties and authority of that office. If the President is not the Chief Executive C-6 Officer, then the President shall have the duties and authority as authorized by the Board of Directors. Section 4.9. Vice Presidents. The Vice President, and if there be more than one, the Executive Vice President or other Vice President designated by the Board of Directors shall, in the absence or disability of the President, have the authority and perform the duties of said office. In addition, each Vice President shall perform such other duties and have such other powers as are normally incident to the office of Vice President or shall be prescribed by the Chief Executive Officer or the Board of Directors. Section 4.10. Secretary. The Secretary shall have the responsibility and authority to maintain and authenticate the records of the Corporation and shall keep, or cause to be kept, accurate records of the acts and proceedings of all meeting of stockholders, directors and Committees. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors and Committees thereof.. The Secretary shall affix the corporate seal to any instrument requiring it, and when so affixed, it shall be attested by the signature of the Secretary, or an Assistant Secretary who may affix the seal to any such instrument in the event of the absence or disability of the Secretary. The Secretary shall have and be the custodian of the stock records and all other books, records and papers of the Corporation (other than financial), shall see that all books, reports, statements, certificates and other documents and records required by law are properly kept and filed and shall perform such other duties as may be prescribed by the Board of Directors. Section 4.11. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the Directors whenever they may require it, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. Section 4.12. Assistant Secretaries and Assistant Treasurers. The Assistant Secretaries and Assistant Treasurers, if any, shall, in the absence or disability of the Secretary or Treasurer, respectively, have all the powers and perform all of the duties of those offices, and they shall in general perform such other duties as shall be assigned to them by the Secretary or the Treasurer, respectively, or by the Chief Executive Officer, the Chief Financial Officer, the Treasurer or the Board of Directors. Section 4.13. Delegation of Duties. In case of the absence or disability of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any Director. C-7 ARTICLE V INDEMNIFICATION Section 5.1. Actions by Others. The Corporation (1) shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was a Director or an officer of the Corporation and (2) except as otherwise required by Section 5.3 of this Article, may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee, agent of or participant in another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts actually and reasonably incurred by such person in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which such person reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful. Section 5.2. Actions by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee, agent of or participant in another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for gross negligence or misconduct in the performance of his or her duty to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Section 5.3. Successful Defense. To the extent that it is determined by a final judicial determination that a person who is or was a Director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section C-8 5.1 or Section 5.2 of this Article, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith. Section 5.4. Specific Authorization. Any indemnification under Section 5.1 or Section 5.2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Director, officer, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in said Sections 5.1 and 5.2. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. Section 5.5. Advance of Expenses. Expenses incurred by any person who may have a right of indemnification under this Article in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the Director, officer, employee or agent to repay such amount if it shall ultimately be finally judicially determined that he or she is not entitled to be indemnified by the Corporation pursuant to this Article. Section 5.6. Right of Indemnity Not Exclusive. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 5.7. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a Director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a Director, officer, employee or agent of or participant in another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of such person's status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article, Section 145 of the General Corporation Law of the State of Delaware or otherwise. Section 5.8. Invalidity of Any Provisions of This Article. The invalidity or unenforceability of any provision of this Article shall not affect the validity or enforceability of the remaining provisions of this Article. C-9 ARTICLE VI SHARE CERTIFICATES; RECORD DATE Section 6.1. Certificates for Shares. Certificates representing shares of the Corporation shall be issued and evidenced by certificates for shares of stock in such form as the Board of Directors shall determine to every stockholder for the fully paid shares owned by him or her. The certificates shall be signed by the Chief Executive Officer, President or a Vice President and by the Secretary, or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, sealed with the seal of the Corporation or a facsimile thereof, and countersigned and registered in such manner, if any, as the Board of Directors may by resolution prescribe. Where any such certificate is countersigned by a transfer agent other than the Corporation or its employee, or registered by a registrar other than the Corporation or its employee, the signature of any such officer may be a facsimile signature. