Exhibit 10.5

 

 
AMENDMENT NO. 1 TO PLEDGE AND SECURITY AGREEMENT

THIS AMENDMENT NO. 1 TO PLEDGE AND SECURITY AGREEMENT, dated as of July 23, 2007
(this “Agreement”), by and between EMAGIN CORPORATION, a Delaware corporation
(the “Grantor”), to ALEXANDRA GLOBAL MASTER FUND LTD., a British Virgin Islands
international business company, as collateral agent (in such capacity, the
“Collateral Agent”) on behalf of the Holders (such capitalized term and all
other capitalized terms used herein having the respective meanings provided
herein), amends the PLEDGE AND SECURITY AGREEMENT, dated as of July 21, 2006
(the “Pledge and Security Agreement”), made by the Grantor to the Collateral
Agent.

W I T N E S S E T H:

WHEREAS, the Grantor and the Collateral Agent are parties to the Pledge and
Security Agreement;

WHEREAS, the Grantor and the Collateral Agent wish to amend the Pledge and
Security Agreement as provided in this Agreement; and

NOW THEREFORE, in consideration of the premises and the mutual covenants made
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

1. Definitions. 

1.1 As used in this Agreement, the terms “Agreement”, “Grantor”, “Collateral
Agent” and “Pledge and Security Agreement” shall have the respective meanings
assigned to such terms in the introductory paragraph of this Agreement.

1.2 Capitalized terms used in this Agreement and not defined in this Agreement
shall have the respective meanings provided in the Pledge and Security
Agreement.

1.3 All the agreements or instruments herein defined shall mean such agreements
or instruments as the same may from time to time be supplemented or amended or
the terms thereof waived or modified to the extent permitted by, and in
accordance with, the terms thereof and of this Agreement.

1.4 The following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):

“Amended Lockbox Agreement” means the Lockbox Agreement, dated as of July 21,
2006, by and between the Grantor, the Lockbox Agent and the Collateral Agent, as
amended by Amendment No. 1 to Lockbox Agreement, dated as of July 23, 2007, by
and between the Grantor and the Collateral Agent.

“Amended Notes” means the Amended and Restated 8% Senior Secured Convertible
Notes due 2008 issued by the Grantor upon amendment and restatement of the
Notes.

 

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“Amended Patent and Trademark Security Agreement” means the Patent and Trademark
Security Agreement, dated as of July 21, 2006, by and between the Grantor and
the Collateral Agent, as amended by Amendment No. 1 to the Patent and Trademark
Security Agreement, dated as of July 23, 2007 by and between the Grantor and the
Collateral Agent.

“Amended Pledge and Security Agreement” means the Pledge and Security Agreement
as amended by this Agreement.

“Amendment Agreements” means the several Amendment Agreements, dated as of July
23, 2007 by and between the Grantor and the Holders.

“Amendment Transaction Documents” means the Amended Notes, the Amended Warrants,
the Certificate Designations, the Amended Patent and Trademark Security
Agreement, the Amended Pledge and Security Agreement, the Amended Lockbox
Agreement and the other agreements, instruments and documents contemplated
hereby and thereby.

“Certificate of Designations” means the Certificate of Designations of Series A
Senior Secured Convertible Preferred Stock of the Grantor as filed with the
Secretary of State of the State of Delaware.

“Effective Date” shall have the meaning provided in Section 4.

“Effective Time” shall have the meaning provided in Amendment Agreements.

“Holders” means with respect to any time prior to the Effective Time on the
Effective Date the holders of Notes and with respect to any time after the
Effective Time on the Effective Date, the holders from time to time of any
Amended Notes or shares of Series A Preferred Stock.

“Series A Preferred Stock” means the Series A Senior Secured Convertible
Preferred Stock, par value $0.001 per share, of the Grantor.

