Document:

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                          SECURITIES PURCHASE AGREEMENT

         This Securities Purchase Agreement (this "Agreement") is dated as of
August 22, 2001 among Universal Display Corporation, a Pennsylvania corporation
(the "Company"), and the purchasers identified on the signature pages hereto
(each a "Purchaser" and collectively the "Purchasers").

         WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933 (the
"Securities Act"), the Company desires to issue and sell to the Purchasers, and
the Purchasers, severally and not jointly, desire to purchase from the Company,
securities of the Company as more fully described in this Agreement.

         NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:

                                    ARTICLE I
                                   DEFINITIONS

         1.1      Definitions. In addition to the terms defined elsewhere in
this Agreement, the following terms have the meanings indicated:

                  "Actual Minimum" means, as of any date, the maximum aggregate
         number of shares of Common Stock then issued or potentially issuable in
         the future pursuant to the Transaction Documents, including any
         Underlying Shares issuable upon exercise or conversion in full of all
         Warrants and convertible Securities, assuming that (a) any previously
         unconverted Notes or Shares are held until the fifth anniversary of the
         Closing Date or, if earlier, until maturity, and all interest and
         dividends thereon are paid in shares of Common Stock, and (b) the
         Closing Price at all times on and after the date of determination
         equals 100% of the actual Closing Price on the Trading Day immediately
         prior to the date of determination.

                  "Affiliate" means any Person that, directly or indirectly
         through one or more intermediaries, controls or is controlled by or is
         under common control with a Person, as such terms are used in and
         construed under Rule 144 under the Securities Act. With respect to a
         Purchaser, any investment fund or managed account that is managed on a
         discretionary basis by the same investment manager as such Purchaser
         will be deemed to be an Affiliate of such Purchaser.

                  "Bankruptcy Event" means any of the following events: (a) the
         Company or any Subsidiary commences a case or other proceeding under
         any bankruptcy, reorganization, arrangement, adjustment of debt, relief
         of debtors, dissolution, insolvency or liquidation or similar law of
         any jurisdiction relating to the Company or any Subsidiary thereof; (b)
         there is commenced against the Company or any Subsidiary any such case
         or proceeding that is not dismissed within 60 days after commencement;

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         (c) the Company or any Subsidiary is adjudicated insolvent or bankrupt
         or any order of relief or other order approving any such case or
         proceeding is entered; (d) the Company or any Subsidiary suffers any
         appointment of any custodian or the like for it or any substantial part
         of its property that is not discharged or stayed within 60 days; (e)
         the Company or any Subsidiary makes a general assignment for the
         benefit of creditors; (f) the Company or any Subsidiary fails to pay,
         or states that it is unable to pay or is unable to pay, its debts
         generally as they become due; or (g) the Company or any Subsidiary, by
         any act or failure to act, expressly indicates its consent to, approval
         of or acquiescence in any of the foregoing or takes any corporate or
         other action for the purpose of effecting any of the foregoing.

                  "Change of Control" means the occurrence of any of (i) an
         acquisition after the date hereof by an individual or legal entity or
         "group" (as described in Rule 13d-5(b)(1) promulgated under the
         Exchange Act) of more than one-half of the voting rights or equity
         interests in the Company, (ii) a replacement of more than one-half of
         the members of the Company's board of directors that is not approved by
         those individuals who are members of the board of directors on the date
         hereof in one or a series of related transactions, (iii) a merger or
         consolidation of the Company or any Subsidiary or a sale of all or
         substantially all of the assets of the Company in one or a series of
         related transactions, unless following such transaction or series of
         transactions, the holders of the Company's securities prior to the
         first such transaction continue to hold at least a majority of the
         voting rights and equity interests in of the surviving entity or
         acquirer of such assets, or (iv) the execution by the Company of an
         agreement to which the Company is a party or by which it is bound,
         providing for any of the events set forth above in (i), (ii) or (iii).

                  "Closing" means the closing of the purchase and sale of the
         Securities pursuant to Section 2.1.

                  "Closing Date" means the date of the Closing.

                  "Closing Price" means, for any date the VWAP for such date (or
         the nearest preceding date) all as reported by Bloomberg L.P. or any
         successor to its function for reporting VWAP.

                  "Commission" means the Securities and Exchange Commission.

                  "Common Stock" means the common stock of the Company, par
         value $.01 per share.

                  "Company Counsel" means Morgan, Lewis & Bockius LLP, counsel
         to the Company.

                  "Conversion Shares Effective Date" means the date that a
         Conversion Shares Registration Statement is declared effective by the
         Commission.

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                  "Conversion Shares Registration Statement" means a
         registration statement meeting the requirements set forth in the
         Registration Rights Agreement and covering the resale by the Purchaser
         of the Underlying Shares issuable upon conversion of the Shares and
         exercise of the Warrants.

                  "Eligible Market" means the New York Stock Exchange, the
         American Stock Exchange, the Nasdaq National Market or the Nasdaq
         SmallCap Market.

                  "Exchange Act" means the Securities Exchange Act of 1934, as
         amended.

                  "First Certificate of Designation" means a certificate of
         designation of the Series C Preferred Stock, in the form of Exhibit A.

                  "First Shares" means an aggregate of 5,000 shares of Series C
         Preferred Stock, which are being purchased by the Purchasers at the
         Closing.

                  "First Warrants" means Common Stock purchase warrants in the
         form of Exhibit H, to purchase an aggregate of 157,480 shares of Common
         Stock.

                  "Motorola Agreement" means collectively the License Agreement
         dated as of September 29, 2000 between the Company and Motorola, Inc.,
         the Stock Purchase Warrant granted to Motorola, Inc. on September 29,
         2000 and the Securities Purchase Agreement dated as of September 29,
         2000 between the Company and Motorola, Inc.

                  "Note Shares Effective Date" means the date that a Note Shares
         Registration Statement is declared effective by the Commission.

                  "Note Shares Registration Statement" means a registration
         statement meeting the requirements set forth in the Registration Rights
         Agreement and covering the resale by the Purchasers of the Underlying
         Shares issuable upon conversion of the Notes.

                  "Notes" means $15,000,000 in aggregate principal amount of
         Convertible Promissory Notes due August 22, 2004 issued by the Company
         to the Purchasers at Closing.

                  "Person" means an individual or corporation, partnership,
         trust, incorporated or unincorporated association, joint venture,
         limited liability company, joint stock company, government (or an
         agency or subdivision thereof) or other entity of any kind.

                  "PPG Agreement" means collectively, the Development and
         License Agreement dated as of October 1, 2000 between the Company and
         PPG Industries, Inc., as amended, and the Stock Purchase Warrant
         granted to PPG Industries, Inc. on October 1, 2000.

                  "Purchaser Counsel" means Morse, Zelnick, Rose & Lander LLP,
         counsel to the Purchasers.

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                  "Registration Rights Agreement" means the Registration Rights
         Agreement, dated the Closing Date, among the Company and the
         Purchasers, in the form of Exhibit C.

                  "Required Effectiveness Date" means the date on which the
         Conversion Shares Registration Statement is required to become
         effective pursuant to the Registration Rights Agreement.

                  "Required Minimum" means, as of any date, the maximum
         aggregate number of shares of Common Stock then issued or potentially
         issuable in the future pursuant to the Transaction Documents, including
         any Underlying Shares issuable upon exercise or conversion in full of
         all Warrants and convertible Securities, assuming that (a) any
         previously unconverted Notes and Shares are held until the fifth
         anniversary of the Closing Date or, if earlier, until maturity, and all
         interest and dividends thereon are paid in shares of Common Stock, and
         (b) the Closing Price at all times on and after the date of
         determination equals 50% of the actual Closing Price on the Trading Day
         immediately prior to the date of determination.

                  "Rule 144" means Rule 144 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same effect as such Rule.

                  "Second Certificate of Designation" means a certificate of
         designation of the Series D Preferred Stock in the form of Exhibit B
         (as completed as contemplated therein).

                  "Second Shares" means an aggregate of 5,000 shares of Series D
         Preferred Stock which are being purchased by the Purchasers on the
         Second Closing Date.

                  "Second Warrants" means Common Stock purchase warrants in the
         form of Exhibit I to purchase an aggregate of 157,480 shares of Common
         Stock.

                  "Securities" means the Shares, Notes, Warrants and the
         Underlying Shares.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Series C Preferred Stock" means the Series C Convertible
         Preferred Stock of the Company, having the rights and preferences set
         forth in the First Certificate of Designation.

                  "Series D Preferred Stock" means the Series D Convertible
         Preferred Stock of the Company having the rights and preferences set
         forth in the Second Certificate of Designation.

                  "Shares" means the First Shares and the Second Shares.

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                  "Subsidiary" means any subsidiary of the Company that is
         required to be listed in Schedule 3.1(a).

                  "Third Warrants" means Common Stock purchase warrants in the
         form of Exhibit J to purchase an aggregate of 429,492 shares of Common
         Stock.

                  "Trading Day" means (a) any day on which the Common Stock is
         traded on its primary Trading Market, or (b) if the Common Stock is not
         then listed or quoted on any national securities exchange, market or
         trading or quotation facility, then a day on which trading occurs on
         the New York Stock Exchange (or any successor thereto).

                  "Trading Market" means the NASDAQ National Market System or
         any other national securities exchange, market or trading or quotation
         facility on which the Common Stock is then listed or quoted.

                  "Transaction Documents" means this Agreement, the Securities,
         the Registration Rights Agreement, the First Certificate of
         Designation, the Second Certificate of Designation, the Transfer Agent
         Instructions, and any other documents or agreements executed in
         connection with the transactions contemplated hereunder.

                  "Transfer Agent Instructions" means instructions to the
         Company's transfer agent, in the form of Exhibit D.

                  "Underlying Shares" means the shares of Common Stock issuable
         upon (i) conversion of the Shares, (ii) conversion of and upon payment
         of interest on the Notes, (iii) upon exercise of the Warrants, and (iv)
         in satisfaction of any other obligation of the Company to issue shares
         of Common Stock pursuant to the Transaction Documents.

                  "Voting Agreement" means the Voting Agreement dated as of the
         Closing Date among the Company and the Purchasers in the form of
         Exhibit E.

                  "VWAP" means Volume Weighted Average Price of a share of
         Common Stock as reported by Bloomberg L.P.

                  "Warrants" means the First Warrants the Second Warrants and
         the Third Warrants.

                                   ARTICLE II
                                PURCHASE AND SALE

         2.1 Closing. Subject to the terms and conditions set forth in this
Agreement, at the Closing the Company shall issue and sell to the Purchasers,
and the Purchasers shall, severally and not jointly, purchase from the Company,
the First Shares for an aggregate purchase price of $5,000,000, and the Notes
and the Warrants for an aggregate purchase price of $15,000,000. The Closing
shall take place at the offices of Purchaser Counsel upon the execution hereof,
or at such other location or time as the parties may agree.

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         2.2      Closing Deliveries.

