FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
LIGHTPATH TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 3674 86-0708398
(State or other jurisdiction of (Primary Standard Industrial (I. R. S. Employer
incorporation or organization) Classification Code Number) Identification No.)
|
6820 Academy Parkway East, N.E., Albuquerque, New Mexico 87109
(505) 342-1100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Donald Lawson
Chief Executive Officer
Lightpath Technologies, Inc.
6820 Academy Parkway East, N.E.
Albuquerque, New Mexico 87109
(505) 342-1100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Joseph Crabb, Esq.
Squire, Sanders & Dempsey L.L.P
40 North Central Avenue
Phoenix, Az 85004
Telephone: (602) 528-4000
Facsimile: (602) 253-8129
APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box [ ]
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering pursuant to Rule 462 (b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________
If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] __________
CALCULATION OF REGISTRATION FEE
===================================================================================================
PROPOSED MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE AGGREGATE PRICE PROPOSED AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT * OFFERING PRICE REGISTRATION FEE
---------------------------------------------------------------------------------------------------
Class A Common stock,
$.01 par value 2,279,847** $20.875 $47,591,806 $12,564.24
===================================================================================================
|
* Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act of 1933, as amended, pursuant to Rules 457 (c) and 457 (h) under the Securities Act, on the basis of the average of the high and low prices for shares of Common Stock as reported by the Nasdaq SmallCap Market on January 5, 2000.
** Represents estimated number of shares issuable upon conversion of outstanding Preferred Stock, as payment of interest on the Preferred Stock, and upon exercise of Class K and Class L Warrants.
In accordance with Rules 416 and 457 under the Securities Act of 1933, the shares of common stock registered hereby shall also be deemed to cover an indeterminate number of additional shares of common stock to be issued as a result of the conversion of the Preferred Stock or as a result of the exercise of the warrants referred to in this footnote to prevent dilution resulting from stock splits, stock dividends or similar transactions.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING SHAREHOLDER MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 10, 2000
PROSPECTUS
LIGHTPATH TECHNOLOGIES, INC.
2,279,847 SHARES
OF CLASS A COMMON STOCK
THE ISSUER
We manufacture, market and distribute optoelectronic, fiber telecommunication and traditional optics products that incorporate our proprietary GRADIUM glass and other fiber optic packaging technologies. Our current product line consists of glass lenses, single mode fiber collimators and fiberoptic optomechanical switches. To date, we have made sales primarily to laser manufacturers and third parties for their evaluation of our products as components of their own product offerings. We have not yet made substantial sales of telecommunication products for broad commercial use.
We can be located at:
LightPath Technologies, Inc.
6820 Academy Parkway, N.E.
Albuquerque, New Mexico 87109
Telephone: (503) 342-1100
THE OFFERING
All of the shares of common stock being offered in this prospectus will be issued by LightPath Technologies to the shareholders who are offering them for sale. The total shares covered by this prospectus will be issued to the selling shareholders upon conversion of Series F Preferred Stock and upon exercise of their outstanding warrants. The selling shareholders can use this prospectus to sell all or part of the shares they receive through the exercise of their Series F Preferred Stock and warrants. In addition, this prospectus relates to 73,597 shares outstanding from prior sales of common stock and 281,250 shares will be issued to the Chairman of the Board upon exercise of the Warrant.
MARKET FOR COMMON STOCK
Our common stock is traded in the over-the counter market through the Nasdaq
SmallCap Market system.
Closing Price
Symbol on January 5, 2000
------ ------------------
LPTHA $20.875
|
PROCEEDS FROM THIS OFFERING
The shares offered here will be sold at prices agreed to by the selling shareholders, which may be the then prevailing market price or a negotiated price. All of the proceeds from sales of the shares will be received by the shareholders making the sale, minus any commissions or expenses they incur. We will receive up to $4,760,500 from the exercise, if any, of warrants by the selling shareholders. We will bear all of the costs and expenses of registering the shares under the federal and state securities laws. These total costs and expenses are estimated to be $34,564.
THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING AT PAGE 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this prospectus is January 10, 2000.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports and other information with the U.S. Securities and Exchange Commission. You may read and copy any document that we have filed at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, DC, 20549. Please call the SEC at 1-800-SEC-0330 for further information about the operation of its public reference facilities. Our SEC filings are also available to you free of charge at the SEC's web site at http://www.sec.gov.
