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
[_]
Confidential, For Use of the Commission Only
(As
Permitted by Rule 14a-6(e)(2))
[X]
Definitive Proxy Statement
[_]
Definitive Additional Materials
[_]
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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:
eMagin
Corporation
2005
NOTICE
OF ANNUAL MEETING
AND
PROXY
STATEMENT
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_____________________________
Friday,
September 30, 2005
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at
2:00 pm
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_____________________________
American
Stock Exchange
86
Trinity Place
New
York, NY
EMAGIN
CORPORATION
10500
NE
8
TH
STREET
Suite
1400
BELLEVUE,
WA 98004
August
29, 2005
Dear
Stockholder:
You
are
cordially invited to attend the 2005 Annual Meeting of Stockholders (the
“Meeting”) of eMagin Corporation, which will be held at the American Stock
Exchange,
86
Trinity Place
,
New
York, New York on Friday, September 30, 2005, at 2:00 pm local time. Details
of
the business to be conducted at the Meeting are provided in the attached
Notice
of Annual Meeting and Proxy Statement.
Whether
or not you plan to attend the Meeting, it is important that your shares be
represented and voted at the Meeting. Therefore, I urge you to vote your
shares
as soon as possible. Instructions in the proxy card will tell you how to
vote
over the Internet, by telephone, or by returning your proxy card by mail.
The
proxy statement explains more about proxy voting. Please read it carefully.
I
highly
encourage you to receive future eMagin annual reports and proxy statement
materials electronically and help us save costs in producing and distributing
these materials. If you wish to receive our annual report and proxy statement
electronically next year, please follow the instructions on the enclosed
proxy
card.
Beginning
at 1:00 pm, prior to commencement of the meeting, we will provide interactive
demonstrations of some of our exciting microdisplay products as well as several
products being commercialized by our customers. If you would like to participate
in this event, please arrive by 1:30 pm to allow time for viewing the exhibit.
I
look
forward to meeting those of you who will be able to attend the Meeting, and
I
appreciate your continued support of our company.
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Sincerely,
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/s/ Gary
W. Jones
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Gary
W. Jones
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Chairman
of the Board of Directors
President and Chief Executive
Offier
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eMagin
Corporation
NOTICE
OF ANNUAL MEETINGS OF STOCKHOLDERS
TO
BE HELD ON SEPTEMBER 30, 2005
To
our Stockholders:
The
2005
Annual Meetings 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
Friday, September 30, 2005, beginning at 2:00 p.m. local time, to consider
the
following proposals:
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1.
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To
elect 2 directors to the Company's Board of Directors, to hold
office for
terms of three (3) years and until their successors are duly elected
and
qualified or until their earlier resignation or removal (Proposal
No.
1);
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2.
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To
adopt eMagin’s 2005 Employee Stock Purchase Plan (Proposal No. 2);
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3.
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To
amend the 2003 Stock Option Plan to provide for grants of shares
of Common
Stock in addition to options to purchase shares of Common Stock
(Proposal
No. 3);
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4.
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To
increase the number of authorized shares of Common Stock issuable
pursuant
to the 2004 Non-Employee Stock Compensation Plan from 1,000,000
to
2,000,000 shares (Proposal 4);
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5.
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To
ratify the appointment of Eisner LLP as the Company’s independent auditors
for the fiscal year ending December 31, 2005 (Proposal No. 5);
and
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6.
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To
consider and transact such other business as may properly come
before the
Annual Meeting and any adjournment or postponement thereof.
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BECAUSE
OF THE SIGNIFICANCE OF THESE PROPOSALS TO THE COMPANY AND ITS SHAREHOLDERS,
IT
IS VITAL THAT EVERY SHAREHOLDER VOTES AT THE ANNUAL MEETING IN PERSON OR
BY
PROXY.
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 August 30, 2005, to all stockholders entitled to vote
at the
Annual Meeting. If you were a stockholder of record of eMagin common stock
(AMEX:EMA) on August 18, 2005, 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 check the appropriate
box on
the Proxy card and retain the bottom portion of the card as your admission
ticket. Registration will begin at 1:00 p.m., and seating will begin at 1:30
p.m. A product exhibit will be available beginning at 1:00 p.m. and concluding
at 1:50 p.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
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/S/
Susan K. Jones
Susan
K. Jones
Executive
Vice President and Secretary
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Dated:
August 29, 2005, Bellevue, WA
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IMPORTANT
The
return of your signed Proxy as promptly as possible will greatly facilitate
arrangements for the Annual Meeting. No postage is required if the Proxy
is
returned in the envelope enclosed for your convenience and mailed in the
United
States. If you received a proxy card with a website address and voting codes,
we
urge you to vote on the Internet at
http://proxy.georgeson.com
.
or telephonically at 1-800-790-3272, to ensure that your vote is recorded
without mail delays. If you vote by telephone or the
Internet you do not need to return the proxy card.
TABLE
OF CONTENTS
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Page
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INFORMATION
ABOUT THE ANNUAL MEETING AND
VOTING.......................................................................................................................................................................................
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1
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What
is the purpose of the Annual
Meeting?
...............................................................................................................................................................................................................................
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1
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Who
is entitled to vote at the
meeting?
.........................................................................................................................................................................................................................................
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1
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Who
can attend the
meeting?
..........................................................................................................................................................................................................................................................
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1
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Why
is the Company soliciting
proxies?
.......................................................................................................................................................................................................................................
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2
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What
constitutes a
quorum?
............................................................................................................................................................................................................................................................
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2
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How
do I
vote?
...................................................................................................................................................................................................................................................................................
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2
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Can
I change my vote after I return my Proxy
card?
..................................................................................................................................................................................................................
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2
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What
are the Board’s
recommendations?
.....................................................................................................................................................................................................................................
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3
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What
vote is required to approve each
item?
..............................................................................................................................................................................................................................
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3
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INFORMATION
ABOUT STOCK
OWNERSHIP.........................................................................................................................................................................................................................
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4
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How
much stock is owned by 5% stockholders, directors, and executive
officers
................................................................................................................................................................
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4
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INFORMATION
ABOUT THE BOARD OF
DIRECTORS...........................................................................................................................................................................................................
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6
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How
often did the Board meet during fiscal
2004?
.....................................................................................................................................................................................................................
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6
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What
committees has the Board
established?
..............................................................................................................................................................................................................................
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6
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How
are directors
compensated?
...................................................................................................................................................................................................................................................
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8
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INFORMATION
ABOUT THE EXECUTIVE
OFFICERS.............................................................................................................................................................................................................
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9
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Executive
Compensation
..................................................................................................................................................................................................................................................................
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9
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What
is the Company’s philosophy of executive officer
compensation
...................................................................................................................................................................................
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9
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Report
of the Compensation Committee of the Board of
Directors
..........................................................................................................................................................................................
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9
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Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Value
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12
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Employment
Agreements
..................................................................................................................................................................................................................................................................
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12
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Report
of the Audit Committee of the Board of
Directors
..........................................................................................................................................................................................................
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13
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Certain
relationships and related
transactions
..........................................................................................................................................................................................................................
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14
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DISCUSSION
OF PROPOSAL ITEMS RECOMMENDED BY THE
BOARD...........................................................................................................................................................................
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17
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ITEM
1—ELECTION OF CLASS A
DIRECTORS.........................................................................................................................................................................................................................
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17
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ITEM
2—THE ADOPTION OF THE 2005 EMPLOYEE STOCK PURCHASE PLAN
.............................................................................................................................................................
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20
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ITEM
3
—AMEND
THE 2003 STOCK OPTION PLAN TO PROVIDE FOR GRANTS OF COMMON
SHARES ................................................................................................................
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23
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ITEM
4
—INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
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ISSUABLE
PURSUANT TO THE 2004 NON-EMPLOYEE STOCK COMPENSATION
PLAN..............................................................................................................................................
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27
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ITEM
5
—RATIFICATION
OF THE APPOINTMENT OF INDEPENDENT
AUDITORS.......................................................................................................................................................
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30
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OTHER
MATTERS............................................................................................................................................................................................................................................................................
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31
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ADDITIONAL
INFORMATION......................................................................................................................................................................................................................................................
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31
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APPENDIX
A - 2005 EMPLOYEE STOCK PURCHASE PLAN
..................................................................................................................................................................................................
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32
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APPENDIX
B - AMENDED AND RESTATED 2003 EMPLOYEE STOCK OPTION PLAN
.................................................................................................................................................
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38
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APPENDIX
C - AMENDED AND RESTATED 2004 NON-EMPLOYEE COMPENSATION PLAN
...................................................................................................................................................................................................................................................................................................
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44
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eMagin
Corporation
10500
NE 8
th
Street, Suite 1400
Bellevue,
WA 98004
(425)
749-3600
______________________
PROXY
STATEMENT
_______________________
This
Proxy Statement is furnished in connection with the solicitation of proxies
by
the Board of Directors of eMagin Corporation (“eMagin” or the “Company”) to be
voted at the Annual Meeting of stockholders which will be held at Trinity
Place,
to be held in the Board Room of the American Stock Exchange,
86
Trinity Place, New York, New York, Tuesday
,
September 30, 2005 beginning at 2:00 p.m., and at any postponements or
adjournments thereof on.
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, adopting the eMagin
2005
Employee Stock Purchase Plan, amending the 2003 Stock Option Plan to provide
for
grants of shares of Common Stock in addition to options to purchase shares
of
Common Stock, increase the number of authorized shares of Common Stock issuable
pursuant to the 2004 Non-Employee Stock Compensation Plan from 1,000,000
to
2,000,000 shares and ratification of the appointment of the Company’s
independent auditors. In addition, management will report on the performance
of
the Company during fiscal year 2004 and respond to questions from
stockholders.
Who
is entitled to vote at the meeting?
Stockholders
of record at the close of business on August 18, 2005, 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 82,829,846 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.
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 and
product demonstrations will begin at 1 p.m., and seating will begin at 1:30
p.m.
Cameras, recording devices and other electronic devices will not be permitted
at
the meeting.
You
will need an admission ticket to enter 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, 10500 NE
8
th
Street,
Suite 1400, Bellevue, WA 98004. (or by facsimile to
425-749-3601
)
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 a majority of the number
of
shares of common stock issued and on the record date will constitute a quorum
permitting the meeting to conduct its business. As noted above, as of the
record
date, 82,829,846 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 41,414,924 votes will be required to establish a
quorum.
How
do I vote?
For
your
convenience, eMagin is offering you four methods of voting.
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·
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You
may indicate your vote on the enclosed proxy card, sign and date
the card,
and return the card in the enclosed prepaid envelope.
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·
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You
may vote by telephone by calling the toll free number that appears
on the
enclosed proxy card and following the instructions given.
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·
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You
may vote via the Internet by following the instructions provided
on the
enclosed proxy card.
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·
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You
may attend the meeting and vote in person.
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All
shares entitled to vote and represented by a properly completed and executed
proxy received before the meeting and not revoked will be voted at the meeting
as you instruct in a proxy delivered before the meeting. If you do not indicate
how your shares should be voted on a matter, the shares represented by your
properly completed and executed proxy will be voted as the Board of Directors
recommends on each of the enumerated proposals and 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.
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.
Please
follow the voting instructions on the enclosed proxy card.
The
deadline for voting by telephone or electronically is 5:00 p.m. (Eastern
Standard Time) on September 29, 2005.
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.
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:
·
for
election
of the nominated slate of Class A directors;
·
for
adopting
the eMagin 2005 Employee Stock Purchase Plan;
·
for
amendment
of the 2003 Stock Option Plan to provide for grants of shares of Common Stock
in
addition to options to purchase shares of Common Stock;
·
for
increasing the number of authorized shares of Common Stock issuable pursuant
to
the 2004 Non-Employee Stock Compensation Plan from 1,000,000 to 2,000,000
shares; and
·
for
ratification
of the appointment of Eisner LLP as the Company’s independent auditors for
fiscal year 2005.
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.
Adopting
the 2005 Employee Stock Purchase Plan, amending the 2003 Stock Option Plan,
amending the 2004 Non-Employee Stock Compensation Plan and ratification of
the
appointment of Eisner LLP as the Company's independent auditors for fiscal
year
2005, will each require the affirmative vote of the holders of at least a
majority of the shares of common stock present in person or represented by
proxy
and entitled to vote at the Annual Meeting.
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 9, and the directors and executive officers as a group as of August
10,
2005, unless otherwise noted. Unless otherwise indicated, the stockholders
listed in the table have sole voting and investment power with respect to the
shares indicated.
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Name
of Owner
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Common
Stock
Beneficially
Owned
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Percentage
Beneficial
Common
Stock**
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Stillwater
LLC (1)
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14,576,266
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16.6%
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George
Haywood (2)
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10,169,952
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11.8%
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Gary
W. Jones (3)
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8,995,648
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10.4%
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Susan
K Jones (3)
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8,995,648
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10.4%
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Ginola
Limited (4)
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8,654,795
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10.1%
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Rainbow
Gate (5)
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2,016,745
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2.4%
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Dr.
K.C. Park (6)
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1,291,914
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1.5%
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Jack
Rivkin (7)
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1,213,896
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1.5%
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Ogier
Trustee (Jersey) Limited (8)
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976,200
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1.2%
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Paul
Cronson (9)
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507,657
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*
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Claude
Charles (10)
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315,000
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*
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Chelsea
Trust Company Limited
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119,161
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*
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John
Atherly (11)
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137,493
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*
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Jack
Goldman (12)
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107,500
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*
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Adm.
Thomas Paulsen (13)
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85,000
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*
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Dr.
Jill Wittels (14)
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85,000
|
*
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All
executive officers and directors as a group (consisting of 10 individuals)
(15)
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12,739,108
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14.9%
|
*
Less
than 1% of the outstanding common stock
**
Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options
or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of August 10, 2005 are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person. Percentages are
based on a total of 82,776,196 shares of common stock outstanding on August
10,
2005, and the shares issuable upon the exercise of options and warrants
exercisable on or within 60 days of August 10, 2005, as described
below.
(1)
This
figure represents:
(i)
9,326,145 shares owned by Stillwater LLC, which includes 1,719,326 shares owned
by Rainbow Gate Corporation, in which the sole member of Stillwater LLC is
the
investment manager of Rainbow Gate Corporation;
(ii)
warrants held by Stillwater LLC to purchase 5,250,121 shares, which
includes:
(a)
a
warrant to purchase 300,000 shares that may not be exercised by Stillwater
LLC
so long as Stillwater LLC is the beneficial owner, directly or indirectly,
of
more than ten percent (10%) of the common stock of eMagin for purposes of
Section 16 of the Securities Exchange Act of 1934, and
(b)
warrants to purchase 297,419 shares held by Rainbow Gate Corporation, in which
the sole member of Stillwater LLC is the investment manager of
Rainbow Gate Corporation;
(2)
This
figure includes 3,586,664 common shares underlying warrants.
(3)
This
figure represents shares owned by Gary Jones and Susan Jones who are married
to
each other, including (i) 2,027,271 shares of common stock issuable upon
exercise of stock options held by Gary Jones and (ii) 1,969,400 shares of common
stock issuable upon exercise of stock options held by Susan Jones. This does
not
include (i) 983,333 shares underlying options owned by Gary Jones which are
not
exercisable within 60 days of August 10, 2005; and (ii) 645,333 shares
underlying options owned by Susan Jones which are not exercisable within 60
days
of August 10, 2005.
(4)
This
figure represents:
(i)
6,026,598 shares owned by Ginola Limited, which include 1,719,326 shares held
indirectly by Rainbow Gate Corporation, 650,800 shares owned by Ogier
Trustee(Jersey) Limited, as trustee, 119,161 shares owned by Chelsea Trust
Company Limited, as trustee, and 396,223 shares owned by Crestflower
Corporation. Ginola Limited disclaims beneficial ownership of the shares owned
by Crestflower Corporation, Ogier Trustee (Jersey) Limited, as trustee, and
Chelsea Trust Company Limited, as trustee; and
(ii)
warrants held by Ginola Limited to purchase 2,628,197 common shares, which
includes warrants to purchase 297,419 shares held by Rainbow Gate Corporation,
in which the sole shareholder of Ginola Limited is also the sole shareholder
of
Rainbow Gate Corporation, and warrants to purchase 325,400 shares owned by
Ogier
Trustee (Jersey) Limited, as trustee. Ginola Limited disclaims beneficial
ownership of the shares owned by Ogier Trustee (Jersey) Limited, as
trustee.