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Corporation. Section 6.2. Transfer of Shares. The shares of stock of the Corporation shall be transferred only upon the books of the Corporation by the holder thereof in person or by his or her attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. Section 6.3. Record Dates. The Board of Directors may fix in advance a date, not less than ten nor more than sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the distribution or allotment of any rights, or the date when any change, conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend, or to receive any distribution or allotment of such rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such distribution or allotment or rights or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. A determination of stockholders entitled to notice of or to vote at a stockholders' meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date for the adjourned meeting, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. C-10 Section 6.4. Lost Certificates. In the event that any certificate of stock is lost, stolen, destroyed or mutilated, the Board of Directors may authorize the issuance of a new certificate of the same tenor and for the same number of shares in lieu thereof. The Board may in its discretion, before the issuance of such new certificate, require the owner of the lost, stolen, destroyed or mutilated certificate, or the legal representative of the owner to make an affidavit or affirmation setting forth such facts as to the loss, destruction or mutilation as it deems necessary, and at its discretion may require said owner to give the Corporation a bond in such reasonable sum as it directs to indemnify the Corporation. ARTICLE VII CHECKS AND DEPOSITS Section 7.1. Checks, Notes, Other Financial Instruments. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, may be signed by the Chief Executive Officer, Chief Financial Officer or Treasurer and may also be signed by such other officer or officers, agent or agents, as shall be authorized from time to time by the Chief Executive Officer or the Board of Directors. Section 7.2. Deposits. All funds of the Corporation not otherwise employed or invested shall be deposited to the credit of the Corporation in such depositories as the Board of Directors may direct. ARTICLE VIII RECORDS AND REPORTS Section 8.1. General. The Corporation shall keep all records and submit and file all reports and filings as are required by applicable law. Unless the Board of Directors or the Chief Executive Officer otherwise directs, the Treasurer or, if named, the Chief Financial Officer shall be responsible for keeping, or causing to be kept, all financial and accounting records of the Corporation and for submitting or filing, or causing to be submitted or filed, all reports and filings of a financial or accounting nature, and the Secretary shall be responsible for keeping, or causing to be kept all other records and for submitting or filing, or causing to be submitted or filed, all other reports or filings. Section 8.2. Financial Statements. There shall be kept at such place of office of the Corporation as the Board of Directors shall determine, within or without the State of Delaware, in electronic or written form, correct books and records of account of all its business and transactions, minutes of the proceedings of its stockholders, Board of Directors and committees. There shall also be kept the stock book, containing the names and addresses of the stockholders, the number of shares held by them, respectively, and the dates when they respectively became the owners of record thereof, and in which the transfer of stock shall be registered, and such other books and records as the Board of Directors may from time to time determine. C-11 ARTICLE IX MISCELLANEOUS PROVISIONS Section 9.1 Fiscal Year. The fiscal year of the Corporation shall be the calendar year unless otherwise determined by the Board of Directors. Section 9.2 Corporate Seal. The seal of the Corporation shall be circular in form and contain the name of the Corporation, and the year and state of its incorporation. Such seal may be altered from time to time at the discretion of the Board of Directors. Section 9.3 Voting of Stock. Unless otherwise specifically authorized by the Board of Directors, all stock owned by the Corporation, other than stock of the Corporation, shall be voted, in person or by proxy, by the Chief Executive Officer, President or any Vice President of the Corporation on behalf of the Corporation. Section 9.4 Copies of Resolutions. Any person dealing with the Corporation may rely upon a copy of any of the records, of the proceedings, resolution or votes of the Board of Directors or stockholders when certified by the Chief Executive Officer, President or Secretary. Section 9.5 Rules of Order. The rules contained in the most recent edition of Robert's Rules of Order shall govern all meetings of stockholders and directors where those rules are not inconsistent with the Amended