                  (a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:

                  (i) one or more stock certificates evidencing the number of
         First Shares indicated below such Purchaser's name on the signature
         page of this Agreement, registered in the name of such Purchaser;

                  (ii) Notes in the aggregate principal amount indicated below
         such Purchaser's name on the signature page of this Agreement,
         registered in the name of such Purchaser;

                  (iii) a First Warrant, registered in the name of such
         Purchaser, pursuant to which such Purchaser shall have the right to
         acquire the number of shares of Common Stock indicated below such
         Purchaser's name on the signature page of this Agreement, on the terms
         set forth therein;

                  (iv) a Second Warrant, registered in the name of such
         Purchaser, pursuant to which such Purchaser shall have the right to
         acquire the number of shares of Common Stock indicated below such
         Purchaser's name on the signature page of this Agreement, on the terms
         set forth therein;

                  (v) a Third Warrant, registered in the name of such Purchaser,
         pursuant to which such Purchaser shall have the right to acquire the
         number of shares of Common Stock indicated below such Purchaser's name
         on the signature page of this Agreement, on the terms set forth
         therein;

                  (vi) evidence that the First Certificate of Designation has
         been filed on or prior to the Closing Date with the Secretary of State
         (or other appropriate office) of Pennsylvania, in form and substance
         mutually agreed to by the parties;

                  (vii) the legal opinion of Company Counsel, in the form of
         Exhibit F, executed by such counsel and addressed and delivered to the
         Purchasers;

                  (viii) a Registration Rights Agreement duly executed by the
         Company;

                  (ix) Transfer Agent Instructions executed by the Company and
         delivered to and acknowledged by American Stock Transfer & Trust
         Company, the Company's transfer agent; and

                  (x) a Letter of Credit issued by First Union National Bank in
         the form annexed hereto as Exhibit G, in an amount equal to the
         principal amount of the Notes being issued to such Purchaser.

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                  (b) At the Closing, each Purchaser shall deliver or cause to
be delivered to the Company the following:

                  (i) the purchase price indicated below such Purchaser's name
         on the signature page of this Agreement, in United States dollars and
         in immediately available funds, by wire transfer to an account
         designated in writing by the Company for such purpose;

                  (ii) a Registration Rights Agreement duly executed by such
         Purchaser;

                  (iii) a Voting Agreement duly executed by such Purchaser; and

                  (iv) a properly executed Treasury Form W-8BEN,

         2.3      Second Closing.

                  (a) Subject to the terms and conditions set forth in this
Agreement, the Company, on the one hand and the Purchasers, on the other hand
shall each have the right to deliver a written notice to the other (the "Second
Tranche Notice"), requiring each other to either sell or buy (severally, and not
jointly), as the case may be, the Second Shares. The Second Tranche Notice may
be delivered no earlier than the day following the Conversion Shares Effective
Date and (i) if delivered by the Company, no later than 111th day after the date
of this Agreement and (ii) if delivered by the Purchasers, no later than August
22, 2004. The closing of the sale of the Second Shares shall occur on the 14th
Trading Day following the giving of the Second Tranche Notice (the "Second
Closing Date"). The closing of the purchase and sale of the Second Tranche
Securities is referred to as the "Second Closing."

                  (b) At the Second Closing, the Company shall deliver or cause
to be delivered to each Purchaser the following:

                  (i) one or more stock certificates evidencing the number of
         Second Shares indicated below such Purchaser's name on the signature
         page of this Agreement, registered in the name of such Purchaser;

                  (ii) evidence that the Second Certificate of Designation has
         been filed on or prior to the Closing Date with the Secretary of State
         (or other appropriate office) of Pennsylvania, in form and substance
         mutually agreed to by the parties; and

                  (iii) all other certificates and instruments required
         hereunder to be delivered by the Company at or prior to the Second
         Closing.

                  (c) At the Second Closing, each Purchaser shall deliver or
cause to be delivered to the Company the purchase price for Second Shares

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indicated below such Purchaser's name on the signature page to this Agreement,
in United States dollars and in immediately available funds, by wire transfer to
an account designated in writing by the Company for such purpose.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         3.1      Representations and  Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchasers:

                  (a) Subsidiaries. The Company has no subsidiaries other than
those listed in Schedule 3.1(a). Except as disclosed in Schedule 3.1(a), the
Company owns all of the capital stock of each Subsidiary free and clear of any
lien, charge, security interest, encumbrance, right of first refusal or other
restriction (collectively, "Liens"), and all the issued and outstanding shares
of capital stock of each Subsidiary are validly issued and are fully paid,
non-assessable and free of preemptive and similar rights.

                  (b) Organization and Qualification. Each of the Company and
the Subsidiaries is an entity duly incorporated or otherwise organized, validly
subsisting and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and the Subsidiaries is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate, (i)
render any material provision of any Transaction Document illegal, invalid or
unenforceable, (ii) have or result in a material adverse effect on the results
of operations, assets, prospects, business or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (iii) materially and
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Documents (any of (i), (ii) or (iii), a
"Material Adverse Effect").

                  (c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company, except for
the Required Approvals or as expressly set forth in any Transaction Document.
Each of the Transaction Documents requiring execution by the Company has been
(or upon delivery will be) duly executed by the Company and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.

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                  (d) No Conflicts. The execution, delivery and performance of
this Agreement, the Notes, the Registration Right Agreement, the Warrants and
the Transfer Agent Instructions by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not (i)
conflict with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other organizational or
charter documents, or (ii) subject to obtaining the Required Approvals (as
defined below), conflict with, or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any agreement, credit facility, debt
or other instrument (evidencing a Company or Subsidiary debt or otherwise) or
other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company or a Subsidiary is bound or affected; except in the case of each of
clauses (ii) and (iii), such as could not, individually or in the aggregate,
have or result in a Material Adverse Effect.

                  (e) Filings, Consents and Approvals. Neither the Company nor
any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required under Section 4.8 and
the required filing of the First Certificate of Designation pursuant to Section
2.2 and the Second Certificate of Designation pursuant to Section 2.3, (ii) the
filing with the Commission of the Conversion Shares Registration Statement and
the Note Shares Registration Statement, (iii) the application(s) to each Trading
Market for the listing of the Underlying Shares for trading thereon in the time
and manner required thereby, (iv) applicable Blue Sky filings, (v) shareholder
approval under the circumstances contemplated by Sections 4.5(f) and 4.5(g)
hereof, and (vi) in all other cases where the failure to obtain such consent,
waiver, authorization or order, or to give such notice or make such filing or
registration could not have or result in, individually or in the aggregate, a
Material Adverse Effect (collectively, the "Required Approvals").

                  (f) Issuance of the Securities. The Securities (including the
Underlying Shares) are duly authorized and, when issued and paid for in
accordance with the Transaction Documents, will be duly and validly issued,
fully paid and nonassessable, free and clear of all Liens created by the
Company. The Company has reserved from its duly authorized capital stock a
number of shares of Common Stock to be issued upon conversion or exercise of the
Securities at least equal to the Required Minimum on the date hereof.

                  (g) Capitalization. The number of shares and type of all
authorized, issued and outstanding capital stock of the Company is set forth in
Schedule 3.1(g). Except as set forth in Schedule 3.1(g), no securities of the
Company are entitled to preemptive or similar rights, and no Person has any
right of first refusal, preemptive right, right of participation, or any similar
right to participate in the transactions contemplated by the Transaction

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Documents. Except as a result of the purchase and sale of the Securities and
except as disclosed in Schedule 3.1(g), there are no outstanding options,
warrants, script rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Except as disclosed in Schedule
3.1(g), the issue and sale of the Securities (including the Underlying Shares)
will not obligate the Company to issue shares of Common Stock or other
securities to any Person (other than the Purchasers) and will not result in a
right of any holder of Company securities to adjust the exercise, conversion,
exchange or reset price under such securities. To the knowledge of the Company,
except for the Purchasers or as disclosed in Schedule 3.1(g), no Person or group
of related Persons beneficially owns (as determined pursuant to Rule 13d-3 under
the Exchange Act), or has the right to acquire, by agreement with or by
obligation binding upon the Company, beneficial ownership of in excess of 5% of
the outstanding Common Stock.

                  (h) SEC Reports; Financial Statements. The Company has filed
all reports required to be filed by it under the Securities Act and the Exchange
Act, including pursuant to Section 13(a) or 15(d) thereof, for the two years
preceding the date hereof (or such shorter period as the Company was required by
law to file such material) (the foregoing materials, together with all exhibits
thereto, being collectively referred to herein as the "SEC Reports" and,
together with the Schedules to this Agreement, the "Disclosure Materials") on a
timely basis or has received a valid extension of such time of filing and has
filed any such SEC Reports prior to the expiration of any such extension. As of
their respective dates, the SEC Reports complied in all material respects with
the requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Reports complied in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
All material agreements to which the Company or any Subsidiary is a party or to
which the property or assets of the Company or any Subsidiary are subject have
been filed as exhibits to the SEC Reports as required under the Exchange Act.

                  (i) Material Changes. Since the date of the latest audited
financial statements included within the SEC Reports, except as specifically
disclosed in the Company's Annual Report filed with the SEC for the year ended
December 31, 2000 and any quarterly reports filed with the SEC for any period
thereafter, (i) there has been no event, occurrence or development that has had

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or that could result in a Material Adverse Effect, (ii) the Company has not
incurred any liabilities (contingent or otherwise) other than (A) trade payables
and accrued expenses incurred in the ordinary course of business consistent with
past practice and (B) liabilities not required to be reflected in the Company's
financial statements pursuant to GAAP or required to be disclosed in filings
made with the Commission, (iii) the Company has not altered its method of
accounting or the identity of its auditors, (iv) the Company has not declared or
made any dividend or distribution of cash or other property to its stockholders
or purchased, redeemed or made any agreements to purchase or redeem any shares
of its capital stock, and (v) the Company has not issued any equity securities
to any officer, director or Affiliate, except pursuant to existing Company stock
option plans.

                  (j) Litigation. There is no action, suit, inquiry, notice of
violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "Action") which (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor to the knowledge of the Company, any
director or officer thereof, is or has within the last five years been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. The
Company does not have pending before the Commission any request for confidential
treatment of information, and the Company does not expect to make any such
request prior to the Required Effectiveness Date. There has not been, and to the
knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company. The SEC has not issued
any stop order or other order suspending the effectiveness of any registration
statement filed by the Company or any Subsidiary under the Exchange Act or the
Securities Act. No strike, work stoppage, slow down or other material labor
problem exists or, to the knowledge of the Company, is threatened or imminent
with respect to any of the employees of the Company or the Subsidiaries.

                  (k) Compliance. Neither the Company nor any Subsidiary (i) is
in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any evidence of indebtedness, indenture, loan or credit agreement
or any other agreement or instrument to which it is a party or by which it or
any of its properties is bound (whether or not such default or violation has
been waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute, rule or
regulation of any governmental authority, including without limitation all
foreign, federal, state and local laws relating to taxes, environmental
protection, occupational health and safety, product quality and safety and
employment and labor matters, except in each case as could not, individually or
in the aggregate, have or result in a Material Adverse Effect.

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                  (l) Regulatory Permits. The Company and the Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("Material Permits"), and neither
the Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.

                  (m) Title to Assets. The Company and the Subsidiaries have
good and marketable title in fee simple to all real property owned by them that
is material to the business of the Company and the Subsidiaries and owns or has
the right to use all personal property that is material to the business of the
Company and the Subsidiaries, in each case free and clear of all Liens, except
for Liens that do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.

                  (n) Patents and Trademarks. The Company and the Subsidiaries
have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or any Subsidiary violates or infringes upon the rights of any Person.
To the knowledge of the Company, (i) all such Intellectual Property Rights are
enforceable and (ii) there is no existing infringement by another Person of any
of the Intellectual Property Rights.

                  (o) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
without a significant increase in cost.

                  (p) Transactions With Affiliates and Employees. Except as set
forth in SEC Reports, none of the officers or directors of the Company and, to
the knowledge of the Company, none of the employees of the Company is presently
a party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.

                                       12
<PAGE>

                  (q) Internal Accounting Controls. The Company and the
Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.

                  (r) Solvency. Based on the financial condition of the Company
as of the Closing Date, (i) the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).

                  (s) Certain Fees. Except as disclosed in Schedule 3.1(s), no
brokerage or finder's fees or commissions are or will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement.

