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Exhibit 10.17.3  

 
  AMENDED AND RESTATED
  CONVERTIBLE NOTE    
    

THE
SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED, QUALIFIED, APPROVED OR DISAPPROVED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT
BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS. NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL OR STATE REGULATORY AUTHORITY HAS PASSED ON OR ENDORSED THE MERITS OF THESE
SECURITIES. 

DISPLAYTECH,
INC. 

CONVERTIBLE
NOTE 

	$10,000,000.00	 	Longmont, Colorado

February 11, 2003
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

Amended
and Restated Note 

 

        FOR
VALUE RECEIVED, the undersigned, Displaytech, Inc., a Colorado corporation (the "Company"), promises to pay to the order of
Hewlett-Packard Company, a Delaware corporation (the "Purchaser'), or permitted assigns the principal sum of Ten Million dollars ($10,000,000.00), with
interest thereon as provided herein. 

        1.    Purchase Agreement; Original Notes.    

        1.1   The Company and Purchaser are parties to a certain Note Purchase Agreement dated as of February 12, 1999, as amended by a
certain Amendment No. 1 to Note Purchase Agreement between the Company and Purchaser dated as of February 19, 1999 and a certain Second Amendment to Note Purchase Agreement of even date herewith (as
so amended, the "Purchase Agreement"). 

        1.2   This Amended and Restated Convertible Note (this "Note") is issued
pursuant to the Purchase Agreement and extends, amends, modifies and restates those four certain Convertible Notes (the "Original Notes") issued as of
the following dates in the following principal amounts: (i) Convertible Note in the principal amount of $2,000,000.00, dated as of February 19, 1999; (ii) Convertible Note in the principal amount of
$3,000,000.00, dated as of February 26, 1999; (iii) Convertible Note in the principal amount of $3,000,000.00, dated as of July 12, 1999; and (iv) Convertible Note in the principal amount of
$2,000,000.00, dated as of October 26, 1999. Each of the Original Notes was previously modified pursuant to a certain Consent, Amendment and Waiver of Rights Arising Due to Issuance of Series D
Convertible Preferred Stock executed by the Company and Purchaser and dated as of July 30, 2001. Interest at the rate of 9% per annum has accrued on each of the Original Notes, pursuant to the terms
thereof, from the issuance date of each such Original Note through the date hereof, in the total amount of Three Million Three Hundred Ninety Two Thousand Five Hundred Dollars ($3,392,500.00)
("Existing Accrued Interest"). Existing Accrued Interest remains unpaid as of the date of this Note. 

        2.    Definitions.    As used in this Note, the following terms have
the meaning indicated: 

        "Affiliate", when used with respect to any Person, means (i) if such Person is a corporation, any officer or director thereof and any
Person which is, directly or indirectly, the beneficial owner (by itself or as part of any group) of more than five percent (5%) of any class of any equity security (within the meaning of the Exchange
Act) thereof, and, if such beneficial owner is a partnership, any general partner thereof, or if such beneficial owner is a corporation, any Person controlling, controlled by or under common control
with such beneficial owner, or any officer or director of such beneficial owner or of any corporation occupying any such control relationship, (ii) if such Person is a partnership, any general or
limited partner thereof, and (iii) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person. For purposes of this definition, "control"
(including the correlative terms "controlling", "controlled by" and "under common control with"), with respect to any Person, shall mean possession, directly or indirectly, of the 

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power
to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. 

        "Business Combination" means any merger, consolidation, sale of all or substantially all assets or similar transaction. 

        "Business Day" means any day which is not a day on which banking institutions in the Cities of New York, Denver or San Francisco are
authorized or obligated by law, regulation or executive order to close. 

        "Capital Stock" means any and all shares of capital stock of the Company (however designated and whether voting or nonvoting), and shall
include, but not be limited to, the Common Stock and the Preferred Stock. 

        "Capital Stock Rights" means any warrants, options or other rights to purchase Capital Stock or any securities convertible into Capital
Stock or any participations or other interests (other than security interests) in Capital Stock. 

        "Change of Control" means the occurrence of any of the following events: (a) any "person" or "group" (as such terms are used in Section
13(d) and 14(d) of the Exchange Act) other than holders of the Company's Series E-1 Senior Preferred Stock is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the
passage of time, upon the happening of an event or otherwise), directly or indirectly, of more than 50% of the total voting power of the Company; (b) any consolidation of the Company with, or merger
of the Company into, any other person, any merger of another person into the Company or any other Business Combination involving the Company which results in the holders of the Company's Capital Stock
immediately prior to giving effect to such transaction owning shares of capital stock of the surviving corporation in such transaction representing (x) fifty percent (50%) or less of the total voting
power of all shares of capital stock of such surviving corporation entitled to vote or (y) fifty percent (50%) or less of the total value of all capital stock of such surviving corporation; (c) the
sale of all or substantially all of the operating assets of the Company; (d) at any time during any consecutive two-year period, individuals who at the beginning of such period constituted the Board
of Directors of the Company (together with any new directors (i) whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of
662/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved or (ii)
designated by the same Company shareholders that designated such initial individuals (and their successors) as directors) cease for any reason to constitute a majority of the Board of Directors of the
Company then in office (regardless of the actual size of the Board of Directors of the Company); or (c) the Company is liquidated or dissolved or adopts a plan of liquidation. 

        "Common Stock" means the Common Stocks, par value $.001 per share, of the Company and all shares hereafter authorized of any class of
common stock of the 

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Company,
and, in the case of a reclassification, recapitalization or other similar change in such Common Stock or in the case of a consolidation or merger of the Company with or into another Person,
such consideration to which a holder of a share of Common Stock would be entitled upon the occurrence of such event. 

        "Conversion Right" has the meaning set forth in Section 6.1 hereof. 

        "Conversion Notice" has the meaning set forth in Section 6.2(a) hereof. 

        "Convertible Portion" has the meaning set forth in Section 6.1 hereof. 

        "Event of Default" has the meaning set forth in Section 11 hereof. 

        "Existing Accrued Interest" has the meaning set forth in Section 1.2 hereof. 

        "Holder" of this Note means the Person in whose name this Note is registered on the books of the Company. 

        "Indemnity" has the meaning set forth in Section 13(f) hereof. 

        "Maturity Date" Means February 19, 2008. 

        "Mandatory Conversion Date" has the meaning set forth in Section 5.2 hereof. 

        "Note Conversion Price" means an amount initially equal to One Hundred Dollars ($100) as such amount shall be adjusted from time to time
in accordance with the provisions of Section 8 hereof. 

        "Optional Conversion Date" has the meaning set forth in Section 6.2(b) hereof. 

        "Original Notes" means the four Convertible Notes described in Section 1 hereof. 

        "Payment Date" has the meaning set forth in Section 3.2. 

        "Person" means an individual, a corporation, a partnership, a joint venture, an association, a joint stock company, a trust, a business
trust, a government or any agency or any political subdivision, any unincorporated organization or any other entity. 

        "PIK Interest Shares" has the meaning set forth in Section 3.1. 

        "Preferred Stock" means the shares of the Company's Series D Convertible Preferred Stock, par value $.001 per share, or the shares of any
class or series of Capital Stock or Capital Stock Rights into which this Note shall hereafter become convertible, in accordance 

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with
its terms, as a result of reclassification of the Company's Series D Convertible Preferred Stock or otherwise. 

        "Purchase Agreement" has the meaning set forth in Section 1.1 hereof. 

        "Qualified Public Offering" means a firm commitment underwritten public offering pursuant to an effective registration statement under the
Securities Act covering the offer and sale of shares of Common Stock in which (i) proceeds to the Company, net of underwriting discounts, commissions and other expenses, are at least $25,000,000.00,
and (ii) the price per share of Common Stock sold in such offering is not less than 125% of the HP Common Price. As used herein, "HP Common Price" means the amount determined by dividing (x)
the aggregate outstanding balance of unpaid principal and accrued interest under this Note as of the time such offering is consummated by (y) the number of shares of Common Stock into which such
aggregate outstanding balance of principal and accrued interest is at that time convertible pursuant to the terms of this Note (whether directly or, if then required by the provisions of this Note,
following the prior conversion of this Note into shares of Preferred Stock). 

        "Section 4.2 Payments" has the meaning set forth in Section 4.2. 

        "Section 4.3 Excess" has the meaning set forth in Section 4.3. 

        Any
other capitalized terms used but not defined herein shall have the respective meanings ascribed to such terms in the Purchase Agreement. 

        3.    Payment of Principal and Interest.    Subject to Sections 5 and
Section 6 hereof, this Note shall be due and payable in accordance with the following provisions: 

        3.1   The Company promises to pay: (i) the full amount of Existing Accrued Interest; plus (ii) interest on the outstanding
principal amount of this Note from the date hereof, until this Note is paid in full, at the rate of 9% per annum. All Interest on this Note (including Existing Accrued Interest) shall be due and
payable on the Maturity Date or such earlier date as the principal amount shall have been repaid or converted or as may be required pursuant to Section 3.2, as the case may be, in full. Interest shall
be computed on the basis of a 360-day year of twelve 30-day months. Interest shall be payable as specified in Section 13(a), except that if this Note is converted upon a Qualified Public Offering
pursuant to Section 5 or if the Holder of this Note exercises its Conversion Right (other than the exercise of such Conversion Right upon a Change of Control or Event of Default) pursuant to Section
6.1, then the Company shall pay (if such conversion is pursuant to Section 5) or may at its option elect to pay (if such conversion is pursuant to Section 6) the interest accrued on the principal
amount of this Note being converted by issuing additional fully paid and nonassessable shares of Preferred Stock (the "PIK Interest Shares"), with the
number of PIK Interest Shares to be issued to be calculated by dividing the amount of interest accrued on the principal amount being converted by the Note Conversion Price then in effect. 

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        3.2   Subject to Section 4.2, the Company shall pay the following amounts on or before the following dates (each a
"Payment Date"), in reduction of principal and accrued interest under this Note: 

        (a)   The
sum of Five Hundred Thousand Dollars ($500,000.00) on or before February 19, 2006; 

        (b)   The
additional sum of One Million Dollars ($1,000,000.00) on or before August 19, 2006; 

        (c)   The
additional sum of One Million Five Hundred Thousand Dollars ($1,500,000.00) on or before February 19, 2007; 

        (d)   The
additional sum of Two Million Dollars ($2,000,000.00) on or before August 19, 2007; and 

        (e)   The
full remaining principal balance and all accrued interest on or before the Maturity Date. 

        3.3   Notwithstanding any provision of the Note to the contrary, upon a Change of Control prior to the Maturity Date, the
Holder may, at its option upon written notice to the Company, (i) accelerate payment of the unpaid principal and accrued interest on this Note to the date of consummation of such Change of
Control, (ii) exercise the Conversion Right, (iii) keep the Notes outstanding, such that interest shall continue to accrue until the Maturity Date, or (iv) select a combination of
any or all of the foregoing. 

        3.4   Each payment under this Note (whether pursuant to Section 3.2 or otherwise) shall be applied as follows:
(a) first, to accrued but unpaid interest; and (b) thereafter, to the principal amount outstanding as of the time of such payment. 

        4.    Prepayment.    The Company may, at its option, at any time and
from time to time and prior to the Maturity Date, prepay all or any portion of the principal amount of this Note, without prepayment penalty or premium. Any such prepayment shall be in accordance with
the following terms and conditions: 

        4.1   The Company shall give the Holder prior written notice of its irrevocable election to prepay this Note as provided above
(identifying the date of prepayment, the full amount of the payment proposed to be made, and the portion thereof that is allocable to principal pursuant to the provisions of Section 3.4), which
written notice shall be delivered to the Holder at least sixty (60) Days prior to any such prepayment date. 