2. Amendments.
 
2.1 Amendments to Pledge and Security Agreement. Upon the terms and subject to
the conditions of this Agreement, the Pledge and Security Agreement is hereby
amended as follows:

(a) Amendment of Certain Definitions. Section 1(d) of the Pledge and Security
Agreement shall be amended by deleting the terms “Additional Note Purchase
Agreement”, “Event of Default”, “Holder”, “Note Purchase Agreements”, “Majority
Holders”, “Notes”, “Obligations” and “Transaction Documents” and the
accompanying definitions thereof and substituting in lieu thereof in their
respective alphabetical order the following:

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“Additional Note Purchase Agreement” means the Note Purchase Agreement, dated as
of July 21, 2006, as amended on March 28, 2007, by and between the Company and
Stillwater LLC, as amended by the Amendment Agreement, pursuant to which the
Company issued the Additional Note.

“Event of Default” means:

(1) the failure by the Grantor to perform in any material respect any obligation
of the Grantor under this Agreement as and when required by this Agreement; or

(2) the failure by the Grantor to pay the Optional Redemption Price or the
Mandatory Redemption Price; or

(3) the breach by the Grantor of any other material covenant or other term or
condition of the Certificate of Designations; or

(4) any representation or warranty made by the Grantor pursuant to this
Agreement shall have been untrue in any material respect when made or deemed to
have been made; or

(5) the failure by the Grantor to perform in any material respect any obligation
of the Grantor under the Patent and Trademark Security Agreement as and when
required by the Patent and Trademark Security Agreement;

(6) any representation or warranty made by the Grantor pursuant to the Patent
and Trademark Security Agreement shall have been untrue in any material respect
when made or deemed to have been made;

(7) the failure by the Grantor to perform in any material respect any obligation
of the Grantor under the Lockbox Agreement as and when required by the Lockbox
Agreement;

(8) any representation or warranty made by the Grantor pursuant to the Lockbox
Agreement shall have been untrue in any material respect when made or deemed to
have been made; or

(9) any Event of Default, as that term is defined in any of the Notes.

“Holder” means any Buyer or any holder from time to time of any Note or any
Preferred Shares.

“Majority Holders” means at any time (i) such of the holders of Notes who hold
Notes which, based on the outstanding principal amounts thereof, represent a
majority of the aggregate outstanding principal amount of the Notes at such
time, and (ii) such of the holders of Preferred Shares which shares constitute a
majority of the outstanding Preferred Shares at such time.

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“Note Purchase Agreements” means the several Note Purchase Agreements, dated as
of July 21, 2006, by and between the Grantor and the respective Buyer party
thereto, as amended by the Amendment Agreement, pursuant to which the Grantor
issued the Notes, including, without limitation, the Additional Note Purchase
Agreement.

“Notes” means the Amended and Restated 8% Senior Secured Convertible Notes due
2008 issued by the Grantor upon amendment and restatement of the Grantor’s 6%
Senior Secured Convertible Notes due 2007-2008, as amended, originally issued
pursuant to the Note Purchase Agreements, including, without limitation, the
Additional Note.

“Obligations” means:

(1) the full and prompt payment when due of all obligations and liabilities to
the Holders, whether now existing or hereafter arising, under the Transaction
Documents and the due performance and compliance with the terms of the
Transaction Documents;

(2) the full and prompt payment when due of all obligations and liabilities of
the Grantor to pay the Optional Redemption Price and Mandatory Redemption Price
pursuant to the Preferred Shares and the due performance and compliance with the
terms of the Certificate of Designations;

(3) any and all sums advanced by the Collateral Agent or any Holder in order to
preserve the Collateral or to preserve the Security Interest;

(4) in the event of any proceeding for the collection or enforcement of any
obligations or liabilities of the Grantor referred to in the immediately
preceding clauses (1) and (2) in accordance with the terms of the Transaction
Documents, the reasonable expenses of re-taking, holding, preparing for sale,
selling or otherwise disposing of or realizing on the Collateral, or of any
other exercise by the Collateral Agent of its rights hereunder, together with
reasonable attorneys' fees and court costs; and

(5) any amounts for which the Collateral Agent or any Holder is entitled to
indemnification under Section 5(j).

(b) Additional Defined Terms. Section 1(d) of the Pledge and Security Agreement
shall be amended by adding new defined terms and definitions thereof, in the
places constituting their respective alphabetical orders, as follows:

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“Amendment Agreement” means the several Amendment Agreements, dated as of July
23, 2007, by and between the Grantor and the Holders.

