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Exhibit 10.5  

 
 

AGREEMENT OF TENDER, EXCHANGE AND TRANSMITTAL
  OF SERIES E-1 STOCK    
    

        Agreement of Tender, Exchange and Transmittal of Series E-1 Stock (this "Agreement") dated as of March 3, 2004, by and between
Displaytech, Inc., a Colorado corporation (the "Company"), and each of the persons and entities listed as Purchasers on the signature pages hereto (each, a "Purchaser" and, collectively, the
"Purchasers"). 

W I T N E S S E T H  

        WHEREAS, by resolution of its Board of Directors dated February 27, 2004, the Company has authorized holders of shares of the Company's
Series E-1 Senior Preferred Stock, par value $.001 per share (the "Series E-1 Stock"), and their designees, to tender their currently-owned shares of
Series E-1 Stock, together with any and all accrued, cumulative and unpaid dividends thereon, to the Company in exchange for shares of the Company's Series F Convertible
Preferred Stock, par value $.001 per share (the "Series F Stock"). 

        NOW,
THEREFORE, in consideration of the premises and the mutual promises set forth herein, and for good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows: 

SECTION 1. TENDER OF SERIES E-1 STOCK  

        Each Purchaser hereby tenders that certain number of shares of Series E-1 Stock set forth opposite such Purchaser's name on  Schedule I hereto, together with any and all accrued, cumulative and unpaid dividends thereon, in exchange for that certain number of shares of
Series F Stock as is set forth on Schedule I hereto. Each Purchaser hereby agrees that immediately as of the date hereof, all rights and
privileges of such Purchaser arising from such Purchaser's ownership of
Series E-1 Stock (whether arising from the Certificate of Designation and Determination of Preferences of the Series E-1 Senior Preferred Stock or otherwise) are
hereby extinguished and the Company is hereby immediately released from any and all obligations arising therefrom. 

SECTION 2. FURTHER ASSURANCES  

        Each Purchaser hereby agrees to cooperate with the Company and to take such actions as the Company may reasonably request to effectuate the transactions
contemplated hereby. 

SECTION 3. MISCELLANEOUS  

        Section 3.1    This
Agreement shall be binding upon, and shall inure to the benefit of, the Company and each of the Purchasers, and their respective successors and
assigns. Nothing expressed herein is intended or shall be construed to give any person or entity other than the persons and entities referred to in the preceding sentence any legal or equitable right,
remedy or claim under or in respect of this Agreement. 

        Section 3.2    This
Agreement shall be construed and enforced in accordance with, and the rights of the parties hereto shall be governed by, the internal laws of the
State of New York, without regard to conflict of laws. This Agreement may be executed in any number of counterparts (and by facsimile), and by the different parties on different counterparts, each
counterpart constituting an original, but all together constituting only one agreement. 

[The
remainder of page is intentionally left blank] 

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. 

	 	 	 	 	DISPLAYTECH, INC.
	

 	
 	

 	
 	

By:	
 	

/s/ RICHARD BARTON

	 	 	 	 	Name: Richard Barton

Title: Chief Executive Officer
	

Accepted and Agreed to as of the date first above written by the undersigned Purchasers:	
 	

 	
 	

 
	

FLEMING US DISCOVERY FUND III, L.P.
	

By:	
 	

FLEMING US DISCOVERY PARTNERS, L.P., its general partner
	

By:	
 	

FLEMING US DISCOVERY, LLC,

its general partner	
 	

 	
 	

 
	

By:	
 	

/s/ ROBERT L. BURR
 Robert L. Burr, member	
 	

 	
 	

 
	

FLEMING US DISCOVERY OFFSHORE FUND III, L.P.
	

By:	
 	

FLEMING US DISCOVERY PARTNERS, L.P., its general partner
	

By:	
 	

FLEMING US DISCOVERY, LLC,

its general partner	
 	

 	
 	

 
	

By:	
 	

/s/ ROBERT L. BURR
 Robert L. Burr, member	
 	

 	
 	

 

	INTERWEST CAPITAL, INC.	 	 
	

By:	
 	

/s/ WM. C. GLYNN
	
 	

 
	Name: William C. Glynn

Title: President	 	 
	

NISSHO ELECTRONICS CORPORATION	
 	

 
	

By:	
 	

/s/ TAKASHI FUKUDA
	
 	

 
	Name: Takashi Fukuda

Title: Senior Managing Director	 	 

Schedule I  

	 
	 	Shares of

	Name of Purchaser
 
	 	Series E-1 Stock Tendered Hereunder
	 	Series F Stock Issuable Hereunder

	 
	 	(together with any and all accrued, cumulative and unpaid dividends thereon as of date the hereof)
 
	 	 

	Fleming US Discovery Fund III, L.P.	 	29,069	 	29,069
	

Fleming US Discovery Offshore Fund III, L.P.	
 	

4,654	
 	

4,654
	

InterWest Capital, Inc.	
 	

33,724	
 	

33,724
	

Nissho Electronics Corporation	
 	

11,101	
 	

11,101

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Exhibit 10.6  

 
 

STOCK PURCHASE AGREEMENT    
    

        THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated effective as of March 24, 2004, by and among Displaytech, Inc., a Colorado corporation (the
"Company") and the purchasers set forth on Schedule 1 hereto (each referred to as
"Purchaser" and collectively as "Purchasers"). 

W I T N E S S E T H: 

        WHEREAS,
the Company desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from the Company, shares of the Company's Series E-1 Senior
Preferred Stock, par value $.001 per share (the "Series E-1 Preferred Stock"), which at the Closing (as defined below) will be
immediately exchanged for shares of the Company's Series F Convertible Preferred Stock, par value $.001 per share (the "Series F Preferred
Stock") on a one-for-one basis pursuant to the terms of the Series E Exchange Agreement, and, if applicable, shares of the Company's
Series G Convertible Preferred Stock, par value $.001 per share (the "Series G Preferred Stock"), upon the terms and provisions
hereinafter set forth. 

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

SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK  

        1.1    Purchase of Shares.    The Company agrees to sell to the Purchasers and, subject to the terms and conditions
hereof and in reliance upon the representations and warranties of the Company contained
herein or made pursuant hereto, the Purchasers severally agree to purchase from the Company at the Closing, the number of shares of Series E-1 Preferred Stock and Series G
Preferred Stock set forth opposite each Purchaser's name on Schedule 1 hereto. The shares of Series E-1 Preferred Stock and
Series G Preferred Stock being acquired under this Agreement are referred to herein collectively as the "Shares." 

        1.2    Purchase Price.    The aggregate purchase price to be paid to the Company by each Purchaser for that portion of
the Shares to be purchased by such Purchaser pursuant to this Agreement shall be the amount set forth opposite such Purchaser's name on  Schedule 1 hereto. 