Copies of publicly available documents that we have filed with the SEC can also be inspected and copied at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
We have filed a registration statement on Form S-3 with the SEC that covers the resale of the common stock offered by this prospectus. This prospectus is a part of that registration statement, but the prospectus does not include all of the information included in the registration statement. You should refer to the registration statement for additional information about us and the common stock being offered in this prospectus. Statements that we make in this prospectus relating to any documents filed as an exhibit to the registration statement or any document incorporated by reference into the registration statement may not be complete and you should review the referenced document itself for a complete understanding of its terms.
The SEC allows us to "incorporate by reference" to the information we file with them, which means that we can disclose important information to you in this prospectus by referring you to those documents. The documents that have been incorporated by reference are an important part of the prospectus, and you should be sure to review that information in order to understand the nature of any investment by you in the common stock. In addition to previously filed documents that are incorporated by reference, documents that we file with the SEC after the date of this prospectus will automatically update the registration statement. The documents that we have previously filed and that are incorporated by reference into this prospectus include the following:
+ our annual report on Form 10-KSB/A-2 for the fiscal year ended June 30,
1999;
+ our proxy statement relating to the 1999 Annual Meeting except that
information shown under "Security Ownership of Principal Stockholders and
management" has been modified by certain recent events as described in this
prospectus on page 14;
+ our quarterly report on Form 10-QSB/A for the quarter ended September 30,
1999; and
+ the description of our Class A Common Stock included in our registration
statement on Form 8-A filed on January 13, 1996.
All documents and reports filed by us pursuant to Sections 13 (a), 13 (c), 14 or 15 (d) of the Securities Exchange Act of 1934 after the date of this prospectus and prior to the date that this offering is terminated will automatically be incorporated by reference into this prospectus.
We will provide you with copies of any of the documents incorporated by reference, at no charge to you, however, we will not deliver copies of any exhibits to those documents unless the exhibit itself is specifically incorporated by reference. If you would like a copy of any document, please write or call us at:
LightPath Technologies, Inc. 6820 Academy Parkway, N.E.
Albuquerque, New Mexico 87109
Attn: Corporate Secretary
Telephone: (505) 342-1100
You should only rely upon the information included in or incorporated by reference into this prospectus or in any prospectus supplement that is delivered to you. We have not authorized anyone to provide you with additional or different information. You should not assume that the information included in or incorporated by reference into this prospectus or any prospectus supplement is accurate as of any date later than the date on the front of the prospectus or prospectus supplement.
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY SHOULD BE READ BY YOU TOGETHER WITH THE MORE DETAILED INFORMATION INCLUDED AT OTHER SECTIONS OF THIS PROSPECTUS. IN ADDITION, YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER "RISK FACTORS" BEGINNING AT PAGE 6 OF THIS PROSPECTUS. OUR FISCAL YEAR ENDS ON JUNE 30 AND REFERENCES TO YEARS IN THIS PROSPECTUS REFER TO OUR FISCAL YEAR ENDED AS OF JUNE 30 OF THE REFERENCED CALENDAR YEAR.
LIGHTPATH TECHNOLOGIES, INC.
LightPath produces GRADIUM(R) glass, utilizes other optical materials and specialized optical packaging concepts to producE products that manipulate light, and performs research and development for optical solutions in the fiber telecommunications and traditional optics markets.
WHAT IS GRADIUM GLASS? GRADIUM glass is an optical quality glass material with varying refractive indices, capable of reducing optical aberrations inherent in conventional lenses and performing with a single lens tasks traditionally performed by multi-element conventional lens systems. We believe that GRADIUM glass lenses provide advantages over conventional lenses for certain applications. By reducing optical aberrations, we believe that GRADIUM glass lenses can provide sharper images, higher resolution, less image distortion, a wider usable field of view and a smaller focal spot size. By reducing the number of lenses in an optical system, GRADIUM glass can provide more efficient light transmission and greater brightness, lower production costs, and a simpler, smaller product. Although other researchers have likely sought to produce optical quality lens material with properties similar to that of GRADIUM glass, we are not aware of any other person or firm that has developed a repeatable manufacturing process for producing such material on a prescribable basis. To date, LightPath has been issued eighteen US patents for GRADIUM glass products and currently has numerous filed patent applications pending related to our GRADIUM glass materials composition, product design and fabrication processes for production. Additional patent applications have been filed or are in process for laser fusion techniques and fiberoptic optomechanical switch technologies. We are continually developing new GRADIUM glass materials with various refractive index and dispersion profiles and for the telecommunications field; fiberoptic optomechanical switches, multiplexers, interconnects and cross-connects.