and Restated Certificate of Incorporation, By-Laws or other rules of order of the Corporation. ARTICLE X AMENDMENTS Section 10.1 Amendments of By-Laws. The vote of the holders of at least two-thirds of the shares of stock of the Corporation, issued and outstanding and entitled to vote, shall be necessary at any meeting of stockholders to amend or repeal these By-Laws or to adopt new by-laws. These By-Laws may also be amended or repealed, or new By-Laws adopted, at any meeting of the Board of Directors by the vote of at least two-thirds of the entire Board; provided that any by-law adopted by the Board may be amended or repealed by the stockholders in the manner set forth above. Any proposal to amend or repeal these By-Laws or to adopt new by-laws shall be stated in the notice of the meeting of the Board of Directors or the stockholders, or in the waiver of notice thereof, as the case may be, unless all of the Directors or the holders of record of all of the shares of stock of the Corporation, issued and outstanding and entitled to vote, are present at such meeting. C-12 EX-99.4 5 b311989_ex99-4.txt EMPLOYEE STOCK PURCHASE PLAN EXHIBIT D EMAGIN CORPORATION EMPLOYEE STOCK PURCHASE PLAN July 16, 2001 2 TABLE OF CONTENTS Page ---- SECTION 1. PURPOSE OF THE PLAN...........................................1 SECTION 2. ADMINISTRATION OF THE PLAN....................................1 (a) Committee Composition.........................................1 (b) Committee Responsibilities....................................1 SECTION 3. ENROLLMENT AND PARTICIPATION..................................1 (a) Offering Periods..............................................1 (b) Accumulation Periods..........................................1 (c) Enrollment....................................................1 (d) Duration of Participation.....................................1 (e) Applicable Offering Period....................................2 SECTION 4. EMPLOYEE CONTRIBUTIONS........................................2 (a) Frequency of Payroll Deductions...............................2 (b) Amount of Payroll Deductions..................................2 (c) Changing Withholding Rate.....................................3 (d) Discontinuing Payroll Deductions..............................3 (e) Limit on Number of Elections..................................3 SECTION 5. WITHDRAWAL FROM THE PLAN......................................3 (a) Withdrawal....................................................3 (b) Re-Enrollment After Withdrawal................................3 SECTION 6. CHANGE IN EMPLOYMENT STATUS...................................3 (a) Termination of Employment.....................................3 (b) Leave of Absence..............................................3 (c) Death.........................................................4 SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES..........................4 (a) Plan Accounts.................................................4 (b) Purchase Price................................................4 (c) Number of Shares Purchased....................................4 (d) Available Shares Insufficient.................................4 (e) Issuance of Stock.............................................4 (f) Unused Cash Balances..........................................5 (g) Stockholder Approval..........................................5 SECTION 8. LIMITATIONS ON STOCK OWNERSHIP................................5 (a) Five Percent Limit............................................5 (b) Dollar Limit..................................................5 i 3 SECTION 9. RIGHTS NOT TRANSFERABLE.......................................6 SECTION 10. NO RIGHTS AS AN EMPLOYEE......................................6 SECTION 11. NO RIGHTS AS A STOCKHOLDER....................................6 SECTION 12. SECURITIES LAW REQUIREMENTS...................................7 SECTION 13. STOCK OFFERED UNDER THE PLAN..................................7 (a) Authorized Shares.............................................7 (b) Anti-Dilution Adjustments.....................................7 (c) Reorganizations...............................................7 SECTION 14. AMENDMENT OR DISCONTINUANCE...................................7 SECTION 15. DEFINITIONS...................................................7 (a) Accumulation Period...........................................7 (b) Board.........................................................8 (c) Code..........................................................8 (d) Committee.....................................................8 (e) Corporation...................................................8 (f) Compensation..................................................8 (g) Corporate Reorganization......................................8 (h) Eligible Employee.............................................8 (i) Exchange Act..................................................8 (j) Fair Market Value.............................................8 (k) Offering Period...............................................9 (l) Participant...................................................9 (m) Participating Corporation.....................................9 (n) Plan..........................................................9 (o) Plan Account..................................................9 (p) Purchase Price................................................9 (q) Stock.........................................................9 (r) Subsidiary....................................................9 