SECTION 2. CLOSING  

        2.1    Closing.    Subject to the terms and conditions hereof, the initial closing of the purchase and sale of the
Shares to be purchased by the Purchasers (the "Closing") will take place at the offices of Faegre & Benson LLP, 3200 Wells Fargo Center, 1700
Lincoln Street, Denver, Colorado at 10:00 A.M., Mountain Standard Time, on the date hereof, or such other time and date as shall be mutually agreed to by the Company and the Purchasers (such
time and date are herein referred to as the "Closing Date"). 

        2.2    Closing Deliveries.    Subject to the terms and conditions hereof, at the Closing (i) the Company will
deliver to each Purchaser a certificate registered in the respective Purchaser's name (or the name of its nominee, if any, as specified on  Schedule 1 hereto) evidencing the number of Shares set
forth opposite each Purchaser's name on  Schedule 1 and (ii) substantially simultaneously with the Purchaser's receipt thereof, each Purchaser shall deliver to the Company a
certified or official bank check (or wire transfer) in an amount equal to the aggregate purchase price (as specified in Section 1.2 hereof) for the Shares to be purchased by such Purchaser
payable to the order of the Company in federal or other immediately available funds. 

 

SECTION 3. DEFINITIONS  

        3.1   For
purposes of this Agreement, the following definitions shall apply (such definitions to be equally applicable to both the singular and plural forms of the terms
defined): 

        "Affiliate", when used with respect to any Person, means (i) if such Person is a corporation, any officer or director thereof and
any Person which is, directly or indirectly, the beneficial owner (by itself or as part of any group) of more than five percent (5%) of any class of any equity security (within the meaning of the
Exchange Act) thereof, and, if such beneficial owner is a partnership, any general partner thereof, or if such beneficial owner is a corporation, any Person controlling, controlled by or under common
control with such beneficial owner, or any officer or director of such beneficial owner or of any corporation occupying any such control relationship, (ii) if such Person is a partnership, any
general or limited partner thereof, and (iii) any other Person which, directly or indirectly, controls or is controlled by or is under common control with such Person. For purposes of this
definition, "control" (including the correlative terms "controlling", "controlled by" and "under common control with"), with respect to any Person, shall mean possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. The holding of Shares and the
rights under this Agreement or under the Certificates of Designation or the Shareholders Agreement, shall not in and of itself cause a Purchaser to be deemed to be an "Affiliate" of the Company. 

        "Benefit Plan" means, as of the Closing Date, any Plan, existing at the Closing Date or prior thereto, established or to which
contributions have at any time been made by the Company, or any predecessor of any of the foregoing, or under which any employee, former employee or director of the Company or any beneficiary thereof
is covered, is eligible for coverage or has benefit rights. 

        "Board" or "Board of Directors" means with respect to any Person which is a corporation, a
business trust or other entity, the board of directors or other group, however designated, which is charged with legal responsibility for the management of such Person, or any committee of such board
of directors or group, however designated, which is authorized to exercise the power of such board or group in respect of the matter in question. 

        "Capital Stock" means any class of capital stock of the Company authorized by its articles of incorporation, as amended. 

        "Capitalized Lease" means any lease to which the Company is party as lessee, or by which it is bound, under which it leases any property
(personal or mixed) from any lessor other than the Company, and which either is required to be capitalized in accordance with generally accepted accounting principles
consistently applied, or, even if not so required to be capitalized, shall have (or have had), at the time first entered into, an initial term of greater than three (3) years (including leases
of shorter duration which are or were extendible to a total term greater than three (3) years at the option of the lessor). 

        "Certificates of Designation" means the Certificate of Designation and Determination of Preferences of the Series E-1
Senior Preferred Stock, the Certificate of Designation and Determination of Preferences of the Series F Convertible Preferred Stock, the Certificate of Designation and Determination of
Preferences of the Series G Convertible Preferred Stock, the Certificate of Designation and Determination of Preferences of the Series E-D Convertible Preferred Stock, the
Certificate of Designation and Determination of Preferences of the Series E-B Convertible Preferred Stock, the Amended and Restated Certificate of Designation and Determination of
Preferences of the Series D Convertible Preferred Stock and the Amended and Restated Certificate of Designation and Determination of Preferences of the Series B Convertible Preferred
Stock. 

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        "Closing" has the meaning set forth in Section 2.1 hereof. 

        "Closing Date" has the meaning set forth in Section 2.1 hereof. 

        "Code" means the Internal Revenue Code of 1986, as amended. 

        "Commission" means the Securities and Exchange Commission and any other similar or successor agency of the federal government
administering the Securities Act or the Exchange Act. 

        "Common Stock" means the Company's Common Stock, par value $.001 per share, and shall also include any common stock of the Company
hereafter authorized and any Capital Stock of the Company of any other class hereafter authorized which is not preferred as to dividends or assets over any other class of Capital Stock of the Company
or which has ordinary voting power for the election of directors of the Company. 

        "Consolidated" or "consolidated", when used with reference to any financial term in this
Agreement, means the aggregate for the Company and any of its majority-owned subsidiaries of the amounts signified by such term for all such Persons, with intercompany items eliminated, and, with
respect to net worth, after eliminating the portion of net worth properly attributable to minority interests, if any, in the capital of any such Person (other than in the capital of the Company) and
otherwise as
determined in accordance with generally accepted accounting principles consistently applied (except as otherwise expressly provided herein). 

        "Convertible Securities" means any warrants, options or other rights to acquire shares of Capital Stock (whether upon exercise,
conversion, exchange or otherwise). 

        "Disclosure Material" has the meaning set forth in Section 4.6(a) hereof. 

        "Environmental Laws" means all federal, state, local, foreign, civil and criminal laws, statutes, ordinances, orders, codes, rules,
policies, and regulations and common law relating to the protection of the environment and human health or relating to the handling, use, generation, treatment, storage, transportation or disposal of
Hazardous Materials, including but not limited to the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq.; the Toxic
Substances Control Act, 15 U.S.C. § 2601 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42
U.S.C. § 9601 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et
seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
§ 1801 et seq.; The Occupational Safety and Health Act, 29 U.S.C. § 651; the Federal Insecticide, Fungicide and Rodenticide Act,
7 U.S.C. § 136y et seq.; and the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et
seq., all as may be amended or superseded from time to time, and all common law claims relating to the same. 

        "Environmental Lien" has the meaning set forth in Section 4.16(f) hereof. 

        "Environmental Permits" means all permits, licenses, approvals, authorizations or consents required by any Governmental Authority under
any applicable Environmental Law and includes any and all orders, consent orders or binding agreements issued or entered into by a Governmental Authority under any applicable Environmental Law. 

        "ERISA" means Employee Retirement Income Security Act of 1974, as amended. 

        "ERISA Affiliate" means each "person" (as defined in Section 3(9) of ERISA) which is under "common control" with the Company
(within the meaning of Section 414(b), (c), (m) or (o) of the Code). 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules, regulations and interpretations thereunder. 