(5)
This
figure includes 297,419 shares underlying warrants.
(6)
This
figure includes 1,168,985 common stock shares issuable upon exercise of stock
options, and does not include 258,333 shares underlying options owned by Dr.
K.
C. Park which are not exercisable within 60 days of August 10,
2005.
(7)
This
figure represents 639,093 shares owned by Mr. Rivkin, warrants held by Mr.
Rivkin to purchase 244,803 shares of common stock, and 330,000 common stock
shares issuable upon exercise of stock options.
(8)
This
figure includes 325,400 shares underlying warrants.
(9)
This
figure represents 191,984 shares owned by Mr. Cronson, of which 17,688 are
owned
by the Evelyn Sharpe Foundation in which Mr. Cronson is a board member, and
120,974 are owned by a family member wherein Mr. Cronson disclaims ownership.
215,673, shares underlying warrants, and 100,000 shares underlying options
held
directly and indirectly by Paul Cronson. This includes (i) 42,857 shares
underlying warrants held indirectly by a family member wherein Mr. Cronson
disclaims ownership; and (ii) 43,651 shares underlying warrants held indirectly
by Larkspur Corporation of which he is the Managing Director.
(10)
This
figure represents shares underlying options.
(11)
This
figure represents 4,160 owned by Mr. Atherly and 133,333 shares underlying
options. This figure does not include 866,667 shares of common stock issuable
upon exercise of stock that are not presently exercisable and are not
exercisable within 60 days of August 10, 2005.
(12)
This
figure represents shares underlying options.
(13)
This
figure represents shares underlying options.
(14)
This
figure represents shares underlying options.
(15)
This
figure includes (i) warrants to purchase 460,476 shares of common stock, and
(ii) 6,321,489 shares of common stock issuable upon exercise of stock
options.
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 Class A Directors”
on
page
17.
How
often did the Board meet during fiscal 2004?
During
2004, the Board of Directors held 7 meetings. Each director attended no fewer
than 75% of the aggregate of the total number of meetings of the Board and
the
total number of meetings held by all committees on which such director served.
The Board also approved certain actions by unanimous written
consent.
What
committees has the Board established?
The
Board
of
Directors
has
standing Audit, Compensation, and Governance and Nominating Committees.
Information concerning the membership and function of each committee is as
follows:
BOARD
COMMITTEE MEMBERSHIP
|
Name
|
Audit
Committee
|
|
Governance
and
Nominating Committee
|
|
Gary
W. Jones
|
|
|
|
|
Claude
Charles
|
*
|
|
|
|
Paul
Cronson (1)
|
*
|
|
|
|
Irwin
Engelman
|
**
|
|
|
|
Jacob
Goldman
|
|
**
|
**
|
|
Rear
Admiral Thomas Paulsen, USN (Ret.)
|
|
*
|
*
|
|
Jack
Rivkin (2)
|
*
|
*
|
|
|
Dr.
Jill Wittels
|
|
|
*
|
*
Member
of Committee
**
Chairman of Committee
(1)
The
Board of Directors has determined that Paul Cronson, due to Larkspur
Corporation’s role in certain of the Company’s financings, no longer meets the
“independent director” requirements of Section 121(A) of the American Stock
Exchange Company Guide and can no longer serve as a member of the Company’s
audit committee. Accordingly, immediately following the Annual Meeting, the
Board of Directors will appoint Thomas Paulsen as the third independent director
to the audit committee in accordance with Section 121(B)(2) of the American
Stock Exchange Company Guide.
(2)
Jack
Rivkin is retiring from the Board of Directors, as announced at the time of
Mr.
Engelman’s election to the Board. Mr. Engelman has assumed Chairmanship of the
Audit Committee and Dr. Goldman has assumed Chairmanship of the Compensation
Committee.
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 2004 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, Board has determined
that, with the exception of Mr. Cronson, each of the members of the Audit
Committee is unrelated, an outside member with no other affiliation with the
Company and is independent as defined by the American Stock Exchange. The Board
has determined that Mr. Engelman is an “audit committee financial expert” as
defined by the SEC. During 2004, the Audit Committee
held
5
meetings.
Compensation
Committee.
The
Compensation Committee determines matters pertaining to the compensation and
expense reporting of certain executive officers of the Company, and administers
the Company's stock option, incentive compensation, and employee stock purchase
plans. During 2004, the Compensation Committee held 2 meetings.
Nomination
of Directors
As
provided in its charter and our company’s corporate governance principles, the
Governance and Nominating Committee is responsible for identifying individuals
qualified to become directors. The Governance and Nominating Committee seeks
to
identify director candidates based on input provided by a number of sources,
including (1) the Governance and Nominating Committee members, (2) our other
directors, (3) our stockholders, (4) our Chief Executive Officer or Chairman,
and (5) third parties such as professional search firms. In evaluating potential
candidates for director, the Nominating and Corporate Governance Committee
considers the entirety of each candidate’s credentials.
Qualifications
for consideration as a director nominee may vary according to the particular
areas of expertise being sought as a complement to the existing composition
of
the Board of Directors. However, at a minimum, candidates for director must
possess:
|
|
•
|
|
high
personal and professional ethics and integrity;
|
|
|
•
|
|
the
ability to exercise sound judgment;
|
|
|
•
|
|
the
ability to make independent analytical inquiries;
|
|
|
•
|
|
a
willingness and ability to devote adequate time and resources to
diligently perform Board and committee duties; and
|
|
|
•
|
|
the
appropriate and relevant business experience and acumen.
|
In
addition to these minimum qualifications, the Governance and Nominating
Committee also takes into account when considering whether to nominate a
potential director candidate the following factors:
|
|
•
|
|
whether
the person possesses specific industry expertise and familiarity
with
general issues affecting our business;
|
|
|
•
|
|
whether
the person’s nomination and election would enable the Board to have a
member that qualifies as an “audit committee financial expert” as such
term is defined by the Securities and Exchange Commission (the “SEC”) in
Item 401 of Regulation S-K;
|
|
|
•
|
|
whether
the person would qualify as an “independent” director under the listing
standards of the American Stock Exchange;
|
|
|
•
|
|
the
importance of continuity of the existing composition of the Board
of
Directors to provide long term stability and experienced oversight;
and
|
|
|
•
|
|
the
importance of diversified Board membership, in terms of both the
individuals involved and their various experiences and areas of expertise.
|
The
Governance and Nominating Committee will consider director candidates
recommended by stockholders provided such recommendations are submitted in
accordance with the procedures set forth below. In order to provide for an
orderly and informed review and selection process for director candidates,
the
Board of Directors has determined that stockholders who wish to recommend
director candidates for consideration by the Governance and Nominating Committee
must comply with the following:
|
|
·
|
The
recommendation must be made in writing to the Corporate Secretary,
eMagin
Corporation, 10500 NE 8
th
Street, Suite 1400, Bellevue, WA 98004. The recommendation must include
the candidate's name, home and business contact information, detailed
biographical data and qualifications, information regarding any
relationships between the candidate and the Company within the last
three
years and evidence of the recommending person's ownership of the
Company’s
common stock.
|
|
|
·
|
The
recommendation shall also contain a statement from the recommending
shareholder in support of the candidate; professional references,
particularly within the context of those relevant to board membership,
including issues of character, judgment, diversity, age, independence,
expertise, corporate experience, length of service, other commitments
and
the like; and personal references.
|
|
|
·
|
A
statement from the shareholder nominee indicating that such nominee
wants
to serve on the Board and could be considered "independent" under
the
Rules and Regulations of the American Stock Exchange and the Securities
and Exchange Commission ("SEC"), as in effect at that
time.
|
All
candidates submitted by stockholders will be evaluated by the Governance and
Nominating Committee according to the criteria discussed above and in the same
manner as all other director candidates.
How
are directors compensated?
Non-management
directors receive options under the 2003 Stock Option Plan (the "2003 Plan").
Under the 2003 Plan, a grant of options to purchase 60,000 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 price per share equal
to 100% of the market value of one share on the date of grant. Such options
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 60,000 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, granted options based on committee assignments consisting of options
to purchase 5,000 shares per year for each committee assignment, except for
the
audit committee participants who each receive annual options to purchase 15,000
shares.
Code
of Business Conduct and Ethics
We
have
adopted a Code of Business Conduct and Ethics that applies to all of our
directors, officers and employees, including our principal executive officer,
principal financial officer and principal accounting officer. The Code of
Business Conduct and Ethics can be found on our website
at
http://www.emagin.com/investors
.
We
intend
to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an
amendment to, or waiver from, a provision of this Code of Business Conduct
and
Ethics by posting such information on our website, at the address and location
specified above and, to the extent required by the listing standards of the
American Stock Exchange, by filing a Current Report on Form 8-K with the SEC,
disclosing such information.
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
|
|
Ga
ry
Jones
|
50
|
President,
Chief Executive Officer, and Chairman of the Board of
Directors
|
|
K.C.
Park
|
67
|
Executive
Vice President, International Operations
|
|
Susan
K. Jones
|
53
|
Chief
Strategy and Marketing Officer and Secretary
|
|
John
Atherly
|
46
|
Chief
Financial Officer
|
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 provide incentives and reward both short and long 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 believes 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.
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 as of December 31, 2004 was $305,090, the balance of
deferred pay in the amount of $140,798, as well as a reimbursement for
relocation expenses of $46,636. Mr. Jones was paid the balance of his deferred
pay through the application of these amounts to the exercise of options. In
May
2004, Mr. Jones was granted 1,200,000 shares as part of a company-wide bonus
program. In 2004,
Mr.
Jones
invested a higher amount of cash into eMagin Corporation, by exercising options
which had been granted in prior years, than was paid to him during 2004 as
salary.
Compensation
Committee
Dr.
Jacob
Goldman (Chairman)
Thomas
Paulsen
Compensation
Committee interlocks and insider participation
None
of
the members of the Compensation Committee 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, 2004, were (i) the Chief Executive
Officer of the Company and (ii) the other most highly compensated executive
officers of the Company whose total annual salary and bonus exceeded $100,000
(collectively, the "named executive officers").
|
|
|
|
|
|
|
|
|
Long-Term
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
Other
Annual
|
Awards
(Securities
|
|
Name
and Positions
|
Year
|
Salary
|
Bonus
|
|
Compensation
|
Underlying
Options)
|
|
Gary
W. Jones
|
President,
Chief Executive
|
2004
|
305,090
|
0
|
(1)
|
46,636
|
1,200,000
|
|
|
|
Officer,
Chairman, and
|
2003
|
305,090
|
0
|
|
0
|
516,260
|
|
|
|
Director
|
2002
|
297,260
|
0
|
|
0
|
3,589,827
|
|
|
|
|
|
|
|
|
|
|
|
Susan
K. Jones
|
Chief
Strategy and Marketing
|
2004
|
245,933
|
0
|
(2)
|
0
|
750,000
|
|
|
|
Officer
and Secretary
|
2003
|
245,933
|
0
|
|
0
|
403,825
|
|
|
|
|
2002
|
239,621
|
0
|
|
0
|
2,293,368
|
|
|
|
|
|
|
|
|
|
|
|
K.C.
Park
|
Executive
Vice President
|
2004
|
168,000
|
0
|
(3)
|
17,200
|
300,000
|
|
|
|
of
International Operations
|
2003
|
168,000
|
0
|
|
0
|
231,697
|
|
|
|
|
2002
|
175,000
|
0
|
|
0
|
938,310
|
|
John
Atherly
|
Chief
Financial Officer
|
2004
|
105,000
|
0
|
(4)
|
0
|
750,000
|
|
|
|
2003
|
N/A
|
0
|
|
0
|
N/A
|
|
|
|
2002
|
N/A
|
0
|
|
0
|
N/A
|
|
|
|
|
|
|
|
|
|
(1)
In
2004, Mr. Jones was paid a base salary 305,090, the balance of deferred pay
in
the
amount of $140,798, as well as a reimbursement for relocation expenses of
$46,636. Mr. Jones was paid the balance of his deferred pay through the
application of these amounts to the exercise of options. In May 2004, Mr. Jones
was granted 1,200,000 shares as part of a company-wide bonus program.
(2)
In
2004, Ms. Jones was paid a base salary of $245,933 and the balance of deferred
pay in the amount of $110,134. Ms. Jones was paid the balance of her deferred
pay through the application of these amounts to the exercise of options. In
May
2004, Ms. Jones was granted 750,000 shares as part of a company-wide bonus
program.
(3)
In
2004, Dr. Park was paid a base salary of $168,000, the balance of deferred
pay
in the amount of $63,190, as well as a reimbursement for relocation expenses
of
$17,200. Mr. Park was paid the balance of his deferred pay through the
application of these amounts to the exercise of options. In May 2004, Dr. Park
was granted 300,000 shares as part of a company-wide bonus program.
(4)
Mr.
Atherly's base salary is $210,000. He joined eMagin Corporation in June 2004
and
was paid a salary of $105,000. He was granted 750,000 shares as part of his
hiring package. Of these 750,000 option shares granted, 500,000 shares vest
quarterly over a period of five years. 250,000 shares are target incentive
options based on successful completion of four consecutive EBITA positive
quarters.
(5)
In
2004, Mr. Haug was paid a base salary of $156,000 and the balance of deferred
pay in the amount of $44,835. $10,000 of which was paid through the application
of this amount to the exercise of options. In 2003, he earned a total of
$156,000 where he received partial payment of his salary of $126,111 plus a
partial payment of deferred 2002 salary of $29,889. In 2003, Mr. Haug was
granted 164,394 option shares for continuing to defer the balance of his pay.
In
2002, Mr. Haug earned a total of $156,000 of which $42,287 was deferred. In
October 2002, Mr. Haug was awarded 617,228 option shares which were issued
in
July of 2003 after shareholder approval.
Options/SARs
Grants During Last Fiscal Year
The
following table provides information related to options granted to our named
executive officers during the fiscal year ended December 31, 2004.
|
Name
|
Number
of Securities Underlying
Options
Granted
|
%
of Total Options Granted
in
Fiscal 2004
|
Exercise
Price Per Share
|
Expiration
Date
|
|
Gary
W. Jones (1)
|
1,200,000
|
18%
|
$1.81
|
5/17/09
|
|
Susan
K Jones (1)
|
750,000
|
11%
|
$1.81
|
5/17/09
|
|
John
Atherly (2)
|
500,000
|
7%
|
$1.69
|
6/16/11
|
|
John
Atherly (3)
|
250,000
|
4%
|
N/A
(3)
|
6/16/11
|
|
K.C.
Park (1)
|
300,000
|
4%
|
$1.79
|
5/10/09
|
|
Rick
Haug (1)
|
120,000
|
2%
|
$1.69
|
6/16/09
|
(1)
Options awarded as part of a company-wide bonus program.
(2)
Options awarded as inducement option compensation award to new employees.
(3)
Issued as a performance-based award. The named employee must achieve EBITDA
profitability for 4 consecutive quarters with the options priced at the most
recent American Stock Exchange closing trade price of the stock before the
accomplishment is reported in a 10K or 10Q.
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, 2004 by each of the named
executive officers and the number of shares subject to both exercisable and
unexercisable stock options as of December 31, 2004. The common stock price
at
December 31, 2004 was $1.19 per share.
|
|
Shares
Acquired on Exercise
|
Value
Realized (1)
|
#
of Securities Underlying Unexercised Options at FY-End
Exercisable
|
Unexercisable
|
Value
of Unexercised In-the-money Options at FY-End Exercisable
|
Unexercisable
|
|
Gary
Jones (1)
|
2,792,666
|
$
3,870,534
|
1,460,604
|
1,200,000
|
$
911,469
|
$
0
|
|
Susan
K. Jones (1)
|
1,531,796
|
$
2,123,445
|
1,648,377
|
750,000
|
$
604,641
|
$
0
|
|
K.C.