                  (t) Private Placement. Neither the Company nor any Person
acting on the Company's behalf has sold or offered to sell or solicited any
offer to buy the Securities by means of any form of general solicitation or
advertising. Neither the Company nor any of its Affiliates nor any person acting
on the Company's behalf has, directly or indirectly, at any time within the past
six months, made any offer or sale of any security or solicitation of any offer
to buy any security under circumstances that would (i) eliminate the
availability of the exemption from registration under Regulation D under the
Securities Act in connection with the offer and sale of the Securities as
contemplated hereby (to the extent Regulation D applies thereto) or (ii) cause
the offering of the Securities pursuant to the Transaction Documents to be
integrated with prior offerings by the Company for purposes of any applicable
law, regulation or shareholder approval provisions, including without limitation
under the rules and regulations of any Trading Market. The Company is not, and
is not an Affiliate of, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.

                  (u) Form S-3 Eligibility. The Company is eligible to register
its Common Stock for resale by the holders thereof under Form S-3 promulgated
under the Securities Act.

                                       13
<PAGE>

                  (v) Listing and Maintenance Requirements. The Company has not,
in the two years preceding the date hereof, received notice (written or oral)
from any Trading Market on which the Common Stock is or has been listed or
quoted to the effect that the Company is not in compliance with the listing or
maintenance requirements of such Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.

                  (w) Registration Rights. Except as described in Schedule
3.1(w), the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.

                  (x) Application of Takeover Protections. The Company and its
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Company's
Certificate of Incorporation (or similar charter documents) or the laws of its
state of incorporation that is or could become applicable to the Purchasers as a
result of the Purchasers and the Company fulfilling their obligations or
exercising their rights under the Transaction Documents, including without
limitation the Company's issuance of the Securities and the Purchasers'
ownership of the Securities.

                  (y) Disclosure. Subject to the issuance of the press release
contemplated by Section 4.8(i), the Company confirms that neither it nor any
other Person acting on its behalf has as of the date of this Agreement provided
any of the Purchasers or their agents or counsel with any information that
constitutes or might constitute material non-public information. The Company
understands and confirms that the Purchasers will rely on the representation
contained in the immediately foregoing sentence in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct in all material respects and do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The Company acknowledges and agrees that
no Purchaser makes or has made any representations or warranties with respect to
the transactions contemplated hereby other than those specifically set forth in
Section 3.2.

         3.2      Representations and Warranties of the Purchasers. Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
to the Company as follows:

                  (a) Organization; Authority. Such Purchaser is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement and the

                                       14
<PAGE>

Voting Agreement has been duly executed by such Purchaser, and when delivered by
such Purchaser in accordance with the terms hereof, will constitute the valid
and legally binding obligation of such Purchaser, enforceable against it in
accordance with its terms.

                  (b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at all times
to sell or otherwise dispose of all or any part of such Securities pursuant to
an effective registration statement under the Securities Act or under an
exemption from such registration and in compliance with applicable federal and
state securities laws. Nothing contained herein shall be deemed a representation
or warranty by such Purchaser to hold Securities for any period of time. Such
Purchaser is acquiring the Securities hereunder in the ordinary course of its
business.

                  (c) Purchaser Status. At the time such Purchaser was offered
the Securities, it was, and at the date hereof it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act.

                  (d) Experience of such Purchaser. Such Purchaser, either alone
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.

                  (e) General Solicitation. Such Purchaser is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.

                  (f) Reliance. Such Purchaser understands and acknowledges that
(i) the Securities are being offered and sold to it without registration under
the Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.

                  (g) Sale of Securities. Such Purchaser understands that it may
not sell or otherwise dispose of any Securities except pursuant to an effective
registration statement (a "Subject Registration Statement") under the Securities
Act, and (ii) may only sell such Securities in accordance with the Plan of
Distribution set forth in the prospectus forming a part of the Subject
Registration Statement, and otherwise in compliance with the requirements of the
Act, including, but not limited to, the prospectus delivery requirements of the
Act.

                                       15
<PAGE>

                                   ARTICLE IV
                         OTHER AGREEMENTS OF THE PARTIES

         4.1      Transfer Restrictions.

                  (a) Securities may only be disposed of pursuant to an
effective registration statement under the Securities Act, to the Company or
pursuant to an available exemption from or in a transaction not subject to the
registration requirements of the Securities Act, and in compliance with any
applicable state securities laws. In connection with any transfer of Securities
other than pursuant to an effective registration statement or to the Company,
except as otherwise set forth herein, the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, such counsel and the form and substance of which opinion shall be
reasonably satisfactory to the Company and Company counsel, to the effect that
such transfer does not require registration under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register on the books of the Company and with any transfer agent for the
securities of the Company, without any such legal opinion, any transfer of
Securities by a Purchaser to an Affiliate of such Purchaser, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications hereof)
and not with a view to, or for, resale, distribution or fractionalization
thereof in whole or in part in violation of the Securities Act. As a condition
of transfer, any such transferee shall agree in writing to be bound by the terms
of this Agreement and shall have the rights of a Purchaser under this Agreement
the Registration Rights Agreement and the Voting Agreement.

                  (b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on the certificates
evidencing the Securities:

         NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THEY ARE
         CONVERTIBLE/EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND
         EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
         RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
         OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
         BE OFFERED OR SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
         STATEMENT UNDER THE SECURITIES ACT UNLESS, IN THE OPINION (WHICH SHALL
         BE IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION) OF COUNSEL
         SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.

The shares of Common Stock issuable upon the conversion of the Shares or the
exercise of the Warrants shall not contain the legend set forth above nor any
other legend while a Conversion Shares Registration Statement is effective under
the Securities Act. On the Conversion Shares Effective Date, the Company shall
issue the letter attached to the Transfer Agent Instructions to the Company's
transfer agent with respect to the shares of Common Stock issuable upon the

                                       16
<PAGE>

conversion of the Shares or the exercise of the Warrants. The shares of Common
Stock issuable upon the conversion of the Notes shall not contain the legend set
forth above nor any other legend while a Note Shares Registration Statement is
effective under the Securities Act. On the Note Shares Effective Date, the
Company shall issue the letter attached to the Transfer Agent Instructions to
the Company's transfer agent with respect to the shares of Common Stock issuable
upon the conversion of the Notes. In addition, none of the Securities (including
the Underlying Shares) shall contain the legend set forth above nor any other
legend (i) following any sale of such Securities pursuant to Rule 144 or (ii) if
such legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the Staff of
the Commission). The Company agrees that at such time as such legend is no
longer required under this Section 4.1(b), it will, no later than four Trading
Days following the delivery by a Purchaser to the Company or the Company's
transfer agent of a certificate representing Securities (including Underlying
Shares) issued with a restrictive legend, deliver or cause to be delivered to
such Purchaser a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in this Section or in the Registration
Rights Agreement.

                  (c) If the Company fails to deliver or cause to be delivered
to any Purchaser a certificate representing any Securities by the date on which
delivery of such certificate is required by any Transaction Document (the
"Delivery Date"), the Company shall pay to such Purchaser, in cash, as
liquidated damages and not as a penalty, $5,000 for each Trading Day after such
Delivery Date until such certificate is delivered. Nothing herein shall limit
such Purchaser's right to pursue actual damages for the Company's failure to
deliver certificates representing any Securities as required by the Transaction
Documents, and such Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. The exercise of any such rights
shall not prohibit a Purchaser from seeking to enforce damages pursuant to any
other provision of this Agreement or under applicable law.

                  (d) In addition to any other rights available to a Purchaser,
if the Company fails to deliver to such Purchaser a certificate representing
Common Stock by the Delivery Date, and if after such Delivery Date such
Purchaser purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by such Purchaser of the
shares that the Purchaser anticipated receiving from the Company (a "Buy-In"),
then the Company shall pay in cash to such Purchaser (in addition to any
remedies available to or elected by the such Purchaser ) the amount by which (x)
such Purchaser's total purchase price (including brokerage commissions, if any)
for the Common Stock so purchased exceeds (y) the product of (1) the lesser of
(A) the aggregate number of shares of Common Stock that such Purchaser
anticipated receiving from the conversion or exercise at issue or (B) the number
of shares of Common Stock so purchased, multiplied by (2) the conversion price
or exercise price, as the case may be, of the Common Stock on the date on which
the applicable notice of conversion or exercise, as the case may be, was given
(the "Notice Date"), in which event the number of shares of Common Stock that
would have been issued had the Company timely complied with its delivery
requirements shall not be so issued. For example, if such Purchaser purchases
Common Stock having a total purchase price of $11,000 to cover a Buy-In in

                                       17
<PAGE>

connection with an attempted conversion of Shares with respect to which the
conversion price of an Underlying Share on the applicable Notice Date multiplied
by the number of Underlying Shares was equal to $2,000 under clause (A) of the
immediately preceding sentence, the Company shall be required to pay such
Purchaser $9,000. Such Purchaser shall provide the Company written notice
indicating the amounts payable to the Purchaser in respect of the Buy-In.

         4.2      Acknowledgment of Dilution. The Company acknowledges that the
issuance of the Securities (including the Underlying Shares) will result in
dilution of the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further acknowledges
that subject to obtaining all required shareholder approvals, if any, its
obligation to issue the Securities (including the Underlying Shares) pursuant to
the Transaction Documents is unconditional and absolute, regardless of the
effect of any such dilution.

         4.3      Furnishing of Information. As long as any Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any such Person, the Company shall deliver to
such Person a written certification of a duly authorized officer as to whether
it has complied with the preceding sentence. As long as any Purchaser owns
Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with paragraph (c) of Rule 144 such information as is required for
the Purchasers to sell the Securities under Rule 144. The Company further
covenants that it will take such further action as any holder of Securities may
reasonably request, all to the extent required from time to time to enable such
Person to sell such Securities without registration under the Securities Act
within the limitation of the exemptions provided by Rule 144.

         4.4      Integration. Except for the sale of the Securities to the
Purchasers as contemplated herein the Company shall not, and shall use its best
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market.

         4.5      Reservation and Listing of Securities.

                  (a) The Company shall maintain a reserve from its duly
authorized shares of Common Stock for issuance pursuant to the Transaction
Documents in such amount as may be required to fulfill its obligations in full
under the Transaction Documents.

                  (b) If, on any date, the number of authorized but unissued
(and otherwise unreserved) shares of Common Stock (the "Remaining Authorized
Shares") is less than 125% of (i) the Actual Minimum on such date, minus (ii)
the number of shares of Common Stock previously issued pursuant to the
Transaction Documents, then the Board of Directors of the Company shall use its
best efforts to amend the Company's certificate or articles of incorporation to

                                       18
<PAGE>

increase the number of authorized but unissued shares of Common Stock to at
least the Required Minimum at such time (minus the number of shares of Common
Stock previously issued pursuant to the Transaction Documents), as soon as
possible and in any event not later than the 65th day after such date; provided
that the Company will not be required at any time to authorize a number of
shares of Common Stock greater than the maximum remaining number of shares of
Common Stock that could possibly be issued after such time pursuant to the
Transaction Documents.

                  (c) If, at the time any Purchaser requests an exercise or
conversion of any Securities, the Actual Minimum minus the number of shares of
Common Stock previously issued pursuant to the Transaction Documents exceeds the
Remaining Authorized Shares, then the Company shall issue to the Purchaser
requesting such exercise or conversion a number of Underlying Shares equal to
such Purchaser's pro-rata portion of the Remaining Authorized Shares (based on
such Purchaser's share of the aggregate purchase price paid hereunder and
considering any Underlying Shares previously issued to such Purchaser), and the
remainder of the Underlying Shares issuable in connection with such exercise or
conversion shall constitute "Excess Shares" pursuant to Section 4.5(g) below.