3

 

        "Governmental Authority" means any federal, state, or local governmental agency or authority (including regulatory authority) having
jurisdiction over the Company or any of its respective assets or businesses. 

        "Hazardous Materials" means any petroleum, petroleum hydrocarbons, petroleum waste or petroleum products, underground storage tanks,
asbestos or asbestos-containing materials, pesticides, lead and lead-containing materials, urea formaldehyde insulation and polychlorinated biphenyls (PCBs), ionizing and
non-ionizing radiation including radon and electromagnetic frequency radiation; and any chemicals, materials, substances or wastes in any amount or concentration which are "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants" or words of similar import, under any
applicable Environmental Law. 

        "Indebtedness" means, with respect to any Person, without duplication, (a) all liabilities of such Person for borrowed money or for
the deferred purchase price of property or services, excluding, any (i) trade account payables arising in the ordinary course of business and (ii) other accrued current liabilities
incurred in the ordinary course of business, including, without limitation, all obligations, contingent or otherwise, of such Person in connection with any letters of credit, banker's acceptance or
other similar credit transaction; (b) all obligations of such Person evidenced by bonds, debentures or other similar instruments; (c) all indebtedness created or arising under any
conditional sale or other title retention agreement with respect to property acquired by such Person (even if the rights and remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property), but excluding trade accounts payable arising in the ordinary course of business; (d) all obligations of such Person under any
Capitalized Leases; (e) all Indebtedness referred to in the preceding clauses of other Persons and all dividends of other Persons, the payment of which is secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien upon property (including, without limitation, accounts and contract rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of such Indebtedness (the amount of such obligation being deemed to be the lesser of the value of such property or asset or the
amount of the obligation so secured); (f) all guarantees of Indebtedness referred to in this definition by such Person; and (g) all obligations under or in respect of currency agreements
(other than the provisions in the Miyota Co. Ltd. Agreement, dated December 10, 1998, as amended, related to currency exchange rates) and interest rate protection obligations of such
Person. 

        "Intellectual Property" has the meaning set forth in Section 4.12(a) hereof. 

        "Intellectual Property Licenses" has the meaning set forth in Section 4.12(a) hereof. 

        "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, or preference, priority or other security
interest of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same effect as any of
the foregoing, any assignment or other conveyance of any right to receive income and any assignment of receivables with recourse against the assignor), any filing of a financing statement as debtor
under the Uniform Commercial Code or any similar statute and any agreement to give or make any of the foregoing; provided that the term "Lien" shall not
include Permitted Liens. 

        "Patents and Applications" has the meaning set forth in Section 4.12(c) hereof. 

        "Pension Plan" means any "employee pension benefit plan" as defined in Section 3(2) of ERISA. 

        "Permitted Lien" means (i) any Lien for Taxes, governmental charges or levies not yet due or delinquent or being contested in good
faith by appropriate proceedings for which adequate 

4

 

reserves
have been established in accordance with generally accepted accounting principles, (ii) any imperfections of title, easements, rights of way or similar Liens, zoning laws or land use
restrictions as normally exist with respect to property similar in character to the property affected thereby and which individually or in the aggregate with other such Liens, zoning laws or land use
restrictions do not materially impair the value or marketability of the property subject to such Liens, zoning laws or land use restrictions or interfere with the use of such property in the conduct
of the business of the Company and which do not secure obligations for money borrowed, (iii) Liens imposed by any law, such as mechanic's, materialman's, landlord's, warehouseman's and
carrier's Liens, securing obligations incurred in the ordinary course of business which are not yet overdue or which are being diligently contested in good faith by appropriate proceedings and, with
respect to such obligations which are being contested, for which the Company has set aside adequate reserves, if appropriate, and (iv) any Lien resulting from purchase by the Company of goods
in the ordinary course of business as to which Liens are not filed of record. 

        "Person" or "person" means an individual, partnership, corporation, trust, unincorporated
organization, joint venture, government or agency, political subdivision thereof, or any other entity of any kind. 

        "Plan" means any bonus, incentive compensation, deferred compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence, layoff, vacation day or dependent care, legal services, cafeteria, life, health, accident, disability, workmen's
compensation or other insurance, severance, separation or other employee benefit plan, practice, policy or arrangement of any kind, whether written or oral, or whether for the benefit of
a single individual or more than one individual including, but not limited to, any "employee benefit plan" within the meaning of Section 3(3) of ERISA. 

        "Preferred Stock" means any class of the capital stock of the Company (whether or not convertible into any other class of such capital
stock) which has any right, whether absolute or contingent, to receive dividends or other distributions of the assets of the Company (including, without limitation, amounts payable in the event of the
voluntary or involuntary liquidation, dissolution or winding-up of such corporation), which right is superior to the rights of another class of the capital stock of the Company. "Preferred
Stock" includes, without limitation, the Series B Preferred Stock, the Series D Preferred Stock, the Series E-B Preferred Stock, the Series E-D
Preferred Stock, the Series E-1 Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock. 

        "Purchaser" and "Purchasers" each has the meaning set forth in the Preamble of this
Agreement. 

        "Securities Act" means the Securities Act of 1933, as amended, and the rules, regulations and interpretations thereunder. 

        "Series B Exchange Agreement" means the Agreement of Tender, Exchange and Transmittal of Series B Stock in the form attached
hereto as Exhibit A. 

        "Series B Preferred Stock" means the Company's Series B Convertible Preferred Stock, par value $.001 per share. 

        "Series D Exchange Agreement" means the Agreement of Tender, Exchange and Transmittal of Series D Stock in the form attached
hereto as Exhibit B. 

        "Series D Preferred Stock" means the Company's Series D Convertible Preferred Stock, par value $.001 per share. 

        "Series E Exchange Agreement" means the Agreement of Tender, Exchange and Transmittal of Series E-1 Stock in the
form attached hereto as Exhibit C. 

5

 

        "Series E-1 Preferred Stock" has the meaning set forth in the recitals hereto. 

        "Series E-B Preferred Stock" means the Company's Series E-B Convertible Preferred Stock, par value
$.001 per share. 

        "Series E-D Preferred Stock" means the Company's Series E-D Convertible Preferred Stock, par value
$.001 per share. 

        "Series F Preferred Stock" has the meaning set forth in the recitals hereto. 

        "Series G Preferred Stock" has the meaning set forth in the recitals hereto. 

        "Shares" has the meaning set forth in Section 1.1 hereof. In the event that any Shares are sold in a public offering pursuant to a
registration statement under Section 5 of the Securities Act, then the transferees of such Shares shall not be entitled to any benefits under this Agreement with respect to such Shares and such
Shares shall no longer be considered to be "Shares" for purposes of any consent or waiver provision of this Agreement. 

        "Stock Incentive Plans" means any stock plan or stock option plan authorized by the Company's Board of Directors prior to the date hereof
and/or as permitted by the terms and conditions of this Agreement. 

        "Subscription Agreement" means any Subscription Agreement and Letter of Investment Intent entered into by a Purchaser. 