ii EMAGIN CORPORATION EMPLOYEE STOCK PURCHASE PLAN SECTION 1. PURPOSE OF THE PLAN. The Plan was adopted by the Board and ratified by the Shareholders of the Company effective as of July 16, 2001. The purpose of the Plan is to provide Eligible Employees with an opportunity to increase their proprietary interest in the success of the Corporation by purchasing Stock from the Corporation on favorable terms and to pay for such purchases through payroll deductions. The Plan is intended to qualify under section 423 of the Code. SECTION 2. ADMINISTRATION OF THE PLAN. (a) COMMITTEE COMPOSITION. The Plan shall be administered by the Committee. The Committee shall consist exclusively of one or more directors of the Corporation, who shall be appointed by the Board. (b) COMMITTEE RESPONSIBILITIES. The Committee shall interpret the Plan and make all other policy decisions relating to the operation of the Plan. The Committee may adopt such rules, guidelines and forms as it deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final and binding on all persons. SECTION 3. ENROLLMENT AND PARTICIPATION. (a) OFFERING PERIODS. While the Plan is in effect, one or more Offering Periods shall commence in each calendar year. Unless otherwise specified by the Committee, the Offering Periods shall consist of the 24-month periods commencing on each January 1 and July 1, except that the first Offering Period shall commence on July 16, 2001 and end on June 30, 2003. (b) ACCUMULATION PERIODS. While the Plan is in effect, up to two Accumulation Periods shall commence in each calendar year. Unless otherwise specified by the Committee, the Accumulation Periods shall consist of the six-month periods commencing on each January 1 and July 1, except that the first Accumulation Period shall commence on July 16, 2001 and end on December 31, 2001. (c) ENROLLMENT. Any individual who, on the day preceding the first day of an Offering Period, qualifies as an Eligible Employee may elect to become a Participant in the Plan for such Offering Period by executing the enrollment form prescribed for this purpose by the Committee. The enrollment form shall be filed with the Corporation at the prescribed location not later than one business day prior to the commencement of such Offering Period. (d) DURATION OF PARTICIPATION. Once enrolled in the Plan, a Participant shall continue to participate in the Plan until he or she ceases to be an Eligible Employee, withdraws from the Plan under Section 5(a) or reaches the end of the Accumulation Period in which his or her employee contributions were discontinued under Section 4(d) or 8(b). A Participant who discontinued employee contributions under Section 4(d) or withdrew from the Plan under Section 5(a) may again become a Participant, if he or she then is an Eligible Employee, by following the procedure described in Subsection (c) above. A Participant whose employee contributions were discontinued automatically under Section 8(b) shall automatically resume participation at the beginning of the earliest Accumulation Period ending in the next calendar year, if he or she then is an Eligible Employee. (e) APPLICABLE OFFERING PERIOD. For purposes of calculating the Purchase Price under Section 7(b), the applicable Offering Period shall be determined as follows: (i) Once a Participant is enrolled in the Plan for an Offering Period, such Offering Period shall continue to apply to him or her until the earliest of (A) the end of such Offering Period, (B) the end of his or her participation under Subsection (d) above or (C) re-enrollment for a subsequent Offering Period under Paragraph (ii) or (iii) below. (ii) In the event that the Fair Market Value of Stock on the last trading day before the commencement of the Offering Period for which the Participant is enrolled is higher than on the last trading day before the commencement of any subsequent Offering Period, the Participant shall automatically be re-enrolled for such subsequent Offering Period. (iii) Any other provision of the Plan notwithstanding, the Corporation (at its sole discretion) may determine prior to the commencement of any new Offering Period that all Participants shall be re-enrolled for such new Offering Period. (iv) When a Participant reaches the end of an Offering Period but his or her participation is to continue, then such Participant shall automatically be re-enrolled for the Offering Period that commences immediately after the end of the prior Offering Period. SECTION 4. EMPLOYEE CONTRIBUTIONS. (a) FREQUENCY OF PAYROLL DEDUCTIONS. A Participant may purchase shares of Stock under the Plan solely by means of payroll deductions. Payroll deductions, as designated by the Participant pursuant to Subsection (b) below, shall occur on each payday during participation in the Plan. (b) AMOUNT OF PAYROLL DEDUCTIONS. An Eligible Employee shall designate on the enrollment form the portion of his or her Compensation that he or she elects to have withheld for the purchase of Stock. Such portion shall be a whole percentage of the Eligible Employee's Compensation, but not less than 1% nor more than 15%. (c) CHANGING WITHHOLDING RATE. If a Participant wishes to change the rate of payroll withholding, he or she may do so by filing a new enrollment form with the Corporation at the prescribed location at any time. The new withholding rate shall be effective as soon as reasonably practicable after such form has been received by the Corporation. The new withholding rate shall be a whole percentage of