TO WHAT INDUSTRIES ARE LIGHTPATH'S GRADIUM GLASS PRODUCTS BEING MARKETED? We believe that GRADIUM glass and our other optical materials can potentially be marketed for use in most optics and optoelectronics products. During 1998, we restructured our internal organization and marketing focus with the intended purpose of serving two distinct markets: optoelectronics and fiber telecommunications and traditional optics (e.g. lasers, medical equipment, consumer optics, etc.).
Optoelectronics technologies consist of an overlap of photonics and electronics and are key enablers of "Information Age" technologies, such as fiber optic communications, optical data storage, laser printers, digital imaging, and sensors for machine vision and environmental monitoring. Prior to 1998, we targeted various optoelectronic industry market niches as potential purchasers of our GRADIUM glass products. During 1998, we began to develop products for the emerging optoelectronics markets, specifically in the areas of
fiber telecommunications. With the resolution of fiber optic issues concerning packaging and alignment and utilizing advances made by LightChip, an affiliate, in the area of WDM equipment, we began to produce and demonstrate a passive optoelectronic product, the single mode fiber collimator assembly. During 1999 we expanded this product line with the goal of demonstrating to the telecommunication optical components industry our ability to provide low cost products and provide solutions to their telecom needs.
For traditional optics, we initially emphasized laser products because our management believed at that time that GRADIUM lenses could have a substantial immediate commercial impact in laser products with a relatively small initial financial investment. Generally, optical designers can substitute GRADIUM glass components from our standard line of products in lieu of existing conventional laser lens elements. Lasers are presently used extensively in a broad range of consumer and commercial products, including fiber optics, robotics, wafer chip inspection, bar code reading, document reproduction and audio and video compact disc machines. Because GRADIUM glass can concentrate light transmission into a much smaller focal spot than conventional lenses, we believe, and customers' test results confirm, that GRADIUM glass has the ability to improve the current standard of laser performance. One of our distributors, Permanova Lasersystems AB of Sweden, qualified GRADIUM YAG lenses into systems produced by Rofin-Sinar GmbH, a significant original equipment manufacturer, OEM, of high-powered CO2 and YAG lasers headquartered in Germany. Our growth strategy is to increase our emphasis on key laser market niches and establish the necessary products and partnership alliances to sell into Europe and Asia as well as the U.S. market. During fiscal 1999, LightPath and Rodenstock Prazisionsoptik GmbH (Rodenstock) executed an agreement to transfer to Rodenstock the exclusive, application-related utilization and distribution of GRADIUM lenses throughout the whole of Europe. The agreement was for an initial five-year period. Rodenstock's one hundred years of experience in the field of advanced optical systems and employs over 6,000 people worldwide, will be a strong asset to the expansion of LightPath's presence in Europe. We have established relationships with eight foreign distributors. We believe these distributors will enable us to establish and maintain a presence in foreign and domestic markets without further investment in this product area. In addition to laser applications, we, through our printed and Internet on-line catalog, offer a standard line of GRADIUM glass lenses for commercial sales to optical designers developing particular systems for OEMs or in-house products.
HOW HAS LIGHTPATH DEVELOPED GRADIUM GLASS PRODUCTS? From our inception in 1985 until June 1996, we were classified as a development stage enterprise that engaged in basic research and development. We believe that most of our product sales made during this period were to persons evaluating the commercial application of GRADIUM glass or using the products for research and development. During fiscal year 1997, our operational focus begin to shift to commercial product development and sales. We completed numerous prototypes for production orders and received our first orders for catalog sales of standard lens profiles. We also began to offer standard, computer-based profiles of GRADIUM glass that engineers use for product design. During fiscal 1998, sales of lenses to the traditional optics market continued with significant increases in sales of lenses used in the YAG laser market, catalog and distributor sales, and lenses used in the wafer inspection markets. In fiscal year 1998, we also began
to explore the development of products for emerging markets such as optoelectronics, photonics and solar due to the number of potential customers inquiries into the ability of GRADIUM glass to solve optoelectronic problems, specifically in the areas of fiber telecommunications. Our resolution of packaging and alignment issues, and advances made by LightChip, an affiliate, with WDM equipment, led us in 1998 to develop a strategy for entering the optoelectronic markets. Our first passive optoelectronic product, a single mode fiber collimator assembly, or SMF assembly, was demonstrated in February 1998. The SMF assembly is a key element in all fiber optic systems, including WDM equipment. The SMF assembly straighten and make parallel, diverging light as it exits a fiber. Beginning in fiscal 1999, we began offering, and have delivered for testing to potential customers, three product levels, the collimating lens, the SMF assembly and the large beam collimating assembly. The telecommunications collimator marketplace is currently estimated by industry experts to generate annual gross revenues of $125 million in 1999 with projected growth to $256 million in five years.