        "Subsidiary", with respect to any Person, means any corporation, association or other entity of which more than 50% of the total voting
power of shares of stock or other equity interests (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is, at the time as of which
any determination is being made, owned or controlled, directly or indirectly, by such Person or one or more of its Subsidiaries, or both. The term
"Subsidiary" when used herein without reference to any particular Person, means a Subsidiary of the Company. 

        "Tax Returns" means any returns, reports or statements (including any information returns) required to be filed for purposes of a
particular Tax. 

        "Taxes" means all federal, state, local or foreign net or gross income, gross receipts, net proceeds, sales, use,  ad valorem, value added, franchise, bank shares,
withholding, payroll, employment, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or other governmental charges of any nature whatsoever, whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto. 

        "Taxing Authority" means any governmental agency, board, bureau, body, department or authority of any United States federal, state or
local jurisdiction, or any foreign jurisdiction, having or purporting to exercise jurisdiction with respect to any Tax. 

        "Transaction Documents" means this Agreement, the Series B Exchange Agreement, the Series D Exchange Agreement and the
Series E Exchange Agreement. 

        "Transferees" shall mean any transferee of the Shares from a Purchaser. Transferees shall not include a transferee of the Shares sold in a
public offering pursuant to a registration statement under the Securities Act. 

6

 

        3.2   For
all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: 

        (a)   the
words "herein", "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision; 

        (b)   all
accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles consistently applied
(except as otherwise provided herein); 

        (c)   any
uses of the masculine, feminine or neuter gender shall also be deemed to include any other gender, as appropriate; 

        (d)   all
references herein to actions by the Company, such as "create", "sell", "transfer", "dispose of", etc., mean such action whether voluntary or involuntary, by
operation of law or otherwise; and 

        (e)   the
exhibits and schedules to this Agreement shall be deemed a part of this Agreement. 

SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY  

        The Company represents and warrants to the Purchasers as follows as of the date hereof, except as set forth in the schedules attached hereto: 

        4.1    Corporate Existence, Power and Authority.    

        (a)   The
Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation. The Company is duly qualified,
licensed and authorized to do business and is in good standing in each jurisdiction in which it owns or leases any property or in which the conduct of its business requires it to so qualify or be so
licensed, except for such jurisdictions where the failure to so qualify or be so licensed would not have a material adverse effect on the Company's assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects. 

        (b)   No
proceeding has been commenced looking toward the dissolution or merger of the Company or the amendment of its articles of incorporation. 

        (c)   The
Company has all requisite power, authority (corporate and other) and legal right to own or to hold under lease and to operate the properties it owns or holds and to
conduct its business as now being conducted. 

        (d)   The
Company has all requisite power, authority (corporate and other) and legal right to execute, deliver, enter into, and consummate the transactions contemplated by and
perform its obligations under each of the Transaction Documents, including, without limitation, the issuance by the Company of the Shares as contemplated herein. The Company has duly executed and
delivered each of the Transaction Documents. Each of the Transaction Documents constitutes the legal, valid and binding obligations of the Company enforceable in accordance with their respective
terms, subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to the rights of creditors generally or under general principles of equity. 

        4.2    Capital Stock.    

        (a)   Schedule 4.2(a) hereto correctly and completely lists (i) the authorized Capital Stock of the Company
(Common Stock and Preferred Stock), (ii) the number of designated shares of Preferred Stock in each series or class after giving effect to the Certificates of Designation and
(iii) before giving effect to the issuance of Shares on the Closing Date, as contemplated by this Agreement, the number of shares outstanding in each series or class. All of such outstanding 

7

 

shares
are, and on the Closing Date the Shares will be, duly authorized, validly issued and outstanding, fully paid and non-assessable. Except as provided in the Certificates of
Designation or in Schedule 4.2(a), none of the shares of the Company's Capital Stock which will be outstanding at the Closing (x) were or
will be subject to preemptive rights when issued or (y) provide the holders thereof with any preemptive rights with respect to any issuances of Capital Stock. 

        (b)   Except
as referred to in Schedule 4.2(b), there are no outstanding options, warrants, subscriptions, rights,
convertible securities or other agreements or plans under which the Company may become obligated to issue, sell or transfer shares of its Capital Stock or other securities. 

        (c)   Except
as set forth in Schedule 4.2(c), there are no voting agreements, voting trusts, proxies or other agreements
or understandings with respect to the voting of any Capital Stock of the Company of which the Company is a party, except as provided herein and in the Certificates of Designation. 

        (d)   Except
as set forth in Schedule 4.2(d) and except for anti-dilution protections in the Certificates of
Designation and other agreements the Company is a party to providing for adjustments for stock splits, dividends, combinations, reclassifications and the like, there are no anti-dilution
protections or other adjustment provisions in existence with respect to any Capital Stock of the Company. 

        (e)   Each
Certificate of Designation has been duly adopted by the Company and is fully effective as an amendment to the Company's articles of incorporation. The Shares will
have all of the rights, priorities and terms set forth in the applicable Certificate of Designation. 

        (f)    To
the knowledge of the Company, Schedule 4.2(f) hereto correctly and completely lists the names of those persons
who beneficially own, directly or indirectly, more than 5% (calculated in accordance with Rule 13d-3 under the Exchange Act) of the Company's outstanding Capital Stock. 

        4.3    Subsidiaries.    The Company has two wholly-owned Subsidiaries, Displaytech International, Inc., a
Colorado corporation, and Displaytech Asia-Pacific K.K., a Japanese corporation. 

        4.4    Business.    The Company is engaged in the business of designing, developing, manufacturing and marketing
Ferroelectric Liquid Crystal microdisplays used to provide superior image quality in electronic devices such as digital still camera and camcorder viewfinders. 

        4.5    No Defaults or Conflicts.    

        (a)   Except
as provided in Schedule 4.5(a), the Company is not in violation or default in any material respect (and is
not in default in any respect regarding any Indebtedness) under any indenture, agreement or instrument to which it is a party or by which it or its properties may be bound. The Company is not in
default in any material respect under any material order, writ, injunction, judgment or decree of any court or other governmental authority or arbitrator(s). 

        (b)   The
execution, delivery and performance by the Company of each of the Transaction Documents and any of the transactions contemplated thereby (including, without
limitation, the issuance of the Shares as contemplated herein) do not and will not (i) violate or conflict with, with or without the giving of notice or the passage of time or both, any
provision of (A) the articles of incorporation or bylaws of the Company, (B) any law, rule, regulation or order of any federal, state, county, municipal or other Governmental Authority,
(C) any judgment, writ, injunction, decree, award or other action of any court or Governmental Authority or arbitrator(s), or (D) any agreement, indenture or other instrument applicable
to the Company or any of its respective properties, (ii) result in the creation of any Lien upon any of the Company's properties, assets or revenues, except as provided in the Certificates of
Designation, (iii) require the consent, waiver, approval, order or authorization of, or declaration, registration, qualification or filing with, any 

8

 

Person
(whether or not a Governmental Authority and including, without limitation, any shareholder approval) (other than any necessary approvals which have been obtained prior to the Closing Date), or
(iv) cause antidilution clauses of any outstanding securities to become operative or give rise to any preemptive rights (except as contemplated by Section 4.2(d)). No provision of any
item referred to in the preceding clause (i) materially adversely affects the assets, properties, liabilities, business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company to perform its obligations under this Agreement, the Certificates of Designation, or any of the transactions contemplated
hereby or thereby. 