                  (d) The Company shall (i) in the time and manner required by
each Trading Market, prepare and file with such Trading Market an additional
shares listing application covering a number of shares of Common Stock at least
equal to the greater of (A) the Required Minimum on the Closing Date and (B) the
Required Minimum on the date of such application, (ii) take all steps necessary
to cause such shares of Common Stock to be approved for listing on each Trading
Market as soon as possible thereafter, (iii) provide to the Purchasers evidence
of such listing, and (iv) maintain the listing of such Common Stock on each such
Trading Market or another Eligible Market.

                  (e) If, on any date, the number of shares of Common Stock
previously listed on a Trading Market is less than 125% of the Actual Minimum on
such date, then the Company shall take the necessary actions to list on such
Trading Market, as soon as reasonably possible, a number of shares of Common
Stock at least equal to the Required Minimum on such date; provided that the
Company will not be required at any time to list a number of shares of Common
Stock greater than the maximum number of shares of Common Stock that could
possibly be issued pursuant to the Transaction Documents.

                  (f) If any Trading Market is an Eligible Market, then the
maximum number of shares of Common Stock that the Company may issue pursuant to
the Transaction Documents at an effective purchase price less than the "Market
Value" (as defined in Nasdaq Marketplace Rule 4200(a)(20)) of a share of Common
Stock on the Trading Day immediately preceding the Closing Date (the "Market
Value") equals 3,409,245 shares (the "Issuable Maximum"), unless the Company
obtains shareholder approval in accordance with the rules and regulations of
such Trading Market. If, at the time any Purchaser requests an exercise or
conversion of any Securities, the Actual Minimum (excluding any shares issued or
issuable at an effective purchase price in excess of the Market Value on the
Trading Day immediately preceding the Closing Date) exceeds the Issuable Maximum
(and if the Company has not have previously obtained the required shareholder
approval), then the Company shall issue to the Purchaser requesting such

                                       19
<PAGE>

exercise or conversion a number of Underlying Shares of Common Stock equal to
such Purchaser's pro-rata portion of the Issuable Maximum (based on such
Purchaser's share of the aggregate purchase price paid hereunder and considering
any Underlying Shares previously issued to such Purchaser), and the remainder of
the Underlying Shares issuable in connection with such exercise or conversion
shall constitute "Excess Shares" pursuant to Section 4.5(g) below.

                  (g) Any Purchaser whose receipt of Excess Shares upon exercise
or conversion of Securities is restricted based on the number of Remaining
Authorized Shares or the Issuable Maximum shall have the option, by notice to
the Company, to require the Company to either: (i) use its best efforts to
obtain the required shareholder approval necessary to permit the issuance of
such Excess Shares as soon as is possible, but in any event not later than the
65th day after such notice, or (ii) within five Trading Days after such notice,
pay cash to such Purchaser, as liquidated damages and not as a penalty, in an
amount equal to the number of Excess Shares times the average Closing Price over
the five Trading Days immediately prior to the date of such notice or, if
greater, the five Trading Days immediately prior to the date of payment (the
"Cash Amount"). If the exercising or converting Purchaser elects the first
option under the preceding sentence and the Company fails to obtain the required
shareholder approval on or prior to the 65th day after such notice, then within
three Trading Days after such 65th day, the Company shall pay the Cash Amount to
such Purchaser, as liquidated damages and not as penalty.

         4.6      Conversion and Exercise Procedures. The Transfer Agent
Instructions and Conversion Notice, as defined in the First Certificate of
Designation, the Second Certificate of Designation and the Notes, set forth the
totality of the procedures required to with respect to the conversion of the
Shares and the Notes. The Transfer Agent Instructions and Form of Election to
Purchase under the Warrants set forth the totality of the procedures with
respect to the exercise of the Warrants. No additional legal opinion or other
information or instructions shall be necessary to enable the Purchasers to
convert their Shares and Notes or exercise their Warrants. The Company shall
honor conversions of the Shares and Notes and exercises of the Warrants and
shall deliver Underlying Shares in accordance with the terms, conditions and
time periods set forth in the Transaction Documents.

         4.7      Subsequent Placements.

                  (a) From the date hereof until 90 Trading Days after the
Effective Date, the Company will not, directly or indirectly, offer, sell, grant
any option to purchase, or otherwise dispose of (or announce any offer, sale,
grant or any option to purchase or other disposition of) any of its or the
Subsidiaries' equity or equity equivalent securities, including without
limitation any debt, preferred stock or other instrument or security that is, at
any time during its life and under any circumstances, convertible into or
exchangeable for Common Stock (any such offer, sale, grant, disposition or
announcement being referred to as a "Subsequent Placement").

                  (b) The Company will not, directly or indirectly, effect any
Subsequent Placement from the date hereof until 240 days after the Effective
Date, unless (i) the Company delivers to each of the Purchasers a written notice
(the "Subsequent Placement Notice") of its intention to effect such Subsequent
Placement, which Subsequent Placement Notice shall describe in reasonable detail

                                       20
<PAGE>

the proposed terms of such Subsequent Placement, the amount of proceeds intended
to be raised thereunder, the Person with whom such Subsequent Placement is
proposed to be effected, and attached to which shall be a term sheet or similar
document relating thereto and (ii) such Purchaser shall not have notified the
Company by 6:30 p.m. (New York City time) on the tenth Trading Day after its
receipt of the Subsequent Placement Notice of its willingness to provide (or to
cause its designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on the same terms set forth in the
Subsequent Placement Notice. If the Purchasers shall fail to so notify the
Company of their willingness to participate in the full Subsequent Placement,
the Company may effect such Subsequent Placement on the terms and to one or more
of the Persons set forth in the Subsequent Placement Notice; provided that the
Company must provide the Purchasers with a second Subsequent Placement Notice,
and the Purchasers will again have the right of first refusal set forth above in
this paragraph (b), if the Subsequent Placement subject to the initial
Subsequent Placement Notice is not consummated for any reason on the terms set
forth in such Subsequent Placement Notice within 40 days after the date of the
initial Subsequent Placement Notice with the one or more of the Persons
identified in the Subsequent Placement Notice. If the Purchasers indicate a
willingness to provide financing in excess of the amount set forth in the
Subsequent Placement Notice, then each Purchaser will be entitled to provide
financing pursuant to such Subsequent Placement Notice up to an amount equal to
such Purchaser's pro rata portion of the aggregate purchase price paid for the
Securities under this Agreement, but the Company shall not be required to accept
financing from the Purchasers in an amount in excess of the amount set forth in
the Subsequent Placement Notice.

                  (c) Except for (i) Registrable Securities, as defined in the
Registration Rights Agreement, and (ii) shares of Common Stock issuable upon
exercise of any currently outstanding warrants and upon conversion of any
currently outstanding convertible securities of the Company, in each case
disclosed in Schedule 3.1(g) or pursuant to the anti-dilution provisions
contained in any such derivative securities, but not with respect to any
amendment or modification thereto, the Company shall not, until 90 Trading Days
after the Conversion Shares Effective Date, without the prior written consent of
the Purchasers, file a registration statement with the Commission with respect
to any securities of the Company or the Subsidiaries other than a registration
statement on Form S-8.

                  (d) The 90 Trading Day period set forth in the foregoing
paragraphs of this Section 4.7 shall be extended for (i) the number of Trading
Days during such periods in which trading in the Common Stock is suspended by
any Trading Market, and (ii) the number of Trading Days after the Effective Date
during which (A) the Conversion Shares Registration Statement is not effective
or (B) the prospectus included in the Conversion Shares Registration Statement
may not be used by the holders thereof for the resale of Registrable Securities
thereunder.

                  (e) The restrictions contained in paragraphs (a) and (b) of
this Section 4.7 shall not apply to (i) the granting of options to employees,
officers and directors of the Company pursuant to any stock option plan duly
adopted by the Company or to the issuance of Common Stock upon exercise of such
options or (ii) the issuance of any securities under the Motorola Agreement, the
PPG Agreement or the issuance of Common Stock upon the exercise or conversion of
any such securities, (iii) up to 1,000,000 shares of Common Stock issued in

                                       21
<PAGE>

connection with any contractual strategic alliances approved by the Company's
Board of Directors, and (iv) any securities issuable upon the exercise or
conversion of, or pursuant to the anti-dilution provisions contained within, any
option, restricted stock awards, preferred stock or warrants outstanding on the
date hereof (but not to the extent amended hereafter), all of which are set
forth on Schedule 3.1(g) hereto.

         4.8      Securities Laws Disclosure; Publicity. The Company shall (i)
on the Closing Date, issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) within ten Trading Days
after the Closing Date, file with the Commission a Report on Form 8-K disclosing
the transactions contemplated hereby, and (iii) timely file with the Commission
a Form D promulgated under the Securities Act with respect to the transactions
contemplated hereby and provide a copy thereof to the Purchasers promptly after
the filing thereof. The Company shall, at least two Trading Days prior to the
filing or dissemination of any disclosure required by this paragraph, provide a
copy thereof to the Purchasers for their review. The Company and the Purchasers
shall consult with each other in issuing any press releases or otherwise making
public statements or filings and other communications with the Commission or any
regulatory agency or Trading Market with respect to the transactions
contemplated hereby, and neither party shall issue any such press release or
otherwise make any such public statement, filing or other communication without
the prior consent of the other, except if such disclosure is required by law, in
which case the disclosing party shall promptly provide the other party with
prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of any Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure (but not any
disclosure as to the controlling Persons thereof) is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure.

         4.9      Use of Proceeds. The Company shall use the net proceeds from
the sale of the Securities hereunder for working capital purposes and not for
the satisfaction of any portion of the Company's debt (other than payment of
trade payables and accrued expenses in the ordinary course of the Company's
business and prior practices), to redeem any Company equity or equity-equivalent
securities or to settle any outstanding litigation.

         4.10     Reimbursement by Company. If any Purchaser or any Affiliate,
officer, director, partner, controlling person, employee or agent of a Purchaser
(a "Purchaser Related Person") becomes involved in any capacity in any action,
proceeding or investigation brought by or against any Person in connection with
or as a result of the transactions contemplated by the Transaction Documents,
the Company will reimburse such Purchaser or Purchaser Related Person for its
reasonable legal and other expenses (including the costs of any investigation,
preparation and travel) incurred in connection therewith, as such expenses are
incurred, except to the extent that any such action, proceeding or investigation
is due primarily on account of any Purchaser's or Purchaser Related Person's
gross negligence or willful misconduct. In addition, the Company shall indemnify
and hold harmless each Purchaser and Purchaser Related Person from and against
any and all losses, claims, damages, liabilities, costs and expenses (including
reasonable legal costs and reasonable costs of investigation, preparation and

                                       22
<PAGE>

travel) (collectively, "Losses"), as incurred, arising out of or relating to any
breach by the Company of any of the representations, warranties or covenants
made by the Company in this Agreement or any other Transaction Document, or any
allegation by a third party that, if true, would constitute such a breach,
excluding only Losses that result from such Purchaser's or Purchaser Related
Person's gross negligence or willful misconduct. The reimbursement and
indemnification obligations of the Company under this paragraph shall survive
any termination of this Agreement until the 180th day following the day on which
no Shares are outstanding, no amount is due on the Notes and the Purchasers do
not own any Underlying Shares (the "End Indemnity Day"), and shall be in
addition to any liability that the Company may otherwise have, and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Purchasers and any such Purchaser Related
Persons. The Company also agrees that neither the Purchasers nor any Purchaser
Related Persons shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result
of the transactions contemplated by the Transaction Documents, except to the
extent that any losses, claims, damages, liabilities or expenses incurred by the
Company result from the gross negligence or willful misconduct of the applicable
Purchaser or Purchaser Related Person in connection with such transactions. If
the Company breaches its obligations under any Transaction Document, then, in
addition to any other liabilities the Company may have under any Transaction
Document or applicable law, the Company shall pay or reimburse the Purchasers on
demand for all costs of collection and enforcement (including reasonable
attorneys fees and expenses).