Park
|
215,057
|
$
177,467
|
1,027,318
|
300,000
|
$ 700,603
|
$
0
|
|
Rick
Haug
|
91,777
|
$
171,164
|
920,774
|
120,000
|
$
621,583
|
$
0
|
|
John
Atherly (2)
|
0
|
$
0
|
0
|
750,000
|
$
0
|
$
0
|
(1)
Value
Realized is calculated based upon the spread between the market value of the
common stock on the date of exercise minus the exercise price. The Company
received $1,175,447 upon exercise of the options from Mr. Jones and Mrs. Jones.
Mr. Jones and Mrs. Jones invested more cash into eMagin Corporation during
2004
by exercising options which had been granted in prior years than was paid to
them during 2004 as salaries.
(2)
Performance based award is not exercisable at December 31, 2004. The value
of
this award cannot be ascertained at this date due to the fact that the exercise
price will not be determined until the target is reached.
Compliance
with internal Revenue Code Section 162(m) disallows a tax deduction to publicly
held companies for compensation paid to certain of their executive officers
to
the extent that such compensation exceeds $1.0 million per covered officer
in
any fiscal year. The limitation applies only to compensation that is not
qualified performance based compensation under the IRS code.
Executive
Employment Agreements
We
currently have no Employment Agreements in place with any officers of the
company.
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 also provides oversight and review of the Company’s senior executives’
expense reporting.
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 Eisner 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
).
Audit
Fees and All Other Fees: The aggregate fees billed for the audit of eMagin’s
annual financial statements and the review of Forms 10-Q for the 2004 fiscal
year were $93,697. Aggregate fees billed for all other services rendered by
Eisner LLP for the 2004 fiscal year were $60,969. Aggregate fees billed for
all
other services rendered by Grant Thornton for the 2004 fiscal year were $31,000.
The Audit Committee has considered whether the provision for services covered
by
fees other than audit fees is compatible with maintaining the principal
auditor’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-KSB for the fiscal years ended December 31, 2004, 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
Eisner LLP as the Company’s independent auditors for 2005, and the Board
concurred in its recommendation.
Audit
Committee
:
Irwin
Engelman (Chairman)
Claude
Charles
Paul
Cronson
On
April
25, 2003, eMagin Corporation and a group of several accredited institutional
and
individual investors (collectively, the "Investors") entered into a Global
Restructuring and Secured Note Purchase Agreement (the "Secured Note Purchase
Agreement") dated as of April 25, 2003 (the "Closing Date") whereby Investors
agreed to lend eMagin $6,000,000 in exchange for (i) the issuance of $6,000,000
principal amount of 9.00% Secured Convertible Promissory Notes due on November
1, 2005 (the "Secured Notes") and (ii) Warrants (the "Warrants") to purchase
an
aggregate of 7,749,921 shares of common stock of eMagin (subject to certain
customary anti-dilution adjustments), which Warrants are exercisable for a
period of three (3) years. Mr. Rivkin, who at the time of the transaction was
a
member of our Board of Directors, participated as an investor in the transaction
and invested $125,000 in the Company. In return for such investment, Mr. Rivkin
received (i) a Secured Convertible Promissory Note in an aggregate principal
amount of $125,000, and (ii) warrants exercisable for 161,456 of our common
shares. In addition, Stillwater LLC, an entity controlled by Mr. Mortimer D.A.
Sackler, agreed to invest an aggregate of $2,600,000 under the transaction
and
received (i) Secured Convertible Promissory Notes in an aggregate principal
amount of $2,600,000, and (ii) warrants exercisable for 3,358,300 of our common
shares. As part of the transactions, Messrs. Sackler and Rivkin, who were the
holders of an aggregate of $1,325,000 principal amount of secured notes that
were purchased pursuant to a secured note purchase agreement entered into as
of
November 27, 2001 (collectively, the "Original Secured Notes"), and Mr. Sackler,
who additionally was the holder of a $200,000 principal Bridge Note, agreed
to
(a) amend their respective Original Secured Notes and Bridge Note issued to
them, (b) terminate the Security Agreement dated November 20, 2001 that was
entered into in connection with the purchase of the Original Secured Notes
and
the Security Agreements dated June 20, 2002 that were entered into in connection
with the purchase of the Bridge Note and allow the new investors to enter into
a
New Security Agreement (as defined below) with them on a pari passu basis in
order for the Company to continue its operations as a developer of virtual
imaging technology.
The
amendments to the Original Secured Notes and Bridge Note included (i) amending
the Bridge Note so as to provide that the Bridge Note shall be convertible
and
will have the same conversion price as the Notes issued pursuant to the Secured
Note Purchase Agreement, (ii) extending the maturity dates of the Original
Secured Notes and Bridge Note from June 30, 2003 to November 1, 2005, and (iii)
revising and clarifying certain of the other terms and conditions of the
Original Secured Notes and Bridge Note, including provisions relating to
interest payments, conversions, default and assignments of the Original Secured
Notes and Bridge Note. On April 25, 2003, Mr. Sackler transferred all of his
holdings in the Company to Stillwater LLC, a limited liability company in which
Mr. Sackler is the sole member.
In
February 2004, the Company and all of the holders of the Secured Convertible
Notes (the "Notes"), which were due in November 2005, entered into an agreement
whereby the holders agreed to an early conversion of 100% of the principal
amount of the Notes aggregating $7.825 million, together with all of the accrued
interest of approximately $742,000 on the Notes, into 11,394,621 shares of
common stock of eMagin. The listing of the shares issuable pursuant to such
agreement was approved by the American Stock Exchange.
In
consideration of the Noteholders agreeing to the early conversion of the Notes,
eMagin has agreed to issue the Noteholders warrants to purchase an aggregate
of
2.5 million shares of common stock (the "warrants"), which warrants are
exercisable at a price of $2.76 per share. 1.5 million of the warrants are
exercisable until the later of (i) twelve (12) months from the date upon which
a
registration statement covering the shares issuable upon exercise of the
Warrants is declared effective by the Securities and Exchange Commission, or
(ii) December 31, 2005. The remaining 1.0 million of the warrants are
exercisable until four (4) years from the date upon which the registration
statement covering such shares is declared effective by the Securities and
Exchange Commission. Stillwater LLC, a limited liability company and a
beneficial owner of more than five percent of the outstanding shares of eMagin's
common stock, held an aggregate of $4 million of the notes converted. Ginola
Limited, a beneficial owner of more than five percent of the outstanding shares
of eMagin's common stock, held an aggregate of $1.3 million of the notes
converted.
In
connection with the above conversion, eMagin also entered into a Registration
Rights Agreement with the holders of the Notes providing the holders with
certain registration rights under the Securities Act of 1933, as amended, with
respect to the common stock issuable upon exercise of the warrants.
eMagin is party to a financial advisory and investment banking agreement with
Larkspur Capital Corporation. Paul Cronson, a director of eMagin, is a founder
and shareholder of Larkspur Capital Corporation. Larkspur Capital Corporation
received as compensation for financial advisory and investment banking services
in connection with the January 2004 private placement a cash fee of 6 3/4%
of
the funds raised for a fee of $283,503 and warrants to purchase eMagin shares
of
common stock equal to 2.5% of the cash netted to eMagin for a total of 43,651
common stock purchase warrants exercisable at $2.41 per share.
In
August
2004, eMagin and the certain of the holders of its outstanding Class A, B and
C
common stock purchase warrants entered into an agreement pursuant to which
eMagin and the holders of the warrants agreed to the re-pricing and exercise
of
an aggregate of 500,952, 862,085 and 736,857 currently outstanding Class A,
B
and C common stock purchase warrants. As a condition to the transaction, the
holders of the warrants agreed to limit the right of participation that they
were granted pursuant to Section 4.11 of the Securities Purchase Agreement,
dated January 9, 2004, under which they originally purchased such
securities.
Specifically,
the Company agreed to lower the exercise price of such warrants from $1.74,
$1.74 and/or $1.90, respectively, to $.90 per share, in consideration of the
holders agreeing to: (i) limit their right of participation with respect to
any
proposed financing transaction to the maximum number of shares that AMEX will
allow the Investors to purchase in any subsequent financing without the Company
being required to seek shareholder approval (provided, however, that in no
event
will the participation of all investors of the January 2004 financing in any
such subsequent financing exceed 35% of such financing); and (ii) immediately
exercise the re-priced Class A, B and/or C common stock purchase
warrants.
As
a
result of the transaction, the holders have agreed to re-price and exercise,
for
an aggregate of approximately $1,889,900, an aggregate of 2,099,894 Class A,
B
and/or C common stock purchase warrants.
The
Class
B common stock purchase warrants were due to expire on August 12, 2004, while
the Class A and C common stock purchase warrants remain exercisable until
January 9, 2009 and February 12, 2005, respectively. Following the completion
of
the transaction, the Company continues to have outstanding an aggregate of
1,213,352 and 184,212 Class A and C common stock purchase warrants,
respectively. The remaining outstanding unexercised Class A and C common stock
purchase warrants continue to be exercisable as per their original
terms.
On
October 21, 2004, eMagin entered into a Securities Purchase Agreement pursuant
to which we sold and issued 10,259,524 shares of common stock, par value $0.001
per share, and Series F Common Stock Purchase Warrants to purchase our common
stock to purchasers who are a party to the Securities Purchase Agreement for
an
aggregate purchase price of $10,772,500. The common shares were priced at $1.05.
The common shares, Series F Warrants and common shares issuable upon exercise
of
the warrants were drawn-down off of a shelf registration statement which was
filed by us on May 5, 2004, and declared effective by the Securities and
Exchange Commission on June 10, 2004.
The
Series F Warrants are exercisable from April 25, 2005 until April 25, 2010
to
purchase up to 1,370,238 shares of common stock at an exercise price of $1.21
per share, subject to adjustment upon the occurrence of specific events,
including stock dividends, stock splits, combinations or reclassifications
of
our common stock or distributions of cash or other assets. In addition, the
Series F Warrants contain provisions protecting against dilution resulting
from
the sale of additional shares of our common stock for less than the exercise
price of the Series F Warrants, or the market price of the common stock, on
the
date of such issuance or sale. The Series F Warrants do not entitle the holders
to any voting or other rights as a stockholder until such Series F Warrants
are
exercised and common stock is issued. Under the terms of the offering, in no
event shall any holder of the Series F Warrants become the beneficial owner
of
more than 4.99% of the number of shares of our common stock outstanding
immediately after giving effect to such issuance. An exercise that is limited
by
this provision may be permitted at a later date if, on such date, such exercise
would not cause such beneficial ownership to exceed 4.99%. This limitation
may
be waived, in whole or in part, by a holder of the Series F Warrants upon,
at
the election of such holder, not less than 61 days' prior notice to us, and
the
provisions of this limitation shall continue to apply until such 61st day (or
such later date, as determined by such holder, as may be specified in such
notice of waiver); provided, however, that four of the investors in this
offering delivered a waiver of this limitation to us prior to the closing date
of this offering, which waiver took effect as of the closing date. In addition,
in no event shall the Company issue to holders of the Series F Warrants, without
first obtaining shareholder approval, shares of common stock which, in the
aggregate, would exceed 19.9% of the number of shares outstanding on the closing
date. The rights of the holder of the Series F Warrants are more fully set
forth
in Exhibit 4.1 to our Form 8-K filed with the SEC on October 26,
2004.
On
October 29, 2004, eMagin entered into a Securities Purchase Agreement (pursuant
to which we sold and issued, on November 3, 2004, 2,740,476 shares of common
stock, par value $0.001 per share, and Series F Common Stock Purchase Warrants
to purchase our common stock to purchasers who are a party to the Securities
Purchase Agreement for an aggregate purchase price of approximately $2,877,500.
The common shares were priced at $1.05. The Company also issued 75,000 shares
to
its legal counsel in consideration of legal services rendered in connection
with
a recently completed offering. The common shares, Series F Warrants, common
shares issuable upon exercise of the warrants and common shares issued to its
legal counsel were drawn-down off of a shelf registration statement which was
filed by us on May 5, 2004, and declared effective by the Securities and
Exchange Commission on June 10, 2004. The Series F Warrants were issued under
the same terms as our October 21, 2004 financing described above.
ACTIONS
TO BE TAKEN AT THE MEETING
ITEM
1
ELECTION
OF CLASS A DIRECTORS
At
the 2001 Annual Meeting of Stockholders held on July 16, 2001, the stockholders
approved the establishment of a classified board of directors, divided into
three classes having staggered terms of three years each. Under the classified
board provision, the board of directors was divided into three classes,
designated Class A, Class B and Class C. Any director in Class A will hold
office until the 2005 annual meeting of stockholders; any director in Class
B
will hold office until the 2006 annual meeting of stockholders; and any director
in Class C will hold office until the 2007 annual meeting of stockholders;
and,
in each case, until their successors are duly elected and qualified or until
their earlier resignation, removal from office or death. As a result, only
one
class of directors will be elected at each annual meeting of stockholders,
with
the remaining classes continuing their respective three-year terms.
At
the
Annual Meeting, the stockholders will elect two Class A directors to serve
until
the 2008 Annual Meeting of Stockholders or until their successors are elected
and qualified. In the event the nominees are unable or unwilling to serve as
directors at the time of the Annual Meeting, the proxies will be voted for
any
substitute nominees designated by the present Board or the proxy holders to
fill
such vacancy, or for the balance of the nominees named without nomination of
a
substitute, or the size of the Board will be reduced in accordance with the
Bylaws of the Company. The Board has no reason to believe that the persons
named
below will be unable or unwilling to serve as nominees or as directors if
elected.
Assuming
a quorum is present, the two nominees receiving the highest number of
affirmative votes of shares entitled to be voted for such persons will be
elected as directors of the Company for the ensuing three years. Unless marked
otherwise, proxies received will be voted “FOR” the election of the nominees
named below. In the event that additional persons are nominated for election
as
directors, the proxy holders intend to vote all proxies received by them in
such
a manner as will ensure the election of the nominees listed below, and, in
such
event, the specific nominees to be voted for will be determined by the proxy
holders.
Information
With Respect to Director Nominees
Listed
below are the nominees for Class A directors, with information showing the
principal occupation or employment of the nominees for director, the principal
business of the corporation or other organization in which such occupation
or
employment is carried on, and such nominees’ business experience during the past
five years. Such information has been furnished to the Company by the director
nominees:
Class
A Nominees
|
Name
|
Age
|
Class
|
Position
|
|
Gary
W. Jones
|
50
|
A
|
President,
Chief Executive Officer and Director
|
|
Irwin
Engelman
|
70
|
A
|
Director
|
|
Gary
W. Jones
|
Director
since 1992
|
Gary
W.
Jones has served as Chairman, Chief Executive Officer, and President of eMagin
since 1992, and as Acting Chief Financial Officer from August 2002 to June
2004.
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/eMagin
Corporation, Mr. Jones served as Director of the Device Development and
Processing division at MCNC Center for Microelectronics in North Carolina from
1985 to 1992. From 1977 to 1985 Mr. Jones managed both semiconductor
manufacturing and research and development programs at Texas Instruments. Mr.
Jones received a B.S. in electrical engineering and physics from Purdue
University. Mr. Jones has served as a member of the Executive Committee of
the
Board of the United States Display Consortium.
|
Irwin
Engelman
|
Director
since 2005
|
Irwin
Engelman has served as a director since May of 2005. Irwin Engelman has been
a
director of New Plan Excel Realty Trust, Inc., a publicly-traded company that
is
one
of
the nation's largest owners and managers of community and neighborhood shopping
centers, since 2003. He is currently a consultant to various industrial
companies
.
From
November 1999 until April 2002, he served as Executive Vice President
and Chief Financial Officer of YouthStream Media Networks, Inc., a media
and retailing company serving high school and college markets. From 1992 until
April 1999, he served as Executive Vice President and Chief Financial
Officer of MacAndrews and Forbes Holdings, Inc., a privately-held
financial holding company. From November 1998 until April 1999,
he
also served as Vice Chairman, Chief Administrative Officer and a director of
Revlon, Inc., a publicly-traded consumer products company. From 1978
until
1992, he served as an executive officer of various public companies including
International Specialty Products, Inc. (a subsidiary of GAF Holdings
Inc.),
CitiTrust Bancorporation, General Foods Corporation and The Singer Company.