the Eligible Employee's Compensation, but not less than 1% nor more than 15%. (d) DISCONTINUING PAYROLL DEDUCTIONS. If a Participant wishes to discontinue employee contributions entirely, he or she may do so by filing a new enrollment form with the Corporation at the prescribed location at any time. Payroll withholding shall cease as soon as reasonably practicable after such form has been received by the Corporation. (In addition, employee contributions may be discontinued automatically pursuant to Section 8(b).) A Participant who has discontinued employee contributions may resume such contributions by filing a new enrollment form with the Corporation at the prescribed location. Payroll withholding shall resume as soon as reasonably practicable after such form has been received by the Corporation. (e) LIMIT ON NUMBER OF ELECTIONS. No Participant shall make more than two elections under Subsection (c) or (d) above during any Accumulation Period. SECTION 5. WITHDRAWAL FROM THE PLAN. (a) WITHDRAWAL. A Participant may elect to withdraw from the Plan by filing the prescribed form with the Corporation at the prescribed location at any time before the last day of an Accumulation Period. As soon as reasonably practicable thereafter, payroll deductions shall cease and the entire amount credited to the Participant's Plan Account shall be refunded to him or her in cash, without interest. No partial withdrawals shall be permitted. (b) RE-ENROLLMENT AFTER WITHDRAWAL. A former Participant who has withdrawn from the Plan shall not be a Participant until he or she re-enrolls in the Plan under Section 3(c). Re-enrollment may be effective only at the commencement of an Offering Period. SECTION 6. CHANGE IN EMPLOYMENT STATUS. (a) TERMINATION OF EMPLOYMENT. Termination of employment as an Eligible Employee for any reason, including death, shall be treated as an automatic withdrawal from the Plan under Section 5(a). (A transfer from one Participating Corporation to another shall not be treated as a termination of employment.) (b) LEAVE OF ABSENCE. For purposes of the Plan, employment shall not be deemed to terminate when the Participant goes on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Corporation in writing. Employment, however, shall be deemed to terminate 90 days after the Participant goes on a leave, unless a contract or statute guarantees his or her right to return to work. Employment shall be deemed to terminate in any event when the approved leave ends, unless the Participant immediately returns to work. (c) DEATH. In the event of the Participant's death, the amount credited to his or her Plan Account shall be paid to a beneficiary designated by him or her for this purpose on the prescribed form or, if none, to the Participant's estate. Such form shall be valid only if it was filed with the Corporation at the prescribed location before the Participant's death. SECTION 7. PLAN ACCOUNTS AND PURCHASE OF SHARES. (a) PLAN ACCOUNTS. The Corporation shall maintain a Plan Account on its books in the name of each Participant. Whenever an amount is deducted from the Participant's Compensation under the Plan, such amount shall be credited to the Participant's Plan Account. Amounts credited to Plan Accounts shall not be trust funds and may be commingled with the Corporation's general assets and applied to general corporate purposes. No interest shall be credited to Plan Accounts. (b) PURCHASE PRICE. The Purchase Price for each share of Stock purchased at the close of an Accumulation Period shall be the lower of: (i) 85% of the Fair Market Value of such share on the last trading day in such Accumulation Period; or (ii) 85% of the Fair Market Value of such share on the last trading day before the commencement of the applicable Offering Period (as determined under Section 3(e)) or, in the case of the first Offering Period under the Plan, 85% of the closing price of one share of Stock on July 13, 2001. (c) NUMBER OF SHARES PURCHASED. As of the last day of each Accumulation Period, each Participant shall be deemed to have elected to purchase the number of shares of Stock calculated in accordance with this Subsection (c), unless the Participant has previously elected to withdraw from the Plan in accordance with Section 5(a). The amount then in the Participant's Plan Account shall be divided by the Purchase Price, and the number of shares that results shall be purchased from the Corporation with the funds in the Participant's Plan Account. The foregoing notwithstanding, no Participant shall purchase more than 25,000 shares of Stock with respect to any Accumulation Period nor more than the amounts of Stock set forth in Sections 8(b) and 13(a). The Committee may determine with respect to all Participants that any fractional share, as calculated under this Subsection (c), shall be (i) rounded down to the next lower whole share or (ii) credited as a fractional share. (d) AVAILABLE SHARES INSUFFICIENT. In the event that the aggregate number of shares that all Participants elect to purchase during an Accumulation Period exceeds the maximum number of shares remaining available for issuance under Section 13(a), then the number of shares to which each Participant is entitled shall be determined by multiplying the number of shares available for issuance by a fraction, the numerator of which is the number of shares that such Participant has elected to purchase and the denominator of which is the number of shares that all Participants have elected to purchase. (e) ISSUANCE OF STOCK. Certificates