        4.6    Disclosure Materials; Other Information.    

        (a)   The
Company has previously furnished to the Purchasers or their counsel the materials described on Schedule 4.6(a)
hereto (the "Disclosure Material"). The audited and unaudited financial statements referred to or contained in the materials referred to on  Schedule 4.6(a) fairly present the consolidated financial condition of the Company as of the respective dates thereof in all material respects
and the
consolidated results of the operations of the Company for such periods and have been prepared in accordance with generally accepted accounting principles consistently applied, except that any such
unaudited statements may omit notes and may be subject to normal recurring adjustments and year-end adjustments. 

        (b)   Since
December 31, 2003, (i) the business of the Company has been conducted in the ordinary course and (ii) there has been no material adverse
change in the assets, properties, liabilities, business, affairs, results of operations, condition (financial or otherwise) or prospects of the Company on a consolidated basis. As of the Closing Date
and as of the date hereof, there are no material liabilities of the Company which would be required to be provided for in a consolidated balance sheet of the Company as of any such date prepared in
accordance with generally accepted accounting principles consistently applied, other than liabilities provided for in the financial statements referred to in Section 4.6(a). 

        (c)   There
are no material liabilities, contingent or otherwise, of the Company that have not been disclosed in the financial statements referred to in Section 4.6(a)
or otherwise disclosed in the schedules hereto. 

        4.7    Litigation.    Except as set forth on Schedule 4.7,
there is no action, suit, proceeding, investigation or claim pending or, to the knowledge of the Company, threatened in law, equity or otherwise before any court, administrative agency or arbitrator
which (i) questions the validity of this Agreement, the Certificates of Designation or the Shares or any action taken or to be taken pursuant hereto or thereto, (ii) might adversely
affect the right, title or interest of any Purchaser to the Shares or (iii) might result in a material adverse change in the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a consolidated basis. 

        4.8    Taxes.    The Company has duly and timely filed all material Tax Returns required to be filed by it, and each
such Tax Return correctly and completely reflects, in all material respects, the Tax liability and all other information required to be reported thereon. The Company has paid or caused to be paid all
material Taxes (whether or not reflected on such Tax Returns) that are due and payable. The provision for Taxes due by the Company in the most recent financial statement included in the Disclosure
Material is sufficient for all material unpaid Taxes, being current Taxes not yet due and payable, of the Company, as of the end of the period covered by such financial statement, and as of the
Closing Date, such provision, as adjusted for the passage of time through the Closing Date, will be sufficient for the then-accrued and unpaid Taxes not yet due and payable of the Company.
No Tax Returns of the Company have ever been audited by any Taxing Authority, there is no dispute concerning any Tax liability of the Company either threatened, claimed or raised by any Taxing 

9

   
Authority, and the Company does not expect any Taxing Authority to assess additional Taxes against or in respect of it for any past period. The Company has withheld and paid, or, if not yet due for
payment, set aside in accounts for such purposes, all Taxes required to have been withheld in connection with amounts paid or owing to any employee, creditor, independent contractor or other third
party. Other than stamp taxes, the Company has no liability for Taxes of any Person other than the Company (i) as a transferee or successor, (ii) by contract, or (iii) otherwise. 

        4.9    ERISA.    

        (a)   All
Benefit Plans are listed in Schedule 4.9(a), and copies of all documentation relating to such Benefit Plans
have been delivered to or made available for review by the Purchasers (including copies of written Benefit Plans, written descriptions of oral Benefit Plans, summary plan descriptions, trust
agreements, the three most recent annual returns, employee communications, and IRS determination letters). 

        (b)   Each
Benefit Plan has at all times been maintained and administered in all material respects in accordance with its terms and with the requirements of all applicable
law, including ERISA and the Code, and each Benefit Plan intended to qualify under Section 401(a) of the Code has at all times since its adoption been so qualified, and each trust which forms a
part of any such plan has at all times since its adoption been tax-exempt under Section 501(a) of the Code. 

        (c)   No
Benefit Plan has incurred any "accumulated funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of the Code, and the "amount of
unfunded benefit liabilities" within the meaning of Section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit Plan subject to Title IV of ERISA. 

        (d)   No
"reportable event" (within the meaning of Section 4043 of ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by an ERISA Affiliate
since the effective date of said Section 4043 for which notice is not waived under the regulations issued pursuant to said Section 4043. 

        (e)   No
Benefit Plan is a multiemployer plan within the meaning of Section 3(37) of ERISA. 

        (f)    No
direct, contingent or secondary liability has been incurred or is expected to be incurred by the Company under Title IV of ERISA to any party with respect to any
Benefit Plan, or with respect to any other Plan presently or heretofore maintained or contributed to by any ERISA Affiliate. 

        (g)   Neither
the Company nor any ERISA Affiliate has incurred any liability for any tax imposed under Section 4971 through 4980B of the Code or civil liability under
Section 502(i) or (l) of ERISA. 

        (h)   No
benefit under any Benefit Plan, including, without limitation, any severance or parachute payment plan or agreement, will be established or become accelerated, vested
or payable by reason of any transaction contemplated under this Agreement. 

        (i)    No
Benefit Plan provides health or death benefit coverage beyond the termination of an employee's employment, except as required by Part 6 of Subtitle B of Title
I of ERISA or Section 4980B of the Code or any State laws requiring continuation of benefits coverage following termination of employment. 

        (j)    No
suit, action or other litigation (excluding claims for benefits incurred in the ordinary course of plan activities and any other claim which could not reasonably be
expected to result in a material liability or expense to the Company) has been brought or, to the knowledge of the Company, threatened against or with respect to any Benefit Plan and there are no
facts or circumstances known to the Company that could reasonably be expected to give rise to any such suit, action or other litigation. 

10

 

        (k)   All
contributions to Benefit Plans that were required to be made under such Benefit Plans have been made, and all benefits accrued under any unfunded Benefit Plan have
been paid, accrued or otherwise adequately reserved in accordance with generally accepted accounting principles, all of which accruals under unfunded Benefit Plans are as disclosed in  Schedule 4.9(k), and the Company has performed all material obligations required to be performed under all Benefit Plans. 

        (l)    The
execution, delivery and performance of this Agreement and the other Transaction Documents and the consummation of the transactions contemplated hereby and thereby
(including, without limitation, the offer, issue and sale by the Company, and the purchase by any Purchaser of the Shares) will not involve any "prohibited transaction" within the meaning of ERISA or
the Code with respect to any Benefit Plan. 