He
is currently a director of Sanford Bernstein Mutual Funds, a publicly-traded
company, and a member of its audit committee. Mr. Engelman received a BBA in
Accounting from Baruch College in 1955 and a Juris Doctorate from Brooklyn
Law
School in 1961. He was admitted practice law in the State of New York in 1962.
In addition, he was licensed as a CPA in the State of New York in
1966.
Information
With Respect to Continuing Directors
Listed
below are the continuing Class B and C directors, with information showing
the
principal occupation or employment of the director, the principal business
of
the corporation or other organization in which such occupation or employment
is
carried on, and such director’s business experience during the past five years.
Such information has been furnished to the Company by the
directors:
|
Name
|
Age
|
Class
|
Position
|
|
Paul
C. Cronson
|
47
|
B
|
Director
|
|
Rear
Admiral Thomas Paulsen, USN (Ret.)
|
68
|
B
|
Director
|
|
Claude
Charles
|
67
|
C
|
Director
|
|
Dr.
Jacob (Jack) Goldman
|
82
|
C
|
Director
|
|
Dr.
Jill Wittels
|
55
|
C
|
Director
|
|
Paul
C. Cronson
|
Director
Since 2003
|
Paul
Cronson has served as a director since July of 2003. Mr. Cronson is Managing
Director of Larkspur Capital Corporation, which he founded in 1992. Larkspur
is
a broker dealer that is a member of the National Association of Securities
Dealers and advises companies seeking private equity or debt. Mr. Cronson's
career in finance began in 1979 at Laidlaw, Adams Peck where he worked in asset
management and corporate finance. From 1983 to 1985, Mr. Cronson worked with
Samuel Montagu Co., Inc. in London, where he marketed eurobond issuers and
structured transactions. Subsequently from 1985 to 1987, he was employed by
Chase Investment Bank Ltd., where he structured international debt securities
and he developed "synthetic asset" products using derivatives. Returning to
the
U.S., he joined Peter Sharp Co., where he managed a real estate portfolio,
structured financings and assisted with capital market investments from until
1992. Mr. Cronson received his BA from Columbia College in 1979, and his MBA
from Columbia University School of Business Administration in 1982. He is on
the
Board of Umbanet, in New York City, a private company specializing in email
based distributed applications and secure messaging.
|
Rear
Admiral Thomas Paulsen, USN (Ret.)
|
Director
Since 2003
|
Admiral
Thomas Paulsen has served as a director since July 2003. Admiral Thomas Paulsen
served for over 34 years in the US Navy in Command Control, Communications
and
Intelligence (C3I), Telecommunications, Network Systems Operations, Computers
and Computer Systems Operations until his retirement in 1994 as a Rear Admiral.
He then served as Chief Information Officer for Williams Telecommunications.
Admiral Paulsen has served as a director Umbanet, Inc. since 2002. Since 2000,
Admiral Paulsen has served on the Board of Governors of the Institute of
Knowledge Management, George Washington University. Since 1994, he has served
as
the Chairman of the Advisory Board and President Emeritus of the Center for
Advanced Technologies (CAT) and a Managing Partner on the National Knowledge
and
Intellectual Property Management Taskforce, a not-for-profit company
headquartered in Dallas, Texas, and is a member of the Board of Governors for
the Japanese American National Museum, Los Angeles, California.
|
Claude
Charles
|
Director
since 2000
|
Claude
Charles has served as a director since April of 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 in Singapore. Mr. Charles has also served
as a director and in senior executive positions at SG Warburg and Co. Ltd.,
Peregrine Investment Holdings, Trident International Finance Ltd., and Dow
Banking Corporation. Mr. Charles holds a B.S. in economics from the Wharton
School at the University of Pennsylvania and a M.S. in international finance
from Columbia University.
|
Dr.
Jack Goldman
|
Director
since 2003
|
Dr.
Jack
Goldman joined our board of directors in February of 2003. Dr. Goldman is the
retired senior vice-president for R&D and chief technical officer of the
Xerox Corporation. While at Xerox, he founded and directed the celebrated Xerox
PARC laboratory. Prior to joining Xerox, Dr. Goldman was Director of Ford Motor
Company's Scientific Research Laboratory. He also served as Visiting Edwin
Webster Professor at MIT. Dr. Goldman presently serves on the Boards of
Directors of Umbanet Inc. and Medis Technologies Inc., and he has served on
the
Boards of Xerox, General Instrument Corp., United Brands, Intermagnetics
General, GAF and Bank Leumi USA. He has also been active in government and
professional advisory roles including service on the US Dept. of Commerce
Technical Advisory Board, chairman of Statutory Visiting Committee of The
National Bureau of Standards (National Institute of Standards and Technology),
vice-president of the American Association for the Advancement of Science and
president of the Connecticut Academy of Science and Engineering.
|
Dr.
Jill Wittels
|
Director
since 2003
|
Dr.
Jill
Wittels has served as a director since July 2003. Since February 2001, Dr.
Wittels has been the Corporate Vice President, Business Development for L-3
Communications, a merchant supplier of intelligence, surveillance and
reconnaissance systems and products, secure communications systems and products,
avionics and ocean products, training devices and services, microwave components
and telemetry, instrumentations, space and navigation products. Dr. Wittels
has
over 25 years of management, engineering and leadership experience. Prior to
L-3
Communications, Dr. Wittels worked for 21 years with BAE Systems and its
predecessor companies, including Lockheed Martin, Loral and Honeywell. Most
recently, she served as vice president and general manager of BAE Systems'
Information and Electronic Warfare Systems/Infrared and Imaging Systems
division. Dr. Wittels began her career as a systems engineer and has also served
as a Congressional Fellow for the American Physical Society, a research
associate at Massachusetts Institute of Technology and a senior visiting
scientist for the National Academy of Sciences. Dr. Wittels received a Bachelor
of Science degree in Physics from MIT in 1970 and received a PhD in Physics
from
MIT in 1975. She serves on the Board of Overseers for the Department of Energy's
Fermi National Accelerator Lab, is a member of the American Physical Society
and
a member of the American Astronomical Society. Dr. Wittels presently serves
on
the Boards of Directors of Innovative Micro Technology Inc. and of Millivision
Inc.
Required
Vote
Each
director will be elected by plurality of the votes cast by the stockholders
present in person or represented by proxy at the Annual Meeting.
RECOMMENDATION
OF THE BOARD FOR PROPOSAL NO. 1:
THE
BOARD RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE ABOVE
NOMINEES.
ITEM
2
APPROVAL
OF THE 2005
EMPLOYEE
STOCK PURCHASE PLAN
At
the
Annual Meeting, the Company's stockholders are being asked to approve the 2005
Employee Stock Purchase Plan (“2005 Employee Stock Purchase Plan”). The Board
has unanimously approved the 2005 Employee Stock Purchase Plan and has directed
that it be submitted for the approval of the stockholders at the annual meeting.
The 2005 Employee Stock Purchase Plan will become effective on the date of
shareholder approval (the “Effective Date”).
The
following description of the 2005 Employee Stock Purchase Plan is only a summary
of the important provisions of the 2005 Employee Stock Purchase Plan and does
not contain all of the terms and conditions of the 2005 Employee Stock Purchase
Plan. A copy of the 2005 Employee Stock Purchase Plan is attached to this Proxy
Statement as “Appendix A.”
The
purpose of the
2005
Employee 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
2005
Employee 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, 2006, January 1, 2007, and January
1, 2008, by 750,000 shares. The
2005
Employee 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. The
2005
Employee 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 February 15 and August 15) 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 2005 Employee Stock Purchase Plan. Common
stock will be purchased for each participant in the 2005 Employee Stock Purchase
Plan
as
of the
last day of each accumulation period (generally August 14 and February 14)
within an offering period with the money deducted from their paychecks during
the accumulation period. Offering periods under the 2005 Employee Stock Purchase
Plan will begin on February 15 and August 15 of each calendar year while the
2005 Employee Stock Purchase Plan
is
in
effect, and each offering period is 24 months in length, unless the Compensation
Committee determines otherwise. 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.
A
participant may elect to have payroll deductions made under the 2005 Employee
Stock Purchase Plan for the purchase of common stock in an amount not to exceed
15% of the participant's compensation.
Compensation
for purposes of the 2005 Employee 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
2005
Employee 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
2005 Employee 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 2005 Employee 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 2005 Employee Stock Purchase Plan
or
may be withdrawn by the participant.
A
participant may withdraw from participation in the 2005 Employee 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 2005 Employee 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 2005 Employee 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
2005 Employee 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 2005 Employee
Stock Purchase Plan, unless the 2005 Employee 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 2005 Employee Stock
Purchase Plan at any time, except that certain amendments may be made only
with
the approval of the stockholders of eMagin.
However,
participants will be taxed on amounts withheld from their compensation under
2005 Employee 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 2005 Employee
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 2005 Employee
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.
In
view
of the complexity of the tax aspects of transactions involving the purchase
of
Common Stock under the 2005 Employee Stock Purchase Plan, and because the impact
of taxes will vary depending on individual circumstances, each participant
purchasing shares of common stock under the 2005 Employee Stock Purchase Plan
should consult their own tax advisor to determine the tax consequences in such
participant’s particular circumstances.
New
plan benefits
Participation
in the 2005 Employee 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
August 10, 2005 there are approximately 90 employees (representing all of the
employees of the Company and its subsidiaries) who would be eligible to
participate in the 2005 Employee Stock Purchase Plan if the plan had been in
effect on that date.
Required
Vote
Approval
of the 2005 Employee Stock Purchase Plan 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.
RECOMMENDATION
OF THE BOARD FOR PROPOSAL NO. 2:
ITEM
3
AMENDMENT
TO THE 2003 EMPLOYEE STOCK OPTION PLAN TO PROVIDE
FOR
GRANTS OF SHARES OF COMMON STOCK IN ADDITION TO OPTIONS
TO
PURCHASE SHARES OF COMMON STOCK
At
the
Annual Meeting, the Company's stockholders are being asked to approve an
amendment to the 2003 Employee Stock Option Plan (the "2003 Option Plan") to
provide for grants of shares of common stock in addition to options to purchase
shares of common stock. The Board has unanimously approved such amendment and
has directed that it be submitted for the approval of the stockholders at the
Annual Meeting. The amendment the 2003 Option Plan to provide for grants of
shares of common stock in addition to options to purchase shares of common
stock
will become effective on the date of shareholder approval (the “Effective
Date”).
PURPOSE
The
primary purpose of the 2003 Option Plan is to attract and retain the best
available personnel for the Company in order to promote the success of the
Company's business and to facilitate the ownership of the Company's stock by
employees. As stated below, we are proposing to issue shares of common stock,
in
addition to certain options to purchase shares of common stock, upon shareholder
approval of this proposal. The options and shares of common stock being issued
were and will continue to be required to attract new personnel. In the event
that the amendment to the 2003 Option Plan is not adopted, the Company may
have
considerable difficulty in retaining and attracting qualified personnel,
officers, directors and consultants.
The
following description of the 2003 Option Plan is a summary of the provisions
of
the 2003 Option Plan, and does not contain all of the terms and conditions
of
the 2003 Option Plan. A copy of the 2003 Option Plan is attached to this Proxy
Statement as “Appendix B.” The 2003 Option Plan and the right of participants to
make purchases thereunder are intended to qualify as an "employee stock purchase
plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the
"Code"). The 2003 Option Plan is not a qualified deferred compensation plan
under Section 401(a) of the Internal Revenue Code and is not subject to the
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
SHARE
RESERVATION
We
have
reserved a total of 9,200,000 shares of our common stock for issuance under
the
2003 Option Plan. On January 1, 2004, the share reserve was automatically
increased by 2,000,000 shares. On January 1 of each year for a period of
nine
(9) years, commencing on January 1, 2005, the aggregate number of shares
of
Common Stock that is available for issuance under the 2003 Option Plan shall
automatically be increased by three percent (3%) of the diluted shares
outstanding; provided, however, that the Board, from time to time, may provide
for a lesser increase in the aggregate number of shares of Common Stock that
is
available for issuance under the Plan.
However,
the automatic increase is subject to reduction by the board. If the recipient
of
an option grant or stock award does not purchase the shares subject to the
option grant or stock award before it expires or terminates, the shares that
are
not purchased again become available for issuance under the 2003 Option
Plan.
ADMINISTRATION
The
2003
Option Plan is administered by the Company's Board of Directors as the Board
of
Directors may be composed from time to time. The Board determines all questions
of interpretation of the 2003 Option Plan, and its decisions are final and
binding upon all participants. Any determination by a majority of the members
of
the Board of Directors at any meeting, or by written consent in lieu of a
meeting, shall be deemed to have been made by the whole Board of Directors.
Notwithstanding
the foregoing, the Board of Directors may at any time, or from time to time,
appoint a committee (the "Committee") of at least three members of the Board
of
Directors, and delegate to the Committee the authority of the Board of Directors
to administer the Plan. Upon such appointment and delegation, the Committee
shall have all the powers, privileges and duties of the Board of Directors,
and
shall be substituted for the Board of Directors, in the administration of
the
Plan, subject to certain limitations.
Members
of the Board of Directors who are eligible employees are permitted to
participate in the 2003 Option Plan, provided that any such eligible member
may
not vote on any matter affecting the administration of the 2003 Option Plan
or
the grant of any option or stock award pursuant to it, or serve on a committee
appointed to administer the 2003 Option Plan. In the event that any member
of
the Board of Directors is at any time not a "disinterested person", as defined
in Rule 16b-3(c)(3)(i) promulgated pursuant to the Securities Exchange Act
of
1934, the Plan shall not be administered by the Board of Directors, and may
only
by administered by a Committee, all the members of which are disinterested
persons, as so defined.
ELIGIBILITY
Under
the
2003 Option Plan, options and/or stock awards may be granted to key employees,
officers, directors or consultants of the Company, as provided in the 2003
Option Plan (in the case of a grant of options, the participant is referred
to
herein as an “Optionee” and in the case of a grant of a stock award, the
participant is referred to herein as a “Grantee”).
TERMS
OF OPTIONS AND STOCK AWARDS
The
term
of each Option or stock award granted under the Plan shall be contained in
a
stock option or stock award agreement between the Optionee or Grantee and the
Company and such terms shall be determined by the Board of Directors consistent
with the provisions of the Plan, including the following:
(a)
PURCHASE PRICE. The purchase price of the Common Shares subject to each ISO
shall not be less than the fair market value (as set forth in the 2003 Option
Plan), or in the case of the grant of an ISO to a Principal Stockholder, not
less that 100% of fair market value of such Common Shares at the time such
Option is granted. The purchase price of the Common Shares subject to each
Non-ISO shall be determined at the time such Option is granted, but in no case
less than 85% of the fair market value of such Common Shares at the time such
Option is granted.
(b)
VESTING. The dates on which each Option or stock award (or portion thereof)
shall be exercisable or shall vest and the conditions precedent to such exercise
or vesting, if any, shall be fixed by the Board of Directors, in its discretion,
at the time such Option or stock award is granted.
(c)
EXPIRATION. The Board of Directors, in its discretion, shall fix the expiration
of each Option or stock award, at the time such Option or stock award is
granted; however, unless otherwise determined by the Board of Directors at
the
time such Option or stock award is granted, an Option or stock award shall
be
exercisable for ten (10) years after the date on which it was granted (the
"Grant Date"). Each Option or stock award shall be subject to earlier
termination as expressly provided in the 2003 Option Plan or as determined
by
the Board of Directors, in its discretion, at the time such Option or stock
award is granted.
(d)
TRANSFERABILITY. No Option or stock award shall be transferable, except by
will
or the laws of descent and distribution, and any Option or stock award may
be
exercised during the lifetime of the Optionee or Grantee only by him. No Option
or stock award granted under the Plan shall be subject to execution, attachment
or other process.