        4.2   To the extent (if any) that the aggregate amount of accrued interest and principal paid by the Company pursuant to this
Note on or before August 19, 2006 ("Section 4.2 Payments") exceeds One Million Five Hundred Thousand Dollars ($1,500,000.00), the Company shall receive
(in addition to the credit received for the amount 

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of
such payments) a credit against its obligations under this Note in an amount equal to 20% of such excess. Each such credit (i) shall be applied to accrued interest and principal in
substantially the same manner as is set forth in Section 3.4, as if the amount of such credit were a payment and (ii) shall be credited against, and offset from, the Company's obligation for
payments coming due on the next succeeding Payment Date(s). By way of example only, if the Company pays principal and accrued interest in the aggregate amount of Two Million Dollars ($2,000,000.00) on
or before August 19, 2006,
then the Company shall be entitled to a credit in the amount of One Hundred Thousand Dollars ($100,000.00) against the payment required to be made on or before February 19, 2007 pursuant to
Section 3.2(c). 

        4.3   For purposes of this Section 4.3, the "Section 4.3 Excess" shall mean the
amount, if any, by which (a) the aggregate amount of accrued interest and principal paid by the Company pursuant to this Note on or before August 19, 2007 exceeds (b) the full
amount of Section 4.2 Payments actually made by the Company. Provided that the Company timely makes all payments required to be made under this Note as of August 19, 2006, then to the extent
(if any) that the Section 4.3 Excess exceeds Three Million Five Hundred Thousand Dollars ($3,500,000.00), the Company shall receive (in addition to the credit received for the amount of such payments)
a credit against its obligations under this Note in an amount equal to 10% of the amount by which the Section 4.3 Excess exceeds Three Million Five Hundred Thousand Dollars ($3,500,000.00).
Each such credit (i) shall be applied to accrued interest and principal in substantially the same manner as is set forth in Section 3.4, as if the amount of such credit were a payment
and (ii) shall be credited against, and offset from, the Company's obligation for payments coming due on the next succeeding Payment Date(s). By way of example only, if the Company pays
(A) principal and accrued interest in the aggregate amount of Two Million Dollars ($2,000,000.00) on or before August 19, 2006 and (B) principal and accrued interest in the
additional aggregate amount of Four Million ($4,000,000.00) on or before August 19, 2007, then in addition to the credit described in the last sentence of Section 4.2, the Company shall
be entitled to a credit in the amount of Fifty Thousand Dollars ($50,000.00) against the payment required to be made on or before the Maturity Date pursuant to Section 3.2(e). 

        5.    Mandatory Conversion.    

        5.1    Conversion upon IPO.    The outstanding
principal and interest of this Note shall be converted automatically into the number of shares of Preferred Stock obtained by dividing the aggregate amount of such principal and interest by the then
effective Note Conversion Price, immediately upon the closing of a Qualified Public Offering. The number of shares of Preferred Stock obtained upon the closing of a Qualified Public Offering shall
then be converted into shares of Common Stock in accordance with the provisions of Section 5.2; provided, that notwithstanding any provision of
this Note to the contrary, no portion of this Note shall be converted into shares of Preferred Stock pursuant to the provisions of this Section 5.1 unless immediately thereafter, such shares of
Preferred Stock automatically convert (in the manner set forth in Section 5.2) into shares of Common Stock having an aggregate value (based on the price per share of Common Stock sold in the
Qualified 

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Public
Offering) of at least 125% of the aggregate amount of principal and accrued interest to be converted hereunder. 

        5.2    Notice of Mandatory Conversion.    Within five (5) Business
Days after the date on which this Note converts into shares of Preferred Stock and is then converted into shares of Common Stock as described in Section 5.1 (the
"Mandatory Conversion Date"), the Company shall mail a notice of conversion by first class mail, postage prepaid, to the Holder, addressed to the Holder
at its last address shown on the books of the Company. Notwithstanding any provision of this Note or any other document or instrument to the contrary, this Note (and, in accordance with the provisions
of this Section 5.2, the shares of Preferred Stock issuable upon conversion of this Note) shall be converted automatically and without any further action by the Holder hereof on the Mandatory
Conversion Date, whether or not this Note or any other certificates, documents or instruments are surrendered to the Company by the Holder. On the Mandatory Conversion Date, the Company shall make
entries on the stock book of the Company reflecting the conversion of the Note into the shares of Preferred Stock and the conversion of the shares of Preferred Stock into Common Stock. The Company
shall be obligated to issue (i) certificates evidencing the shares of Common Stock issuable upon conversion of the Preferred Stock, and, (ii) as provided in Section 7 hereof, a
check or cash in respect of any fractional shares of Common Stock issuable upon such conversion, within three (3) days after the Mandatory Conversion Date. Within seven (7) days after the Mandatory
Conversion Date the Holder shall either deliver this Note to the Company, or notify the Company that this Note has been lost, stolen or destroyed and provide to the Company an Indemnity in respect
thereto. 

        6.    Optional Conversion.    

        6.1    Conversion Right.    Subject to the terms and conditions of
this Note and the Purchase Agreement, (i) on the Maturity Date, (ii) upon the occurrence of any Event of Default, (iii) following notice of prepayment of the Note pursuant to
Section 4, (iv) upon a Change of Control and (v) upon any public offering of the Company's securities (other than a Qualified Public Offering upon which this Note automatically
converts in accordance with Section 5), the Holder shall have the right (the "Conversion Right"), at its option, to convert the entire principal
amount of this Note or, at the Holder's election, any portion of the principal amount of this Note (the "Convertible Portion"), into that number of
fully paid and nonassessable shares of Preferred Stock obtained by dividing such principal amount or Convertible Portion, as the case may be, by the Note Conversion Price in effect on the date such
conversion is deemed to be effective. 

        6.2    Exercise of Conversion Right.    

        (a)   In
order to effect a conversion pursuant to Section 6.1, the Holder shall surrender this Note to the Company and shall give written notice, in substantially the
form of Exhibit A attached hereto, to the Company (a "Conversion Notice") that the Holder elects to convert this Note, or the Convertible Portion
as is specified in the Conversion Notice, into shares of Preferred Stock. Promptly upon receipt of a Conversion Notice and 

8

 

surrender
of this Note, the Company shall issue and deliver, or cause to be issued and delivered, to the Holder (i) a certificate or certificates for the number of full shares of Preferred
Stock issuable upon the conversion of this Note, or the Convertible Portion, as the case may be, in accordance with the provisions of this Section 6, and, (ii) as provided in Section 7,
a check or cash in respect of any fractional shares of Preferred Stock issuable upon such conversion and, in accordance with Section 13(a), all accrued but unpaid interest on the principal
amount of this Note being converted. The foregoing notwithstanding, upon exercise of the Conversion Right (except an exercise of the Conversion Right upon a Change of Control or Event of Default), the
Company, at its option, may elect to pay the interest accrued on the principal amount of this Note then being converted by issuing PIK Interest Shares, with the number of PIK Interest Shares to be
issued to be calculated by dividing the amount of interest accrued on the principal amount of this Note or the Convertible Portion being converted on the Optional Conversion Date by the Note
Conversion Price then in effect. If the Holder exercises its Conversion Right upon a Change of Control or Event of Default, the election to receive PIK Interest Shares in lieu of interest accrued
shall be at the option of the Holder. If less than the entire principal amount of this Note is being converted, the Company shall issue and deliver, or cause to be issued and delivered, to the Holder,
without charge to the Holder, a new Note in a principal amount equal to the unconverted principal amount of this Note and dated the date of this Note. 

        (b)   Each
conversion shall be deemed to have been effected on the date (the "Optional Conversion Date") on which this Note
shall have been surrendered to the Company and a Conversion Notice with respect to this Note shall have been received by the Company as described in Section 6.2(a). Any person in whose name any
certificate or certificates for shares of Preferred Stock shall be issuable upon conversion shall be deemed to have become the holder of record of the shares represented thereby on the Optional
Conversion Date. 

        6.3    No Other Adjustments.    Except as otherwise provided in this
Section 6 and Section 5 and Section 8, no payment or adjustment to the Note Conversion Price will be made for dividends or other distributions with respect to any shares of
Preferred Stock issuable upon conversion of this Note as provided herein. 

        7.    No Fractional Shares.    No fractional shares of Preferred Stock
or scrip representing fractional shares shall be issued upon conversion (whether optional or mandatory) of the principal amount and interest, if applicable, of this Note or the Convertible Portion. If
any fractional shares of Preferred Stock would, but for this Section 7, be issuable upon the conversion of this Note or the Convertible Portion, the Company shall make a payment therefor in
check or cash in an amount equal to the Fair Market Value of such fractional shares. The term "Fair Market Value" of any share of Preferred Stock shall mean the fair market value of the shares of
Preferred Stock as determined in good faith by the Board of Directors of the Company, which determination shall be conclusive. 

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        8.    Adjustment of Note Conversion Price.    

        (a)   In
the event that the Company shall at any time after the date hereof: (i) declare a dividend or make a distribution on its Preferred Stock in shares of Preferred
Stock, (ii) subdivide or reclassify shares of its outstanding Preferred Stock into a greater number of shares, (iii) combine shares of its outstanding Preferred Stock into a smaller
number of shares, or (iv) pay a dividend or make a distribution on its Preferred Stock in shares of any series of its Capital Stock (other than Preferred Stock) or in any Capital Stock Rights,
or (v) issue to the holders of its Preferred Stock, by reclassification of its Preferred Stock or otherwise, shares of any series of its Capital Stock or any Capital Stock Rights, then the Note
Conversion Price in effect immediately prior to such event shall be adjusted so that the Holder of this Note shall be entitled to receive on conversion of this Note or the Convertible Portion, as the
case may be, the number of shares of Preferred Stock, other Capital Stock or Capital Stock Rights of the Company which such Holder would have owned or have been entitled to receive after the happening
of any of the events described above had this Note or the Convertible Portion been converted immediately prior to the happening of such event. Any adjustment made pursuant to this Section 8
shall become effective immediately after the effective date in the case of a dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision,
combination, reclassification or similar event. Such adjustment shall be made successively whenever any event referred to above shall occur. 

        (b)   Upon
an adjustment of the Note Conversion Price pursuant to Section 8(a), the Company shall give prompt written notice thereof to the Holder of this Note, which
notice shall state the Note Conversion Price resulting from such adjustment and shall set forth in reasonable detail the method of calculation of such Note Conversion Price and the facts upon which
such calculation was based. 

        (c)   In
case at any time: 

        (i)    the
Company shall determine to declare any dividend or make any distribution on its shares of Preferred Stock other than in shares of Capital Stock or in Capital Stock
Rights; 

        (ii)   there
shall be an impending Business Combination; or 

        (iii)  there
shall be an impending voluntary or involuntary dissolution, liquidation or winding up of the Company; 

then,
in any one or more of said cases, the Company shall give written notice of the action in question to the Holder of this Note. Such notice shall describe the material terms and conditions of such
action and shall specify (y) in the case of a dividend or distribution, the date on which the books of the Company shall close or a record shall be taken for such dividend or distribution and
the date as of which holders of shares of Preferred Stock of record shall participate in such dividend, or distribution,
and (z) in the case of a Business Combination dissolution, liquidation or winding up of the Company, the date on which such Business 

10

 

Combination,
dissolution, liquidation or winding up shall take place and the date as of which the holders of Capital Stock shall be entitled to exchange their Capital Stock for securities or other
property deliverable upon such Business Combination, dissolution, liquidation or winding up. Such written notice shall be given at least ten (10) Business Days prior to the action in question and not
less than ten (10) business Days prior to the record date or the date on which the Company's stock transfer books are closed in respect thereof. The Holder shall keep such notice and any information
contained therein confidential, provided that: (A) this obligation of confidentiality does not apply to information which (i) was lawfully in Holder's possession prior to any disclosure
by the Company, (ii) is generally available to the public other than as a result of disclosure by Holder, or its employees, agents, representatives or others acting on Holder's behalf, or
(iii) becomes available to Holder on a non-confidential basis from a source other than the Company or its representatives provided that the source of such information was not bound by a
confidentiality agreement with the Company in respect thereof; and (B) Holder may disclose such notice and information to a limited group of Holder's directors, officers, employees, attorneys
or other professional advisors who are participating in the evaluation of the transactions and matters that are the subject to such notice and information, each of whom shall be informed of the
confidential nature of such information and the existence of the obligation set forth herein. 