representing the shares of Stock purchased by a Participant under the Plan shall be issued to him or her as soon as reasonably practicable after the close of the applicable Accumulation Period, except that the Committee may determine that such shares shall be held for each Participant's benefit by a broker designated by the Committee. Shares may be registered in the name of the Participant or jointly in the name of the Participant and his or her spouse as joint tenants with right of survivorship or as community property. (f) UNUSED CASH BALANCES. An amount remaining in the Participant's Plan Account that represents the Purchase Price for any fractional share shall be carried over in the Participant's Plan Account to the next Accumulation Period. Any amount remaining in the Participant's Plan Account that represents the Purchase Price for whole shares that could not be purchased by reason of Subsection (c) above, Section 8(b) or Section 13(a) shall be refunded to the Participant in cash, without interest. (g) STOCKHOLDER APPROVAL. Any other provision of the Plan notwithstanding, no shares of Stock shall be purchased under the Plan unless and until the Corporation's stockholders have approved the adoption of the Plan. SECTION 8. LIMITATIONS ON STOCK OWNERSHIP. (a) FIVE PERCENT LIMIT. Any other provision of the Plan notwithstanding, no Participant shall be granted a right to purchase Stock under the Plan if such Participant, immediately after his or her election to purchase such Stock, would own stock possessing more than 5% of the total combined voting power or value of all classes of stock of the Corporation or any parent or Subsidiary of the Corporation. For purposes of this Subsection (a), the following rules shall apply: (i) Ownership of stock shall be determined after applying the attribution rules of section 424(d) of the Code; (ii) Each Participant shall be deemed to own any stock that he or she has a right or option to purchase under this or any other plan; and (iii) Each Participant shall be deemed to have the right to purchase 25,000 shares of Stock under this Plan with respect to each Accumulation Period. (b) DOLLAR LIMIT. Any other provision of the Plan notwithstanding, no Participant shall purchase Stock with a Fair Market Value in excess of the following limit: (i) In the case of Stock purchased during an Offering Period that commenced in the current calendar year, the limit shall be equal to (A) $25,000 minus (B) the Fair Market Value of the Stock that the Participant previously purchased in the current calendar year (under this Plan and all other employee stock purchase plans of the Corporation or any parent or Subsidiary of the Corporation). (ii) In the case of Stock purchased during an Offering Period that commenced in the immediately preceding calendar year, the limit shall be equal to (A) $50,000 minus (B) the Fair Market Value of the Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Corporation or any parent or Subsidiary of the Corporation) in the current calendar year and in the immediately preceding calendar year. (iii) In the case of Stock purchased during an Offering Period that commenced in the second preceding calendar year, the limit shall be equal to (A) $75,000 minus (B) the Fair Market Value of the Stock that the Participant previously purchased (under this Plan and all other employee stock purchase plans of the Corporation or any parent or Subsidiary of the Corporation) in the current calendar year and in the two preceding calendar years. For purposes of this Subsection (b), the Fair Market Value of Stock shall be determined in each case as of the beginning of the Offering Period in which such Stock is purchased. Employee stock purchase plans not described in section 423 of the Code shall be disregarded. If a Participant is precluded by this Subsection (b) from purchasing additional Stock under the Plan, then his or her employee contributions shall automatically be discontinued and shall resume at the beginning of the earliest Accumulation Period ending in the next calendar year (if he or she then is an Eligible Employee). SECTION 9. RIGHTS NOT TRANSFERABLE. The rights of any Participant under the Plan, or any Participant's interest in any Stock or moneys to which he or she may be entitled under the Plan, shall not be transferable by voluntary or involuntary assignment or by operation of law, or in any other manner other than by beneficiary designation or the laws of descent and distribution. If a Participant in any manner attempts to transfer, assign or otherwise encumber his or her rights or interest under the Plan, other than by beneficiary designation or the laws of descent and distribution, then such act shall be treated as an election by the Participant to withdraw from the Plan under Section 5(a). SECTION 10. NO RIGHTS AS AN EMPLOYEE. Nothing in the Plan or in any right granted under the Plan shall confer upon the Participant any right to continue in the employ of a Participating Corporation for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Participating Companies or of the Participant, which rights are hereby expressly reserved by each, to terminate his or her employment at any time and for any reason, with or without cause. SECTION 11. NO RIGHTS AS A STOCKHOLDER. A Participant shall have no rights as a stockholder with respect to any shares of Stock that he or she may have a right to purchase under the Plan until such shares have been purchased on the last day of the applicable Accumulation Period. SECTION 