(e)
OPTION ADJUSTMENTS. The aggregate number and class of shares as to which Options
or stock award may be granted under the 2003 Option Plan, the number and class
shares covered by each outstanding Option or stock award and the exercise price
or purchase per share thereof (but not the total price), and all such Options
or
stock awards, shall each be proportionately adjusted for any increase decrease
in the number of issued Common Stock resulting from split-up spin-off or
consolidation of shares, additional issuance of shares, or any like capital
adjustment or the payment of any stock dividend. The total number of shares
approved in the 2003 Option Plan would not decrease as a result of the
exercising of options or the purchase of common stock pursuant to a stock award.
Except
as
otherwise provided in the 2003 Option Plan, any Option or stock award granted
shall terminate in the event of a merger, consolidation, acquisition of property
or stock, separation, reorganization or liquidation of the Company. However,
the
Optionee or Grantee shall have the right immediately prior to any such
transaction to exercise his Option or purchase shares of common stock in whole
or in part notwithstanding any otherwise applicable vesting requirements.
(f)
TERMINATION, MODIFICATION AND AMENDMENT. The 2003 Option Plan (but not Options
or stock awards previously granted under the Plan) shall terminate ten (10)
years from the earlier of the date of its adoption by the Board of Directors
or
the date on which the Plan is approved by the affirmative vote of the holders
of
a majority of the outstanding shares of capital stock of the Company entitled
to
vote thereon, and no Option or stock award shall be granted after termination
of
the Plan. Subject to certain restrictions, the Plan may at any time be
terminated and from time to time be modified or amended by the affirmative
vote
of the holders of a majority of the outstanding shares of the capital stock
of
the Company present, or represented, and entitled to vote at a meeting duly
held
in accordance with the applicable laws of the State of Delaware.
FEDERAL
INCOME TAX ASPECTS OF THE 2003 OPTION PLAN
THE
FOLLOWING IS A BRIEF SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION UPON
THE
PARTICIPANTS AND THE COMPANY WITH RESPECT TO THE PURCHASE OF SHARES UNDER THE
2003 OPTION PLAN. THIS SUMMARY DOES NOT PURPORT TO BE COMPLETE AND DOES NOT
ADDRESS THE FEDERAL INCOME TAX CONSEQUENCES TO TAXPAYERS WITH SPECIAL TAX
STATUS. IN ADDITION, THIS SUMMARY DOES NOT DISCUSS THE PROVISIONS OF THE INCOME
TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT
MAY RESIDE, AND DOES NOT DISCUSS ESTATE, GIFT OR OTHER TAX CONSEQUENCES OTHER
THAN INCOME TAX CONSEQUENCES. THE COMPANY ADVISES EACH PARTICIPANT TO CONSULT
HIS OR HER OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PARTICIPATION
IN
THE 2003 OPTION PLAN AND FOR REFERENCE TO APPLICABLE PROVISIONS OF THE CODE.
The
2003
Option Plan and the right of participants to make purchases thereunder are
intended to qualify under the provisions of Sections 421, 422 and 423 of the
Code. Under these provisions, no income will be recognized by a participant
prior to disposition of shares acquired under the 2003 Option Plan.
If
the
shares are sold or otherwise disposed of (including by way of gift) more than
two years after the first day of the offering period during which shares were
purchased (the "Offering Date"), a participant will recognize as ordinary income
at the time of such disposition the lesser of (a) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
of
the shares or (b) 15% of the fair market value of the shares on the first day
of
the offering period. Any further gain or loss upon such disposition will be
treated as long-term capital gain or loss. If the shares are sold for a sale
price less than the purchase price, there is no ordinary income and the
participant has a capital loss for the difference.
If
the
shares are sold or otherwise disposed of (including by way of gift) before
the
expiration of the two-year holding period described above, the excess of the
fair market value of the shares on the purchase date over the purchase price
will be treated as ordinary income to the participant. This excess will
constitute ordinary income in the year of sale or other disposition even if
no
gain is realized on the sale or a gift of the shares is made. The balance of
any
gain or loss will be treated as capital gain or loss and will be treated as
long-term capital gain or loss if the shares have been held more than one year.
In
the
case of a participant who is subject to Section 16(b) of the Exchange Act,
the
purchase date for purposes of calculating such participant's compensation income
and beginning of the capital gain holding period may be deferred for up to
six
months under certain circumstances. Such individuals should consult with their
personal tax advisors prior to buying or selling shares under the 2003 Option
Plan.
The
ordinary income reported under the rules described above, added to the actual
purchase price of the shares, determines the tax basis of the shares for the
purpose of determining capital gain or loss on a sale or exchange of the shares.
The
Company is entitled to a deduction for amounts taxed as ordinary income to
a
participant only to the extent that ordinary income must be reported upon
disposition of shares by the participant before the expiration of the two-year
holding period described above.
RESTRICTIONS
ON RESALE
Certain
officers and directors of the Company may be deemed to be "affiliates" of the
Company as that term is defined under the Securities Act. The Common Stock
acquired under the 2003 Option Plan by an affiliate may be reoffered or resold
only pursuant to an effective registration statement or pursuant to Rule 144
under the Securities Act or another exemption from the registration requirements
of the Securities Act.
REQUIRED
VOTE
The
approval of the amendment to the 2003 Option Plan to provide for grants of
shares of common stock in addition to options to purchase shares of common
stock
requires the affirmative vote of the holders of a majority of the shares of
the
Company's Common Stock present at the Annual Meeting in person or by proxy
and
entitled to vote and constituting at least a majority of the required quorum.
The
proxy
holders intend to vote the shares represented by proxies to approve the
amendment to the 2003 Stock Option Plan.
RECOMMENDATION
OF THE BOARD FOR PROPOSAL NO. 3:
THE
BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE 2003 EMPLOYEE
STOCK
OPTION PLAN TO PROVIDE FOR GRANTS OF SHARES OF COMMON STOCK IN ADDITION TO
OPTIONS TO PURCHASE SHARES OF COMMON STOCK.
ITEM
4
INCREASE
OF THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK ISSUABLE PURSUANT TO THE
2004
NON-EMPLOYEE COMPENSATION PLAN
At
the
Annual Meeting, the Company's stockholders are being asked to approve an
increase in the number of authorized shares of common stock issuable pursuant
to
the 2004 Non-Employee Compensation Plan ("2004 Non-Employee Compensation Plan")
from 1,000,000 to 2,000,000 shares. The Board has unanimously approved such
increase and has directed that it be submitted for the approval of the
stockholders at the annual meeting. The increase in the number of authorized
shares of common stock issuable pursuant to the 2004 Non-Employee Compensation
Plan from 1,000,000 to 2,000,000 shares will become effective on the date of
shareholder approval (the "Effective Date").
The
following description of the 2004 Non-Employee Compensation Plan is only a
summary of the important provisions of the 2004 Non-Employee Compensation Plan
and does not contain all of the terms and conditions of the 2004 Non-Employee
Compensation Plan. A copy of the 2004 Non-Employee Compensation Plan, is
attached to this Proxy Statement as “Appendix C”.
What
Is the Purpose of the 2004 Non-Employee Compensation Plan?
The
purpose of the 2004 Non-Employee Compensation Plan is to help us retain
consultants, professionals, and service providers who provide services to the
Company in connection with, among other things, the Company's obligations as
a
publicly-held reporting company. In addition, we expect to benefit from the
added interest that the awardees will have in our welfare as a result of their
ownership or increased ownership of our Common Stock.
Over
the
last two years, we have been able to engage consultants, professionals, and
service providers by compensating them through the issuance of shares of our
common stock. This afforded us the ability to utilize our cash, at a time when
we were seeking out financing and working with our creditors with respect to
restructuring outstanding obligations, for the more immediate needs that we
had
related to the acquisition of the products and inventory needed to further
our
manufacturing process so as to be able to deliver finished goods to our
customers pursuant to outstanding orders. As we continue to have a significant
backlog of orders, we believe that, for the foreseeable future, it is in our
best interests to be able to continue to engage and compensate such persons
through the payment of our shares of common stock. In addition, Section 711
of
the AMEX Company Guide, which was amended in October 2003, now requires that
such compensation arrangements be approved by the Company's shareholders. For
the foregoing reasons, the Board of Directors has unanimously approved the
increase in the number of authorized shares of common stock issuable pursuant
to
the 2004 Non-Employee Compensation Plan from 1,000,000 to 2,000,000 shares
and
has directed that such proposal be submitted for the approval of the
stockholders at the annual meeting.
What
Types of Awards Can be Granted Under the 2004 Non-Employee Compensation Plan?
Awards
authorized under the 2004 Non-Employee Compensation Plan shall consist of shares
of our common stock. Such awards may be subject to forfeiture in the event
of
premature termination of engagement, failure to meet certain performance
objectives, or other conditions, as may be determined by the Board of Directors.
Each
award described above is sometimes referred to in this Proxy Statement as an
"Award", and all such awards are sometime collectively referred to in this
Proxy
Statement as "Awards" and individuals receiving Awards are sometimes referred
to
as "Awardees".
How
Will the 2004 Non-Employee Compensation Plan Be Administered?
The
2004
Non-Employee Compensation Plan will be administered by the Board of Directors
(provided however, that the Board may delegate such administration to the
Compensation Committee). Subject to the express terms and conditions of the
2004
Non-Employee Compensation Plan, the Board of Directors will have full power
to
make Awards, to construe or interpret the 2004 Non-Employee Compensation Plan,
to prescribe, amend and rescind rules and regulations relating to it and to
make
all other determinations necessary or advisable for its administration. Except
as otherwise provided in the 2004 Non-Employee Compensation Plan, the Board
of
Directors may also determine which persons shall be granted Awards, the nature
of the Awards granted, the number of shares subject to Awards and the time
at
which Awards shall be made. Such determinations will be final and binding.
How
Much Stock Will Be Available Under the 2004 Non-Employee Compensation Plan?
The
only
class of stock subject to an Award is Common Stock. The maximum number of shares
of Common Stock with respect to which Awards may be granted is currently
1,000,000 shares; however, this number is subject to adjustment in the event
of
a recapitalization, reorganization or similar event. If our stockholders approve
this Proposal 3, the maximum number of shares of Common Stock with respect
to
which Awards may be granted will be 2,000,000 shares. The maximum number of
shares of Common Stock with respect to which Awards may be granted to any
participant in any year under the 2004 Non-Employee Compensation Plan is 500,000
shares.
Shares
shall consist, in whole or in part, of authorized and unissued shares or
treasury shares. Any shares represented by Awards that are cancelled, forfeited,
terminated or expired will again be available for grants and issuance under
the
2004 Non-Employee Compensation Plan.
Who
Is Eligible to Participate in the 2004 Non-Employee Compensation Plan?
Persons
eligible for Awards under the 2004 Non-Employee Compensation Plan will be
limited to consultants, professionals and service providers of the Company
and
our subsidiaries ("Eligible Persons"). The Board of Directors will select who
will receive Awards and the amount and nature of such Awards.
What
Happens If the Number of Outstanding Shares Changes Because of a Merger,
Consolidation, Recapitalization or Reorganization?
In
the
event that our outstanding shares of Common Stock are increased, decreased
or
changed or converted into other securities by reason of merger, reorganization,
consolidation, recapitalization, stock dividend, extraordinary cash dividend
or
other change in our corporate structure affecting the stock, the number of
shares that may be delivered under the 2004 Non-Employee Compensation Plan
and
the number and/or the purchase price of shares subject to outstanding Awards
under the 2004 Non-Employee Compensation Plan may be adjusted at the sole
discretion of the Board of Directors to the extent that the Board of Directors
determines to be appropriate, provided, however, that the number of shares
subject to any Awards will always be a whole number.
When
Will the 2004 Non-Employee Compensation Plan Terminate?
The
2004
Non-Employee Compensation Plan will expire on May 17, 2014, but the Board of
Directors may terminate the 2004 Non-Employee Compensation Plan at any time
prior to that date and Awards granted prior to such termination may extend
beyond such date. Termination of the 2004 Non-Employee Compensation Plan will
not alter or impair, without the consent of the Awardee, any of the rights
or
obligations of any Award made under the 2004 Non-Employee Compensation Plan.
What
Changes Can the Board Make to the 2004 Non-Employee Compensation Plan?
The
Board
may from time to time alter, amend, suspend or discontinue the 2004 Non-Employee
Compensation Plan. However, no such action of the Board may alter the provisions
of the 2004 Non-Employee Compensation Plan so as to alter any outstanding Awards
to the detriment of the Awardee or participant without such participant's or
Awardees consent, and no amendment to the 2004 Non-Employee Compensation Plan
may be made without stockholder approval if such amendment would materially
increase the benefits to the Awardees or the participants in the 2004
Non-Employee Compensation Plan, materially increase the number of shares
issuable under the 2004 Non-Employee Compensation Plan, extend the terms of
the
2004 Non-Employee Compensation Plan or the period during which Awards may be
granted or exercised or materially modify requirements as to eligibility to
participate in the 2004 Non-Employee Compensation Plan.
What
Are the Important Provisions of the Plan With Respect to Each Type of Award?
Grant.
The Board of Directors may, at its discretion, award shares of common stock
to a
recipient (the "Stock Awards"). The Stock Awards will be issued pursuant to
an
agreement between the Company and the Awardee. Each recipient of a Stock Award
will be a stockholder and have all the rights of a stockholder with respect
to
such shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such shares.
If
the
recipient of an Award ceases to be a consultant, professional or service
provider for any reason, then the Award may be subject to forfeiture, as
provided in the particular agreement, unless such forfeiture is waived by the
Board of Directors when it, in its discretion, determines that such waiver
is in
our best interests.
In
the
event of a participant's retirement, permanent disability or death, or in cases
of special circumstances, the Board of Directors may waive any or all of the
remaining restrictions and limitations imposed under the 2004 Non-Employee
Compensation Plan with respect to any Awards.
Restrictions
on Transferability. These Shares of stock may not be sold, exchanged,
transferred, pledged, hypothecated, or otherwise disposed of until such time
as
any stated restrictions lapse. The Board of Directors, in its absolute
discretion, may impose such restrictions on the transferability of the Awards
granted in this 2004 Non-Employee Compensation Plan as it deems appropriate.
Any
such restrictions shall be set forth in the Agreement with respect to such
Awards and may be referred to on the certificates evidencing shares issued
pursuant to any such Award. Shares of restricted stock will be evidenced by
a
certificate that bears a restrictive legend.
What
are the U.S. Federal Income Tax Consequences of the 2004 Non-Employee
Compensation Plan?
The
following discussion is a summary of the U.S. Federal income tax consequences
to
recipients of Awards and to us with respect to Awards granted under the 2004
Non-Employee Compensation Plan. The 2004 Non-Employee Compensation Plan is
not
qualified under Section 401(a) of the Code.
Stock
awarded to an Awardee may be subject to any number of restrictions (including
deferred vesting, limitations on transfer, and forfeit ability) imposed by
the
Board of Directors. In general, the receipt of stock with restrictions will
not
result in the recognition of income by an Awardee until such time as the shares
are either not forfeitable or are freely transferable. Upon the lapse of such
restrictions, the Awardee will be required to include as ordinary income the
difference between the amounts paid for the stock, if any, and the fair market
value of such stock on the date the restrictions lapse and we will be entitled
to a corresponding deduction. In addition, any dividends paid with respect
to
the stock prior to the lapse of the restrictions will be treated as compensation
income by the Awardee and will be deductible by us. Awardees receiving Stock
Awards may elect to include the value of such stock (less any amounts paid
for
such stock) as ordinary income at the time the Award is made. Awardees making
this election would treat any gain or loss realized on a sale of the stock
as
capital gain or loss, but would not be entitled to any loss deduction if they
forfeited the stock pursuant to the restrictions imposed by the Board of
Directors.
In
view
of the complexity of the tax aspects of transactions involving the grant and
exercise Awards, and because the impact of taxes will vary depending on
individual circumstances, each Awardee receiving an Award under the 2004
Non-Employee Compensation Plan should consult their own tax advisor to determine
the tax consequences in such Awardee's particular circumstances.