The current focus of our development group has been to expand application of GRADIUM products to the areas of fiberoptic optomechanical switches, multiplexers, interconnects and cross-connects for the telecommunications field, further refinement of the crown glass product line to supplement its existing flint products, and further development of acrylic axial gradient material to extend the range of existing product applications.
WHERE YOU CAN FIND US. LightPath was incorporated in Delaware in 1992. Our corporate headquarters are located at 6820 Academy Parkway East N.E., Albuquerque, New Mexico, 87109 and our telephone number is (505) 342-1100.
THE OFFERING
Securities Offered by the A total of 2,279,847 shares of Class A
Selling Shareholders ............. Common Stock are covered by this
prospectus. These shares are being
offered as follows:
1,925,000 shares issuable upon conversion
of outstanding Series F Preferred Stock
and upon exercise of Class K and Class L
warrants;
73,597 shares of outstanding restricted
common stock; and
281,250 shares issuable upon exercise of
the Warrant held by Mr. Ripp.
A description of the terms of the common
stock, preferred stock and warrants are
included in this prospectus under
"Selling Shareholders" at page 15.
|
Common Stock Outstanding as of November 30, 1999:
Class A Common Stock 6,833,199 shares(1)(3)
Class E-1 Common Stock 1,492,480 shares(2)
Class E-2 Common Stock 1,492,480 shares(2)
Class E-3 Common Stock 994,979 shares(2)
Use of Proceeds ................... We will not receive any of the proceeds
of sales of common stock by the Selling
shareholders but we will receive up to
$4,760,500 from the exercise, if any, of
warrants by the selling shareholders.
Risk Factors ...................... The shares of common stock offered hereby
involve a high degree of risk. See "Risk
Factors" on page 6.
Nasdaq SmallCap Market Symbols .... Class A Common Stock - "LPTHA"
Units - "LPTHU"
Class A Warrants - "LPTHW"
Class B Warrants - "LPTHZ"
----------
|
(1) Does not include shares underlying options outstanding at November 30, 1999 to purchase 1,284,516 shares of Class A Common Stock, (which includes 71,102 options which the holders receives, upon exercise, 71,102 Class A shares, 106,652 shares of Class E-1, 106,652 shares of Class E-2 and 71,102 shares of Class E-3 Common Stock) which are exercisable at option exercise prices ranging from $2.84 to $51.56 per share and 887,984 shares of Class A Common Stock reserved for issuance upon future grants of options under LightPath's stock option plans.
(2) Each share of outstanding Class E-1 Common Stock, Class E-2 Common Stock and Class E-3 Common Stock, collectively referred to as the Class E shares, will, on a class basis, automatically convert into Class A Common Stock if and as the Company attains certain earnings levels with respect to each of the three separate classes. The Class E shares will be redeemed by LightPath for a nominal amount if such earnings levels are not achieved.
(3) Does not include an aggregate of 10,984,735 shares of Class A Common Stock
issuable upon exercise of (i) the Unit Purchase Option (160,000 Class A
common shares) granted to the IPO underwriter and the 160,000 Class A and
160,000 Class B Common Stock Purchase Warrants underlying the Unit Purchase
Option; (ii) the 160,000 additional Class B Warrants issuable upon exercise
of the Class A Warrants referred to in (i); (iii) 1,828,649 Class A
Warrants and 1,851,351 Class B Warrants forming part of the IPO Units; (iv)
the 1,828,649 additional Class B Warrants issuable upon exercise of the
Class A Warrants referred to in (iii); (v) the 839,000 Class A Warrants
issued at the IPO; (vi) the 839,000 additional Class B Warrants issuable
upon exercise of the Class A Warrants referred to in (v) above, (vii) the
additional 801,836 shares of Class A Common Stock issuable upon exercise of
the Class C, Class D, Class E, Class F, Class G, and Class H Warrants,
(viii) the additional 150,000 shares of Class A Common Stock issuable upon
exercise of the Class J Warrants (ix) 1,925,000 shares of Class A Common
Stock issuable upon conversion of the Series F Preferred Stock and exercise
of the Class K and Class L Warrants and (x) 281,250 shares of Class A
Common Stock issuable upon exercise of the Chairman's Warrant.