        9.    Taxes on Shares Issued.    The issuance of stock certificates
upon conversion of this Note or the Convertible Portion pursuant to Sections 5 and 6 shall be made without charge to the converting Holder for any transfer, stamp or similar tax in respect of
the issuance thereof. 

        10.    Reservation of Shares.    The Company shall reserve, free from
preemptive rights, out of its authorized but unissued shares, or out of shares held in its treasury, sufficient shares of Preferred Stock to provide for the conversion, based on the Conversion Price
from time to time in effect, of the full principal amount of this Note from time to time outstanding. The Company covenants that all shares of Preferred Stock which may be issued upon conversion of
this Note or the Convertible Portion will upon issuance be duly authorized, validly issued, fully paid and nonassessable by the Company and free from all taxes, liens and charges with respect to the
issuance thereof. 

        11.    Events of Default.    

        (a)   Each
of the following shall constitute an "Event of Default" hereunder: 

        (i)    the
Company shall fail to make any payment of principal or interest when due under this Note, and such failure continues for a period of seven (7) days after receipt of
written notice of nonpayment from the Holder; or 

        (ii)   the
Company does not perform or comply with any one or more of its material obligations in the Notes or the Purchase Agreement 

11

 

(other
than a default under (i) above) for a period of forty five (45) days after written notice of such default shall have been given to the Company by the Holder; or 

        (iii)  one
or more defaults in the required payments, including principal, interest, premium, rent or leasehold payments, if any, on any Permitted Indebtedness (as defined in
the Purchase Agreement), when the same becomes due and payable, or the occurrence of any other event of default under any Permitted Indebtedness (in accordance with the terms thereof), and the Company
has failed to cure such default or defaults within the applicable grace period or period to cure such default or defaults, without regard to any waiver of the grace or cure periods, subsequent cure,
or notice provisions of the Permitted Indebtedness; or 

        (iv)  an
involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (A) relief in respect of the
Company or of a substantial part of its property or assets, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (B) the appointment of a receiver, trustee, custodian, sequestrator, conservator or a similar official for the Company or for a substantial part of its
property or assets, or (C) the winding up or liquidation of the Company; and such proceeding or petition shall continue undismissed for sixty (60) days, or an order or decree approving or
ordering any of the foregoing shall be entered; or 

        (v)   the
Company shall (A) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other Federal or state bankruptcy, insolvency, receivership or similar law, (B) consent to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding for the filing of any petition described in paragraph (v) of this Section 11(a), (C) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Company, or for a substantial part of its property or assets, (D) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors, (F) become unable, admit in writing its inability or fail generally to pay
its debts as they become due or (G) take any action for the purpose of effecting any of the foregoing; or 

        (vi)  the
Company breaches any provision of that certain Mutual Cooperation Agreement between the Company and Purchaser 

12

 

dated
as of the date hereof, as same may be amended from time to time, which breach is not cured within thirty days after written notice to the Company; or 

        (vii) any
representation, warranty, certification or statement made by or on behalf of the Company in the Purchase Agreement or this Note, or in any certificate or other
document delivered pursuant hereto or thereto, shall have been incorrect in any material respect when made. 

        (b)   Notwithstanding
any provision of this Note to the contrary, the following are the consequences of an Event of Default: 

        (i)    if
an Event of Default other than as specified in clauses (iii), (iv) or (v) of Section 11(a) above shall occur, the Holder of this Note may, at its option, by notice in
writing to the Company, declare the unpaid principal of this Note, together with all interest accrued and unpaid thereon, to be forthwith due and payable, and the same shall thereupon become and be
immediately due and payable; and 

        (ii)   if
an Event of Default specified in clause (iv) or clause (v) of Section 11(a) above shall occur, the unpaid principal of this Note, together with all interest accrued
and unpaid thereon, shall be and become immediately due and payable; 

        (iii)  if
any Event of Default shall occur, the Holder of this Note shall have the Conversion Right specified in Section 6 thereof. 

        (c)   The
rights and remedies of the Holder of this Note upon the occurrence of an Event of Default set forth above are in addition to and not in derogation of any other
rights such Holder may have under applicable law. 

        12.    Rank.    This Note shall rank senior to all indebtedness of the
Company, whether presently existing or hereinafter incurred, with the exception of (i) all obligations owed to Transamerica Business Credit Corporation ("TA") under that certain Master Lease Agreement
between the Company and TA dated as of July 6, 1998 and (ii) such future secured indebtedness of the Company as constitutes Permitted Indebtedness within the meaning of the Purchase Agreement. 

        13.    Miscellaneous.    

        (a)   All
payments hereunder shall be made by wire transfer of immediately available federal funds to such account as the Holder of this Note shall specify from time to time
by notice in writing to the Company. 

        (b)   This
Note shall be governed by the laws of the State of Colorado without giving effect to principles of conflicts of laws thereof. 

13

 

        (c)   The
Company hereby waives presentment, protest, notice of nonpayment, dishonor and notice of dishonor, except to the extent expressly required hereby. 

        (d)   All
notices hereunder shall be given and deemed received in the manner specified for notices under the Purchase Agreement. 

        (e)   The
Company agrees to pay all costs of collection, including reasonable attorneys' fees and disbursements, in the event any sum payable pursuant to this Note is not paid
when due. 

        (f)    If
a mutilated Note is surrendered to the Company, or if the Holder of this Note claims this Note has been lost, destroyed or willfully taken and provides an indemnity
bond or agreement or other security sufficient, in the reasonable judgment of the Company, to protect the Company and any of its officers, directors, employees or representatives from any loss which
any of them may suffer if this Note is replaced (an "Indemnity"), then the Company shall issue a replacement Note of like tenor and dated the date of
this Note. 

        (g)   The
Company shall, at its expense and upon written request of the Holder of this Note and surrender of this Note for such purpose, issued new Notes in exchange therefor
in such denominations of at least $300,000 as shall be specified by the Holder of this Note, in an aggregate principal amount equal to the then unpaid principal amount of this Note and substantially
in the form of this Note, with appropriate insertions and variations, and dated the date of this Note. 

        (h)   This
Note may not be sold, assigned, transferred or otherwise disposed of ("Transfer"), except that the Purchaser or any
subsequent Holder of this Note may Transfer this Note to an Affiliate of the Purchaser. All of the covenants, stipulations, promises and agreements contained in this Note by or on behalf of the
Company shall bind its successors and assigns, whether so expressed or not. 

        (i)    The
Company shall keep at its principal office a register in which the Company shall provide for the registration of this Note and of transfers of this Note. Upon
surrender of this Note for transfer at the principal office of the Company, duly endorsed or accompanied by a written instrument of transfer duly executed by the Holder hereof or its attorney duly
authorized in writing, the Company shall execute and deliver in the name of the designated transferee a new promissory note in a principal amount equal to the unpaid principal amount of, and dated the
date of this Note, and otherwise in the form of this Note. 

        (j)    Amendments
and modifications to this Note may be made only in the manner provided in Section 13.5 of the Purchase Agreement. The failure of the Holder to insist
on strict compliance with any of the terms, covenants, or conditions of this Note by the Company shall not be deemed a waiver of that or any other term, covenant, or condition, nor shall any waiver or
relinquishment of any right or power at any one time or times be deemed a 

14

 

waiver
or relinquishment of that or any other right or power for all or any other time. Without limiting the generality of the foregoing, the acceptance by the Holder of any payment hereunder which
is less than the payment in full of all amounts due and payable at the time of such payment shall not constitute a waiver of the right to exercise any rights or remedies available to the Holder
hereunder or by law at that time or at any subsequent time or nullify any prior exercise of any such right or remedy, except as and to the extent otherwise provided by law. 

15

 

        IN
WITNESS WHEREOF, the Company has caused this Amended and Restated Convertible Note to be executed by an officer thereunto duly authorized this 11 day of February 2003. 

	

 	
 	

DISPLAYTECH, INC.
	

 	
 	

By:	

/s/  RICHARD BARTON      
	 	 	 	
 Name:  Richard Barton

Title:    Chief Executive Officer

16

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Exhibit 10.18  

        [*****] = Certain
confidential information contained in this document, marked with brackets, has been omitted and filed separately with the
Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended. 

 
 

LOAN AND SECURITY AGREEMENT    
    

DISPLAYTECH, INC.  

   TABLE OF CONTENTS  

	 
	 	 
	 	 
	 	Page

	1	 	ACCOUNTING AND OTHER TERMS	 	1
	

2	
 	
LOAN AND TERMS OF PAYMENT	
 	

1
	 	 	2.1	 	Promise to Pay	 	1
	 	 	2.2	 	Interest Rate, Payments	 	1
	 	 	2.3	 	Fees	 	2
	

3	
 	
CONDITIONS OF LOANS	
 	

2
	 	 	3.1	 	Conditions Precedent to Term Loan	 	2
	

4	
 	
CREATION OF SECURITY INTEREST	
 	

2
	 	 	4.1	 	Grant of Security Interest	 	2
	

5	
 	
REPRESENTATIONS AND WARRANTIES	
 	

3
	 	 	5.1	 	Due Organization and Authorization	 	3
	 	 	5.2	 	Collateral	 	3
	 	 	5.3	 	Litigation	 	3
	 	 	5.4	 	No Material Adverse Change in Financial Statements	 	3
	 	 	5.5	 	Solvency	 	4
	 	 	5.6	 	Regulatory Compliance	 	4
	 	 	5.7	 	Investments in Subsidiaries	 	4
	 	 	5.8	 	Inside Debt	 	4
	 	 	5.9	 	Full Disclosure	 	4
	

6	
 	
AFFIRMATIVE COVENANTS	
 	

4
	 	 	6.1	 	Government Compliance	 	4
	 	 	6.2	 	Financial Statements, Reports, Certificates	 	5
	 	 	6.3	 	Inventory; Returns	 	5
	 	 	6.4	 	Taxes	 	5
	 	 	6.5	 	Insurance	 	5
	 	 	6.6	 	Primary Accounts	 	6
	 	 	6.7	 	Financial Covenants	 	6
	 	 	6.8	 	Subordination of Inside Debt	 	6
	 	 	6.9	 	Registration of Intellectual Property Rights	 	6
	 	 	6.10	 	Further Assurances	 	6
	

7	
 	
NEGATIVE COVENANTS	
 	

6
	 	 	7.1	 	Dispositions	 	6
	 	 	7.2	 	Changes in Business, Ownership, or Locations of Collateral	 	6
	 	 	7.3	 	Mergers or Acquisitions	 	7
	 	 	7.4	 	Indebtedness	 	7
	 	 	7.5	 	Encumbrance	 	7
	 	 	7.6	 	Distributions; Investments	 	7
	 	 	7.7	 	Transactions with Affiliates	 	7
	 	 	7.8	 	Subordinated Debt	 	7
	 	 	7.9	 	Compliance	 	7
	 	 	 	 	 	 	 

i

 

	

8	
 	
EVENTS OF DEFAULT	
 	

8
	 	 	8.1	 	Payment Default	 	8
	 	 	8.2	 	Covenant Default	 	8
	 	 	8.3	 	Material Adverse Change	 	8
	 	 	8.4	 	Attachment	 	8
	 	 	8.5	 	Insolvency	 	9
	 	 	8.6	 	Other Agreements	 	9
	 	 	8.7	 	Judgments	 	9
	 	 	8.8	 	Misrepresentations	 	9
	 	 	8.9	 	Management Change	 	9
	

9	
 	
BANK'S RIGHTS AND REMEDIES	
 	

9
	 	 	9.1	 	Rights and Remedies	 	9
	 	 	9.2	 	Power of Attorney	 	10
	 	 	9.3	 	Bank Expenses	 	10
	 	 	9.4	 	Bank's Liability for Collateral	 	10
	 	 	9.5	 	Remedies Cumulative	 	10
	 	 	9.6	 	Demand Waiver	 	10
	