         4.11     Reimbursement by Purchasers. Each Purchaser, severally and not
jointly, shall indemnify and hold harmless the Company or any Affiliate,
officer, director, controlling person, employee or agent of the Company (a
"Company Related Person") from and against any and all Losses, as incurred,
arising out of or relating to any breach by such Purchaser of any of the
representations, warranties or covenants made by such Purchaser in this
Agreement or any other Transaction Document, or any allegation by a third party
that, if true, would constitute such a breach, excluding only Losses that result
from the Company's or Company Related Person's gross negligence or willful
misconduct. The reimbursement and indemnification obligations of the Purchasers
under this paragraph shall survive any termination of this Agreement until the
End Indemnity Day, and shall be in addition to any liability that such Purchaser
may otherwise have, and shall be binding upon and inure to the benefit of any
successors, assigns, heirs and personal representatives of the Company and any
Company Related Persons. If a Purchaser breaches its obligations under any
Transaction Document, then, in addition to any other liabilities such Purchaser
may have under any Transaction Document or applicable law, such Purchaser shall
pay or reimburse the Company on demand for all costs of collection and
enforcement (including reasonable attorneys fees and expenses).

         4.12     Shareholders Rights Plan. In the event that a shareholders
rights plan is adopted by the Company, no claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any such plan or in any way could be deemed to trigger the provisions of such
plan solely by virtue of receiving Securities under the Transaction Documents.

                                       23
<PAGE>

         4.13 Covenant Not to Disclose Material Non-Public Information. The
Company covenants and agrees that it shall refrain from disclosing, and shall
cause its officers, directors, employees and agents to refrain from disclosing,
any material non-public information to the Purchasers, in the absence of a
confidentiality agreement executed by the Purchasers.

         4.14     Voting. During the period in which it owns Securities, each
Purchaser agrees to abide by the terms of the Voting Agreement.

         4.15     Sale of Securities. Each Purchaser, for itself only, hereby
covenants and agrees with the Company that it (i) will not sell or otherwise
dispose of the shares of Common Stock to be delivered to it upon conversion of
the Shares or the Notes or upon exercise of any of the Warrants (the "Delivered
Shares") except pursuant to an effective registration statement (an "Effective
Registration Statement") under the Securities Act, (ii) will sell the Delivered
Shares only in accordance with the Plan of Distribution set forth in the
prospectus forming a part of the Effective Registration Statement (the
"Prospectus"), (iii) will comply with the requirements of the Securities Act
when selling or otherwise disposing of the Delivered Shares, including, but not
limited to, the prospectus delivery requirements of the Securities Act, and (iv)
will not sell or otherwise dispose of, and will return immediately to the
Company for the purpose of placing a restrictive legend thereon, the Delivered
Shares (and any certificates representing the Delivered Shares, if applicable)
upon notice from the Company that the Prospectus may not be used for the sale of
the Delivered Shares.

                                    ARTICLE V
                                   CONDITIONS

         5.1       Conditions Precedent to the Obligations of the Purchasers.
The obligation of each Purchaser to acquire Securities at the Closing is subject
to the satisfaction or waiver by such Purchaser, at or before the Closing, of
each of the following conditions:

                  (a) Representations and Warranties. The representations and
warranties of the Company contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing as though made
on and as of such date;

                  (b) Performance. The Company shall have performed, satisfied
and complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied or
complied with by it at or prior to the Closing;

                  (c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents; and

                  (d) No Suspensions of Trading in Common Stock; Listing.
Trading in the Common Stock shall not have been suspended by the Commission or

                                       24
<PAGE>

any Trading Market (except for any suspensions of trading of not more than one
Trading Day solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for trading on
an Eligible Market.

         5.2      Conditions Precedent to the Obligations of the Company. The
obligation of the Company to sell Securities at the Closing is subject to the
satisfaction or waiver by the Company, at or before the Closing, of each of the
following conditions:

                  (a) Representations and Warranties. The representations and
warranties of the Purchasers contained herein shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made on and as of such date;

                  (b) Performance. The Purchasers shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by the Transaction Documents to be performed, satisfied
or complied with by the Purchasers at or prior to the Closing;

                  (c) No Injunction. No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;

         5.3      Conditions Precedent to the Obligation of the Purchasers at
the Second Closing. The obligation of each Purchaser to acquire the Second
Shares at the Second Closing is subject to the satisfaction or waiver by such
Purchaser, at or before the Second Closing Date, of each of the following
conditions:

                  (a) First Closing. The Closing shall have occurred, and each
of the conditions set forth in Section 5.1 shall be satisfied at the time of the
Second Closing (and, for such purpose, references in Section 5.1 to the
"Closing" shall be deemed to refer to the Second Closing);

                  (b) Conversion Shares Registration Statement. The Conversion
Shares Registration Statement shall have remained effective at all times since
its Effective Date, not subject to any actual or threatened stop order or
suspension by any regulatory authority;

                  (c) Change of Control. No Change of Control of the Company
shall have occurred.

                  (d) Conversion and Exercise Obligations. The Company shall
have delivered Underlying Shares upon conversion or exercise of the Securities,
if any, in accordance with the Transaction Documents;

                  (e) Certificate of Designation Filed. The Second Certificate
of Designation shall have been filed.

                                       25
<PAGE>

                  (f) Reservation of Shares. No approval of the shareholders of
the Company shall be required, under the rules of a Trading Market or otherwise,
in order to issue the Actual Minimum number of shares of Common Stock (including
the Second Shares and any Underlying Shares issuable upon conversion or exercise
thereof).

The parties agree that, if one or more of the conditions set forth in this
Section is not satisfied, each Purchaser shall have the right, in its sole
discretion, to purchase at the Second Closing all, any portion or none of the
Second Shares otherwise to have been purchased by it.

                                   ARTICLE VI
                                  MISCELLANEOUS

         6.1      Fees and Expenses. At the Closing, the Company shall reimburse
the Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to the
Purchasers, in proportion to their respective purchase prices (or, at the
Purchasers' election, directly to Purchaser Counsel), an aggregate of $50,000.
At the Second Closing, the Company shall reimburse the Purchasers for 50% of
their legal fees and expenses incurred in connection with the preparation and
negotiation of the documents related to the Second Closing by paying to the
Purchasers, in proportion to their respective purchase prices (or, at the
Purchasers' election, directly to Purchaser Counsel), up to an aggregate of
$5,000. In lieu of the payments required by the immediately preceding sentence,
the Purchasers may retain the amount of such payments instead of delivering such
amounts to the Company at the Closing and the Second Closing. Except as
expressly set forth in the Transaction Documents to the contrary, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the issuance of the Securities.

         6.2      Entire Agreement. The Transaction Documents, together with the
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.

         6.3      Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, or (c) the Trading Day

                                       26
<PAGE>

following the date of mailing, if sent by U.S. nationally recognized overnight
courier service. The address for such notices and communications shall be as
follows:

         If to the Company:                 Universal Display Corporation
                                            375 Phillips Boulevard
                                            Ewing, New Jersey 08618
                                            Fax No.: 609-671-0995
                                            Attn: Sidney Rosenblatt

         With a copy to:                    Morgan, Lewis & Bockius, LLP
                                            1701 Market Street
                                            Philadelphia, Pennsylvania 19103
                                            Fax No.(877) 432-9652
                                            Attn:  Stephen M. Goodman, Esq.

         If to a Purchaser:                 To the address set forth under such
                                            Purchaser's name on the signature
                                            pages hereof;

         With a copy to:                    Morse, Zelnick, Rose & Lander, LLP
                                            450 Park Avenue
                                            New York, N.Y. 10022
                                            Att'n: George Lander, Esq.
                                            Fax No.: 212-838-9190

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

         6.4      Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.

         6.5      Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.

         6.6      Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or obligations

                                       27
<PAGE>

hereunder without the prior written consent of the Purchasers. Any Purchaser may
assign its rights under this Agreement and the Registration Rights Agreement to
any Person to whom such Purchaser assigns or transfers any Securities.

         6.7      No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except that each Purchaser Related Person and each Company
Related Person is an intended third party beneficiary of Section 4.10 and may
enforce the provisions of such Section directly against the Company or the
Purchasers, as the case may be.

         6.8      Governing Law. The corporate laws of the Commonwealth of
Pennsylvania shall govern all issues concerning the relative rights of the
Company and its stockholders. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

         6.9      Survival. The representations and warranties set forth in
Article III of this Agreement shall survive the Closing for a period of two
years and the Second Closing for a period of two years. All other
representations, warranties, agreements and covenants contained herein shall
survive the Closing and the delivery, exercise and/or conversion of the
Securities, as applicable until the End Indemnity Day.

         6.10     Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.

         6.11     Severability. If any provision of this Agreement is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be

                                       28
<PAGE>

affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.

         6.12     Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.

         6.13     Usury. To the extent it may lawfully do so, the Company hereby
agrees not to insist upon or plead or in any manner whatsoever claim, and will
resist any and all efforts to be compelled to take the benefit or advantage of,
usury laws wherever enacted, now or at any time hereafter in force, in
connection with any claim, action or proceeding that may be brought by any
Purchaser in order to enforce any right or remedy under any Transaction
Document. Notwithstanding any provision to the contrary contained in any
Transaction Document, it is expressly agreed and provided that the total
liability of the Company under the Transaction Documents for payments in the
nature of interest shall not exceed the maximum lawful rate authorized under
applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no
event shall any rate of interest or default interest, or both of them, when
aggregated with any other sums in the nature of interest that the Company may be
obligated to pay under the Transaction Documents exceed such Maximum Rate. It is
agreed that if the maximum contract rate of interest allowed by law and
applicable to the Transaction Documents is increased or decreased by statute or
any official governmental action subsequent to the date hereof, the new maximum
contract rate of interest allowed by law will be the Maximum Rate of interest
applicable to the Transaction Documents from the effective date forward, unless
such application is precluded by applicable law. If under any circumstances
whatsoever, interest in excess of the Maximum Rate is paid by the Company to any
Purchaser with respect to indebtedness evidenced by the Transaction Documents,
such excess shall be applied by such Purchaser to the unpaid principal balance
of any such indebtedness or be refunded to the Company, the manner of handling
such excess to be at such Purchaser's election.

                                       29
<PAGE>

         6.14     Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document are several and not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Purchaser shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or out of
the other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                            SIGNATURE PAGES FOLLOWS]

                                       30
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.