FORWARD-LOOKING STATEMENTS
Throughout this prospectus and the other documents incorporated by reference into this prospectus we make certain "forward-looking" statements. These are statements about future events, results of operation, business plans and other matters. We use words such as "expect", "anticipate", "intend" or other similar words to identify forward looking statements. These statements are made based on our current knowledge and understanding. However, there can be no assurances as to whether or not actual results will be consistent with these statements. In fact, actual events or results could vary dramatically from these statements as a result of among other factors:
+ Economic conditions, domestically and internationally
+ Technological developments
+ Industry trends
+ Risk factors described in this prospectus.
We have no obligation to update the forward-looking statements made in this prospectus or incorporated by reference herein.
RISK FACTORS
BEFORE YOU BUY ANY OF THE SHARES OF COMMON STOCK BEING OFFERED BY THIS PROSPECTUS, YOU SHOULD CAREFULLY READ AND CONSIDER EACH OF THE RISK FACTORS WE HAVE DESCRIBED IN THIS SECTION. YOU SHOULD BE PREPARED TO ACCEPT ALL OF THESE RISKS, INCLUDING THE RISK THAT YOU MAY LOSE YOUR ENTIRE INVESTMENT, BEFORE YOU MAKE A DECISION TO BUY ANY OF THE SHARES OF COMMON STOCK.
WE HAVE EXPERIENCED LOSSES IN PRIOR YEARS
Our operations have never been profitable. We believe that our introduction of products for the telecommunication market in 1999 may generate sales in excess of amounts realized to date, although there can be no assurance in this regard. We expect to continue operating at a deficit during the current fiscal year and until such time, if ever, as our operations generate sufficient revenues to cover our costs. The likelihood of our financial success must be considered in light of the delays, uncertainties, difficulties and risks inherent in a new business, many of which are beyond our ability to control. These risks include, but are not limited to, unanticipated problems relating to product development, testing, manufacturing, marketing and competition, and additional costs and expenses that may exceed our current estimates. There can be no assurance that our revenues will increase significantly in the future or that, even if they do, our operations will ever be profitable.
WE MAY BE UNABLE TO CONTINUE OPERATING AS A GOING CONCERN.
We have received a report from our independent auditors that includes an explanatory paragraph regarding uncertainty as to our ability to continue as a going concern. The factors cited by the auditors as raising substantial doubt as to our ability to continue as a going concern are our recurring losses from operations and resulting continued dependence on external sources of capital. We may incur losses for the foreseeable future due to the significant costs associated with the development, manufacturing and marketing of our products and due to the continued research and development activities that will be necessary to further refine our technology and products and to develop products with additional applications.
WE ANTICIPATE THE NEED FOR ADDITIONAL FUTURE FINANCING IN ORDER TO FUND OUR OPERATIONS AND PLANS FOR GROWTH.
We anticipate that our projected product sales and the net proceeds from our private placement of 6% Convertible Debentures and related warrants, completed in July 1999, will be available to fund our working capital needs for fiscal 2000. The net proceeds from the sale in November 1999 of Series F Preferred Stock, approximately $3.9 million, and $250,000 purchase of 62,500 shares of Class A Common Stock by Robert Ripp, will be used to expand collimator production, further development of the optical switch and provide working capital. In addition, our ability to fund future capital requirements will depend on the extent that our products become commercially accepted, if at all, and if our marketing program is successful in generating sales sufficient to sustain our operations. At this time, the Company does not believe product sales will reach the level required to sustain its operations and growth plans in the near term; therefore, the Company is actively pursuing additional financing. We do not have any commitments from others to provide such additional financing and there can be no assurance that any such additional financing will be available if needed or, if available, will be on terms favorable to us. In the event such needed financing is not obtained, our operations will be materially adversely affected and we will have to cease or substantially reduce operations. Any additional equity financing may be dilutive to stockholders, and debt financings, if available, may involve restrictive covenants.
WE MAY HAVE DIFFICULTIES IN MANAGING GROWTH
We will need to grow our product sales and manufacturing output significantly in order to be successful. If we are unable to manage growth effectively, it could have material adverse effects on our results of operations, financial condition or business. We cannot guarantee that we will successfully expand or that any expansion will enhance our profitability. We expect our planned growth will place a significant strain on our management and operations. Our future growth will depend in part on the ability of our officers and other key employees to implement and expand financial control systems and to expand, train and manage our employee base and provide support to an expanded customer base.