10	
 	
NOTICES	
 	

11
	

11	
 	
CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER	
 	

11
	

12	
 	
GENERAL PROVISIONS	
 	

11
	 	 	12.1	 	Successors and Assigns	 	11
	 	 	12.2	 	Indemnification	 	11
	 	 	12.3	 	Time of Essence	 	11
	 	 	12.4	 	Severability of Provision	 	11
	 	 	12.5	 	Amendments in Writing, Integration	 	11
	 	 	12.6	 	Counterparts	 	12
	 	 	12.7	 	Survival	 	12
	 	 	12.8	 	Confidentiality	 	12
	 	 	12.9	 	Attorneys' Fees, Costs and Expenses	 	12
	

13	
 	
DEFINITIONS	
 	

12
	 	 	13.1	 	Definitions	 	12

ii

   
        This LOAN AND SECURITY AGREEMENT (the "Agreement") dated as of April 4, 2003, between SILICON VALLEY BANK ("Bank"), whose address
is 4410 Arapahoe Avenue, Suite 200, Boulder, Colorado 80303 (facsimile no. 303-938-0486), and DISPLAYTECH, INC., a Colorado corporation ("Borrower"), whose
address is 2602 Clover Basin Drive, Longmont, Colorado 80503 (facsimile no. 303-772-2193), provides the terms on which Bank will lend to Borrower and Borrower will repay
Bank. The parties agree as follows: 

1 ACCOUNTING AND OTHER TERMS  

        All capitalized terms used herein shall have the meanings set forth in Section 13 of this Agreement. Accounting terms not defined in this Agreement will be
construed following GAAP. Calculations and determinations must be made following GAAP. The term "financial statements" includes the notes and schedules. The terms "including" and "includes" always
mean "including (or includes) without limitation," in this or any Loan Document. 

2 LOAN AND TERMS OF PAYMENT  

2.1   Promise to Pay.  

        Borrower promises to pay Bank the unpaid principal amount of all Credit Extensions and interest on the unpaid principal amount of the Credit Extensions. 

2.1.1 Term Loans.  

        (a)   Bank
will make the Term Loan available to Borrower on the Closing Date as working capital for the purpose of paying off certain current outstanding lease indebtedness
owed to Transamerica Technology Finance Corporation by Borrower (the "Transamerica Indebtedness"). 

        (b)   Borrower
will pay twenty-four (24) equal installments of principal and interest of $30,578.25 on the Term Loan (the "Term Loan Payment"). The first
Term Loan Payment shall be due on the Closing Date. Every other Term Loan Payment is payable on the first day of each month thereafter during the term of the loan. Borrower's final Term Loan Payment
shall be due on the Term Loan Maturity Date, and shall be in an amount necessary to satisfy in full all outstanding Term Loan principal and accrued interest on the Term Loan through such date. The
Term Loan may not be reborrowed once repaid. 

2.2   Interest Rate, Payments.  

2.2.1 As to Term Loans.  

        (a)   Interest
Rate. The Term Loan accrues interest at a per annum rate equal to the Prime Rate as of the Closing Date plus one and one-half percent (1.5%), which
is 5.75%. The interest rate shall be fixed as of the Closing Date. After an Event of Default, Obligations accrue interest at five percent above the rate effective immediately before the Event of
Default. Interest is computed on a 360 day year for the actual number of days elapsed. 

        (b)   Final
Payment. On the Term Loan Maturity Date, Borrower will pay, in addition to the unpaid principal and accrued interest and all other amounts due on such date with
respect to the Term Loan, an amount equal to the Final Payment. 

        (c)   Mandatory
Prepayment Upon an Acceleration. If the Term Loan is accelerated following the occurrence of an Event of Default or otherwise, then Borrower will immediately
pay to Bank (i) all outstanding principal of the Term Loan, (ii) all unpaid accrued interest on the Term Loan through the date of prepayment, (iii) if such prepayment requirement
occurs within twelve months after the Closing Date, an amount equal to 1% of the original principal amount of the Term Loan, (iv) the Final 

1

 

Payment,
and (v) all other Obligations, if any, that shall have become due and payable with respect to this Agreement. 

        (d)   Permitted
Prepayment of Loan. Borrower shall have the option to prepay all, but not less than all, of the Term Loan,  provided Borrower (i) provides written notice to Bank to prepay the Term Loan prior to
such prepayment, and (ii) pays, on the date of the
prepayment (A) all outstanding principal of the Term Loan; (B) all unpaid accrued interest on the Term Loan through the date of the prepayment; (C) if such prepayment occurs
within twelve months after the Closing Date, an amount equal to 1% of the original principal amount of the Term Loan; (D) the Final Payment, and (E) all other Obligations, if any, that
shall have become due and payable hereunder with respect to this Agreement. 

2.2.2 Request to Debit Accounts.  

        Borrower authorizes Bank to debit any of Borrower's deposit accounts including Account Number 3300364560 for principal and interest payments or any amounts
Borrower owes Bank when due. Bank will notify Borrower of all debits that Bank makes against Borrower's accounts. These debits to Borrower's account are not a set-off. 

2.3   Fees.  

        In addition to any other fees due and payable to Bank by Borrower as set forth in this Agreement, Borrower will pay: 

        (a)   Facility
Fee. A fully earned, non-refundable facility fee of $2,500.00 for the Term Loan due on the Closing Date; and 

        (b)   Bank
Expenses. All Bank Expenses (including reasonable attorneys' fees and reasonable expenses) incurred through and after the date of this Agreement, are payable when
due. 

3 CONDITIONS OF LOANS  

3.1   Conditions Precedent to Term Loan.  

        Bank's obligation to make the Term Loan is subject to the condition precedent that it receive the agreements, documents and fees it requires. 

4 CREATION OF SECURITY INTEREST  

4.1   Grant of Security Interest.  

        Borrower grants Bank a continuing security interest in all presently existing and later acquired Collateral to secure all Obligations and performance of each of
Borrower's duties under the Loan Documents. Except for Permitted Liens, any security interest will be a first priority security interest in the Collateral. If this Agreement is terminated, Bank's lien
and security interest in the Collateral will continue until Borrower fully satisfies its Obligations. 

4.1.1 Authorization to File.  

        Borrower authorizes Bank to file financing statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to
perfect or protect Bank's interest in the Collateral. 

2

 

5 REPRESENTATIONS AND WARRANTIES  

        Borrower represents and warrants as follows: 

5.1   Due Organization and Authorization.  

        Borrower and each Subsidiary is duly existing and in good standing in its state of incorporation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to cause a
Material Adverse Change. Borrower has not changed its state of incorporation or its organizational structure or type or any organizational number (if any) assigned by its jurisdiction of
incorporation. 

        The
execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower's formation documents, nor constitute an event of default under
any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material
Adverse Change. 

5.2   Collateral.  

        Borrower has good title to the Collateral, free of Liens except Permitted Liens or Borrower has Rights to each asset that is Collateral. Borrower has no other
deposit account, other than the deposit accounts described in the Schedule. The Accounts are bona fide, existing obligations, and the service or property has been performed or delivered to the account
debtor or its agent for immediate shipment to and unconditional acceptance by the account debtor. The Collateral is not in the possession of any third party bailee (such as at a warehouse). In the
event that Borrower, after the date hereof, intends to store or otherwise deliver the Collateral to such a bailee, then Borrower will receive the prior written
consent of Bank and such bailee must acknowledge in writing that the bailee is holding such Collateral for the benefit of Bank. Borrower has no notice of any actual or imminent Insolvency Proceeding
of any account debtor whose accounts are an Eligible Account in any Borrowing Base Certificate. All Inventory is in all material respects of good and marketable quality, free from material defects.
Except as set forth in the Schedule, Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted to its customers in the ordinary course of business.
No part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property violates the rights of any
third party, except to the extent such claim could not reasonably be expected to cause a Material Adverse Change, and, to the knowledge of Borrower's Responsible Officers, each Patent is valid and
enforceable. 

5.3   Litigation.  

        Except as shown in the Schedule, there are no actions or proceedings pending or, to the knowledge of Borrower's Responsible Officers, threatened by or against
Borrower or any Subsidiary in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change. 

5.4   No Material Adverse Change In Financial Statements.  

        All consolidated financial statements for Borrower, and any Subsidiary, delivered to Bank fairly present in all material respects Borrower's consolidated
financial condition and Borrower's consolidated results of operations. There has not been any material deterioration in Borrower's consolidated financial condition since the date of the most recent
financial statements submitted to Bank. 

3

 

5.5   Solvency.  

        Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as
they mature. 

5.6   Regulatory Compliance.  

        Borrower is not an "investment company" or a company "controlled" by an "investment company" under the Investment Company Act. Borrower is not engaged as one of
its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of Governors). To the knowledge of Borrower's Responsible Officers, Borrower has
compiled in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a
Material Adverse Change. None of Borrower's or any Subsidiary's properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate
provision to pay, all taxes, except those being contested in good faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made
all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently conducted, except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change. 

5.7   Investments in Subsidiaries.  

        Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 

5.8   Inside Debt.  

        Except as shown in the Schedule, Borrower presently does not owe any indebetedness to its officers, directors and shareholders. 

5.9   Full Disclosure.  

        No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank (taken together with all such written
certificates and written statements to Bank) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or
statements not misleading. It being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that
actual results during the period or periods covered by such projections and forecasts may differ from the projected and forecasted results. 

6 AFFIRMATIVE COVENANTS  

        Borrower will do all of the following for so long as Bank has an obligation to lend, or there are outstanding Obligations: 

6.1   Government Compliance.  

        Borrower will maintain its and all Subsidiaries' legal existence and good standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to cause a material adverse effect on Borrower's business or operations. Borrower will comply, and have each Subsidiary
comply, with all laws, ordinances and regulations to 

4

 

which
it is subject, noncompliance with which could have a material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change. 

6.2   Financial Statements, Reports, Certificates.  

        (a)   Borrower
will deliver to Bank: (i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated operations during the period certified by a Responsible Officer and in a form acceptable to Bank; (ii) as soon
as available, but no later than one hundred twenty (120) days after the last day of Borrower's fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied,
together with an unqualified opinion on the financial statements from an independent certified public accounting firm reasonably acceptable to Bank; (iii) within five days of filing, copies of
all statements, reports and notices made available to Borrower's security holders or to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and
8-K filed with the Securities and Exchange Commission; (iv) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in
damages or costs to Borrower or any Subsidiary of $100,000 or more; (v) budgets, sales projections, operating plans or other financial information Bank reasonably requests; and
(vi) prompt notice of any material change in the composition of the Intellectual Property, including any subsequent ownership right of Borrower in or to any Copyright, Patent or Trademark not
shown in any Schedule of Borrower or knowledge of an event that materially adversely affects the value of the Intellectual Property. 

        (b)   Within
thirty (30) days after the last day of each month, Borrower will deliver to Bank an aged listings of accounts receivable and accounts payable by invoice
date certified by a Responsible Officer and in a form acceptable to Bank. 

        (c)   Within
thirty (30) days after the last day of each month and one hundred twenty (120) days after the last day of Borrower's fiscal year, Borrower will
deliver to Bank with the monthly or annual financial statements a Compliance Certificate signed by a Responsible Officer in the form of  Exhibit B. 

        (d)   Allow
Bank to audit Borrower's Collateral at Borrower's expense. Such audits will be conducted no more often than annually unless an Event of Default has occurred and is
continuing. 

6.3   Inventory; Returns.  

        Borrower will keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between Borrower and its account debtors
will follow Borrower's customary practices as they exist at execution of this Agreement. Borrower must promptly notify bank of all returns, recoveries, disputes and claims, that involve more than
$50,000. 

6.4   Taxes.  

        Borrower will make, and cause each Subsidiary to make, timely payment of all federal, state, and local taxes or assessments and will deliver to Bank, on demand,
appropriate certificates attesting to the payment. 