                         UNIVERSAL DISPLAY CORPORATION

                         By: /s/ Sidney D. Rosenblatt
                            --------------------------------
                         Name:  Sidney D. Rosenblatt
                         Title: Chief Financial Officer

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                      SIGNATURE PAGE FOR PURCHASER FOLLOWS]

<PAGE>

<TABLE>
<CAPTION>
                                    STRONG RIVER INVESTMENTS, INC.
                                    <S>                                                            <C>
                                    By:    /s/ Kenneth L. Henderson
                                           --------------------------
                                    Name:  Kenneth L. Henderson
                                    Title: Attorney-in-fact

                                    First Closing:
                                    -------------

                                    Purchase Price:                                                 $10,000,000

                                    Number of Shares of Series C Preferred
                                    Stock to be acquired:                                                 2,500

                                    Face Amount of Notes to be acquired:                             $7,500,000

                                    Warrant Shares subject to First Warrant:                             78,740

                                    Warrant Shares subject to Second Warrant:                            78,740

                                    Warrant Shares subject to Third Warrant:                            214,746

                                    Second Closing:
                                    --------------

                                    Purchase Price:                                                  $2,500,000

                                    [Number of Shares of Series D Preferred
                                    Stock to be acquired]:                                                2,500

                                    Address for Notice:
                                    Strong River Investments, Inc.
                                    c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd.
                                    Vanterpool Plaza, 2nd Floor, Wickhams Cay I
                                    Road Town, Tortola, British Virgin Islands

                                    Facsimile No.: 212-651-9010
                                    Telephone No.: 212-651-9002
                                    Attn: Danny Golan

         With a copy to:            Morse, Zelnick, Rose & Lander, LLP
                                    450 Park Avenue
                                    New York, New York 10022
                                    Attention: George Lander, Esq.
                                    Facsimile No.: 212-838-9190
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                    PINE RIDGE FINANCIAL INC.
                                    <S>                                                             <C>
                                    By:    /s/ Kenneth L. Henderson
                                           ---------------------------
                                    Name:  Kenneth L. Henderson
                                    Title: Attorney-in-fact

                                    First Closing:
                                    -------------

                                    Purchase Price:                                                 $10,000,000

                                    Number of Shares of Series C Preferred
                                    Stock to be acquired:                                                 2,500

                                    Face Amount of Notes to be acquired:                             $7,500,000

                                    Warrant Shares subject to First Warrant:                             78,740

                                    Warrant Shares subject to Second Warrant:                            78,740

                                    Warrant Shares subject to Third Warrant:                            214,746

                                    Second Closing:
                                    --------------

                                    Purchase Price:                                                  $2,500,000

                                    [Number of Shares of Series D Preferred
                                    Stock to be acquired]:                                                2,500

                                    Address for Notice:
                                    Pine Ridge Financial Inc.
                                    c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd.
                                    Vanterpool Plaza, 2nd Floor, Wickhams Cay I
                                    Road Town, Tortola, British Virgin Islands

                                    Facsimile No.: 212-651-9010
                                    Telephone No.: 212-651-9002
                                    Attn: Danny Golan

         With a copy to:            Morse, Zelnick, Rose & Lander, LLP
                                    450 Park Avenue
                                    New York, New York 10022
                                    Attention: George Lander, Esq.
                                    Facsimile No.: 212-838-9190
</TABLE><PAGE>
                          REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (this "Agreement") is made and
entered into as of August 22, 2001, among Universal Display Corporation, a
Pennsylvania corporation (the "Company"), and the investors signatory hereto
(each such investor is a "Purchaser" and all such investors are, collectively,
the "Purchasers").

         WHEREAS, the parties have agreed to enter into this Agreement in
connection with, and as a condition to the Closing under, the Securities
Purchase Agreement, dated as of the date hereof, among the Company and the
Purchasers (the "Purchase Agreement");

         NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:

         1. Definitions. In addition to the terms defined elsewhere in this
Agreement, (a) capitalized terms that are not otherwise defined herein have the
meanings given to such terms in the Purchase Agreement, and (b) the following
terms have the meanings indicated:

                  "Conversion Shares Registration Statement" means the initial
         registration statement required to be filed hereunder with respect to
         the Common Stock issuable upon conversion of the Preferred Stock and
         upon exercise of the Warrants and any additional registration
         statements related thereto that are contemplated by Section 3(c),
         including (in each case) the Prospectus, amendments and supplements to
         such registration statement or Prospectus, including pre- and
         post-effective amendments, all exhibits thereto, and all material
         incorporated by reference or deemed to be incorporated by reference in
         such registration statement.

                  "CS Required Minimum" means, as of any date, two times the
         maximum aggregate number of shares of Common Stock then issued or
         potentially issuable in the future upon exercise or conversion in full
         of all First Shares and Warrants, assuming that (1) any previously
         unconverted First Shares and unexercised Warrants are held until the
         fifth anniversary of the Closing Date or, if earlier, until maturity
         and (2) the Closing Price at all times on and after the date of
         determination equals 50% of the actual Closing Price on the Trading Day
         immediately prior to the date of determination.

                  "Filing Date" means (i) with respect to the Conversion Shares
         Registration Statement required to be filed hereunder, the 30th day
         following the Closing Date; (ii) with respect to the Note Shares
         Registration Statement, the 30th day following the date on which the
         Conversion Shares Registration Statement is declared effective; and
         (iii) with respect to any additional Registration Statements that may
         be required pursuant to Section 3(c), the 30th day following the date
         on which the Company first knows, or reasonably should have known that
         such additional Registration Statement is required under such Section.

<PAGE>

                  "Holder" means any holder, from time to time, of Registrable
         Securities.

                  "Note Required Minimum" means, as of any date, the maximum
         aggregate number of shares of Common Stock then issued or potentially
         issuable in the future upon conversion in full of all Notes, assuming
         that (a) any previously unconverted Notes are held until the fifth
         anniversary of the Closing Date or, if earlier, until maturity and (b)
         the Closing Price at all times on and after the date of determination
         equals 50% of the actual Closing Price on the Trading Day immediately
         prior to the date of determination.

                  "Note Shares Registration Statement" means the initial
         registration statement required to be filed hereunder with respect to
         the Common Stock issuable upon conversion of the Notes and any
         additional registration statements related thereto that are
         contemplated by Section 3(c), including (in each case) the Prospectus,
         amendments and supplements to such registration statement or
         Prospectus, including pre- and post-effective amendments, all exhibits
         thereto, and all material incorporated by reference or deemed to be
         incorporated by reference in such registration statement.

                  "Proceeding" means an action, claim, suit, investigation or
         proceeding (including, without limitation, an investigation or partial
         proceeding, such as a deposition), whether commenced or threatened.

                  "Prospectus" means the prospectus included in the Registration
         Statement (including, without limitation, a prospectus that includes
         any information previously omitted from a prospectus filed as part of
         an effective registration statement in reliance upon Rule 430A
         promulgated under the Securities Act), as amended or supplemented by
         any prospectus supplement, with respect to the terms of the offering of
         any portion of the Registrable Securities covered by the Registration
         Statement, and all other amendments and supplements to the Prospectus,
         including post-effective amendments, and all material incorporated by
         reference or deemed to be incorporated by reference in such Prospectus.

                  "Registrable Securities" means any Common Stock (including
         Underlying Shares) issued or issuable pursuant to the Transaction
         Documents.

                  "Registration Statement" means the Conversion Shares
         Registration Statement and/or the Note Shares Registration Statement as
         the context requires.

                  "Required Effectiveness Date" means, with respect to the
         Conversion Shares Registration Statement required to be filed
         hereunder, the 90th day following the Closing Date, and, with respect
         to any additional Registration Statements that may be required pursuant
         to Section 3(c), the 60th day following the date on which the Company
         first knows, or reasonably should have known, that such additional
         Registration Statement is required under such Section.

                  "Rule 415," "Rule 424" and "Rule 461" means Rule 415, Rule 424
         and Rule 461, respectively, promulgated by the Commission pursuant to
         the Securities Act, as such Rules may be amended from time to time, or

                                       2
<PAGE>

         any similar rule or regulation hereafter adopted by the Commission
         having substantially the same effect as such Rule.

                  "Special Counsel" means one special counsel to the Holders.
         Unless the Holders notify the Company otherwise, the Special Counsel
         will be the Purchaser Counsel identified in the Purchase Agreement.

         2. Shelf Registration

            (a) On or prior to each Filing Date, the Company shall prepare and
file with the Commission a "Shelf" Registration Statement covering the resale of
all Registrable Securities required to be included therein as set forth below
for an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form S-3 or any successor form (except if the
Company is not then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on Form S-1 or another
appropriate form in accordance herewith as the Holders may consent) and shall
contain (except if otherwise directed by the Holders) the "Plan of Distribution"
substantially in the form attached hereto as Annex A. The Company shall use its
reasonable best efforts to cause the Conversion Shares Registration Statement
and the Note Shares Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event, with respect to the Conversion Shares Registration Statement only, prior
to the Required Effectiveness Date, and shall use its reasonable best efforts to
keep such Registration Statement continuously effective under the Securities Act
(subject to Section 3(m) until the date which is two years after the date that
such Registration Statement is declared effective by the Commission or such
earlier date when all Registrable Securities covered by such Registration
Statement have been sold or may be sold in any calendar quarter pursuant to Rule
144(k) (the "Effectiveness Period").

            (b) (i)  The initial Conversion Shares Registration Statement to be
filed hereunder shall cover the sale by the Holders of at least the CS Required
Minimum number of shares of Common Stock.

                (ii) The initial Note Shares Registration Statement to be filed
hereunder shall cover the sale by the Holders of at least the Note Required
Minimum number of shares of Common Stock.

            (c) Each of the following shall constitute a "CS Event" with respect
to the Conversion Shares Registration Statement:

                  (i) a Conversion Shares Registration Statement is not filed on
         or prior to its Filing Date or is filed without the Company affording
         the Holders the opportunity to review and comment on the same as
         required by Section 3(a) hereof;

                  (ii) an amendment to a Conversion Shares Registration
         Statement is not filed by the Company with the Commission within ten
         Trading Days after the Commission notifies the Company that such

                                       3
<PAGE>
         amendment is required in order for such Conversion Shares Registration
         Statement to be declared effective, or the Company fails to respond as
         promptly as reasonably possible and in any event within ten Trading
         Days to any comments received from the Commission with respect to a
         Conversion Shares Registration Statement or any amendment thereto;

                  (iii) the Company fails to file with the Commission a request
         for acceleration in accordance with Rule 461 within five days after the
         date the Company is notified (orally or in writing, whichever is
         earlier) by the Commission that a Conversion Shares Registration
         Statement will not be "reviewed" or is not subject to further review;

                  (iv) after the Effective Date of a Conversion Shares
         Registration Statement, a Holder is not permitted to sell Registrable
         Securities registered under such Conversion Shares Registration
         Statement (or a subsequent Conversion Shares Registration Statement
         filed in replacement thereof) for any reason, except as otherwise
         provided in Section 3(m);

                  (v) the Common Stock is not listed or quoted, or is suspended
         from trading, on an Eligible Market for a period of three Trading Days
         (which need not be consecutive Trading Days);

                  (vi) the exercise or conversion rights of the Holders pursuant
         to the Transaction Documents are suspended for any reason, without the
         consent of the Holders or as otherwise permitted by the Transaction
         Documents; or

                  (vii) the Conversion Shares Registration Statement filed
         hereunder is not declared effective by the Commission on or prior to
         its Required Effectiveness Date.

Upon the occurrence of any CS Event and on every monthly anniversary thereof
until the applicable CS Event is cured, as partial relief for the damages
suffered therefrom by the Holders (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each
Holder an amount in cash, as liquidated damages and not as a penalty, equal to
1.0% of the aggregate purchase price actually paid by such Holder pursuant to
the Purchase Agreement for the Preferred Stock for the first month following the
date on which such CS Event occurs (the "CS Event Date") and 2% for each month
thereafter until such CS Event has been cured. If such CS Event has not been
cured either (A) if the CS Event is on account of the provisions of Section
2(c)(i) through 2(c)(vi), within 15 days of the CS Event Date, or (B) if the CS
Event is on account of the provisions of Section 2(c)(vii), within 90 days of
the CS Event Date then, at any time within thirty days after the later of (1)
the expiration of such 15- or 90-day cure period, as the case may be, or (2) the
date on which the Holder became aware that it has the right to send a Repurchase
Notice (as defined below) the Holder may send a written notice to the Company
requiring the Company to repurchase the Preferred Stock held by the Holder for a
price equal to the Stated Value of such Preferred Stock (a "Repurchase Notice")
as of the date of repurchase, in which event the Company shall repurchase such
Preferred Stock on the 5th Trading Day after the giving of such Repurchase
Notice. There shall be excluded from the periods set forth in the previous
sentences any delays that are attributable solely the failure of the Holders to

                                       4
<PAGE>

timely complete their review of the Conversion Shares Registration Statement
under Section 3(a). The liquidated damages payable pursuant to the terms hereof
shall apply on a pro-rata basis for any portion of a month prior to the cure of
a CS Event.