        4.10    Legal Compliance.    

        (a)   The
Company has complied with all applicable laws, rules, regulations, orders, licenses, judgments, writs, injunctions, decrees or demands, except to the extent that
failure to so comply would not materially adversely affect the assets, properties, liabilities, business affairs, results of operations or financial condition of the Company on a consolidated basis. 

        (b)   There
are no adverse orders, judgments, writs, injunctions, decrees, or demands of any court or administrative body, domestic or foreign, or of any governmental agency
or instrumentality, domestic or foreign, outstanding against the Company. 

        4.11    Offering of Securities.    Subject in part to the truth and accuracy of each Purchaser's representations set
forth in Section 5 of this Agreement and each of their applicable Subscription Agreements, the offer, sale and issuance of the Shares, as contemplated by this Agreement are, and will be as of
the Closing, exempt from the registration requirements of the Securities Act and neither the Company nor any authorized agent acting on its behalf will take any action hereafter that would cause the
loss of such exemption. 

        4.12    Intellectual Property and Other Rights.    

        (a)   (i)    Except
as set forth on Schedule 4.12(a), the Company owns, or has the right to use, all United
States and foreign patents, trademarks, service marks, trade names, computer software and programs, technology, know-how and processes, and registered copyrights, and any applications for
any of the foregoing of any kind which is used in its business (collectively, the "Intellectual Property").  Schedule 4.12(a) hereto contains a true,
correct and complete list of all registered trademarks and service marks, all reserved trade names, all
registered copyrights and all filed patent applications and issued patents that are material to the Company's business or are otherwise necessary for the conduct of its business as heretofore
conducted and as currently proposed to be conducted and all licenses, permits, consents, approvals or agreements that in any way affect the rights of the Company to any of its Intellectual Property or
any trade secret material (the "Intellectual Property Licenses"). 

         (ii)  Subject
to the limitations set forth in the Intellectual Property Licenses, except as otherwise set forth in any exceptions listed under  Schedule 4.12(a), the Company has all right, title and interest in
all of the Intellectual Property, free and clear of all Liens. The Company
owns or has the exclusive or non-exclusive right to use all Intellectual Property or trade secrets necessary to conduct its business as now being conducted. The Company owns or possesses
sufficient licenses, permits, consents, approvals or other rights to use all Intellectual Property covered by its patents or patent applications necessary to conduct its business as now being
conducted and as currently proposed to be conducted. 

        (iii)  The
Company has at all times maintained reasonable procedures to protect and has enforced all of its Intellectual Property and trade secrets. 

11

 

        (iv)  The
consummation of the transactions contemplated under this Agreement will not alter, adversely affect or impair the rights of the Company to any of the Intellectual
Property, any trade secret material to it, or under any of the Intellectual Property Licenses. 

        (b)   (i)    No
claim with respect to the Intellectual Property, any trade secret material to the Company, or any Intellectual Property License which would adversely
affect the ability of the Company to conduct its business as presently conducted is currently pending or, to the knowledge of the Company, has been asserted, or overtly threatened by any Person, nor
does the Company know of any grounds for any claim against the Company, (A) to the effect that any material operation or activity of the Company presently occurring, including,  inter alia, the
manufacture, use or sale of any product, device, instrument, or other material made or used according to the patents or patent
applications included in the Intellectual Property or Intellectual Property Licenses, infringes or misappropriates any valid United States or foreign copyright, patent, trademark, service mark or
trade secret; (B) to the effect that any other Person infringes on the Intellectual Property or misappropriates any trade secret or know-how or other proprietary rights material to
the Company; (C) challenging the ownership, validity or effectiveness of any of the Intellectual Property or trade secret material of the Company; or (D) challenging the license of the
Company or other legally enforceable right under, any Intellectual Property or the Intellectual Property Licenses. 

         (ii)  The
Company is not aware of any presently existing valid United States or foreign patents or any patent applications which if issued as patents would be infringed by
any activity contemplated by the Company. 

        (c)   The
United States and foreign patents and patent applications owned by the Company listed in Schedule 4.12(a)
hereto (the "Patents and Applications") as part of the Intellectual Property have been filed on behalf of the Company as named therein, are being
diligently pursued by the Company and, to the Company's knowledge, have been properly prepared. To the Company's knowledge, there are no defects in any of the Patents and Applications that would cause
any of them to be held invalid or unenforceable. 

        4.13    Key Employees.    The Company has good relationships with its employees and has not had and does not expect
any substantial labor problems. The Company has no knowledge as to any intentions of any key employee or any group of employees to leave the employ of the Company. The employees of the Company are not
and have never been represented by any labor union, and no collective bargaining agreement is binding and in force against the Company or currently being negotiated by the Company. 

        4.14    Properties.    The Company does not and has never owned any real property. Other than the Permitted Liens, the
Company has good and marketable title to each of its other properties other than leased properties, all of which are disclosed on Schedule 4.14
hereto. Certain real property used by the Company in the conduct of its business is held under lease (as identified on Schedule 4.14 hereto), and
the Company is not aware of any pending or threatened claim or action by any lessor of any such property to terminate any such lease. All such leases are valid and in full force and effect, and none
of such leases is in default. None of the properties owned or leased by the Company is subject to any Liens which could materially and adversely affect the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects of the Company on a consolidated basis. 

        4.15    Suppliers and Customers.    

        (a)   The
Company has adequate sources of supply for its business as currently conducted and as proposed to be conducted. The Company has good relationships with all of its
material sources of supply of goods and services and does not anticipate any material problem with any such material sources of supply. 

12

 

        (b)   Except
as set forth on Schedule 4.15(b), the Company has no knowledge that the customer base of the Company might
materially decrease. 

        4.16    Environmental Compliance.    

        (a)   Except
as set forth on Schedule 4.16(a), there is no Hazardous Material on, about, under or in, any property, real
or personal, in which the Company has or has formerly had any interest in an amount or concentration which could constitute a violation that would result in a liability in excess of $75,000 or
otherwise result in a liability in excess of $75,000 to the Company under any applicable Environmental Law. 

        (b)   There
is no (and has not been any) off-site use, handling, storage or disposal or, except as set forth on  Schedule 4.16(b), on-site use, handling, storage or disposal of Hazardous Material at or from any
locations currently or formerly
owned, leased, operated or occupied by the Company as a result of which use, handling, storage or disposal the Company could incur a material liability or obligation under any applicable Environmental
Law. 

        (c)   Except
as set forth on Schedule 4.16(a), the Company has not received any verbal or written notice, citation,
subpoena, summons, complaint or other correspondence or communication from any person with respect to the presence of any non-indigenous Hazardous Material upon, into, beneath, or
emanating from or affecting any of the real property (including improvements) currently or formerly owned or occupied by the Company that could result in a liability to the Company in excess of
$75,000 under any applicable Environmental Law. 