Registration
with the Securities and Exchange Commission
We
intend
to file a Post-Effective Registration Statement on Form S-8 covering the
increase in shares of common stock issuable pursuant to the 2004 Non-Employee
Compensation Plan if such increase is approved by the Company’s stockholders.
RECOMMENDATION
OF THE BOARD FOR PROPOSAL NO. 4:
THE
BOARD RECOMMENDS A VOTE FOR APPROVAL OF
AN INCREASE OF THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK ISSUABLE
PURSUANT
THE
2004 NON-EMPLOYEE COMPENSATION PLAN.
ITEM
5.
RATIFICATION
OF THE
APPOINTMENT
OF INDEPENDENT AUDITORS
Eisner
LLP, independent auditors, audited the financial statements of eMagin
Corporation for the 2004 fiscal year. Representatives of Eisner 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 Eisner LLP as the independent auditors of the Company for the
fiscal year ending December 31, 2005.
In
connection with the standards for independence of the Company’s independent
auditors promulgated by the Securities and Exchange Commission, the Audit
Committee has considered whether the provision of such services is compatible
with maintaining the independence of Eisner LLP and has determined that such
services are compatible with the continued independence of Eisner
LLP.
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.
Audit
Fees
Eisner
LLP billed us $72,500 for services rendered for the audit of our annual
consolidated financial statements for the year ended December 31, 2004 included
in our Form 10-KSB. We currently have not received all invoices for 2004 audit
expenses and have accrued an additional amount of $20,000.
All
Other Fees
The
aggregate fees billed by Eisner LLP for services rendered to the Company, other
than services covered in “Audit Fees” for the fiscal year ended December 31,
2004 were $21,197. Eisner LLP did not perform any services which directly or
indirectly related to the operation of, or supervision of the operation of,
our
information systems or management of our local area network.
Required
Vote
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.
RECOMMENDATION
OF THE BOARD FOR PROPOSAL NO. 5:
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF
EISNER LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY.
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 and will vote the shares represented thereby in
accordance with their judgment on such matters.
ADDITIONAL
INFORMATION
Annual
Reports and Form 10-KSB.
Additional
copies of eMagin's Annual Report and Form 10-KSB for the fiscal years ended
December 31, 2004 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-KSB can also be found on eMagin's website:
www.eMagin.com.
Stockholders
Proposals for the 2005 Annual Meeting.
Stockholders
who wish to submit proposals pursuant to Rule 14a-8 of the 1934 Act for
inclusion in the Proxy Statement for the Company's 2005 Annual Meeting of
Stockholders must submit the same to the Secretary, at the Company's principal
executive office at 10500 NE 8
th
St.,
Bellevue, WA 98004 no later than January 15, 2006.
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 Georgeson
Shareholder Communications, Inc.
17
State
Street, New York, New York 10004
,
to
aid in
the solicitation. For these services, we will pay Georgeson a fee of $11,500
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.
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By
Order of the Board of Directors
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By:
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/s/ Susan
K Jones
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Susan
K Jones
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Executive
Vice President and Secretary
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APPENDIX
A
EMAGIN
CORPORATION
2005
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 September 30, 2005.) 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 February 15 and August 15except that the first Offering Period shall
commence within a month of the adoption of the Plan.
(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 February 15 and August 15.
(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 (see section 4e below for
limitation). 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 any
Accumulation Period during the current offering 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)) .
(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 there under, 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 750,000 shares on January 1, 2006,
January 1, 2007 and January 1, 2008.
(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
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.
APPENDIX
B
EMAGIN
CORPORATION
AMENDED
AND RESTATED
2003
EMPLOYEE STOCK OPTION PLAN
1.
Purposes
This
Amended and Restated 2003 Stock Option Plan (the "Plan") is intended to attract
and retain the best available personnel for positions with eMagin Corporation
or
any of its subsidiary corporations (collectively, the "Company"), and to provide
additional incentive to such employees and others to exert their maximum efforts
toward the success of the Company. The above aims will be effectuated through
the granting of certain stock options and shares of Common Stock (as defined
below). Under the Plan, options may be granted which are intended to qualify
as
Incentive Stock Options ("ISOs") under Section 422 of the Internal Revenue
Code
of 1986 (the "Code") or which are not ("Non-ISOs") intended to qualify as
Incentive Stock Options thereunder. The term "subsidiary corporation" shall,
for
the purposes of the Plan, be defined in the same manner as such term is defined
in Section 424(f) of the Code and shall include a subsidiary of any subsidiary.
2.
Administration of the Plan
(a)
The
Plan shall be administered by the Board of Directors of the Company (the "Board
of Directors"), as the Board of Directors may be composed from time to time,
except as provided in subparagraph (b) of this Paragraph 2. The determinations
of the Board of Directors under the Plan, including without limitation as to
the
matters referred to in this Paragraph 2, shall be conclusive. Any determination
by a majority of the members of the Board of Directors at any meeting, or by
written consent in lieu of a meeting, shall be deemed to have been made by
the
whole Board of Directors. Within the limits of the express provisions of the
Plan, the Board of Directors shall have the authority, in its discretion, to
take the following actions under the Plan:
(i)
to
determine the individuals to whom, and the time or times at which, ISOs to
purchase the Company's shares of Common Stock, par value $.001 per share
("Common Shares"), shall be granted, and the number of Common Shares to be
subject to each ISO,
(ii)
to
determine the individuals to whom, and the time or times at which, Non-ISOs
to
purchase the Common Shares, shall be granted, and the number of Common Shares
to
be subject to each Non-ISO,
(iii)
to
determine the individuals to whom, and the time or times at which, Common Shares
shall be issued, and the number of Common Shares to be issued (a “Stock
Award”),
(iv)
to
determine the terms and provisions of the respective stock option agreements
granting ISOs and Non-ISOs and stock award agreements granting Stock Awards
(which need not be identical),
(v)
to
interpret the Plan,
(vi)
to
prescribe, amend and rescind rules and regulations relating to the Plan, and
(vii)
to
make all other determinations and take all other actions necessary or advisable
for the administration of the Plan. In making such determinations, the Board
of
Directors may take into account the nature of the services rendered by such
individuals, their present and potential contributions to the Company's success
and such other factors as the Board of Directors, in its discretion, shall
deem
relevant. An individual to whom an option has been granted under the Plan is
referred to herein as an "Optionee" and an individual to whom a Stock Award
has
been granted under the Plan is referred to herein as a “Grantee”.
(b)
Notwithstanding anything to the contrary contained herein, the Board of
Directors may at any time, or from time to time, appoint a committee (the
"Committee") of at least two members of the Board of Directors, and delegate
to
the Committee the authority of the Board of Directors to administer the Plan.
Upon such appointment and delegation, the Committee shall have all the powers,
privileges and duties of the Board of Directors, and shall be substituted for
the Board of Directors, in the administration of the Plan, except that the
power
to appoint members of the Committee and to terminate, modify or amend the Plan
shall be retained by the Board of Directors. In the event that any member of
the
Board of Directors is at any time not a "disinterested person," as defined
in
Rule 16b- 3(c)(3)(i) promulgated pursuant to the Securities Exchange Act of
1934, the Plan shall not be administered by the Board of Directors, and may
only
by administered by a Committee, all the members of which are disinterested
persons, as so defined. The Board of Directors may from time to time appoint
members of the Committee in substitution for or in addition to members
previously appointed, may fill vacancies in the Committee and may discharge
the
Committee. A majority of the Committee shall constitute a quorum and all
determinations shall be made by a majority of its members. Any determination
reduced to writing and signed by a majority of the members shall be fully as
effective as if it had been made by a majority vote at a meeting duly called
and
held. Members of the Committee shall not be eligible to participate in this
Plan.
3.
Shares Subject to the Plan
(a)
Share
Reserve. Subject to the provisions of Section 11 relating to adjustments upon
changes in the Common Stock, the Common Stock that may be issued pursuant to
Options and the Common Shares issued pursuant to Stock Awards shall not exceed
in the aggregate 9,200,000 shares of Common Stock.
(b)
Evergreen Share Reserve Increase.
(i)
Notwithstanding subsection 4(a) hereof, (i) on January 1, 2004, the aggregate
number of shares of Common Stock that is available for issuance under the Plan
shall automatically be increased by 2,000,000 shares, and (ii) on January 1
of
each year (the "Calculation Date") for a period of nine (9) years, commencing
on
January 1, 2005, the aggregate number of shares of Common Stock that is
available for issuance under the Plan shall automatically be increased by three
percent (3%) of the Diluted Shares Outstanding; provided, however, that the
Board, from time to time, may provide for a lesser increase in the aggregate
number of shares of Common Stock that is available for issuance under the Plan.
(ii)
"Diluted Shares Outstanding" shall mean, as of any date, (1) the number of
outstanding shares of Common Stock of the Company on such Calculation Date,
plus
(2) the number of shares of Common Stock issuable upon such Calculation Date
assuming the conversion of all outstanding Preferred Stock and convertible
notes, plus (3) the additional number of dilutive Common Stock equivalent shares
outstanding as the result of any options or warrants outstanding during the
fiscal year, calculated using the treasury stock method.
(c)
Reversion of Shares to the Share Reserve. If any Option shall for any reason
expire or otherwise terminate, in whole or in part, without having been
exercised in full, the shares of Common Stock not acquired under such Option
shall revert to and again become available for issuance under the Plan. If
the
Company repurchases unvested shares acquired pursuant to an Option and/or Stock
Award, the shares of Common Stock so repurchased shall revert to and again
become available for issuance under the Plan.
(d)
Source of Shares. The shares of Common Stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.
4.
Eligibility
(a)
Subject to subparagraphs (b) and (c) of this Paragraph 4, Options and/or Stock
Awards may be granted to key employees, officers, directors or consultants
of
the Company, as determined by the Board of Directors.
(b)
An
ISO may be granted, consistent with the other terms of the Plan, to an
individual who owns (within the meaning of Sections 422(b)(6) and 424(d) of
the
Code), more that ten (10%) percent of the total combined voting power or value
of all classes of stock of the Company or a subsidiary corporation (any such
person, a "Principal Stockholder") only if, at the time such ISO is granted,
the
purchase price of the Common Shares subject to the ISO is an amount which equals
or exceeds one hundred ten percent (110%) of the fair market value of such
Common Shares, and such ISO by its terms is not exercisable more than five
(5)
years after it is granted.
(c)
A
director or an officer of the Company who is not also an employee of the Company
and consultants to the Company shall be eligible to receive Stock Awards and/or
Non-ISOs but shall not be eligible to receive ISOs.
(d)
Nothing contained in the Plan shall be construed to limit the right to the
Board
of Directors to grant an ISO and Non-ISO concurrently under a single stock
option agreement so long as each Option is clearly identified as to its status.
Furthermore, if an Option and/or Stock Award has been granted under the Plan,
additional Options and/or Stock Awards may be granted from time to time to
the
Optionee or Grantee holding such Options and/or Stock Awards, and Options and/or
Stock Awards may be granted from time to time to one or more employees, officers
or directors who have not previously been granted Options and/or Stock Awards.
(e)
To
the extent that the grant of an Option results in the aggregate fair market
value (determined at the time of grant) of the Common Shares (or other capital
stock of the Company or any subsidiary) with respect to which Incentive Stock
Options are exercisable for the first time by an Optionee during any calendar
year (under all plans of the Company and subsidiary corporation) to exceed
$100,000, such Options shall be treated as a Non-ISO. The provisions of this
subparagraph (e) of Paragraph 4 shall be construed and applied in accordance
with Section 422(d) of the Code and the regulations, if any, promulgated
thereunder.
5.
Terms of Options
The
term
of each Option granted under the Plan shall be contained in a stock option
agreement between the Optionee and the Company and such terms shall be
determined by the Board of Directors consistent with the provisions of the
Plan,
including the following:
(a)
The
purchase price of the Common Shares subject to each ISO shall not be less than
the fair market value (or in the case of the grant of an ISO to a Principal
Stockholder, not less that 110% of fair market value) of such Common Shares
at
the time such Option is granted. Such fair market value shall be determined
by
the Board of Directors and, if the Common Shares are listed on a national
securities exchange or traded on the over-the-counter market, the fair market
value shall be the mean of the highest and lowest trading prices or of the
high
bid and low asked prices of the Common Shares on such exchange, or on the
over-the-counter market as reported by the NASDAQ system or the National
Quotation Bureau, Inc., as the case may be, on the day on which the ISO is
granted or, if there is no trading or bid or asked price on that day, the mean
of the highest and lowest trading or high bid and low asked prices on the most
recent day preceding the day on which the ISO is granted for which such prices
are available.
(b)
The
purchase price of the Common Shares subject to each Non-ISO shall not be less
than 85% of the fair market value of such Common Shares at the time such Option
is granted. Such fair market value shall be determined by the Board of Directors
in accordance with subparagraph (a) of this Paragraph 5. The purchase price
of
the Common Shares subject to each Non-ISO shall be determined at the time such
Option is granted.
(c)
The
dates on which each Option (or portion thereof) shall be exercisable and the
conditions precedent to such exercise, if any, shall be fixed by the Board
of
Directors, in its discretion, at the time such Option is granted.
(d)
The
expiration of each Option shall be fixed by the Board of Directors, in its
discretion, at the time such Option is granted; however, unless otherwise
determined by the Board of Directors at the time such Option is granted, an
Option shall be exercisable for ten (10) years after the date on which it was
granted (the "Grant Date"). Each Option shall be subject to earlier termination
as expressly provided in Paragraph 6 hereof or as determined by the Board of
Directors, in its discretion, at the time such Option is granted.
(e)
Options shall be exercised by the delivery by the Optionee thereof to the
Company at its principal office, or at such other address as may be established
by the Board of Directors, of written notice of the number of Common Shares
with
respect to which the Option is being exercised accompanied by payment in full
of
the purchase price of such Common Shares. Payment for such Common Shares may
be
made (as determined by the Board of Directors) (i) in cash, (ii) by certified
check or bank cashier's check payable to the order of the Company in the amount
of such purchase price, (iii) by a promissory note issued by the Optionee in
favor of the Company in the amount equal to such purchase price and payable
on
terms prescribed by the Board of Directors, which provides for the payment
of
interest at a fair market rate, as determined by the Board of Directors, (iv)
by
delivery of capital stock to the Company having a fair market value (determined
on the date of exercise in accordance with the provisions of subparagraph (a)
of
this Paragraph 5) equal to said purchase price, or (v) by any combination of
the
methods of payment described in clauses (i) through (iv) above.
(f)
An
Optionee shall not have any of the rights of a stockholder with respect to
the
Common Shares subject to his Option until such shares are issued to him upon
the
exercise of his Option as provided herein.
(g)
No
Option shall be transferable, except by will or the laws of descent and
distribution, and any Option may be exercised during the lifetime of the
Optionee only by him. No Option granted under the Plan shall be subject to
execution, attachment or other process.
6.
Term of Stock Awards.
The
term
of each Stock Award granted under the Plan shall be contained in a stock award
agreement between the Grantee and the Company and such terms shall be determined
by the Board of Directors consistent with the provisions of the Plan, including
the following:
(a)
A
Grantee shall have the rights of a stockholder with respect to the Common Shares
issued pursuant to his Stock Award.
(b)
No
Stock Award shall be transferable, except by will or the laws of descent and
distribution. No Stock Award granted under the Plan shall be subject to
execution, attachment or other process.
7.