            (d) Each of the following shall constitute a "Note Event" with
respect to the Note Shares Registration Statement:

                  (i) a Note Shares Registration Statement is not filed on or
         prior to its Filing Date or is filed without the Company affording the
         Holders the opportunity to review and comment on the same as required
         by Section 3(a) hereof;

                  (ii) an amendment to a Note Shares Registration Statement is
         not filed by the Company with the Commission within ten Trading Days
         after the Commission notifies the Company that such amendment is
         required in order for such Note Shares Registration Statement to be
         declared effective, or the Company fails to respond as promptly as
         reasonably possible and in any event within ten Trading Days to any
         comments received from the Commission with respect to a Note Shares
         Registration Statement or any amendment thereto;

                  (iii) the Company fails to file with the Commission a request
         for acceleration in accordance with Rule 461 within five days after the
         date the Company is notified (orally or in writing, whichever is
         earlier) by the Commission that a Note Shares Registration Statement
         will not be "reviewed" or is not subject to further review;

                  (iv) after the Effective Date of a Note Shares Registration
         Statement, a Holder is not permitted to sell Registrable Securities
         registered under such Note Shares Registration Statement (or a
         subsequent Note Shares Registration Statement filed in replacement
         thereof) for any reason, except as otherwise provided in Section 3(m) ;

                  (v) the Common Stock is not listed or quoted, or is suspended
         from trading, on an Eligible Market for a period of three Trading Days
         (which need not be consecutive Trading Days); or

                  (vi) the exercise or conversion rights of the Holders pursuant
         to the Transaction Documents are suspended for any reason, without the
         consent of the Holders or as otherwise permitted by the Transaction
         Documents.

Upon the occurrence of any Note Event and on every monthly anniversary thereof
until the applicable Note Event is cured, as partial relief for the damages
suffered therefrom by the Holders (which remedy shall not be exclusive of any
other remedies available at law or in equity), the Company shall pay to each
Holder an amount in cash, as liquidated damages and not as a penalty, equal to
1.0% of the aggregate purchase price actually paid by such Holder pursuant to
the Purchase Agreement for the Notes for the first month following the date on
which such Note Event occurs and 2% for each month thereafter until such Note
Event has been cured. There shall be excluded from the periods set forth in the

                                       5
<PAGE>

previous sentences any delays that are attributable solely the failure of the
Holders to timely complete their review of the Note Shares Registration
Statement under Section 3(a). The liquidated damages payable pursuant to the
terms hereof shall apply on a pro-rata basis for any portion of a month prior to
the cure of a Note Event.

         3. Registration Procedures. In connection with the Company's
registration obligations hereunder, the Company shall:

            (a) Not less than three Trading Days prior to the filing of each
Registration Statement or any related Prospectus or any amendment or supplement
thereto (including any document that would be incorporated or deemed to be
incorporated therein by reference), the Company shall (i) furnish to the Holders
and their Special Counsel copies of all such documents proposed to be filed,
which documents (other than those incorporated or deemed to be incorporated by
reference) will be subject to the review of such Holders and their Special
Counsel, and (ii) cause its officers and directors, counsel and independent
certified public accountants to respond to such inquiries as shall be necessary,
in the reasonable opinion of respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not be
restricted in any manner from including in a Registration Statement the
distribution or resale of (i) any securities by PPG or Motorola, provided that
such securities are issued and outstanding on the date hereof, are issued upon
exercise or conversion of any securities held by PPG or Motorola on the date
hereof, or are issued pursuant to preemptive rights of PPG outstanding on the
date hereof and (ii) the distribution or resale of up to 200,000 shares of
Common Stock issuable upon exercise of warrants granted to Gerard, Klauer
Mattison & Co. Inc. on the Closing Date (and any shares issuable pursuant to the
antidilution provisions thereof). The Company shall not file the Registration
Statement or any such Prospectus or any amendments or supplements thereto to
which the Holders of a majority of the Registrable Securities and their Special
Counsel shall reasonably object.

            (b) (i) Prepare and file with the Commission such amendments,
including post-effective amendments, to the Registration Statement and the
Prospectus used in connection therewith as may be necessary to keep the
Registration Statement continuously effective as to the applicable Registrable
Securities for the Effectiveness Period and prepare and file with the Commission
such additional Registration Statements in order to register for resale under
the Securities Act all of the Registrable Securities; (ii) cause the related
Prospectus to be amended or supplemented by any required Prospectus supplement,
and as so supplemented or amended to be filed pursuant to Rule 424; (iii)
respond as promptly as reasonably possible, and in any event within ten Trading
Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence from
and to the Commission relating to the Registration Statement; and (iv) comply in
all material respects with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Holders thereof set forth in the
Registration Statement as so amended or in such Prospectus as so supplemented.

                                       6
<PAGE>

            (c) If, on any date, the number of shares of Common Stock previously
registered under all existing Registration Statements is less than 125% of the
Actual Minimum on such date, then the Company shall file an additional
Registration Statement covering a number of shares of Common Stock at least
equal to (i) the Required Minimum on such date, less (ii) the number of shares
of Common Stock previously registered under all existing Registration
Statements; provided that the Company will not be required at any time to
register a number of shares of Common Stock greater than the maximum number of
shares of Common Stock that could possibly be issued pursuant to the Transaction
Documents.

            (d) Notify the Holders of Registrable Securities to be sold and
their Special Counsel as promptly as reasonably possible, and ^ confirm such
notice in writing no later than one Trading Day thereafter, of any of the
following events: (i) the Commission notifies the Company whether there will be
a "review" of any Registration Statement; (ii) the Commission comments in
writing on any Registration Statement (in which case the Company shall deliver
to each Holder a copy of such comments and of all written responses thereto);
(iii) any Registration Statement or any post-effective amendment is declared
effective; (iv) the Commission or any other Federal or state governmental
authority requests any amendment or supplement to a Registration Statement or
Prospectus or requests additional information related thereto; (v) the
Commission issues any stop order suspending the effectiveness of any
Registration Statement or initiates any Proceedings for that purpose; (vi) the
Company receives notice of any suspension of the qualification or exemption from
qualification of any Registrable Securities for sale in any jurisdiction, or the
initiation or threat of any Proceeding for such purpose; or (vii) the financial
statements included in any Registration Statement become ineligible for
inclusion therein or any statement made in any Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference is untrue in any material respect or any revision to a Registration
Statement, Prospectus or other document is required so that it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.

            (e) Use its reasonable best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of (i) any order suspending the effectiveness of
any Registration Statement or (ii) any suspension of the qualification (or
exemption from qualification) of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practicable moment.

            (f) Furnish to each Holder and their Special Counsel, without
charge, at least one conformed copy of each Registration Statement and each
amendment thereto, including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference, and all exhibits
to the extent requested by such Person (including those previously furnished or
incorporated by reference) promptly after the filing of such documents with the
Commission.

            (g) Promptly deliver to each Holder and their Special Counsel,
without charge, as many copies of the Prospectus or Prospectuses (including each
form of prospectus) and each amendment or supplement thereto as such Persons may

                                       7
<PAGE>

reasonably request. The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus and any amendment or supplement thereto.

            (h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the selling
Holders and their Special Counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky laws
of such jurisdictions within the United States as any Holder requests in
writing, to keep each such registration or qualification (or exemption
therefrom) effective during the Effectiveness Period and to do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by a Registration Statement;
provided, that the Company shall not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified or to take any
action that would subject it to general service of process in any jurisdiction
where it is not then so subject or subject the Company to any material tax in
any such jurisdiction where it is not then so subject.

            (i) Cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be delivered
to a transferee pursuant to a Registration Statement, which certificates shall
be free, to the extent permitted by the Purchase Agreement, of all restrictive
legends, and to enable such Registrable Securities to be in such denominations
and registered in such names as any such Holders may request.

            (j) Upon the occurrence of any event described in Section 3(d)(vii),
as promptly as reasonably possible, prepare a supplement or amendment, including
a post-effective amendment, to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, neither the Registration Statement nor such Prospectus
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

            (k) Comply with all applicable rules and regulations of the
Commission.

            (l) The Company may require each selling Holder to furnish to the
Company information regarding such Holder and the distribution of such
Registrable Securities as is required by law to be disclosed in the Registration
Statement; and each Holder shall furnish any such information to the Company.

            (m) Subject to the last sentence of this Section 3(m), the Company
may by written notice require that the Holders immediately cease sales of
Registrable Securities (for a period not to exceed five consecutive Trading Days
in any one instance and for a period not to exceed twenty Trading Days in any
twelve-month period) pursuant to a Registration Statement at any time that (i)
the Company becomes engaged in a business activity or negotiation which is not

                                       8
<PAGE>

disclosed in a Registration Statement (or the prospectus included therein) which
the Company reasonably believes must be disclosed therein under applicable law
and which the Company desires to keep confidential for business purposes, (ii)
the Company determines that a particular disclosure so determined to be required
to be disclosed therein would be premature or would adversely affect the Company
or its business or prospects or (iii) the Registration Statement can no longer
be used under the existing rules and regulations promulgated under the
Securities Act (each of (i), (ii) or (iii), a "Material Condition"). The Company
shall not be required to disclose to the Holders which of the reasons specified
in (i), (ii) or (iii) above is the basis for requiring a suspension of sales due
to the occurrence of a Material Condition. The Company will use its reasonable
best efforts to ensure that the use of the Registration Statement (and the
prospectus included therein) may be resumed as soon as it is practicable. The
Company may not suspend sales of Registrable Securities under a Registration
Statement pursuant to this Section 3(m) more than four (4) times during any
twelve-month period.

         4. Registration Expenses. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (a) all registration and filing fees
(including, without limitation, fees and expenses (i) with respect to filings
required to be made with any Trading Market, and (ii) in compliance with
applicable state securities or Blue Sky laws (including, without limitation,
fees and disbursements of counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities and determination of
the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as requested by the Holders of a majority of the Registrable
securities included in such Registration Statement)), (b) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses requested by the Holders),
(c) messenger, telephone and delivery expenses, (d) fees and disbursements of
counsel for the Company and up to an aggregate of $25,000 (the "Fee Cap") for
the Special Counsel for the Holders and (e) fees and expenses of all other
Persons retained by the Company in connection with the consummation of the
transactions contemplated by this Agreement. The Holders shall pay the fees and
expenses of the Special Counsel retained by them in excess of the Fee Cap.

         5. Indemnification

            (a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment advisors
and employees of each of them, each Person who controls any such Holder (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or relating to any untrue

                                       9
<PAGE>

or alleged untrue statement of a material fact contained in the Registration
Statement, any Prospectus or any form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or form of prospectus or supplement thereto, in light of the
circumstances under which they were made) not misleading, except to the extent,
but only to the extent, that (i) such untrue statements or omissions are based
solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (ii) in the case of an occurrence of an event of the type specified in
Section 3(d)(v)-(vii), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(f). The Company shall notify the Holders
promptly of the institution, threat or assertion of any Proceeding of which the
Company is aware in connection with the transactions contemplated by this
Agreement.