        (d)   Except
as set forth on Schedule 4.16(a), there has been no intentional or unintentional, gradual or sudden,
release, disposal or discharge by the Company or, to the Company's knowledge, by others, upon, into or beneath the real property (including improvements) currently or formerly owned or occupied by the
Company that has caused or is causing soil or groundwater contamination which, under applicable Environmental Laws could require investigation or remediation or could otherwise create a material
liability or obligation on the part of the Company under any applicable Environmental Law. 

        (e)   The
Company is in material compliance with all applicable Environmental Laws, has received all required Environmental Permits and is in material compliance with the
terms and conditions of all Environmental Permits. 

        (f)    To
the best knowledge of the Company, after reasonable inquiry, there are no Liens arising under or pursuant to any Environmental Law
("Environmental Liens") relating to any real property (including improvements thereon) currently owned by the Company. 

        (g)   There
are no (i) underground storage tanks, (ii) polychlorinated biphenyl containing equipment or (iii) asbestos-containing materials at any site
currently owned, operated or leased by the Company, except in compliance with all applicable Environmental Laws. 

        4.17    No Burdensome Agreements.    To the knowledge of the Company, the Company is not a party to any contract or
agreement with any Affiliate of the Company, the terms of which are less favorable to the Company than those which might have been obtained, at the time such contract or agreement was entered into,
from a person who was not such an Affiliate. 

        4.18    Indebtedness.    Schedule 4.18 hereto sets forth
(i) the amount of all Indebtedness of the Company outstanding as of January 31, 2003 (and there is no additional material amount of Indebtedness of the Company outstanding other than as
set forth on such Schedule 4.18), (ii) any Lien with respect to such Indebtedness and (iii) a description of each instrument or
agreement governing such Indebtedness. The Company has made available to the Purchasers a complete and correct copy of each such instrument or agreement (including all amendments, supplements or
modifications thereto). Except as otherwise set forth in Schedule 4.5(a), no material default exists with respect to or under any 

13

 

such
Indebtedness or any instrument or agreement relating thereto and no event or circumstance exists with respect thereto that (with notice or the lapse of time or both) could give rise to such a
default. 

        4.19    Use of Proceeds.    The Company will use the net proceeds realized from the sale of the Shares to fund future
development opportunities, for working capital purposes and for such other purposes as necessary or advisable in the sole judgment of the Company's Board of Directors. 

        4.20    Brokers.    No broker, finder or investment banker or other party is entitled to any brokerage, finder's or
other similar fee or commission in connection with the Transaction Documents. Any such fees and commissions shall be the sole responsibility of the Company and in no circumstance shall the Purchasers
have any liability therefor. 

        4.21    Insurance.    

        (a)   Schedule 4.21(a) contains a list and description of all insurance policies maintained by or on behalf of the
Company on its assets, operations, properties and personnel. Such insurance is of the kind, covering such risks and in such amounts and with such deductibles and exclusions, as are consistent with
those maintained by businesses similarly situated to the Company and are, in the opinion of the Company, reasonable for the business, assets and properties of the Company. All such policies are in
full force and effect. 

        (b)   The
Company has not received any notice of cancellation or termination with respect to any material insurance policy thereof and there are no pending disputes or
controversies between the Company, on the one hand, and the carrier of any such insurance policy, on the other. 

SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS  

        The
Purchasers represent and warrant, severally and not jointly, to the Company as follows: 

        5.1    Corporate Power and Authority.    Each Purchaser has all requisite power, authority and legal right to execute,
deliver, enter into, and consummate the transactions contemplated by and perform its obligations under each of the Transaction Documents and the applicable Subscription Agreement. The execution,
delivery and performance of each of the Transaction Documents and its applicable Subscription Agreement by each Purchaser has been duly authorized by all required corporate and other actions. Each
Purchaser has duly executed and delivered each of the Transaction Documents and its Subscription Agreement, and each of the Transaction Documents and the applicable Subscription Agreement constitutes
the legal, valid and binding obligations of each Purchaser enforceable against each Purchaser in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to the rights of creditors generally or under general principles of equity. 

        5.2    Investment Intent.    Each Purchaser is capable of evaluating the risk of its investment in the Shares being
purchased by it hereunder and is able to bear the economic risk of such investment. Each Purchaser is purchasing the Shares to be purchased by it for its own account for investment and not with a
present view to any distribution thereof in violation of applicable securities laws; provided, however,
that each Purchaser may transfer record and/or beneficial ownership of the Shares to one or more Affiliates, officers or employees of Affiliates or investment funds managed by Affiliates of such
Purchaser, in all cases in compliance with federal securities laws. It is understood that the disposition of each Purchaser's property shall at all times be within such Purchaser's control. If the
Purchasers should in the future decide to dispose of any of their Shares, it is understood that each Purchaser may do so only in compliance with the Securities Act, applicable state and federal
securities laws, this Agreement and the other agreements and documents contemplated herein, or pursuant to an applicable exemption therefrom. Each Purchaser is an "accredited investor" as defined in
Rule 501(a) under the Securities Act. 

14

 

        5.3    Brokers.    No broker, finder, or investment banker or other party is entitled to any brokerage, finder's or
other similar fee or commission in connection with the Transaction Documents, based upon arrangements made by or on behalf of each Purchaser or any of its Affiliates. 

SECTION 6. PURCHASER COVENANTS  

        6.1    Restrictions on Transfer.    Each Purchaser agrees that it shall not sell or otherwise dispose of any Shares
unless such Shares have been registered under the Securities Act and, to the extent required, under any applicable state securities laws, or pursuant to an applicable exemption from such registration
requirements. The Company may endorse on all certificates representing Shares a legend stating or referring to such transfer restrictions and those as set forth in Section 6.2;  provided, that no
such legend shall be endorsed on any Share certificates that, when issued, are no longer subject to the restrictions of this
Section 6. Each Purchaser shall provide the Company with an opinion of its counsel stating that the transfer of such Shares is in compliance with all federal securities laws or an applicable
exemption therefrom. The Company shall not unreasonably delay the transfer of such Shares. 

        6.2    "Market Stand-Off" Agreement.    Each Purchaser hereby agrees that it will not, without the prior
written consent of the managing underwriter, during the period commencing on the date of the final prospectus relating to the Company's initial public offering ("IPO") and ending on the date specified
by the Company and the managing underwriter (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock
(whether such shares or any such securities are then owned by the Purchaser or are thereafter acquired) held immediately prior to the effectiveness of the registration statement for such offering, or
(ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing provisions of this Section 6.2 shall
not apply to the sale of any shares to an underwriter pursuant to an underwriting agreement, and shall only be applicable to the Purchasers if all officers, directors and greater than 5% shareholders
of the Company enter into similar agreements. The underwriters in connection with the Company's IPO are intended third-party beneficiaries of this Section 6.2 and shall have the right, power
and authority to enforce the provisions hereof as though they were a party hereto. Each Purchaser further agrees to execute such agreements as may be reasonably requested by the underwriters in the
Company's IPO that are consistent with this Section 6.2 or that are necessary to give further effect thereto. 