“Certificate of Designations” means the Certificate of Designations of Series A
Senior Secured Convertible Preferred Stock of the Grantor as filed with the
Secretary of State of the State of Delaware.

“Mandatory Redemption Price” shall have the meaning assigned to such term in the
Certificate of Designations.

“Optional Redemption Price” shall have the meaning assigned to such term in the
Certificate of Designations.

“Preferred Shares” means shares of Series A Senior Secured Convertible Preferred
Stock issued by the Grantor.

(c)  Amendment of Section 15(b). Section 15(b) of the Pledge and Security
Agreement shall be amended by deleting Section 15(b) of the Pledge and Security
in its entirety and substituting in lieu thereof the following:

(b) If an Event of Default shall have occurred and be continuing, the Collateral
Agent shall disburse the funds held by it pursuant to this Agreement as follows:

(i) First, to pay any amounts payable to the Collateral Agent pursuant to
Section 17 that have not been paid by the Grantor; and then

(ii) Second, to pay each Holder on a pro rata basis the amount of all accrued
and unpaid interest (and interest, if any, thereon at the Default Rate) then due
each Holder in accordance with the terms of their respective Notes through the
most recent Interest Payment Date; and then

(iii)  Third, to pay each Holder on a pro rata basis the amount, if any, of
unpaid principal then due on the Maturity Date of any installment of principal
of such Holder’s Notes and the unpaid Mandatory Redemption Price for the
Preferred Shares required to be redeemed on the Mandatory Redemption Date; and
then

(iv) Fourth, to pay each Holder, on a pro rata basis, the amount then due upon
acceleration, if any, pursuant to Section 5 of such Holder’s Note(s); and then

(v) Fifth, to pay each Holder who has exercised its repurchase rights under
Section 5 of the Notes or its optional redemption rights under Section 11 of the
Certificate of Designations, on a pro rata basis, all of the applicable unpaid
Repurchase Price for each of the Notes or portions thereof required to be
repurchased and all of the applicable and unpaid Optional Redemption Price for
the Preferred Shares required to be redeemed; and then

(vi) Sixth, to pay each Holder any other amount due and payable to such Holder
under the Transaction Documents; and then

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(vii) Seventh, the remaining amount, if any, to the Grantor.

provided, however, that if the amount of funds held by the Collateral Agent is
insufficient to pay all amounts due to the Holders pursuant to clauses (ii) and
(iv) above, then the amount paid to the Holders pursuant to this Section 15(b)
shall be prorated among the Holders in proportion to the respective amounts due
each Holder pursuant to the particular such clause or clauses for which such
funds are insufficient.

3. Effect of Amendment; Confirmation.

(a) From and after the Effective Date, the rights and obligations of the
Grantor, the Collateral Agent and the Holders under the Pledge and Security
Agreement and the Transaction Documents and all other agreements, documents and
instruments contemplated hereby and thereby shall apply with full force and
effect to the Pledge and Security Agreement, as amended by this Agreement, and
each reference to the Pledge and Security Agreement in the Transaction Documents
shall be deemed to be a reference to the Pledge and Security Agreement, as
amended by this Agreement and each reference in the Pledge and Security
Agreement to “this Agreement,” “hereunder,” “hereof,” “herein,” or words of like
import shall mean and be a reference to the Pledge and Security Agreement as
amended hereby, and this Agreement and the Pledge and Security Agreement shall
be read together and construed as a single instrument.

(b) Except as amended by this Agreement, the Pledge and Security Agreement shall
remain in full force and effect in accordance with its respective terms.

(c) The execution, delivery and effectiveness of this Agreement shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of the Collateral Agent, the Grantor or the Holders under the Pledge and
Security Agreement or any of the Transaction Documents, nor constitute a waiver
or amendment of any other provision of the Pledge and Security Agreement or any
of the Transaction Documents or for any purpose except as expressly set forth
herein.

(d) Nothing in this Agreement or in connection with the transactions
contemplated by this Agreement or otherwise shall be construed, directly or
indirectly, by implication or otherwise to impair the validity, enforceability,
priority, perfection or other attributes of the security interest granted
pursuant to the Pledge and Security Agreement.