6.5   Insurance.  

        Borrower will keep its business and the Collateral insured for risks and in amounts, as Bank may reasonably request. Insurance policies will be in a form, with
companies, and in amounts that are satisfactory to Bank in Bank's reasonable discretion. All property policies will have a lender's loss payable endorsement showing Bank as an additional loss payee
and provide that the insurer must give Bank at least twenty (20) days notice before canceling its policy. At Bank's request, Borrower will 

5

 

deliver
certified copies of policies and evidence of all premium payments. Proceeds payable under any policy will, at Bank's option, be payable to Bank on account of the Obligations. 

6.6   Primary Accounts.  

        Borrower will maintain its primary depository and operating accounts with Bank. 

6.7   Financial Covenants.  

        Borrower will maintain as of the last day of each month: 

        (a)   Liquidity Coverage. A Liquidity Coverage Ratio of not less than 1.75 to 1.00. 

6.8   Subordination of Inside Debt.  

        All Present and future indebtedness of Borrower to its officers, directors and shareholders, shall, at all times, be Subordinated Debt. 

6.9   Registration of Intellectual Property Rights.  

        Borrower will register with the United States Patent and Trademark Office or the United States Copyright Office its Patents within thirty (30) days of the
date of this Agreement, and, if Borrower's
management determines it is necessary for protection of the Intellectual Property, additional Intellectual Property rights developed or acquired including revisions or additions with any product
before the sale or licensing of the product to any third party. 

        Borrower
will (a) protect, defend and maintain the validity and enforceability of the Intellectual Property and promptly advise Bank in writing of material infringements and
(b) not allow any Intellectual Property to be abandoned, forfeited or dedicated to the public without Bank's written consent. 

6.10 Further Assurances.  

        Borrower will execute any further instruments and take further action as Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement. 

7 NEGATIVE COVENANTS  

        Borrower will not do any of the following without Bank's prior written consent, which will not be unreasonably withheld, for so long as Bank has an obligation to
lend and there are any outstanding Obligations: 

7.1   Dispositions.  

        Convey, sell, lease, transfer or otherwise dispose of (collectively "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or
property, including any Intellectual Property as limited by the Negative Pledge Agreement between the parties, except for Transfers (a) of
Inventory in the ordinary course of business; (b) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary
course of business; or (c) of worn-out or obsolete Equipment. 

7.2   Changes in Business, Ownership, or Locations of Collateral.  

        Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto or
have a material change in its 

6

 

ownership
of greater than thirty-five percent (35%) (other than by the sale of Borrower's equity securities in a public offering or to venture capital investors so long as Borrower
identifies the venture capital investors prior to the closing of the investment). Borrower will not, without at least thirty (30) days prior written notice, relocate its chief executive office,
change its state of formation (including reincorporation), change its organizational number or name or add any new offices or business locations (such as warehouses) in which Borrower maintains or
stores over $5,000 in Collateral. 

7.3   Mergers or Acquisitions.  

        Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to acquire,
all or substantially all of the capital stock or property of another Person, except where (a) no Event of Default has occurred and is continuing or would result from such action during the term
of this Agreement and (b) such transaction would not result in a decrease of more than ten percent (10%) of Tangible Net Worth  and (c) the
consideration delivered by Borrower does not require the creation of any indebtedness. A Subsidiary may merge or consolidate into
another Subsidiary or into Borrower. 

7.4   Indebtedness.  

        Create, incur, assume, or be liable for any indebtedness, or permit any Subsidiary to do so, other than Permitted indebtedness. 

7.5   Encumbrance.  

        Create, incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its
Subsidiaries to do so, except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted here, subject to Permitted Liens. 

7.6   Distributions; Investments.  

        Except as set forth in Section 7.3, directly or indirectly acquire or own any Person, or make any investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so. Other than as required by the terms of the Series E Preferred Stock of the Borrower, pay any dividends or make any distribution or
payment or redeem, retire or purchase any capital stock. 

7.7   Transactions with Affiliates.  

        Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary
course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a nonaffiliated Person. 

7.8   Subordinated Debt.  

        Make or permit any payment on any Subordinated Debt or any indebtedness owed to Hewlett-Packard Company, except under the terms of the Subordinated Debt (not
including any acceleration provisions), or amend any provision in any document relating to the Subordinated Debt without Bank's prior written consent. 

7.9   Compliance.  

        Become an "investment company" or a company controlled by an "investment company," under the Investment Company Act of 1940 or undertake as one of its important
activities extending credit to 

7

 

purchase
or carry margin stock, or use the proceeds of any Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a
material adverse effect on Borrower's business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its Subsidiaries to do so. 

8 EVENTS OF DEFAULT  

        Any one of the following is an event of default ("Event of Default"); 

8.1   Payment Default.  

        If Borrower fails to pay any of the Obligations within three (3) Business Days after their due date, however, during such period no Credit Extensions will
be made; 

8.2   Covenant Default.  

        (a)   If
Borrower fails to perform any obligation under Sections 6.2 or 6.7 or violates any of the covenants contained in Article 7 of this Agreement, or 

        (b)   If
Borrower fails or neglects to perform, keep, or observe any other material term, provision, condition, covenant, or agreement contained in this Agreement, in any of
the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition, covenant or agreement that can be cured,
has failed to cure such default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or
cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30 days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not
be deemed an Event of Default (provided that no Credit Extensions will be made during such cure period); 

8.3   Material Adverse Change.  

        If there (a) occurs a material adverse change in the general affairs, management, business, operations, or condition (financial or otherwise) of Borrower,
or (b) is a material impairment of the prospect of repayment of any portion of the Obligations; or (c) is a material impairment of the value or priority of Bank's security interests in
the Collateral (the foregoing being defined as a "Material Adverse Change"); 

8.4   Attachment.  

        If any material portion of Borrower's assets is attached, seized, levied on, or comes into possession of a trustee or receiver and the attachment, seizure or levy
is not removed in ten (10) days, or if Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a
Lien on a material portion of Borrower's assets, or if a notice of lien, levy, or assessment is filed against any of Borrower's assets by any government agency and not paid within ten (10) days
after Borrower receives notice. These are not Events of Default if stayed or if a bond is posted pending contest by Borrower (but no Credit Extensions will be made during the cure period); 

8

   8.5   Insolvency.  

        If Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or an Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within thirty (30) days (but no Credit Extensions will be made before any Insolvency Proceeding is dismissed); 

8.6   Other Agreements.  

        If there is a default in any agreement between Borrower and a third party that gives the third party the right to accelerate any Indebtedness exceeding $100,000
or that could cause a Material Adverse Change; 

8.7   Judgments.  

        If a money judgment(s) in any single judgment of at least $50,000 or in the aggregate of at least $100,000 is rendered against Borrower and is unsatisfied and
unstayed for ten (10) days (but no Credit Extensions will be made before the judgment is stayed or satisfied); 

8.8   Misrepresentations.  

        If Borrower or any Person acting for Borrower makes any material misrepresentation or material misstatement now or later in any warranty or representation in this
Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document; or 

8.9   Management Change.  

        If the individuals serving as chief executive officer and chief financial officer of Borrower as of the Closing Date cease to hold such positions. 

9 BANK'S RIGHT'S AND REMEDIES  

9.1   Rights and Remedies.  

        When an Event or Default occurs and continues Bank may, without notice or demand, do any or all of the following: 

        (a)   Declare
all Obligations immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable
without any action by Bank); 

        (b)   Stop
advancing money or extending credit for Borrower's benefit under this Agreement or under any other agreement between Borrower and Bank; 

        (c)   Settle
or adjust disputes and claims directly with account debtors for amounts, on terms and in any order that Bank considers advisable; notify any Person owing Borrower
money of Bank's security interest in the funds and verify the amount of the Account. Borrower must collect all payments in trust for Bank and, if requested by Bank, immediately deliver the payments to
Bank in the form received from the account debtor, with proper endorsements for deposit; 

        (d)   Make
any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower will assemble the Collateral if Bank
requires and make it available as Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or
compromise any Lien which appears to be prior or superior to its security interest and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without
charge, to exercise any of Bank's rights or remedies; 

9

 

        (e)   Apply
to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit or the account of
Borrower; 

        (f)    Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral; and 

        (g)   Dispose
of the Collateral according to the Code. 

9.2   Power of Attorney.  

        Effective only when an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to: (a) endorse Borrower's name on
any checks or other forms of payment or security; (b) sign Borrower's name on any invoice or bill of lading for any Account or drafts against account debtors, (c) make, settle, and
adjust all claims under Borrower's insurance policies; (d) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines
reasonable; and (e) transfer the Collateral into the name of Bank or a third party as the Code permits. Bank may exercise the power of attorney to sign Borrower's name on any documents
necessary to perfect or continue the perfection of any security interest, if Borrower has failed to sign such documents within five days after Bank's request that Borrower do so, regardless of whether
an Event of Default has occurred. Bank's appointment as Borrower's attorney in fact, and all of Bank's rights and powers, coupled with an interest, are irrevocable until all Obligations have been
fully repaid and performed and Bank's obligation to provide Credit Extensions terminates. 

9.3   Bank Expenses.  

        If Borrower fails to pay any amount or furnish any required proof of payment to third persons, Bank may make all or part of the payment or obtain insurance
policies required in Section 6.5, and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and Immediately due and payable, bearing interest at the
then applicable rate and secured by the Collateral. No payments by Bank are deemed an agreement to make similar payments in the future or Bank's waiver of any Event of Default. 

9.4   Bank's Liability for Collateral.  

        If Bank complies with reasonable banking practices and Section 9-207 of the Code, it is not liable for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other
person. Except as provided above, Borrower bears all risk of loss, damage or destruction of the Collateral. 

9.5   Remedies Cumulative.  

        Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements are cumulative. Bank has all rights and remedies provided under the
Code, by law, or in equity. Bank's exercise of one right or remedy is not an election, and Bank's waiver of any Event of Default is not a continuing waiver. Bank's delay is not a waiver, election, or
acquiescence. No waiver is effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given. 

9.6   Demand Waiver.  

        Except as specifically provided in Section 9.2, Borrower waives demand, notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. 

10

 

10 NOTICES  

        All notices or demands by any party about this Agreement or any other related agreement must be in writing and shall be deemed delivered (a) when
personally delivered, (b) one Business Day after being sent by an overnight delivery service, (c) three Business Days after begin sent by certified mail, postage prepaid, return receipt
requested, or (d) upon confirmation of delivery when sent by telefacsimile, all to the addresses set forth at the beginning of this Agreement. A party may change its notice address by giving
the other party written notice. 

11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER  

        Colorado law governs the Loan Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State
and Federal courts in Boulder County, Colorado. 

        BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
Initial [ILLEGIBLE]

12 GENERAL PROVISIONS  

12.1 Successors and Assigns.  

        This Agreement binds and is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights under it
without Bank's prior written consent which may be granted or withheld in Bank's discretion. Bank has the right, without the consent of or notice to Borrower, to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, Bank's obligations, rights and benefits under this Agreement. 

12.2 Indemnification.  

        Borrower will indemnify, defend and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and
liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable attorneys fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct. 

12.3 Time of Essence.  

        Time is of the essence for the performance of all obligations in this Agreement. 

12.4 Severability of Provision.  

        Each provision of this Agreement is severable from every other provision in determining the enforceability of any provision. 

12.5 Amendments in Writing, Integration.  

        All amendments to this Agreement must be in writing and signed by Borrower and Bank. This Agreement represents the entire agreement about this subject matter, and
supersedes prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations 

11

 

between
the parties about the subject matter of this Agreement merge into this Agreement and the Loan Documents. 

12.6 Counterparts.  

        This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, are an
original, and all taken together, constitute one Agreement. 

12.7 Survival.  

        All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligations of Borrower
in Section 12.2 to indemnify Bank will survive until all statutes of limitations for actions that may be brought against Bank have run. 