Death or Termination of Employment
(a)
If
employment or other relationship of an Optionee or Grantee with the Company
shall be terminated voluntarily by the Optionee or Grantee and without the
consent of the Company or for "Cause" (as hereinafter defined), and immediately
after such termination such Optionee or Grantee shall not then be employed
by
the Company, any Options or unvested or deferred stock awards granted to such
Optionee or Grantee, respectively, to the extent not theretofore exercised
or
vested shall expire forthwith. For purposes of the Plan, "Cause" shall mean
"Cause" as defined in any employment agreement ("Employment Agreement") between
Optionee or Grantee and the Company, and, in the absence of an Employment
Agreement or in the absence of a definition of "Cause" in such Employment
Agreement, "Cause" shall mean (i) any continued failure by the Optionee or
Grantee to obey the reasonable instructions of the President or any member
of
the Board of Directors, (ii) continued neglect by the Optionee or Grantee of
his
duties and obligations as an employee of the Company, or a failure to perform
such duties and obligations to the reasonable satisfaction of the President
or
the Board of Directors, (iii) willful misconduct of the Optionee or Grantee
or
other actions in bad faith by the Optionee or Grantee which are to the detriment
of the Company, including without limitation commission of a felony,
embezzlement or misappropriation of funds or commission of any act of fraud
or
(iv) a breach of any material provision of any Employment Agreement not cured
within 10 days after written notice thereof.
(b)
If
such employment or other relationship shall terminate other than (i) by reason
of death, (ii) voluntarily by the Optionee or Grantee and without the consent
of
the Company, or (iii) for Cause, and immediately after such termination such
Optionee or Grantee shall not then be employed by the Company, any Options
granted to such Optionee or any unvested or deferred Stock Awards granted to
such Grantee may be exercised or may vest at any time within three months after
such termination, subject to the provisions of subparagraph (d) of this
Paragraph 7. After such three-month period, the unexercised Options or any
unvested or deferred Stock Awards shall expire. For the purposes of the Plan,
the retirement of an Optionee or Grantee either pursuant to a pension or
retirement plan adopted by the Company or on the normal retirement date
prescribed from time to time by the Company, and the termination of employment
as a result of a disability (as defined in Section 22(e) (3) of the Code) shall
be deemed to be a termination of such Optionee's or Grantee’s employment or
other relationship other than voluntarily by the Optionee or Grantee or for
Cause.
(c)
If an
Optionee or Grantee dies (i) while employed by, or engaged in such other
relationship with, the Company or (ii) within three months after the termination
of his employment or other relationship other than voluntarily by the Optionee
or Grantee and without the consent of the Company or for Cause, any options
granted to such Optionee or any unvested or deferred Stock Awards may be
exercised or may vest at any time within twelve months after such Optionee's
or
Grantee’s death, subject to the provisions of subparagraph (d) of this Paragraph
7. After the three month period, the unexercised Options or any unvested or
deferred Stock Awards shall expire.
(d)
An
Option or Stock Award may not be exercised or granted pursuant to this paragraph
7 except to the extent that the Optionee or Grantee was entitled to exercise
the
Option or receive the Stock Award at the time of termination of employment
or
such other relationship, or death, and in any event may not be exercised after
the expiration of the earlier of (i) the term of the Option or Stock Award
or
(ii) ten (10) years from the date the Option or Stock Award was granted, or
five
(5) years from the date an ISO or Stock Award was granted if the Optionee or
Grantee was a Principal Stockholder at that date.
8.
Leave of Absence.
For
purposes of the Plan, an individual who is on military or sick leave or other
bona fide leave of absence (such temporary employment by the United States
or
any state government) shall be considered as remaining in the employ of the
Company for 90 days or such longer period as shall be determined by the Board
of
Directors.
9.
Option Adjustments.
Adjustments
upon Changes in Stock.
(a)
Capitalization Adjustments. If any change is made in the stock subject to the
Plan, or subject to any Option, without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject both to the Plan pursuant
to
subsection 4(a) and to the nondiscretionary Options specified in Section 5,
and
the outstanding Options will be appropriately adjusted in the class(es) and
number of securities and price per share of stock subject to such outstanding
Options. The Board shall make such adjustments, and its determination shall
be
final, binding and conclusive. (The conversion of any convertible securities
of
the Company shall not be treated as a transaction "without receipt of
consideration" by the Company.)
(b)
Change in Control. In the event of: (1) a dissolution, liquidation, or sale
of
all or substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving entity; or (3) a reverse
merger in which the Company is the surviving entity but the shares of Common
Stock outstanding immediately preceding the merger are converted by virtue
of
the merger into other property, whether in the form of securities, cash or
otherwise (individually, a "Change in Control"), then the vesting of outstanding
Options shall be accelerated fifty percent (50%) prior to such Change in Control
and the Options terminated if not exercised after such acceleration and at
or
prior to such Change in Control.
(c)
Securities Acquisition. In the event of (i) any consolidation or merger of
the
Company with or into any corporation or other entity or person, or any other
reorganization, in which the stockholders of the Company immediately prior
to
such consolidation, merger or reorganization, own less than fifty (50%) of
the
surviving entity's voting power immediately after such consolidation, merger
or
reorganization, (ii) any transaction or series of related transactions to which
the Company is a party in which in excess of fifty percent (50%) of the
Company's voting power is transferred, or (iii) a sale, lease or other
disposition of all or substantially all of the assets of the Company, then
the
vesting of outstanding Options shall be fully accelerated.
10.
Further Conditions of Exercise.
(a)
Unless prior to the exercise of an Option or the vesting of a Stock Award the
Common Shares issuable upon such exercise or granted pursuant to a Stock Award
are the subject of a registration statement filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), and there is then in effect a prospectus filed as part of
such registration statement meeting the Requirements of Section 10(a)(3) of
the
Securities Act, the notice of exercise with respect to such Option or any
purchase or other stock acquisition pursuant to a Stock Award shall be
accompanied by a representation or agreement of the individual exercising the
Option or the individual acquiring Common Shares to the Company to the effect
that such shares are being acquired for investment only and not with a view
to
the resale or distribution thereof, or such other, documentation as may be
required by the Company, unless, in the opinion of counsel to the Company,
such
representation, agreement or documentation is not necessary to comply with
the
Securities Act.
(b)
Anything in the Plan to the contrary notwithstanding, the Company shall not
be
obligated to issue or sell any Common Shares until they have been listed on
each
securities exchange on which the Common Shares may then be listed and until
and
unless, in the opinion of counsel to the Company, the Company may issue such
shares pursuant to a qualification or an effective registration statement,
or an
exemption from registration, under such state and federal laws, rules or
regulations as such counsel may deem applicable. The Company shall use
reasonable efforts to effect such listing, qualification and registration,
as
the case may be.
11.
Termination, Modification and Amendment
(a)
The
Plan (but not Options or Stock Awards previously granted under the Plan) shall
terminate ten (10) years from the earlier of the date of its adoption by the
Board of Directors or the date on which the Plan is approved by the affirmative
vote of the holders of a majority of the outstanding shares of capital stock
of
the Company entitled to vote thereon, and no Option or Stock Award shall be
granted after termination of the Plan.
(b)
The
Plan may at any time be terminated and from time to time be modified or amended
by the affirmative vote of the holders of a majority of the outstanding shares
of the capital stock of the Company present, or represented, and entitled to
vote at a meeting duly held in accordance with the applicable laws of the State
of Delaware.
(c)
The
Board of Directors of the Company may at any time terminate the Plan or from
time to time make such modifications or amendments of the Plan as it may deem
advisable; provided, however, that the Board of Directors shall not (i) modify
or amend the Plan in any way that would disqualify any ISO issued pursuant
to
the Plan as an Incentive Stock Option or (ii) without approval by the
affirmative vote of the holders of a majority of the outstanding shares of
the
capital stock of the Company present, or represented, and entitled to vote
at a
meeting duly held in accordance with the applicable laws of the State of
Delaware, increase (except as provided by Paragraph 9) the maximum number of
Common Shares as to which Options or Stock Awards may be granted under the
Plan
or change the class of persons eligible to receive Options or Stock Awards
under
the Plan, including any increase in the number of shares available for issuance
under the Plan pursuant to the Evergreen provisions set forth in Paragraph
3(b)
of the Plan, as amended.
(d)
No
termination, modification or amendment of the Plan may adversely affect the
rights conferred by any Options or Stock Awards without the consent of the
Optionee or Grantee thereof.
12.
Effectiveness of the Plan
The
Plan
shall become effective upon adoption by the Board of Directors. The Plan shall
be subject to approval by the affirmative vote of the holders of a majority
of
the outstanding shares of the capital stock of the Company entitled to vote
thereon within one year following adoption of the Plan by the Board of
Directors, and all Options or Stock Awards granted prior to such approval shall
be subject thereto. In the event such approval is withheld, the Plan and all
Options or Stock Awards which may have been granted thereunder shall become
null
and void.
13.
Not a Contract of Employment
Nothing
contained in the Plan or in any stock option or stock award agreement executed
pursuant hereto shall be deemed to confer upon any individual to whom an Option
is or may be granted hereunder any right to remain in the employ of, or in
another relationship with, the relationship with, the Company.
14.
Miscellaneous
(a)
Nothing contained in the Plan or in any stock option or stock award agreement
executed pursuant hereto shall be deemed to confer upon any individual to whom
an Option is or may be granted hereunder any right to remain in the employ
of,
or other relationship with, the Company.
(b)
If an
Option or Stock Award has been granted under the Plan, additional Options or
Stock Awards may be granted from time to time to the Optionee or Grantee, and
Options or Stock Awards may be granted from time to time to one or more
individuals who have not previously been granted Options or Stock Awards.
(c)
Nothing contained in the Plan shall be construed to limit the right of the
Company to grant Options or Common Stock otherwise than under the Plan in
connection with the acquisition of the business and assets of any corporation,
firm, person or association, including options or Common Stock granted to
employees thereof who become employees of the Company, nor shall the provisions
of the Plan be to limit the right of the Company to grant options or Common
Stock otherwise than under the Plan for other proper corporate purposes.
(d)
The
Company shall have the right to require the Optionee or Grantee to pay the
Company the cash amount of any taxes the Company is required to withhold in
connection with the exercise of an Option or the sale of the Common Stock issued
pursuant to a Stock Award.
(e)
No
award under this Plan shall be taken into account in determining an Optionee's
or Grantee’s compensation for purposes of an employee benefit plan of the
Company.
APPENDIX
C
EMAGIN
CORPORATION
AMENDED
AND RESTATED
2004
NON-EMPLOYEE COMPENSATION PLAN
This
eMagin Corporation
2004
AMENDED AND RESTATED NON-EMPLOYEE COMPENSATION PLAN
(the
"
Plan
")
is
designed to retain outside consultants, professionals and service providers
and
reward them for making major contributions to the success of the Company. These
objectives are accomplished by making long-term incentive awards under the
Plan
thereby providing Participants with a proprietary interest in the growth and
performance of the Company.
|
|
(a)
|
"
Board
"
-
The Board of Directors of the
Company.
|
|
|
(b)
|
"
Code
"
-
The Internal Revenue Code of 1986, as amended from time to
time.
|
|
|
(c)
|
"
Committee
"
-
The Compensation Committee of the Company's Board, or such other
committee
of the Board that is designated by the Board to administer the Plan,
composed of not less than two members of the Board all of whom are
disinterested persons, as contemplated by Rule 16b-3 ("
Rule
16b-3
")
promulgated under the Securities Exchange Act of 1934, as amended
(the
"
Exchange
Act
").
|
|
|
(d)
|
"
Company
"
-
eMagin Corporation and its subsidiaries including subsidiaries of
subsidiaries.
|
|
|
(e)
|
"
Exchange
Act
"
-
The Securities Exchange Act of 1934, as amended from time to
time.
|
|
|
(f)
|
"
Fair
Market Value
"
-
The fair market value of the Company's issued and outstanding Stock
as
determined in good faith by the Board or
Committee.
|
|
|
(g)
|
"
Grant
"
-
The grant of any stock award to a Participant pursuant to such terms,
conditions and limitations as the Committee may establish in order
to
fulfill the objectives of the Plan.
|
|
|
(h)
|
"
Grant
Agreement
"
-
An agreement between the Company and a Participant that sets forth
the
terms, conditions and limitations applicable to a
Grant.
|
|
|
(i)
|
"
Participant
"
-
An outside consultants, professional and service provider of the
Company
to whom an Award has been made under the
Plan.
|
|
|
(j)
|
"
Securities
Act
"
-
The Securities Act of 1933, as amended from time to
time.
|
|
|
(k)
|
"
Stock
"
-
Authorized and issued or unissued shares of common stock of the
Company.
|
|
|
(l)
|
"
Stock
Award
"
-
A Grant made under the Plan in stock or denominated in units of stock
for
which the Participant is not obligated to pay additional
consideration.
|
The
Plan
shall be administered by the Board, provided however, that the Board may
delegate such administration to the Committee. Subject to the provisions of
the
Plan, the Board and/or the Committee shall have authority to (a) grant, in
its
discretion, Stock Awards; (b) determine in good faith the fair market value
of
the Stock covered by any Grant; (c) determine which eligible persons shall
receive Grants and the number of shares, restrictions, terms and conditions
to
be included in such Grants; (d) construe and interpret the Plan; (e) promulgate,
amend and rescind rules and regulations relating to its administration, and
correct defects, omissions and inconsistencies in the Plan or any Grant; (f)
consistent with the Plan and with the consent of the Participant, as
appropriate, amend any outstanding Grant; (g) determine the duration and purpose
of leaves of absence which may be granted to Participants without constituting
termination of their engagement for the purpose of the Plan or any Grant; and
(h) make all other determinations necessary or advisable for the Plan's
administration. The interpretation and construction by the Board of any
provisions of the Plan or selection of Participants shall be conclusive and
final. No member of the Board or the Committee shall be liable for any action
or
determination made in good faith with respect to the Plan or any Grant made
thereunder.
The
persons who shall be eligible to receive Grants shall be outside consultants,
professionals and service providers who provide services to the Company in
connection with, among other things, the Company’s obligations as a
publicly-held reporting company. The term consultant shall mean any person,
other than an employee, who is engaged by the Company to render services and
is
compensated for such services.
Authorized
Stock:
Stock
subject to Grants may be either unissued or reacquired Stock.
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(a)
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Number
of Shares:
Subject to adjustment as provided in Section 5(i) of the Plan, the
total
number of shares of Stock which may be purchased or granted directly
by
Stock Awards granted under the Plan shall not exceed Two Million
(2,000,000) shares. If any Grant shall for any reason terminate or
expire,
any shares allocated thereto but remaining unvested shall again be
available for Grants with respect thereto under the Plan as though
no
Grant had previously occurred with respect to such shares. Any shares
of
Stock issued pursuant to a Grant and repurchased pursuant to the
terms
thereof shall be available for future Grants as though not previously
covered by a Grant.
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(b)
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Reservation
of Shares:
The Company shall reserve and keep available at all times during
the term
of the Plan such number of shares as shall be sufficient to satisfy
the
requirements of the Plan. If, after reasonable efforts, which efforts
shall not include the registration of the Plan or Grants under the
Securities Act, the Company is unable to obtain authority from any
applicable regulatory body, which authorization is deemed necessary
by
legal counsel for the Company for the lawful issuance of shares hereunder,
the Company shall be relieved of any liability with respect to its
failure
to issue and sell the shares for which such requisite authority was
so
deemed necessary unless and until such authority is
obtained.
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All
or
part of any Stock Award under the Plan may be subject to conditions established
by the Board or the Committee, and set forth in a Stock Award Agreement, which
may include, but are not limited to, continuous service with the Company,
achievement of specific business objectives, increases in specified indices,
attaining growth rates and other comparable measurements of Company performance.
Such Awards may be based on Fair Market Value or other specified valuation.
All
Stock Awards will be made pursuant to the execution of a Stock Award
Agreement.
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(a)
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Conditions
and Restrictions.
Shares of Stock which Participants may receive as a Stock Award under
a
Stock Award Agreement may include such restrictions as the Board
or
Committee, as applicable, shall determine, including restrictions
on
transfer, repurchase rights, right of first refusal, and forfeiture
provisions. When transfer of Stock is so restricted or subject to
forfeiture provisions it is referred to as "
Restricted
Stock.
"
Further, with Board or Committee approval, Stock Awards may be deferred,
either in the form of installments or a future lump sum distribution.