4. Effectiveness.

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The amendment of the Pledge and Security Agreement pursuant to this Agreement
shall become effective on the date (the “Effective Date”) when all of the
following conditions are satisfied:

(a) The Collateral Agent shall have received Acknowledgement and Consents, in
the form attached hereto as Exhibit A, from the Majority Holders; and

(b) On the Effective Date the Effective Time under all of the Amendment
Agreements shall have occurred.

5. Miscellaneous. 

5.1 Waiver and Amendments; Successors and Assigns.
The provisions of Section 14 of the Pledge and Security Agreement shall be
applicable to this Agreement as if this Agreement were the “Agreement” referred
to in Section 14 of the Pledge and Security Agreement.

5.2 Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.

5.3 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for convenience only
and are not to be considered in construing or interpreting this Agreement.

5.4 Notices.
Any notice required or permitted under this Agreement shall be given as provided
in the Pledge and Security Agreement.

5.5 Severability.
If one or more provisions of this Agreement are held to be unenforceable under
applicable law, such provision shall be excluded from this Agreement and the
balance of this Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.

5.6 Entire Agreement.
This Agreement and the other Amendment Transaction Documents and other documents
contemplated hereby and thereby constitute the entire agreement among the
parties hereof with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.

5.7 Further Assurances.
The parties shall execute and deliver all such further instruments and documents
and take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.

5.8 Applicable Law.
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of New York without regard to principles of conflicts of laws,
except to the extent that under the New York Uniform Commercial Code the laws of
another jurisdiction govern matters of perfection and the effect of perfection
or non-perfection of any security interest granted under the Pledge and Security
Agreement, as amended by this Agreement.

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5.9 Counterparts; Execution.
This Agreement may be executed in any number of counterparts and by the parties
hereto on separate counterparts, but all the counterparts taken together shall
be deemed to constitute one and the same instrument. This Agreement, once
executed by a party, may be delivered to the other party hereto by electronic or
telephone line facsimile transmission of a copy of this Agreement bearing the
signature of the party so delivering this Agreement.

5.10 Construction.
The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rules of strict construction
will be applied against any party.

[Signature Pages Follow]
 
 
 
 
 
 
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IN WITNESS WHEREOF, the Grantor and Collateral Agent have caused this Agreement
to be duly executed and delivered by their respective officers or other
representatives thereunto duly authorized as of the date first above written.

        EMAGIN CORPORATION  
   
   
    By:   /s/   

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Name:   Title:

       
ALEXANDRA GLOBAL MASTER
FUND LTD., as Collateral Agent
 
   
 
 
 
ALEXANDRA INVESTMENT MANAGEMENT, LLC, 
as Investment Advisor
 
 
By:   /s/   

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EXHIBIT A

ACKNOWLEDGEMENT AND CONSENT

To: ALEXANDRA GLOBAL MASTER FUND LTD.,
As Collateral Agent
c/o Alexandra Investment Management, LLC
767 Third Avenue, 39th Floor
New York, New York 10017

Re: eMagin Corporation

Reference is made to the Pledge and Security Agreement, dated as of July 21,
2006 (as amended, supplemented or otherwise modified from time to time, the
“Pledge and Security Agreement”) by and between eMagin Corporation, a Delaware
corporation (the “Grantor”), to Alexandra Global Master Fund Ltd., a British
Virgin Islands international business company, as collateral agent (in such
capacity, the “Collateral Agent”) on behalf of the Holders. Capitalized terms
used herein and not otherwise defined herein are used herein as defined in the
Pledge and Security Agreement.

The Grantor has requested that the Holders consent to an Amendment to the Pledge
and Security Agreement on the terms described in that certain Amendment No. 1 to
the Pledge and Security Agreement (“Amendment No. 1 to Pledge and Security
Agreement”), the form of which is attached hereto.

Pursuant to Section 14 of the Pledge and Security Agreement, the undersigned
Holder hereby consents to the terms of Amendment No. 1 to Pledge and Security
Agreement and authorizes the Collateral Agent to execute and deliver Amendment
No. 1 to Pledge and Security Agreement on its behalf.
 

    Very truly yours,                    Dated as of July 23, 2007 NAME OF
HOLDER:  
   
   
    By:   /s/   

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Name:
  Title: 

 

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