            (b) Indemnification by Holders. Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the
directors, officers, agents and employees of such controlling Persons, to the
fullest extent permitted by applicable law, from and against all Losses, as
incurred, arising solely out of or based solely upon any untrue statement of a
material fact contained in any Registration Statement, any Prospectus, or any
form of prospectus, or in any amendment or supplement thereto, or arising solely
out of or based solely upon any omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in such Registration Statement or such
Prospectus or to the extent that (i) such untrue statements or omissions are
based solely upon information regarding such Holder furnished in writing to the
Company by such Holder expressly for use therein, or to the extent that such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement, such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
or (ii) in the case of an occurrence of an event of the type specified in
Section 3(d)(v)-(vii), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder of
the Advice contemplated in Section 6(f). In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.

            (c) Conduct of Indemnification Proceedings. If any Proceeding shall
be brought or asserted against any Person entitled to indemnity hereunder (an

                                       10
<PAGE>

"Indemnified Party"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "Indemnifying Party") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to the Indemnified Party and the payment of all
reasonable fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.

            An Indemnified Party shall have the right to employ separate counsel
in any such Proceeding and to participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
or Parties unless: (i) the Indemnifying Party has agreed in writing to pay such
fees and expenses; (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof and such counsel shall be at the reasonable
expense of the Indemnifying Party). The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending Proceeding in respect of which any Indemnified Party
is a party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability on claims that are the subject matter of
such Proceeding.

            All reasonable fees and expenses of the Indemnified Party (including
reasonable fees and expenses to the extent incurred in connection with
investigating or preparing to defend such Proceeding in a manner not
inconsistent with this Section) shall be paid to the Indemnified Party, as
incurred, within ten Trading Days of written notice thereof to the Indemnifying
Party, which notice shall be delivered no more frequently than on a monthly
basis (regardless of whether it is ultimately determined that an Indemnified
Party is not entitled to indemnification hereunder; provided, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).

            (d) Contribution. If a claim for indemnification under Section 5(a)
or 5(b) is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that

                                       11
<PAGE>

resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees or
expenses if the indemnification provided for in this Section was available to
such party in accordance with its terms.

            The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.

            The indemnity and contribution agreements contained in this Section
are in addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

         6. Miscellaneous

            (a) Remedies. In the event of a breach by the Company or by a Holder
of any of their obligations under this Agreement, each Holder or the Company, as
the case may be, in addition to being entitled to exercise all rights granted by
law and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

            (b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the same shall be in writing and signed by the Company
and the Holders of at least two-thirds of the then outstanding Registrable
Securities. Notwithstanding the foregoing, a waiver or consent to depart from

                                       12
<PAGE>

the provisions hereof with respect to a matter that relates exclusively to the
rights of Holders and that does not directly or indirectly affect the rights of
other Holders may be given by Holders of at least a majority of the Registrable
Securities to which such waiver or consent relates; provided, however, that the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding sentence.

            (c) No Inconsistent Agreements. Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any of
its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that would have the effect of impairing
the rights granted to the Holders in this Agreement or otherwise conflicts with
the provisions hereof. Except as and to the extent specified in the applicable
schedule to the Purchase Agreement, neither the Company nor any Subsidiary has
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been satisfied in
full.

            (d) No Piggyback on Registrations. Except as and to the extent
specified in the applicable schedule to the Purchase Agreement, neither the
Company nor any of its security holders (other than the Holders in such capacity
pursuant hereto) may include securities of the Company in the Registration
Statement other than the Registrable Securities, and the Company shall not after
the date hereof enter into any agreement providing any such right to any of its
security holders. The Company shall not be restricted in any manner from
including in a Registration Statement (i) the distribution or resale of any
securities by PPG or Motorola, provided that such securities are issued and
outstanding on the date hereof, are issued upon exercise or conversion of any
securities held by PPG or Motorola on the date hereof, or are issued pursuant to
preemptive rights of PPG outstanding on the date hereof and (ii) the
distribution or resale of up to 200,000 shares of Common Stock issuable upon
exercise of warrants granted Gerard, Klauer Mattison & Co. Inc. on the Closing
Date (and any shares issuable pursuant to the antidilution provisions thereof).

            (e) Compliance. Each Holder covenants and agrees that it will: (i)
comply with the prospectus delivery requirements of the Securities Act as
applicable to it in connection with sales of Registrable Securities pursuant to
the Registration Statement; (ii) sell the Registrable Securities pursuant to the
Registration Statement only in transactions that are contemplated by the Plan of
Distribution contained in such Registration Statement; and (iii) in connection
with sales made pursuant to the Registration Statement, deliver only
certificates that represent shares covered by the Registration Statement. The
Holder represents and warrants that the requirements set forth in subsections
(i), (ii) and (iii) of this paragraph (e) shall be true and correct with respect
to every sale of Registrable Securities made pursuant to the Registration
Statement at the time of each such sale.

            (f) Discontinued Disposition. Each Holder agrees by its acquisition
of such Registrable Securities that, upon receipt of a notice from the Company
of the occurrence of any event of the kind described in Sections 3(d)(v),
3(d)(vi), 3(d)(vii) or 3(m), such Holder will forthwith discontinue disposition
of such Registrable Securities under the Registration Statement until such
Holder's receipt of the copies of the supplemented Prospectus and/or amended

                                       13
<PAGE>

Registration Statement contemplated by Section 3(j), or until it is advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed, and, in either case, has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus or Registration Statement. The Company may provide
appropriate stop orders to enforce the provisions of this paragraph.

            (g) Piggy-Back Registrations. If at any time during the
Effectiveness Period there is not an effective Registration Statement covering
all of the Registrable Securities and the Company shall determine to prepare and
file with the Commission a registration statement relating to an offering for
its own account or the account of others under the Securities Act of any of its
equity securities, other than on Form S-4 or Form S-8 (each as promulgated under
the Securities Act) or their then equivalents relating to equity securities to
be issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of such
determination and, if within fifteen days after receipt of such notice, any such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered.

            (h) Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 p.m. (New
York City time) on a Trading Day, (b) the next Trading Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement on a day that is not a
Trading Day or later than 6:30 p.m. (New York City time) and earlier than 11:59
p.m. (New York City time) on any Trading Day or (c) the Trading Day following
the date of mailing, if sent by U.S. nationally recognized overnight courier
service. The address for such notices and communications shall be as follows:

         If to the Company:  Universal Display Corporation
                             375 Phillips Boulevard
                             Ewing, New Jersey 08618
                             Fax No.: (609) 671-0995
                             Attn: Sidney Rosenblatt

         With a copy to:     Morgan, Lewis & Bockius, LLP
                             1701 Market Street
                             Philadelphia, Pennsylvania 19103
                             Fax No.: (877) 432-9652
                             Attn: Stephen Goodman, Esq.

         If to a Purchaser:  To the address set forth under such Purchaser's
                             name on the signature pages hereof;

                                       14
<PAGE>

         With a copy to:     Morse, Zelnick, Rose & Lander, LLP
                             450 Park Avenue
                             New York, N.Y. 10022
                             Fax No: (212) 838-9190
                             Attn: George Lander, Esq.

or such other address as may be designated in writing hereafter, in the same
manner, by such Person.

            (i) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. The Company may not
assign its rights or obligations hereunder without the prior written consent of
each Holder. Each Holder may assign its rights and obligations hereunder in the
manner and to the extent permitted under the Purchase Agreement.

            (j) Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and, all of which taken together shall constitute one and the same Agreement. In
the event that any signature is delivered by facsimile transmission, such
signature shall create a valid binding obligation of the party executing (or on
whose behalf such signature is executed) the same with the same force and effect
as if such facsimile signature were the original thereof.

            (k) Governing Law. The corporate laws of the Commonwealth of
Pennsylvania shall govern all issues concerning the relative rights of the
Company and its shareholders. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed by
and construed and enforced in accordance with the internal laws of the State of
New York, without regard to the principles of conflicts of law thereof. Each
party hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.

            (l) Cumulative Remedies. The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.

                                       15
<PAGE>

            (m) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.

            (n) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

            (o) Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of any other Purchaser hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose.

            (p) Entire Agreement. This Agreement, together with the Transaction
Documents, contains the entire understanding of the parties with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral or written, with respect to such matters.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                           SIGNATURE PAGES TO FOLLOW]

                                       16
<PAGE>

            IN WITNESS WHEREOF, the parties have executed this Registration
Rights Agreement as of the date first written above.

                                    UNIVERSAL DISPLAY CORP.

                                    By:     /s/ Sidney D. Rosenblatt
                                            ---------------------------------
                                    Name:   Sidney D. Rosenblatt
                                    Title:  Chief Financial Officer

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
                     SIGNATURE PAGES OF PURCHASER TO FOLLOW]

                                       17
<PAGE>

                                    STRONG RIVER INVESTMENTS, INC.

                                    By:     /s/ Kenneth L. Henderson
                                            ------------------------
                                    Name:   Kenneth L. Henderson
                                    Title:  Attorney-in-fact

                                    Address for Notice:
                                    Strong River Investments, Inc.
                                    c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd.
                                    Vanterpool Plaza, 2nd Floor, Wickhams Cay I
                                    Road Town, Tortola, British Virgin Islands

                                    Facsimile No.: 212-651-9010
                                    Telephone No.: 212-651-9002
                                    Attn:  Danny Golan

                                    With copies to:

                                    Morse, Zelnick, Rose & Lander LLP
                                    450 Park Avenue, Suite 902
                                    New York, New York 10022
                                    Fax No.: 212-838-9190
                                    Attn:  George Lander, Esq.

<PAGE>

                                    PINE RIDGE FINANCIAL INC.

                                    By:     /s/ Kenneth L. Henderson
                                            --------------------------------
                                    Name:   Kenneth L. Henderson
                                    Title:  Attorney-in-fact

                                    Address for Notice:
                                    Strong River Investments, Inc.
                                    c/o Icaza, Gonzalez-Ruiz & Aleman (BVI) Ltd.
                                    Vanterpool Plaza, 2nd Floor, Wickhams Cay I
                                    Road Town, Tortola, British Virgin Islands

                                    Facsimile No.: 212-651-9010
                                    Telephone No.: 212-651-9002
                                    Attn:  Danny Golan

                                    With copies to:

                                    Morse, Zelnick, Rose & Lander LLP
                                    450 Park Avenue, Suite 902
                                    New York, New York 10022
                                    Fax No.: 212-838-9190
                                    Attn:  George Lander, Esq.

<PAGE>

                                                                         Annex A

                              Plan of Distribution
                              --------------------

         The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The Selling Stockholders may use any one or more of the
following methods when selling shares:

o        ordinary brokerage transactions and transactions in which the
         broker-dealer solicits purchasers;

o        block trades in which the broker-dealer will attempt to sell the shares
         as agent but may position and resell a portion of the block as
         principal to facilitate the transaction;

o        purchases by a broker-dealer as principal and resale by the
         broker-dealer for its account;

o        an exchange distribution in accordance with the rules of the applicable
         exchange;

o        privately negotiated transactions;

o        to cover short sales effected after the date hereof;

o        broker-dealers may agree with the Selling Stockholders to sell a
         specified number of such shares at a stipulated price per share;

o        a combination of any such methods of sale; and

o        any combination of any of the above methods.

         The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

         The Selling Stockholders may also engage in short sales against the
box, puts and calls and other transactions in securities of the Company or
derivatives of Company securities and may sell or deliver shares in connection
with these trades. The Selling Stockholders may pledge their shares to their
brokers under the margin provisions of customer agreements. If a Selling
Stockholder defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.

         Broker-dealers engaged by the Selling Stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive

<PAGE>

commissions or discounts from the Selling Stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.

         The Selling Stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.

         The Selling Stockholders will be subject to prospectus delivery
requirements of the Securities Act. We have informed the Selling Stockholders
that the anti-manipulative provisions of Regulation M promulgated under the
Exchange Act may apply to their sales in the market.

         The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders, up to $25,000. The Company has agreed to indemnify the
Selling Stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.

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