12.8 Confidentiality.  

        In handling any confidential information, Bank will exercise the same degree of care that it exercises for its own proprietary information, but disclosure of
information may be made (a) to Bank's subsidiaries or affiliates in connection with their business with Borrower, (b) to prospective transferees or purchasers of any interest in the
loans (provided, however, Bank shall use commercially reasonable efforts in obtaining such prospective transferee or purchasers agreement of the terms of this provision), (c) as required by
law, regulation, subpoena, or other order, (d) as required in connection with Bank's examination or audit and (e) as Bank considers appropriate exercising remedies under this Agreement.
Confidential information does not include information that either: (i) is in the public domain or in Bank's possession when disclosed to Bank, or becomes part of the public domain after
disclosure to Bank; or (ii) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information. 

12.9 Attorneys' Fees, Costs and Expenses.  

        In any action or proceeding between Borrower and Bank arising out of the Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to any other relief to which it may be entitled. 

13 DEFINITIONS  

13.1 Definitions.  

        In this Agreement: 

        "Accounts" are all existing and later arising accounts, contract rights, and other obligations owed Borrower in connection with its sale
or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower
and Borrower's Books relating to any of the foregoing, as such definition may be amended from time to time according to the Code. 

        "Affiliate" of a Person is a Person that owns or controls directly or indirectly the Person, any Person that controls or is controlled by
or is under common control with the Person, and each of that Person's senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person's managers and
members. 

        "Bank Expenses" are all audit fees and expenses and reasonable costs and expenses (including reasonable attorneys' fees and expenses) for
preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency Proceedings). 

12

 

        "Borrower's Books" are all Borrower's books and records including ledgers, records regarding Borrower's assets or liabilities, the
Collateral, business operations or financial condition and all computer programs or discs or any equipment containing the information. 

        "Business Day" is any day that is not a Saturday, Sunday or a day on which Bank is closed. 

        "Closing Date" is the date of this Agreement. 

        "Code" is the Colorado Uniform Commercial Code, as applicable. 

        "Collateral" is the property described on Exhibit A. 

        "Contingent Obligation" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any
indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse
by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from
any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in Interest rates,
currency exchange rates or commodity prices; but "Contingent Obligation" does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or
determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good
faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement. 

        "Copyrights" are all copyright rights, applications or registrations and like protections in each work or authorship or derivative work,
whether published or not (whether or not it is a trade secret) now or later existing, created, acquired or held. 

        "Credit Extension" is the Term Loan or any other extension of credit by Bank for Borrower's benefit. 

        "Current Liabilities" are the aggregate amount of Borrower's Total Liabilities which mature within one (1) year. 

        "Equipment" is all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest. 

        "ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations. 

        "Event of Default" is defined in Article 8. 

        "Final Payment" is a payment (in addition to and not a substitution for the regular payments of principal and interest) due on the Term
Loan Maturity Date in an amount equal to the Term Loan Amount multiplied by four percent (4%). 

        "GAAP" is generally accepted accounting principles. 

        "Indebtedness" is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and
other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and
(d) Contingent Obligations. 

        "Insolvency Proceeding" are proceedings by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or
insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking re-organization, arrangement, or other relief. 

13

 

        "Intellectual Property" is all of Borrower's: 

        (a)   Copyrights,
Trademarks, Patents, and Mask Works including amendments, renewals, extensions, and all licenses or other rights to use and all license fees and royalties
from the use; 

        (b)   Any
trade secrets and any intellectual property rights in computer software and computer software products now or later existing, created, acquired or held; 

        (c)   All
design rights that may be available to Borrower now or later created, acquired or held; 

        (d)   Any
claims for damages (past, present or future) for infringement of any of the rights above, with the right, but not the obligation, to sue and collect damages for use
or infringement of the intellectual property rights above; 

        All
proceeds and products of the foregoing, including all insurance, indemnity or warranty payments. 

        "Inventory" is present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or
in the custody or possession, actual or constructive, of Borrower, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other
proceeds (including insurance proceeds) from the sale or disposition of any of the foregoing and any documents of title. 

        "Investment" is any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance
or capital contribution to any person. 

        "Lien" is a mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance. 

        "Liquidity Coverage Ratio" is the ratio of (a) unrestricted cash (and equivalents) maintained at Bank  plus sixty percent (60%) of Net Accounts to (b) the
Obligations under this Agreement. 

        "Loan Documents" are, collectively, this Agreement, the Negative Pledge Agreement, any note, or notes executed by Borrower, and any other
present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated. 

        "Mask Works" are all mask works or similar rights available for the protection of semiconductor chips, now owned or later acquired. 

        "Material Adverse Change" is defined in Section 8.3. 

        "Negative Pledge Agreement" is that certain negative pledge agreement between the parties as of the date hereof. 

        "Net Accounts" are all Accounts less any Accounts funded pursuant to Borrower's Bill of
Exchange Purchase Agreement with Bank. 

        "Obligations" are debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, including cash management
services, letters of credit and foreign exchange contracts, if any and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to
Bank. 

        "Patents" are patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same. 

        "Permitted Indebtedness" is: 

        (a)   Borrower's
indebtedness to Bank under this Agreement, any other Loan Document or the Bill of Exchange Purchase Agreement between Borrower and Bank; 

14

 

        (b)   Indebtedness
existing on the Closing Date and shown on the Schedule; 

        (c)   Subordinated
Debt; 

        (d)   Indebtedness
to trade creditors incurred in the ordinary course of business; and 

        (e)   Indebtedness
secured by Permitted Liens. 

        "Permitted Investments" are: 

        (a)   Investments
shown on the Schedule and existing on the Closing Date; and 

        (b)   (i) marketable
direct obligations issued or unconditionally guaranteed by the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its creation and having the highest rating from either Standard & Poor's Corporation or Moody's Investors
Service, Inc., and (iii) Bank's certificates of deposit issued maturing no more than 1 year after issue. 

        "Permitted Liens" are: 

        (a)   Liens
existing on the Closing Date and shown on the Schedule or arising under this Agreement or other Loan Documents; 

        (b)   Liens
for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains
adequate reserves on its Books; 

        (c)   Purchase
money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the equipment; 

        (d)   Licenses
or sublicenses granted in the ordinary course of Borrower's business and any interest or title of a licensor or under any license or sublicense; 

        (e)   Leases
or subleases granted in the ordinary course of Borrower's business, including in connection with Borrower's leased premises or leased property; 

        (f)    Liens
incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c),  but any extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness may not increase. 

        "Person" is any individual, sole proprietorship, partnership, limited liability company, joint venture, company association, trust,
unincorporated organization, association, corporation, institution, public benefit corporation, film, joint stock company, estate, entity or government agency. 

        "Prime Rate" is Bank's most recently announced "prime rate," even if it is not Bank's lowest rate. 

        "Responsible Officer" is each of the Chief Executive Officer, the President, the Chief Financial Officer and the Controller of Borrower. 

        "Rights", as applied to the Collateral, means Borrower's rights and interests in, and
powers with respect to, that Collateral, whatever the nature of those rights, interests and powers and, in any event, including Borrower's power to transfer rights in such Collateral to Bank. 

        "Schedule" is any schedule attached to this Agreement. 

        "Subordinated Debt" is debt incurred by Borrower subordinated to Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in writing. 

15

 

        "Subsidiary" is for any Person, or any other business entity of which more than 50% of the voting stock or other equity interests is owned
or controlled, directly or indirectly, by the Person or one or more Affiliates of the Person. 

        "Term Loan Maturity Date" is April 1, 2005. 

        "Term Loan" is a loan in the principal amount of $695,004.04. 

        "Term Loan Payment" is defined in Section 2.1.1(b). 

        "Total Liabilities" is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower's consolidated balance
sheet, including all indebtedness, and current portion Subordinated Debt allowed to be paid, but excluding all other Subordinated Debt. 

        "Trademarks" are trademark and servicemark rights, registered or not, applications to register and registrations and like protections, and
the entire goodwill of the business of Assignor connected with the trademarks. 

        "Transamerica Indebtedness" is defined in Section 2.1.1(a). 

        "Transfer" is defined in Section 7.1. 

        This
Loan and Security Agreement is executed by the parties as of the date set forth above: 

	BORROWER:	 	 
	DISPLAYTECH, INC.	 	 
	

By:	
 	

/s/  LLOYD LEWIS      
	
 	

 
	Title:	 	CFO
	 	 
	

BANK:	
 	

 
	

SILICON VALLEY BANK	
 	

 
	

By:	
 	

/s/ [ILLEGIBLE]
	
 	

 
	Title:	 	Vice President
	 	 

16

EXHIBIT A  

        The Collateral consists of all of Borrower's right, title and interest in and to the following whether owned now or hereafter arising and whether Borrower has
rights now or hereafter has rights therein and wherever located: 

        All
goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any
of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located; 

        All
inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and
finished products including such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above; 

        All
contract rights and general intangibles (as such definitions may be amended from time to time according to the Code), now owned or hereafter acquired, including, without limitation,
goodwill, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind; 

        All
now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Borrower arising out of the sale or lease of
goods, the licensing of technology or the rendering of services by Borrower (as such definitions may be amended from time to time according to the Code) whether or not earned by performance, and any
and all credit insurance, insurance (including refund) claims and proceeds, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower; 

        All
documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, letter of credit rights,
certificates of deposit, instruments and chattel paper and electronic chattel paper now owned or hereafter acquired and Borrower's Books relating to the foregoing; and 

        All
Borrower's Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds
thereof. 

        Notwithstanding
the foregoing, the Collateral does not include any of Borrower's Intellectual Property. 

        Borrower and Bank are parties to that certain Negative Pledge Agreement, whereby Borrower, in connection with Bank's loan or loans to Borrower, has agreed, among
other things, not to sell, transfer, assign, mortgage, pledge, lease grant a security interest in, or encumber any of its Intellectual Property, without Bank's prior written
consent.

EXHIBIT B

COMPLIANCE CERTIFICATE  

	TO:	 	SILICON VALLEY BANK

4410 Arapahoe Ave., Suite 200

Boulder, CO 80303
	

FROM:	
 	

DISPLAYTECH, INC.

2602 Clover Basin Drive

Longmont, CO 80503

        The
undersigned authorized officer of            ("Borrower") certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the
"Agreement"), (i) Borrower is in complete compliance for the period ending            with all required covenants except as noted below and (ii) all representations and warranties in the
Agreement are true and correct in all material respects on this date. Attached are the required documents supporting the certification. The Officer certifies that these are prepared in accordance with
Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer acknowledges that no borrowings
may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate
is delivered. 

Please indicate compliance status by circling Yes/No under "Complies" column.  

	Reporting Covenant
 
	 	Required
	 	Complies

	Monthly financial statements + CC	 	Monthly within 30 days	 	Yes	 	No
	Annual (Audited)	 	FYE within 120 days	 	Yes	 	No
	10-Q, 10-K and 8-K	 	Within 5 days after filing with SEC	 	Yes	 	No
	A/R & A/P Agings	 	Monthly within 30 days	 	Yes	 	No
	A/R Audit	 	Initial and Annually	 	Yes	 	No

	Financial Covenant
 
	 	Required
	 	Actual
	 	Complies

	Maintain on a Monthly Basis:	 	 	 	 	 	 	 	 
	 	Minimum Liquidity Coverage	 	1.75:1.00	 	        :1.00	 	Yes	 	No

Have
there been updates to Borrower's intellectual property?        Yes/No 

        Borrower
only has deposit accounts located at the following institutions: 

Comments Regarding Exceptions: See Attached.  

Sincerely,

DISPLAYTECH,
INC. 

	
 SIGNATURE	 	 
	

 TITLE	
 	

 
	

 DATE	
 	

 

 BANK USE ONLY  

	Received by:	 	 	 	 	 	 
	 	 	
 AUTHORIZED SIGNER

	Date:	 	 	 	 	 	 
	 	 	

	Verified:	 	 	 	 	 	 
	 	 	
 AUTHORIZED SIGNER

	Date:	 	 	 	 	 	 
	 	 	

	

Compliance Status:	
 	

Yes	
 	

No

Schedule to Loan and Security Agreement  

        The exact correct corporate name of Borrower is (attach a copy of the formation documents, e.g., articles, partnership agreement): Displaytech, Inc. 