OUR PRODUCTS ARE AT AN EARLY STAGE OF DEVELOPMENT AND MAY NOT ACHIEVE MARKET ACCEPTANCE.
Through June 1996, our primary activities were basic research and development of glass material properties. Our current line of GRADIUM products have not generated sufficient revenues to sustain operations and our telecommunications products are still in the introduction phase. While we believe our existing products are commercially viable, we anticipate the need to educate the optical components market in order to generate market demand and market feedback may require us to further refine these products. Development of additional product lines will require significant further research, development, testing and marketing prior to commercialization. There can be no assurance that any proposed products will be successfully developed, demonstrate desirable optical performance, be capable of being produced in commercial quantities at reasonable costs or be successfully marketed.
OUR PRODUCTS HAVE NOT BEEN DEMONSTRATED TO BE COMMERCIALLY SUCCESSFUL.
Our telecommunication products have not yet achieved commercial acceptance. The traditional optics have been accepted commercially, however, their benefits are not widely known. Although we are engaged in negotiations and discussions with potential customers, there can be no assurance that any such discussions will lead to development of commercially viable products or significant revenues, if any, or that any products currently existing or to be developed in the future will attain sufficient market acceptance to generate significant revenues. In order to persuade potential customers to purchase GRADIUM products, we will need to overcome industry resistance to, and suspicion of, gradient lens technology that has resulted from previous failed attempts by various researchers and manufacturers unrelated to us to develop a repeatable, consistent process for producing lenses with variable refractive indices. We must also satisfy industry-standard Bellcore Testing on telecommunication products to meet customer requirements, as well as satisfy prospective customers that we will be able to meet their demand for quantities of products, since we may be the sole supplier and licensor. We do not have demonstrated experience as a manufacturer and do not have a substantial net worth. We may be unable to accomplish any one or more of the foregoing to the extent necessary to develop market acceptance of our products. Prospective customers will need to make substantial expenditures to redesign products to incorporate GRADIUM lenses. There can be no assurances that potential customers will view the benefits of our products as sufficient to warrant such design expenditures.
WE DEPEND UPON KEY PERSONNEL
Our inability to retain or attract key employees could have a material adverse effect on our business and results of operations. Our operations depend, to a great extent, upon the efforts of our CEO and President, Donald Lawson, who conceived our strategic plan and who is substantially responsible for planning and guiding our direction, and upon Mark Fitch, our senior vice president. We also depend upon our ability to attract additional members to our management and operations teams to support our expansion strategy. The loss of any of these key employees would adversely affect our business. We have obtained a key employee life insurance policy in the amount $1,000,000 on the life of Mr. Lawson. We had thirty-three employees on November 30, 1999. Additional personnel will need to be hired if we are able to successfully expand our operations. There can be no assurance that we will be able to identify, attract and retain employees with skills and experience necessary and relevant to the future operations of our business.
COMPETITION MAY ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL RESULTS
The optical lens and telecommunication components markets are intensely competitive and numerous companies offer products and services competitive to those offered by us. Substantially all of these competitors have greater financial and other resources than we do. We compete with manufacturers of conventional spherical lens products and aspherical lens products, producers of optical quality glass and other developers of gradient lens technology and telecom product manufacturers. In the markets for conventional and aspheric lenses, we are competing against, among others, established international industry giants. Many of these companies also are primary customers for optical components, and therefore have significant control over certain markets for our products. We are also aware of other companies that are attempting to develop radial gradient lens technology. There may also be others of which we are not aware that are attempting to develop axial gradient lens technology similar to our technology. There can be no assurance that existing or new competitors will not develop technologies that are superior to or more commercially acceptable than our existing and planned technology and products.
WE HAVE LIMITED MARKETING AND SALES CAPABILITIES, AND MUST MAKE SALES IN A FRAGMENTED MARKET.
Our operating results will depend to a large extent on our ability to educate the various industries utilizing optical glass about the advantages of GRADIUM and other optical materials to market products to the participants within those industries. We currently have very limited marketing capabilities and experience and will need to hire additional sales and marketing personnel, develop additional sales and marketing programs and establish sales distribution channels in order to achieve and sustain commercial sales of our products. Although we have developed a marketing plan, there can be no assurance that the plan will be implemented or, if implemented, will succeed in creating sufficient levels of customer demand for our products. The markets for optical lenses and telecommunication components are highly fragmented. Consequently, we will need to identify and successfully target particular market segments in which we believe we will have the most success. These efforts will require a substantial, but unknown, amount of effort and resources.