        In
order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the shares of Capital Stock held by each Purchaser (and the
shares or securities of every other person subject to the foregoing restriction) until the end of such period. 

SECTION 7. CONDITIONS TO PURCHASER'S OBLIGATIONS  

        The
obligations of each Purchaser to the Company under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise
waived: 

        7.1    Representations and Warranties.    The representations and warranties of the Company contained in
Section 2 shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and warranties had been made on and as of the date of
the Closing. 

15

 

        7.2    Performance.    The Company shall have performed and complied with all covenants, agreements, obligations and
conditions contained in this Agreement that are required to be performed or complied with by it on or before the Closing. 

        7.3    Transaction Documents.    The Company and each Purchaser (other than the Purchaser relying upon this condition
to excuse such Purchaser's performance hereunder) shall have executed and delivered each of the Transaction Documents. 

        7.4    Compliance Certificate.    An officer of the Company shall deliver to the Purchasers at the Closing a
certificate certifying that the conditions specified in Sections 7.1 and 7.2 have been fulfilled. 

SECTION 8. CONDITIONS TO COMPANY'S OBLIGATIONS  

        The
obligations of the Company to each Purchaser under this Agreement are subject to the fulfillment, on or before the Closing, of each of the following conditions, unless otherwise
waived: 

        8.1    Representations and Warranties.    The representations and warranties of each Purchaser contained in
Section 5 and under each applicable Subscription Agreement shall be true and correct in all material respects on and as of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing. 

        8.2    Performance.    All covenants, agreements and conditions contained in this Agreement to be performed by the
Purchasers on or prior to the Closing shall have been performed or complied with in all material respects. 

        8.3    Transaction Documents.    Each Purchaser shall have executed and delivered each of the Transaction Documents to
the Company. 

        8.4    Qualifications.    All authorizations, approvals or permits, if any, of any governmental authority or
regulatory body of the United States or of any state that are required in connection with the lawful issuance and sale of the Stock pursuant to this Agreement shall be obtained and effective as of the
Closing. 

SECTION 9. MISCELLANEOUS  

        9.1    Survival.    Unless otherwise set forth in this Agreement, the warranties, representations and covenants of the
Company and the Purchasers contained in or made pursuant to this Agreement shall survive the execution and delivery of this Agreement. 

        9.2    Transfer; Successors and Assigns.    The terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. 

        9.3    Governing Law.    This Agreement and all acts and transactions pursuant hereto and the rights and obligations
of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Colorado, without giving effect to principles of conflicts of law. 

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

        9.5    Notices.    All notices, requests, demands, consents and other communications hereunder shall be in writing and
shall be delivered by hand or shall be sent by facsimile (confirmed by registered, certified or overnight mail or courier, postage and delivery charges prepaid), (i) if to the Company, to
Displaytech, Inc., 2602 Clover Basin Drive, Longmont, CO 80503-7603, Attention: Richard D. Barton, 

16

 

Facsimile:
(303) 772-2193, or (ii) if to the Purchasers, at the address indicated on Schedule 1 hereto, or at such
other address as a party may from time to time designate as its address in writing to the other party to this Agreement. Whenever any notice is required to be given hereunder, such notice shall be
deemed given and such requirement satisfied only when such notice is delivered or, if sent by telex or telecopier, when received. 

        9.6    Fees and Expenses.    Each of the parties shall pay all of its own fees and expenses incurred in connection
with the negotiation, execution, delivery and performance of this Agreement. 

        9.7    Attorney's Fees.    If any action at law or in equity (including arbitration) is necessary to enforce or
interpret the terms of any of the Transaction Documents, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to
which such party may be entitled. 

        9.8    Amendments and Waivers.    Any term of this Agreement may be amended or waived only with the written consent of
the Company and the holders of at least a majority of the Common Stock issued or issuable upon conversion of the shares of Series F Preferred Stock and the shares of Series G Preferred
Stock. Any amendment or waiver effected in accordance with this Section 9.8 shall be binding upon the Purchasers and each transferee of the Shares (or the Common Stock issuable upon conversion
thereof), each future holder of all such securities, and the Company. 

        9.9    Severability.    If one or more provisions of this Agreement are held to be unenforceable under applicable law,
the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of the Agreement shall be
enforceable in accordance with its terms. 

        9.10    Delays or Omissions.    No delay or omission to exercise any right, power or remedy accruing to any party
under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting
party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any
party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the
extent specifically set forth in such writing. All remedies, either under this Agreement or by law or in equity or otherwise afforded to any party, shall be cumulative and not alternative. 

        9.11    Entire Agreement.    This Agreement, together with the other Transaction Documents, constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements relating to the subject matter hereof existing between the parties hereto
are expressly canceled. 

        9.12    Exculpation Among Purchasers.    Each Purchaser acknowledges that it is not relying upon any person, firm or
corporation, other than the Company and its officers and directors, in making its investment or decision to invest in the Company. Each Purchaser agrees that no Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any Purchaser shall be liable to any other Purchaser for any action heretofore or hereafter taken or omitted to be taken by
any of them in connection with the purchase of the Shares. 

        [The remainder of this page is intentionally left blank.]

17

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. 

	 	 	COMPANY:
	

 	
 	
DISPLAYTECH, INC.
	

 	
 	

By:	
 	

/s/  RICHARD D. BARTON      

	 	 	 	 	Name:	 	Richard D. Barton
	 	 	 	 	Title:	 	Chief Executive Officer
	

 	
 	
PURCHASERS:
	

 	
 	
ANALYSIS GROUP FUND I, L.P.
	

 	
 	

By:	
 	

/s/  NORMAN W. GORIN      

	 	 	 	 	Name:	 	Norman W. Gorin
	 	 	 	 	Title:	 	Chief Financial Officer
	

 	
 	

/s/  MARK A. HANDSCHY      
MARK A. HANDSCHY, individually
	

 	
 	

/s/  MICHAEL J. O'CALLAGHAN      
MICHAEL J. O'CALLAGHAN, individually

SCHEDULE 1  

	Name and Address of Purchase
 
	 	Shares of

Series E-1

Preferred

stock at $100

per share
	 	Shares of

Series G

Preferred

Stock at $100

per Share
	 	Aggregate

Purchase

Price

	Analysis Group Fund I, L.P.

111 Huntington Ave., 10th FL

Boston, MA 02199	 	176	 	44	 	$	22,000
	Mark A. Handschy

3230 11th Street

Boulder, CO 80304	 	52	 	13	 	$	6,500
	Michael J. O'Callaghan

964 W. Maple Court

Louisville, CO 80027	 	52	 	13	 	$	6,500

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STOCK PURCHASE AGREEMENT

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