12. SECURITIES LAW REQUIREMENTS. Shares of Stock shall not be issued under the Plan unless the issuance and delivery of such shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations, and the regulations of any stock exchange or other securities market on which the Corporation's securities may then be traded. SECTION 13. STOCK OFFERED UNDER THE PLAN. (a) AUTHORIZED SHARES. The number of shares of Stock available for purchase under the Plan shall be 750,000 (subject to adjustment pursuant to this Section 13). In addition, the number of shares of Common Stock available for purchase under the Plan shall automatically increase by the lesser of (i) 2% of the total number of shares of Common Stock then outstanding or (ii) 250,000 shares on January 1, 2003, January 1, 2004 and January 1, 2005. (b) ANTI-DILUTION ADJUSTMENTS. The aggregate number of shares of Stock offered under the Plan, the 25,000 share limitation described in Section 7(c) and the price of shares that any Participant has elected to purchase shall be adjusted proportionately by the Committee for any increase or decrease in the number of outstanding shares of Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend, any other increase or decrease in such shares effected without receipt or payment of consideration by the Corporation, the distribution of the shares of a Subsidiary to the Corporation's stockholders or a similar event. (c) REORGANIZATIONS. Any other provision of the Plan notwithstanding, immediately prior to the effective time of a Corporate Reorganization, the Offering Period and Accumulation Period then in progress shall terminate and shares shall be purchased pursuant to Section 7, unless the Plan is continued or assumed by the surviving corporation or its parent corporation. The Plan shall in no event be construed to restrict in any way the Corporation's right to undertake a dissolution, liquidation, merger, consolidation or other reorganization. SECTION 14. AMENDMENT OR DISCONTINUANCE. The Board shall have the right to amend, suspend or terminate the Plan at any time and without notice. Except as provided in Section 13, any increase in the aggregate number of shares of Stock to be issued under the Plan shall be subject to approval by a vote of the stockholders of the Corporation. In addition, any other amendment of the Plan shall be subject to approval by a vote of the stockholders of the Corporation to the extent required by an applicable law or regulation. SECTION 15. DEFINITIONS. (a) "ACCUMULATION PERIOD" means a six-month period during which contributions may be made toward the purchase of Stock under the Plan, as determined pursuant to Section 3(b). (b) "BOARD" means the Board of Directors of the Corporation, as constituted from time to time. (c) "CODE" means the Internal Revenue Code of 1986, as amended. (d) "COMMITTEE" means a committee of the Board, as described in Section 2. (e) "COMPENSATION" means (i) the total compensation paid in cash to a Participant by a Participating Corporation, including salaries, wages, bonuses, incentive compensation, commissions, overtime pay and shift premiums, plus (ii) any pre-tax contributions made by the Participant under section 401(k) or 125 of the Code. "Compensation" shall exclude all non-cash items, moving or relocation allowances, cost-of-living equalization payments, car allowances, tuition reimbursements, imputed income attributable to cars or life insurance, severance pay, fringe benefits, contributions or benefits received under employee benefit plans, income attributable to the exercise of stock options, and similar items. The Committee shall determine whether a particular item is included in Compensation. (f) "CORPORATE REORGANIZATION" means: (i) The consummation of a merger or consolidation of the Corporation with or into another entity or any other corporate reorganization; or (ii) The sale, transfer or other disposition of all or substantially all of the Corporation's assets or the complete liquidation or dissolution of the Corporation. (g) "CORPORATION" means EMagin Corporation, a Delaware corporation. (h) "ELIGIBLE EMPLOYEE" means any employee of a Participating Corporation if his or her customary employment is for more than five months per calendar year and for more than 20 hours per week. The foregoing notwithstanding, an individual shall not be considered an Eligible Employee if his or her participation in the Plan is prohibited by the law of any country which has jurisdiction over him or her or if he or she is subject to a collective bargaining agreement that does not provide for participation in the Plan. (i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. (j) "FAIR MARKET VALUE" means the market price of Stock, determined by the Committee as follows: (i) If the Stock was traded on The Nasdaq National Market on the date in question, then the Fair Market Value shall be equal to the last-transaction price quoted for such date by The Nasdaq National Market; (ii) If the Stock was traded on a stock exchange on the date in question, then the Fair Market Value shall be equal to the closing price reported by the applicable composite transactions report for such date; or (iii) If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate. Whenever possible, the determination of Fair Market Value by the Committee shall be based on the prices reported in The Wall Street Journal or as reported directly to the Corporation by Nasdaq or a stock exchange. Such determination shall be conclusive and binding on all persons. (k) "OFFERING