The fragmented nature of the optical products market may impede our ability to achieve commercial acceptance for our products. In addition, our success will depend in great part on our ability to develop and implement a successful marketing and sales program. There can be no assurance that any marketing and sales efforts undertaken by us will be successful or will result in any significant product sales.
WE ARE HIGHLY DEPENDENT ON OUR PATENTS AND PROPRIETARY TECHNOLOGY.
Our success will depend, in part, on our ability to obtain protection for products and technologies under United States and foreign patent laws, to preserve trade secrets, and to operate without infringing the proprietary rights of others. There can be no assurance that patent applications relating to our products or potential products will result in patents being issued, that any issued patents will afford adequate protection or not be challenged, invalidated, infringed or circumvented, or that any rights granted will afford competitive advantages to us. Furthermore, there can be no assurance that others have not independently developed, or will not independently develop, similar products and/or technologies, duplicate any of our product or technologies, or, if patents are issued to, or licensed by, us, design around such patents. There can be no assurance that patents owned or licensed and issued in one jurisdiction will also issue in any other jurisdiction. Furthermore, there can be no assurance that we can adequately preserve proprietary technology and processes that we maintain as trade secrets. If we are unable to develop and adequately protect our proprietary technology and other assets, our business, financial condition and results of operations will be materially adversely affected.
OUR BUSINESS DEPENDS UPON THE EFFORTS OF THIRD PARTIES.
Our strategy for the research, development and commercialization of certain products entails entering into various arrangements with corporate partners, OEMs, licensees and others in order to generate product sales, license fees, royalties and other funds adequate for product development. We may also rely on our collaborative partners to conduct research efforts, product testing and to manufacture and market certain of our products. Although we believe that parties to any such arrangements would have an economic motivation to succeed in performing their contractual responsibilities, the amount and timing of resources to be devoted to these activities may not be within our control. There can also be no assurance that we will be successful in establishing any such collaborative arrangements or that, if established, the parties to such arrangements will assist us in commercializing products. We currently have development agreements with a mechanical switch manufacturer and an endoscope manufacturer pursuant to which we have developed prototypes of products for use in each of those areas. However, there can be no assurance that such agreements will progress to a production phase or, if production commences, that we will receive significant revenues from these relationships. We have a non-exclusive agreement with a catalog company to distribute certain of its products. We have formalized relationships with eight foreign distributors to create markets for GRADIUM in their respective countries. There can be no assurance that these parties, or any future partners, will perform their obligations as expected or that any revenue will be derived from such arrangements.
WE HAVE ONLY LIMITED MANUFACTURING CAPABILITIES.
We believe that our present manufacturing facilities, with the clean room addition which was completed in October 1999, are sufficient for our planned operations over the next several years. However, we do not have any experience manufacturing products in quantities sufficient to meet commercial demand. If we are unable to manufacture products in sufficient quantities and in a timely manner to meet customer demand, our business, financial condition and results of operations will be materially adversely affected.
WE FACE PRODUCT LIABILITY RISKS.
The sale of our optical products will involve the inherent risk of product liability claims by others. We do not currently maintain product liability insurance coverage, although we do intend to procure such insurance in the future. Product liability insurance is expensive, subject to various coverage exclusions and may not be obtainable on terms acceptable to us. Moreover, the amount and scope of any coverage may be inadequate to protect us in the event that a product liability claim is successfully asserted.
WE WILL RECOGNIZE A SUBSTANTIAL CHARGE TO INCOME UPON CONVERSION OF OUR CLASS E COMMON STOCK.
In the event any shares of the Class E Common Stock held by stockholders who are officers, directors, employees or consultants of the Company are converted into shares of Class A Common Stock, we will record compensation expense for financial reporting purposes during the period in which such conversion occurs. Such charge will equal the fair market value of such shares on the date of release, which may be substantial. Although the amount of compensation expense recognized will not affect the total stockholders' equity, it may have a material negative effect on the market price of our securities, particularly the shares of Class A Common Stock. Additionally, since Class E shares are not treated as outstanding for purposes of earnings per share calculations, the increase in the number of shares of Class A Common Stock upon conversion of any series of Class E Common Stock may have a material adverse effect on our earnings per share.