The
Board or Committee may permit selected Participants to elect to defer
distributions of Stock Awards in accordance with procedures established
by
the Board or Committee to assure that such deferrals comply with
applicable requirements of the Code including, at the choice of
Participants, the capability to make further deferrals for distribution
after retirement. Any deferred distribution, whether elected by the
Participant or specified by the Stock Award Agreement or by the Board
or
Committee, may require the payment be forfeited in accordance with
the
provisions of Section 5(c). Dividends or dividend equivalent rights
may be
extended to and made part of any Stock Award, subject to such terms,
conditions and restrictions as the Board or Committee may
establish.
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(b)
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Cancellation
and Rescission of Grants.
Unless the Stock Award Agreement specifies otherwise, the Board or
Committee, as applicable, may cancel any unvested or deferred Grants
at
any time if the Participant is not in compliance with all other applicable
provisions of the Stock Award Agreement, the Plan and with the following
conditions:
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(i)
A
Participant shall not render services for any organization or engage directly
or
indirectly in any business which, in the judgment of the chief executive officer
of the Company or other senior officer designated by the Board or Committee,
is
or becomes competitive with the Company, or which organization or business,
or
the rendering of services to such organization or business, is or becomes
otherwise prejudicial to or in conflict with the interests of the Company.
For
Participants whose engagement has terminated, the judgment of the chief
executive officer shall be based on the Participant's position and
responsibilities while employed by the Company, the Participant's
post-engagement responsibilities and position with the other organization or
business, the extent of past, current and potential competition or conflict
between the Company and the other organization or business, the effect on the
Company's customers, suppliers and competitors and such other considerations
as
are deemed relevant given the applicable facts and circumstances. A Participant
who has retired shall be free, however, to purchase as an investment or
otherwise, stock or other securities of such organization or business so long
as
they are listed upon a recognized securities exchange or traded
over-the-counter, and such investment does not represent a substantial
investment to the Participant or a greater than five percent (5%) equity
interest in the organization or business.
(ii)
A
Participant shall not, without prior written authorization from the Company,
disclose to anyone outside the Company, or use in other than the Company's
business, any confidential information or material relating to the business
of
the Company, acquired by the Participant either during or after engagement
with
the Company.
(iii)
A
Participant shall disclose promptly and assign to the Company all right, title
and interest in any invention or idea, patentable or not, made or conceived
by
the Participant during engagement by the Company, relating in any manner to
the
actual or anticipated business, research or development work of the Company
and
shall do anything reasonably necessary to enable the Company to secure a patent
where appropriate in the United States and in foreign countries.
(iv)
Upon
exercise, payment or delivery pursuant to a Grant, the Participant shall certify
on a form acceptable to the Company that he or she is in compliance with the
terms and conditions of the Plan.
(i)
Except
pursuant to Section 5(e)(iii) and except as set forth in Section 5(d)(ii),
no
Grant or any other benefit under the Plan shall be assignable or transferable,
or payable to, anyone other than the Participant to whom it was
granted.
(ii)
Where
a
Participant terminates engagement and retains a Grant pursuant to Section
5(e)(ii) in order to assume a position with a governmental, charitable or
educational institution, the Board or Committee, in its discretion and to the
extent permitted by law, may authorize a third party (including but not limited
to the trustee of a "blind" trust), acceptable to the applicable governmental
or
institutional authorities, the Participant and the Board or Committee, to act
on
behalf of the Participant with regard to such Awards.
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(d)
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Termination
of Engagement.
If
the engagement or service to the Company of a Participant terminates,
other than pursuant to any of the following provisions under this
Section
5(e), all unvested or deferred Stock Awards shall be cancelled
immediately, unless the Stock Award Agreement provides otherwise:
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(i)
Retirement
Under a Company Retirement Plan.
When a
Participant's engagement terminates as a result of retirement in accordance
with
the terms of a Company retirement plan, the Board or Committee may permit Stock
Awards to continue in effect beyond the date of retirement in accordance with
the applicable Grant Agreement and vesting of any such Grants may be
accelerated.
(ii)
Rights
in the Best Interests of the Company.
When a
Participant resigns from the Company and, in the judgment of the Board or
Committee, the acceleration and/or continuation of outstanding Stock Awards
would be in the best interests of the Company, the Board or Committee may (i)
authorize, where appropriate, the acceleration and/or continuation of all or
any
part of Grants issued prior to such termination and (ii) permit the vesting
of
such Grants for such period as may be set forth in the applicable Grant
Agreement, subject to earlier cancellation pursuant to Section 8 or at such
time
as the Board or Committee shall deem the continuation of all or any part of
the
Participant's Grants are not in the Company's best interest.
(iii)
Death
or Disability of a Participant.
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(1)
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In
the event of a Participant's death, the Participant's estate or
beneficiaries shall have a period up to the expiration date specified
in
the Grant Agreement within which to receive or exercise any outstanding
Grant held by the Participant under such terms as may be specified
in the
applicable Grant Agreement. Rights to any such outstanding Grants
shall
pass by will or the laws of descent and distribution in the following
order: (a) to beneficiaries so designated by the Participant; if
none,
then (b) to a legal representative of the Participant; if none, then
(c)
to the persons entitled thereto as determined by a court of competent
jurisdiction. Grants so passing shall be made at such times and in
such
manner as if the Participant were
living.
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(2)
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In
the event a Participant is deemed by the Board or Committee to be
unable
to perform his or her usual duties by reason of mental disorder or
medical
condition which does not result from facts which would be grounds
for
termination for cause, Grants and rights to any such Grants may be
paid to
the Participant, if legally competent, or a committee or other legally
designated guardian or representative if the Participant is legally
incompetent by virtue of such
disability.
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(3)
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After
the death or disability of a Participant, the Board or Committee
may in
its sole discretion at any time (1) terminate restrictions in Grant
Agreements; (2) accelerate any or all installments and rights; and
(3)
instruct the Company to pay the total of any accelerated payments
in a
lump sum to the Participant, the Participant's estate, beneficiaries
or
representative; notwithstanding that, in the absence of such termination
of restrictions or acceleration of payments, any or all of the payments
due under the Grant might ultimately have become payable to other
beneficiaries.
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(4)
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In
the event of uncertainty as to interpretation of or controversies
concerning this Section 5, the determinations of the Board or Committee,
as applicable, shall be binding and
conclusive.
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All
Grants under the Plan are intended to be exempt from registration under the
Securities Act provided by Rule 701 thereunder. Unless and until the sale and
issuance of Stock subject to the Plan are registered under the Securities Act
or
shall be exempt pursuant to the rules promulgated thereunder, each Grant under
the Plan shall provide that the purchases or other acquisitions of Stock
thereunder shall be for investment purposes and not with a view to, or for
resale in connection with, any distribution thereof. Further, unless the
issuance and sale of the Stock have been registered under the Securities Act,
each Grant shall provide that no shares shall be purchased upon the exercise
of
the rights under such Grant unless and until (i) all then applicable
requirements of state and federal laws and regulatory agencies shall have been
fully complied with to the satisfaction of the Company and its counsel, and
(ii)
if requested to do so by the Company, the person exercising the rights under
the
Grant shall (i) give written assurances as to knowledge and experience of such
person (or a representative employed by such person) in financial and business
matters and the ability of such person (or representative) to evaluate the
merits and risks of receiving the Stock as compensation, and (ii) execute and
deliver to the Company a letter of investment intent and/or such other form
related to applicable exemptions from registration, all in such form and
substance as the Company may require. If shares are issued upon exercise of
any
rights under a Grant without registration under the Securities Act, subsequent
registration of such shares shall relieve the purchaser thereof of any
investment restrictions or representations made upon the exercise of such
rights.
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7.
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Amendment,
Modification, Suspension or Discontinuance of the
Plan
.
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The
Board
may, insofar as permitted by law, from time to time, with respect to any shares
at the time not subject to outstanding Grants, suspend or terminate the Plan
or
revise or amend it in any respect whatsoever, except that without the approval
of the shareholders of the Company, no such revision or amendment shall (i)
increase the number of shares subject to the Plan, (ii) decrease the price
at
which Grants may be granted, (iii) materially increase the benefits to
Participants, or (iv) change the class of persons eligible to receive Grants
under the Plan; provided, however, no such action shall alter or impair the
rights and obligations under any Stock Award outstanding as of the date thereof
without the written consent of the Participant thereunder. No Grant may be
issued while the Plan is suspended or after it is terminated, but the rights
and
obligations under any Grant issued while the Plan is in effect shall not be
impaired by suspension or termination of the Plan.
In
the
event of any change in the outstanding Stock by reason of a stock split, stock
dividend, combination or reclassification of shares, recapitalization, merger,
or similar event, the Board or the Committee may adjust proportionally (a)
the
number of shares of Stock (i) reserved under the Plan, (ii) covered by
outstanding Stock Awards; (b) the Stock prices related to outstanding Grants;
and (c) the appropriate Fair Market Value and other price determinations for
such Grants. In the event of any other change affecting the Stock or any
distribution (other than normal cash dividends) to holders of Stock, such
adjustments as may be deemed equitable by the Board or the Committee, including
adjustments to avoid fractional shares, shall be made to give proper effect
to
such event. In the event of a corporate merger, consolidation, acquisition
of
property or stock, separation, reorganization or liquidation, the Board or
the
Committee shall be authorized to issue or assume stock options, whether or
not
in a transaction to which Section 424(a) of the Code applies, and other Grants
by means of substitution of new Grant Agreements for previously issued Grants
or
an assumption of previously issued Grants.
The
Company shall have the right to deduct applicable taxes from any Grant payment
and withhold, at the time of delivery or exercise of Stock Awards or vesting
of
shares under such Grants, an appropriate number of shares for payment of taxes
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes. If
Stock is used to satisfy tax withholding, such stock shall be valued based
on
the Fair Market Value when the tax withholding is required to be made.
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9.
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Availability
of Information
.
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During
the term of the Plan and any additional period during which a Grant granted
pursuant to the Plan shall be payable, the Company shall make available, not
later than one hundred and twenty (120) days following the close of each of
its
fiscal years, such financial and other information regarding the Company as
is
required by the bylaws of the Company and applicable law to be furnished in
an
annual report to the shareholders of the Company.
Any
written notice to the Company required by any of the provisions of the Plan
shall be addressed to the chief personnel officer or to the chief executive
officer of the Company, and shall become effective when it is received by the
office of the chief personnel officer or the chief executive officer.
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11.
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Indemnification
of Board.
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In
addition to such other rights or indemnifications as they may have as directors
or otherwise, and to the extent allowed by applicable law, the members of the
Board and the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any claim, action, suit or
proceeding, or in connection with any appeal thereof, to which they or any
of
them may be a party by reason of any action taken, or failure to act, under
or
in connection with the Plan or any Grant granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such claim, action, suit or proceeding, except
in any case in relation to matters as to which it shall be adjudged in such
claim, action, suit or proceeding that such Board or Committee member is liable
for negligence or misconduct in the performance of his or her duties; provided
that within sixty (60) days after institution of any such action, suit or Board
proceeding the member involved shall offer the Company, in writing, the
opportunity, at its own expense, to handle and defend the same.
The
Plan
and all determinations made and actions taken pursuant hereto, to the extent
not
otherwise governed by the Code or the securities laws of the United States,
shall be governed by the law of the State of Delaware and construed accordingly.
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13.
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Effective
and Termination Dates.
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The
Plan
shall become effective on the date it is approved by the holders of a majority
of the shares of Stock then outstanding. The Plan shall terminate ten years
later, subject to earlier termination by the Board pursuant to Section 7.
The
foregoing
2004
AMENDED AND RESTATED NON-EMPLOYEE COMPENSATION PLAN
(consisting of 7 pages, including this page) was duly adopted and approved
by
the Board of Directors on _________,
2005
.
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EMAGIN
CORPORATION
a
Delaware Corporation
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By:
/s/ Gary W. Jones
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Gary
W. Jones
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Its:
Chief Executive Officer
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PROXY
CARD
EMAGIN
CORPORATION
PROXY
FOR ANNUAL MEETING TO BE HELD ON SEPTEMBER 30, 2005
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Gary W. Jones, as proxy, with the power to appoint
his substitute, to represent and to vote all the shares of common stock of
eMagin Corporation (the "Company"), which the undersigned would be entitled
to
vote, at the Company's Annual Meeting of Stockholders to be held on September
30, 2005 and at any adjournments thereof, subject to the directions indicated
on
the reverse side hereof.
In
their
discretion, the proxy is authorized to vote upon any other matter that may
properly come before the meeting or any adjournments thereof.
THIS
PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE, BUT IF NO
CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE.
IMPORTANT--This
Proxy must be signed and dated on the reverse side.
___________________________________________________________________
THIS
IS YOUR PROXY
YOUR
VOTE IS IMPORTANT!
Dear
Stockholder:
We
cordially invite you to attend the Annual Meeting of Stockholders of eMagin
Corporation to be held at the Board Room of the American Stock Exchange,
86
Trinity Place, New York, New York,
on
Friday, September 30, 2005, beginning at 2:00 p.m. local time.
Please
read the proxy statement which describes the proposals and presents other
important information, and complete, sign and return your proxy promptly in
the
enclosed envelope.
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TELEPHONE
VOTING
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INTERNET
VOTING
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VOTING
BY MAIL
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This
method of voting is available for residents of the U.S. and Canada.
On a
touch tone telephone, call
TOLL
FREE 1-800-790-3272
,
24 hours a day, 7 days a week. You will be asked to enter
ONLY
the CONTROL NUMBER shown below. Have your proxy card ready, then
follow
the prerecorded instructions. Your vote will be confirmed and cast
as
you've directed. Available 24 hours a day, 7 days a week until 5:00
p.m.
Eastern time on September 29, 2005.
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Visit
the Internet voting website at
http://proxy.georgeson.com.
Enter the COMPANY NUMBER
and
CONTROL NUMBER shown below and follow the instructions on your screen.
You
will incur only your usual Internet charges. Available 24 hours a
day, 7
days a week until 5:00 p.m. Eastern time on September 29,
2005.
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Simply
mark, sign and date your proxy card and return it in the postage-paid
envelope. If you are voting by telephone or the Internet, please
do not
mail your proxy card.
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DO
NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR
INTERNET.
CALL
**TOLL-FREE** 1-800-790-3272 ON A TOUCH-TONE TELEPHONE -
ANYTIME.
There
is no charge to you for this call.
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COMPANY
NUMBER
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CONTROL
NUMBER
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TO
VOTE
BY MAIL, PLEASE DETACH PROXY CARD HERE
---------------------------------------------------------------------------------------------------------------------------------
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1.
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Election of Directors
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FOR
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WITHHOLD
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Nominees:
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Class A
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Gary
W. Jones
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[_]
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[_]
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Irwin
Engelman
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[_]
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[_]
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--------------------------------------------------------------------------------
(Except
nominee(s) written above)
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2.
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Proposal to approve eMagin’s
2005
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FOR
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AGAINST
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ABSTAIN
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Employee Stock Purchase Plan
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[_]
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[_]
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[_]
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3
.
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Proposal to amend the 2003 Stock
Option
Plan
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FOR
|
AGAINST
|
ABSTAIN
|
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to provide for grants of shares
of Common
Stock
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[_]
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[_]
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[_]
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in addition to options to purchase
shares of
Common Stock
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4
.
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Proposal to increase the number
of
authorized
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FOR
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AGAINST
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ABSTAIN
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shares of common stock issuable
pursuant to
the
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[_]
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[_]
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[_]
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2004 Non-Employee Stock Compensation
Plan
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from 1,000,000 to 2,000,000
shares
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5.
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Proposal to ratify Eisner
LLP as the
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FOR
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AGAINST
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ABSTAIN
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Company’s independent auditors for
fiscal
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[_]
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[_]
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[_]
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year 2005
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To
sign up for electronic voting please mark this box
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[__]
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If
you plan to attend the Annual Meeting please mark this box
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[__]
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If
you would like to receive eMagin email Alerts about eMagin financial
filings as well as company news and other activities please mark
this
box
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[__]
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Dated:________________,
2005
Signature
______________________________________________________________________
Name
(printed) _________________________________________________________________
Title
__________________________________________________________________________
Important:
Please sign exactly as name appears on this proxy. When signing as attorney,
executor, trustee, guardian, corporate officer, etc., please indicate full
title.