PERIOD" means a 24-month period with respect to which the right to purchase Stock may be granted under the Plan, as determined pursuant to Section 3(a). (l) "PARTICIPANT" means an Eligible Employee who elects to participate in the Plan, as provided in Section 3(c). (m) "PARTICIPATING CORPORATION" means (i) the Corporation and (ii) each present or future Subsidiary designated by the Committee as a Participating Corporation. (n) "PLAN" means this eMagin Corporation Employee Stock Purchase Plan, as it may be amended from time to time. (o) "PLAN ACCOUNT" means the account established for each Participant pursuant to Section 7(a). (p) "PURCHASE PRICE" means the price at which Participants may purchase Stock under the Plan, as determined pursuant to Section 7(b). (q) "STOCK" means the Common Stock of the Corporation. (r) "SUBSIDIARY" means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. EX-99.5 6 b311989_ex99-5.txt PROXY CARD PROXY eMAGIN CORPORATION PROXY PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR AN ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 16, 2001 The undersigned hereby appoints Gary Jones and Susan Jones and each of them, as attorneys and proxies of the undersigned, with full power of substitution, to vote all of the shares of stock of eMagin Corporation (the "Company"), which the undersigned may be entitled to vote at the Annual Meeting of Stockholders of the Company to be held in the Board Room of the American Stock Exchange, 86 Trinity Place, New York, New York, on Monday, July 16, 2001, at 10:00 a.m. local time, and at any and all continuations and adjournments thereof, with all powers that the undersigned would posses if personally present, upon and in respect of the following matters and in accordance with the following instructions, with discretionary authority as to any and all other matters that may properly come before the meeting. UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, 4 AND 5 AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH. Please vote, date and promptly return this proxy in the enclosed return envelope which is postage prepaid if mailed in the United States. 1. ELECTION OF DIRECTORS |_| |_| 3. Proposal to approve the FOR AGAINST ABSTAIN Nominees: FOR ALL WITHHOLD AUTHORITY reincorporation of the Company in |_| |_| |_| (01) CLAUDE CHARLES nominees for all nominees Delaware. (02) GARY W. JONES (03) AJMAL KHAN |_| 4. Proposal to approve amendment of FOR AGAINST ABSTAIN (04) N. DADOMAR REDDY TO WITHHOLD AUTHORITY TO VOTE for any the Company's 2000 Stock Option |_| |_| |_| (05) JACK RIVKIN nominee(s) written below (write such Plan. (06) MARTIN SOLOMON nominee(s) name(s) below): 5. Proposal to approve adoption of the FOR AGAINST ABSTAIN eMagin Corporation 2001 Employee |_| |_| |_| Stock Purchase Plan. 2. Proposal to ratify appointment of FOR AGAINST ABSTAIN Arthur Anderson LLP as independent |_| |_| |_| public accountants and auditors for the 2001 fiscal year. Date: , 2001 ------------------------------------------ ----------------------------------------------------- Signature Signature if held jointly Please sign exactly as your name appears hereon. If shares are held jointly, each holder should sign. Executors, administrators, trustees, guardians, attorneys and agents should five their full titles. If shareholder is a corporation, sign in full corporate name by the authorized officer.
Do you plan to attend the meeting? |_|Yes |_|No ---------------------------------- VOTE BY TELEPHONE OR INTERNET QUICK *** EASY *** IMMEDIATE ---------------------------------- Your Telephone or Internet vote authorizes the named proxies to vote your shares in the same manner as if you had marked, signed and returned your proxy card. - -------------------------------------------------------------------------------- TO VOTE BY TELEPHONE: Call the toll free number listed below. You will be asked to enter a CONTROL NUMBER located at the bottom of this form. - -------------------------------------------------------------------------------- OPTION A: To vote as the Board of Directors recommends on ALL proposals: Press 1 - -------------------------------------------------------------------------------- OPTION B: If you choose to vote on each item separately, Press 0. You will hear these instructions: Item 1: To vote FOR ALL nominees, press 1; To WITHHOLD FOR ALL nominees, press 9; To WITHHOLD FOR AN INDIVIDUAL nominee, press 0 and listen to the instructions. Item 2: To vote FOR, press 1; AGAINST, press 9; ABSTAIN, press 0. The instructions are the same for all remaining items to be voted. When asked, you must confirm your vote by pressing 1. - -------------------------------------------------------------------------------- TO VOTE BY INTERNET: Connect to the Website listed below: You will be asked to enter a control number which is located at the bottom of this form. Then follow the instructions. THE WEBSITE for voting is www.proxyvoting.com/emagin - -------------------------------------------------------------------------------- DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET. CALL **TOLL FREE** 1-800-676-5925 ON A TOUCH-TONE TELEPHONE - ANYTIME. There is NO CHARGE to you for this call -------------- CONTROL NUMBER -------------- For Telephone/Internet voting - ------------------------------------------------------------------ Annual Meeting Admission Ticket Date: July 16, 2001 Time: 10:00 a.m. Place: 86 Trinity Pl. New York, NY Please present this ticket for admission -----END PRIVACY-ENHANCED MESSAGE-----