        Borrower's
State of formation: Colorado 

        Borrower
has operated under only the following other names (if none, so state):

None 

        All
other address at which the Borrower does business are as follows (attach additional sheets if necessary and include all warehouse addresses):

None 

        Borrower
has deposit accounts and/or investment accounts located only at the following institutions: 

Silicon
Valley Bank; Wells Fargo Bank West N.A. ; Community First National Bank; Key Bank

(WILL CLOSE NON-SVB ACCTS SOON) 

        List
Acct. Numbers: 

Silicon
Valley Bank—Operating Acct 3300364560; Payroll Acct 3300364617; Sec 125 3300364655 and Investment Acct 886-00536-1-3 ZG2; Wells Fargo Bank West—Operating Acct
085-0661992; Community First National Bank—Operating Acct 116411, Business Money Market Acct 7019416, Section 125 Business Acct 116403; Payroll Cashmanager Acct 1400131551; Key Bank
Business Checking Acct—760020000112 

        Liens
existing on the Closing Date and disclosed to and accepted by Bank in writing: 

See
attached 

        Investments
existing on the Closing Date and disclosed to and accepted by Bank in writing: 

Money
Market and Investment Accounts as listed above 

Indebtedness:  

        Indebtedness on the Closing Date and disclosed to and consented to by Bank in writing: 

$10,000,000
principal note to Hewlett Packard

$150,000 note to Cadwalader, Wickersham, and Taft 

        The
following is a list of the Borrower's copyrights (including copyrights of software) which are registered with the United States Copyright Office. (Please include name of the
copyright and registration number and attach a copy of the registration):

None 

        The
following is a list of all software which the Borrower sells, distributes or licenses to others, which is not registered with the
United States Copyright Office. (Please include versions which are not registered:

None 

        The
following is a list of all of the Borrower's patents which are registered with the United States Patent Office. (Please include name of the patent and registration number and attach
a copy of the registration.): 

See
attached 

        The
following is a list of all of the Borrower's patents which are pending with the United States Patent Office. (Please include name of the patent and a copy of the application.): 

See
attached 

        The
following is a list of all of the Borrower's registered trademarks. (Please include name of the trademark and a copy of the registration.): 

See
attached 

        Borrower
is not subject to litigation that would have a material adverse effect on the Borrower's financial condition, except the following (attach additional comments, if needed): 

        Tax
ID Number 84-0986353 

        Organizational
Number, if any: 19871599084 

SCHEDULE 4.12 (a)  

Summary Table  

	Owned and Licensed US Patents	 	63	 	Owned and Licensed US Patent Applications	 	31
	Owned and Licensed Foreign Patents	 	12	 	Owned and Licensed Foreign Patent Applications	 	20
	TOTAL	 	75	 	TOTAL	 	51

Displaytech Owned US Patents  

	Patent No.
 
	 	Title
	 	Issue Date
	 	Expires

	6,426,783	 	Continuously Viewable DC-Field Balanced, Reflective, Ferroelectric Liquid Crystal Image Generator	 	7/30/02	 	2/18/18
	

6,413,448	
 	

Cyclo-hexyl- and Cyclohexynl-substituted Liquid Crystals with Low Birefringence	
 	

7/20/02	
 	

4/26/19
	

6,369,933	
 	

Optical Correlator Having Multiple Active Components Formed on a Single	
 	

4/9/02	
 	

12/18/19
	

6,359,723	
 	

Optics Arrangements Including Light Source Arrangements for an Active Matrix Crystal Image Generator	
 	

3/19/02	
 	

12/12/14
	

6,317,112	
 	

Active Matrix Liquid Crystal Image Generator with Hybrid Writing Scheme	
 	

11/13/01	
 	

12/22/14
	

6,310,664	
 	

Continuously Viewable, DC Field-Balanced, Reflective, Ferroelectric Liquid Crystal Image Generator	
 	

10/30/01	
 	

2/18/18
	

6,247,037	
 	

Optical Correlator Having Multiple Active Components Formed on a Single Integrated Circuit	
 	

6/12/01	
 	

1/28/19
	

6,195,136	
 	

Optics Arrangements Including Light Source Arrangements for an Active Matrix Liquid Crystal Image Generator	
 	

2/27/01	
 	

12/12/14
	

6,144,421	
 	

Continuously Viewable, DC-Field Balanced Reflective, Ferroelectric Liquid Crystal Image Generator	
 	

11/7/00	
 	

2/18/18
	

6,139,771	
 	

Mesogenic Materials with Anomalous Birefringence Dispersion and High Second Order Susceptibility	
 	

10/31/00	
 	

4/4/17
	

6,100,945	
 	

Compensator Arrangements for a Continuously Viewable, DC Field-Balanced, Reflective, Ferroelectric Liquid Crystal Display System	
 	

8/8/00	
 	

2/18/18
	

6,075,577	
 	

Continuously Viewable, DC Field-Balanced, Reflective, Ferroelectric Liquid Crystal Image Generator	
 	

6/13/00	
 	

2/18/18
	

6,038,005	
 	

Optics Arrangements Including Light Source Arrangements for an Active Matrix Liquid Crystal Image Generator	
 	

3/14/00	
 	

12/22/14
	

6,025,890	
 	

Beam Splitter Element including a Beam Splitting Layer and a Polarizing Layer for use in a Light Polarization Modulating Display System	
 	

2/15/00	
 	

2/20/18
	

6,016,173	
 	

Optics Arrangement including a Compensator Cell and Static Wave Plate For a Continuously Viewable, Reflection Mode, Ferroelectric Liquid Crystal Spatial Light Modulating System	
 	

1/18/00	
 	

2/18/18

Restricted and Confidential

	5,900,976	 	Display System including a Polarizing Beam Splitter	 	5/4/99	 	2/20/18
	5,866,036	 	High Tilt Ferroelectric Liquid Crystal Compounds and Compositions	 	2/2/99	 	2/2/16
	5,808,800	 	Optics Arrangements including Light Source Arrangements for an Active Matrix Liquid Crystal Image Generator	 	9/15/98	 	9/15/15
	5,757,348	 	Active Matrix Liquid Crystal Image Generator with Hybrid Writing Scheme	 	5/26/98	 	5/26/15
	5,753,139	 	High Contrast Distorted Helix Effect Electro-Optic Devices and Tight Ferroelectric Pitch Ferroelectric Liquid Crystal Compositions Useful Therein	 	5/19/98	 	5/19/15
	5,748,164	 	Active Matrix Liquid Crystal Image Generator	 	5/5/98	 	5/5/15
	5,694,147	 	Liquid Crystal Integrated Circuit Display Including an Arrangement for Maintaining the Liquid Crystal at a Controlled Temperature	 	12/2/97	 	4/14/15
	5,626,792	 	High Birefringence Liquid Crystal Compounds	 	5/6/97	 	9/6/14
	5,596,451(1	)	Miniature Image Generator Including Optics Arrangement	 	1/21/97	 	1/30/15
	5,585,036	 	Liquid Crystal Compounds Containing Chiral 2-Halo-2-Methyl Ether and Ester Tails	 	12/17/96	 	12/17/13
	5,552,916	 	Diffractive Light Modulator	 	9/3/96	 	9/3/13
	5,539,555(2	)	High Contrast Distorted Helix Effect Electro-Optic Devices and Tight Ferroelectric Pitch Ferroelectric Liquid Crystal Compositions Useful Therein	 	7/23/96	 	7/23/13
	5,523,864	 	Analog Liquid Crystal Spatial Light Modulator including an Internal Voltage Booster	 	6/4/96	 	1/26/14
	5,500,748(3	)	Liquid Crystal Spatial Light Modulator Including an Internal Voltage Booster	 	3/19/96	 	1/26/14
	5,457,235	 	Halogenated Diphenyldiacetylene Liquid Crystals	 	10/10/95	 	10/10/12
	5,453,218	 	Liquid Crystal Compounds Containing Chiral 2-Halo-2 Methyl Alkoxy Tails	 	9/26/95	 	9/26/12
	5,422,037	 	Ferroelectric Liquid Crystal Compounds Containing Halogenated Cores and Chiral Haloalkoxy Tail Units	 	6/6/95	 	6/6/12
	5,380,460	 	Ferroelectric Liquid Crystal Compounds Containing Chiral Haloalkoxy Tail Units and Compositions Containing Them	 	1/10/95	 	1/10/12
	RE 34,726	 	Ferroelectric Liquid Crystal Compositions Containing Chiral Haloalkoxy Tail Units	 	9/13/94	 	7/14/09
	5,347,378	 	Fast Switching Color Filters for Frame-Sequential Video Using Ferroelectric Liquid Crystal Color-Selective Filters	 	9/13/94	 	9/13/11
	5,271,864	 	Ferroelectric Liquid Crystal Compounds with Cyclohexenyl Cores and Compositions Containing Them	 	12/21/93	 	8/7/12
	5,182,665	 	Diffractive Light Modulator	 	1/26/93	 	9/7/10

Restricted and Confidential

	5,180,520(4	)	Ferroelectric Liquid Crystal Compositions Containing Halogenated Cores and Chiral Halogenated Cores and Chiral Haloalkoxy Tail Units	 	1/19/93	 	1/19/10
	5,178,791	 	Halogenated Diphenyldiacetylene Liquid Crystals	 	1/12/93	 	3/11/11
	5,178,445(5	)	Optically Addressed Spatial Light Modulator	 	1/12/93	 	1/12/10
	5,167,855(4	)	Ferroelectric Liquid Crystal Compositions Chiral Haloalkoxyl Tail Units	 	12/1/92	 	12/1/09
	5,061,814	 	High Tilt Ferroelectric Liquid Crystal Compounds and Compositions	 	10/29/91	 	6/1/09
	5,051,506	 	Ferroelectric Liquid Crystal Compounds Containing Chiral Haloalkoxy Tail Units and Compositions Containing Them	 	9/24/91	 	9/24/08
	4,813,771	 	Electro-Optic Switching Devices Using Ferroelectric Liquid Crystals	 	3/21/89	 	10/15/07
	6,507,330 B1	 	DC-Balanced and Non-DC-Balanced Drive Schemes for Liquid Crystal Devices	 	1/14/03	 	 
	6,525,709	 	Miniature Display Apparatus and Method	 	2/25/03	 	 

	(1)
	jointly
owned by Displaytech, Inc. and Martin Shenker Optical Design, Inc.

	(2)
	jointly
owned by Displaytech, Inc. and Hoechst Aktiengesellschaft (with bilateral restrictions on field of use Based on display size; Displaytech has exclusive right to displays with
an active area of 10 cm. or less in diameter, Hoechst has exclusive right to displays with an active area greater than 10 cm. in diameter)

	(3)
	jointly
owned by Displaytech Inc. and Stephen D. Gaalema

	(4)
	owned
solely by Displaytech Inc.; assignee data on patent cover sheet is incorrect

	(5)
	jointly
owned by Displaytech Inc. and University of Colorado Foundation (assignment not recorded at PTO) 

Restricted and Confidential

Displaytech Owned Foreign Patents  

	Country
 
	 	Patent No.
	 	Title
	 	Issue Date
	 	Expires

	Canada	 	1,299,721	 	Electro-Optic Switching Devices Using Ferroelectric Liquid Crystals	 	4/28/92	 	4/28/09
	

Germany	
 	

69109680	
 	

Ferroelectric Liquid Crystal Compositions Containing Chiral Haloalkoxy Tail Units	
 	

5/10/95	
 	

7/22/11
	

Japan	
 	

2868774	
 	

Electro-Optic Switching Devices Using Ferroelectric Liquid Crystals	
 	

12/25/98	
 	

10/14/08
	

Japan	
 	

3124772	
 	

Ferroelectric Liquid Crystal Compositions Containing Chiral Haloalkoxy Tail Units	
 	

10/27/00	
 	

7/22/11
	

Korea	
 	

184,242	
 	

Ferroelectric Liquid Crystal Compositions Containing Chiral Haloalkoxy Tail Units	
 	

12/17/98	
 	

7/22/11
	

Korea	
 	

261,354	
 	

High Contrast Distorted Helix Effect Electro-Optic Devices and Tight Ferroelectric Pitch FLC Compositions Useful Therein	
 	

4/18/00	
 	

2/6/13
	

Korea	
 	

283,163	
 	

Ferroelectric Liquid Crystal Compounds with Cyclohexenyl Cores and Compositions Containing Them	
 	

12/6/00	
 	

8/6/13
	

Sweden	
 	

0 540 648	
 	

Ferroelectric Liquid Crystal Compositions Containing Chiral Haloalkoxy Tail Units	
 	

5/10/95	
 	

7/22/11
	

Sweden	
 	

515 705	
 	

High Contrast Distorted Helix Effect Electro-Optic Devices and Tight Ferroelectric Pitch FLC Compositions Useful Therein	
 	

9/24/01	
 	

2/5/13
	

United Kingdom	
 	

0 540 648	
 	

Ferroelectric Liquid Crystal Compositions Containing Chiral Haloalkoxy Tail Units	
 	

5/10/95	
 	

7/22/11
	

United Kingdom	
 	

2 263 982	
 	

Ferroelectric Liquid Crystals	
 	

2/28/96	
 	

1/29/13
	

Canada	
 	

2,087,592	
 	

Ferroelectric Liquid Crystal Compositions Containing Chiral Haloalkoxy Tail Units	
 	

4/16/02	
 	

7/22/11

Restricted and Confidential

Displaytech Owned Pending US Patent Applications  

	App. No.
 
	 	Title
	 	Date Filed

	08/953,613	 	Methods and Arrangements for Using an Analog Signal to Provide Gray Scale on a Binary Pixel	 	10/17/97
	09/045,247	 	Active Matrix Liquid Crystal Image Generator	 	3/20/98
	09/313,227	 	RGB Illuminator with Calibration via Single Detector Servo	 	5/17/99
	09/388,249	 	Non-DC-Balanced Drive Scheme for Liquid Crystal Device	 	9/1/99
	[*****]	 	 	 	 
	09/604,524	 	Methods and Arrangements for Improving Contrast in FLC Devices	 	6/27/00
	09/639,500	 	Mesogenic Materials with Anomalous Birefringence Dispersion and High Second Order Susceptibility	 	8/11/00
	09/653,437	 	Ferroelectric Liquid Crystal Devices Using Materials with a deVries Smectic A Phase	 	9/1/00
	09/706,553	 	Efficient Method of Manufacturing Liquid Crystal Devices	 	11/2/00
	09/718,843	 	Multi-State Light Modulator with Non-Zero Response Time and Linear Gray Scale	 	11/22/00
	09/754,033	 	Alkyl Silane Liquid Crystal Compounds 1/3/01	 	 
	09/753,749	 	Liquid Crystal Compounds Having a Silane Tail with a Perfluoroalkyl Terminal Portion	 	1/3/01
	09/754,034	 	Liquid Crystalline Materials Containing Perfluoroalkyl and Alkenyl Tails	 	1/3/01
	09/817,809	 	Subpixellated Reflective Microdisplays	 	3/14/01
	09/809,741	 	DC-Balanced and Non-DC-Balanced Drive Schemes for Liquid Crystal Device	 	3/14/01
	09/809,998	 	Data Scheduling with Banks in Reflective Microdisplays	 	3/14/01
	09/828,295	 	Ferroelectric Liquid Crystal infrared Chopper	 	4/6/01
	09/854,181	 	Partially Fluorinated Liquid Crystal Materials	 	5/11/01
	09/885,862	 	Bookshelf Liquid Crystal Materials and Devices	 	6/20/01
	[*****]	 	 	 	 
	[*****]	 	 	 	 
	[*****]	 	 	 	 
	09/992,097	 	Active Matrix Liquid Crystal Image Generator with Hybrid Writing Scheme	 	11/5/01
	09/989,976	 	Dual Mode Near-Eye and Projection Display System	 	11/20/01
	[*****]	 	 	 	 
	10/067,516	 	Optics Arrangements including Light Source Arrangements for an Active Matrix Liquid Crystal Image Generator	 	2/4/02
	[*****]	 	 	 	 

Restricted and Confidential

Displaytech Owned Pending Foreign Patent Applications  

	Date Filed
 
	 	App. No.
	 	Country
	 	Title

	7/22/91	 	2,087,592	 	Canada	 	Ferroelectric Liquid Crystal Compositions Containing Chiral Haloalkoxy Tail Units
	2/05/93	 	9300375-4	 	China	 	High Contrast Distorted Helix Effect Electro-Optic Devices and Tight Ferroelectric Pitch Ferroelectric Liquid Crystal Compositions Useful Therein
	2/05/93	 	43 03 335.0	 	Germany	 	High Contrast Distorted Helix Effect Electro-Optic Devices and Tight Ferroelectric Pitch Ferroelectric Liquid Crystal Compositions Useful Therein
	2/08/93	 	2088934	 	Canada	 	High Contrast Distorted Helix Effect Electro-Optic Devices and Tight Ferroelectric Pitch Ferroelectric Liquid Crystal Compositions Useful Therein
	2/08/93	 	5-20412	 	Japan	 	High Contrast Distorted Helix Effect Electro-Optic Devices and Tight Ferroelectric Pitch Ferroelectric Liquid Crystal Compositions Useful Therein
	8/04/93	 	5-193688	 	Japan	 	Ferroelectric Liquid Crystal Compounds with Cyclohexenyl Cores and Compositions Containing Them
	12/14/95	 	95943444.0	 	Europe	 	Active Matrix Liquid Crystal Image Generator
	2/17/99	 	2,321,252	 	Canada	 	Image Generating System
	2/17/99	 	99909497.2	 	Europe	 	Image Generating System
	2/17/99	 	2000-532773	 	Japan	 	Image Generating System
	2/17/99	 	01100431.6	 	Hong Kong	 	Image Generating System
	2/17/99	 	10-2000-7008981	 	Korea	 	Image Generating System
	8/29/00	 	PCT/US00/23645	 	PCT	 	Liquid Crystal Operation
	8/31/01	 	PCT/US01/27182	 	PCT	 	Partially Fluorinated Liquid Crystal Materials
	11/20/01	 	PCT/US01/	 	PCT	 	Dual Mode Near-Eye and Projection Display System
	11/21/01	 	PCT/US01/	 	PCT	 	Modulation Algorithm for Light Modulator

Restricted and Confidential

Patents Licensed from Clark and Lagerwell  

	Country
 
	 	Patent No.
	 	Title
	 	Issue Date
	 	Expires

	United States	 	RE 34,942	 	Surface Stabilized Ferroelectric Liquid Crystal Devices with Means for Aligning LC molecules at Omega (Alpha) from Normal to the Means	 	5/16/95	 	6/20/06
	

United States	
 	

RE 34,949	
 	

Surface Stabilized Ferroelectric Liquid Crystal Devices	
 	

5/23/95	
 	

9/25/07
	

United States	
 	

RE 34,950	
 	

Surface Stabilized Ferroelectric Liquid Crystal Devices with Means for Aligning LC Molecules at Omega(alpha) from Normal to the Means	
 	

5/23/95	
 	

3/21/06
	

United States	
 	

RE 34,966	
 	

Surface Stabilized Ferroelectric Liquid Crystal Devices with LC Molecules Aligned at Angle Omega (Alpha) from Normal to Substrates .	
 	

6/13/95	
 	

1/7/03
	

United States	
 	

RE 34,967	
 	

Surface Stabilized Ferroelectric Liquid Crystal Devices with Plural Orientation States of Different Colors or Separated by Domain Walls	
 	

6/13/95	
 	

7/13/10
	

United States	
 	

RE 34,973	
 	

Surface Stabilized Ferroelectric Liquid Crystal Devices with Total Reflection in One State and Transmission in Another State	
 	

6/20/95	
 	

1/28/09
	

United States	
 	

5,555,111	
 	

Surface Stabilized Ferroelectric Liquid Crystal Devices with Dielectric Torques Greater Than Ferroelectric Torques	
 	

9/10/96	
 	

3/21/06
	

United States	
 	

5,555,117	
 	

Surface Stabilized Ferroelectric Liquid Crystal Devices	
 	

9/10/96	
 	

9/10/13

Patents Licensed from University Research Corp  

	Patent No.
 
	 	Title
	 	Issue Date
	 	Expires

	5,168,381	 	Smectic Liquid Crystal Devices Using SSFLC and Electroclinic Effect Based Cells	 	12/1/92	 	12/1/09
	5,178,793	 	Ferroelectric Liquid Crystal Compounds and Compositions	 	1/12/93	 	1/12/10
	5,543,078	 	Ferroelectric Liquid Crystals for Nonlinear Optics Applications	 	8/6/96	 	8/6/13
	5,596,434	 	Self-Assembled Monolayers for Liquid Crystal Alignment	 	1/21/97	 	1/21/14
	5,637,256	 	Ferroelectric Liquid Crystals for Nonlinear Optics Applications	 	6/10/97	 	6/10/14
	5,658,493	 	Ferroelectric Liquid Crystals for Nonlinear Optics Applications	 	8/19/97	 	8/19/14

US Patents Licensed from Georgia Tech Research Corp  

	Patent No.
 
	 	Title
	 	Issue Date
	 	Expires

	6,141,072	 	System and Method for Efficient Manufacturing of Liquid Crystal Displays	 	10/31/00	 	4/2/18
	6,469,761	 	System and Method for Efficient Manufacturing of Liquid Crystal Displays	 	10/22/02	 	4/2/18

Restricted and Confidential

US Patent Applications Licensed from Georgia Tech Research Corp  

	App. No.
 
	 	Title
	 	Date Filed

	09/669,180	 	System and Method for Efficient Manufacturing of Liquid Crystal Displays	 	9/25/00

Foreign Patent Applications Licensed from Georgia Tech Research Corp  

	Priority Date
 
	 	App. No.
	 	Country
	 	Title

	4/3/98	 	Not yet Avail	 	Japan	 	System and Method for Efficient Manufacturing of Liquid Crystal Displays
	4/3/98	 	98915254.1	 	Europe	 	System and Method for Efficient Manufacturing of Liquid Crystal Displays
	4/3/98	 	2,285,924	 	Canada	 	System and Method for Efficient Manufacturing of Liquid Crystal Displays
	4/3/98	 	10-1999-7009012	 	S.Korea	 	System and Method for Efficient Manufacturing of Liquid Crystal Displays

US Patents Licensed from Agilent Technologies, Inc.  

	Patent No.
 
	 	Title
	 	Issue Date
	 	Expires

	6,249,269	 	Analog Pixel Driver Circuit for an Electro-Optical Material-Based Display Device	 	6/19/01	 	4/30/18

US Patent Applications Licensed from Agilent Technologies, Inc.  

	Title
 

	Electro-Optical Material-Based Display Device Having Analog Pixel Drivers
	[*****]
	Light Sensitive Issues: Guard Ring and Metal Layer

Displaytech Owned Trademark Registrations and Applications  

        BRIGHTEYESTM

                Pending in the US 

        CHRONOCOLOR®

                Registered in the US 

        DISPLAYTECH®

                Registered in the US and Japan 

                Pending in Europe 

        DESIGN—Stylized
Displaytech Red Block

                Registered in the US 

        FLCD®

                Registered in the US 

        LIGHTCASTER©

                Registered in the US, Europe, Japan and Korea 

Restricted and Confidential

        LIGHTMONKEYTM

                Pending in the US 

        LIGHTVIEWTM

                Pending in the US 

        MYLIGHTTM

                Pending in the US 

        WE
MAKE LIGHT WORKTM

                Pending in the US 

Restricted
and Confidential 

QuickLinks

LOAN AND SECURITY AGREEMENT

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