OUR OPERATIONS MAY BE ADVERSELY AFFECTED BY PROBLEMS ASSOCIATED WITH THE YEAR 2000 ISSUE.
Some computer applications were originally designed to recognize calendar years by their last two digits. As a result, calculations performed using these truncated fields will not work properly with dates from the year 2000 and beyond. This problem is commonly referred to as the "Year 2000 Issue". We have determined that our internal computer systems, manufacturing equipment and software products were produced to be Year 2000 compliant and no material remediation costs have been incurred or are expected to be incurred by us. During the third quarter of fiscal 1999, we confirmed in writing whether the internal business operations of third parties with whom we have a material relationship will be affected by the Year 2000 Issue. Our assessment of third parties is complete and based on their responses, we believe our material third party relationships will not be adversely impacted by the Year 2000 Issue barring any unforeseen circumstances. Under a worst case scenario we may experience delays in receiving products and services thereby impacting product shipments. We plan on having adequate inventory levels to minimize such impact, if any. We will continue to monitor third parties and develop contingency plans if a third party is subsequently found to be non-compliant.
OUR STOCK PRICE IS VOLATILE
Broad market fluctuations or fluctuations in our operations may adversely affect the market price of our common stock. The market for our common stock is volatile. The trading price of our common stock has been and will continue to be subject to:
+ Volatility in the trading markets generally;
+ significant fluctuations in response to quarterly variations in operating results;
+ announcements regarding our business or the business of our competitors;
+ changes in prices of our or our competitors' products and services;
+ changes in product mix; and
+ changes in revenue and revenue growth rates for us as a whole or for geographic areas, and other events or factors.
Statements or changes in opinions, ratings or earnings estimates made by brokerage firms or industry analysts relating to the markets in which we operate or expect to operate could have an adverse effect on the market price of our common stock. In addition, the stock market as a whole has from time to time experienced extreme price and volume fluctuations which have particularly affected the market price for the securities of many small cap companies and which often have been unrelated to the operating performance of these companies.
POTENTIAL CONTROL BY THE EXISTING MANAGEMENT AND SHAREHOLDERS
If our management and shareholders act in concert, disposition of matters submitted to shareholders or the election of the entire Board of Directors may be hindered. The principal stockholders beneficially owned 12% of the total combined voting power of all of the Common Stock outstanding at August 19, 1999.
SOME PROVISIONS IN OUR CHARTER DOCUMENTS AND BYLAWS MAY HAVE ANTI-TAKEOVER EFFECTS
Our Articles of Incorporation and Bylaws contain some provisions that could have the effect of discouraging a prospective acquirer from making a tender offer, or which may otherwise delay, defer or prevent a change in control.
ABSENCE OF DIVIDENDS TO SHAREHOLDERS
Our Board has never declared a dividend on our common stock. We do not anticipate paying dividends on the common stock in the foreseeable future. It is anticipated that earnings, if any, will be reinvested in the expansion of our business.
OUR WARRANTS AND OPTIONS MAY AFFECT OUR FUTURE FINANCING
The existence of our outstanding Preferred Stock, options or warrants may adversely affect the terms on which we can obtain additional financing. As of November 30, 1999, there was outstanding:
+ 2,667,649 Class A Warrants to purchase an aggregate of 2,667,649 shares of Class A Common Stock and 2,667,649 Class B Warrants;
+ 1,851,351 Class B Warrants to purchase 1,851,351 shares of Class A Common Stock;
+ the Unit Purchase Option to purchase an aggregate of 160,000 Units, each Unit consists of 160,000 Class A Common Stock, 160,000 Class A Warrants to purchase an aggregate of 160,000 shares of Class A Common Stock and 160,000 Class B Warrants; and 160,000 Class B Warrants;
+ 160,750 shares of Class A Common Stock issuable upon exercise of Class C and Class D Warrants;
+ 336,177 shares of Class A Common Stock issuable upon exercise of Class E and Class F Warrants;
+ 304,909 shares of Class A Common Stock issuable upon exercise of Class G and Class H Warrants;
+ 150,000 shares of Class A Common Stock issuable upon exercise of Class J Warrants;
+ 1,925,000 shares of Class A Common Stock reserved for issuance to the selling shareholders upon conversion of the Series F Preferred stock and exercise of the Class K and Class L Warrants;
+ 281,250 shares of Class A Common Stock issuable upon exercise of the Chairman's Warrant;
+ outstanding options to purchase an aggregate of 1,284,516 shares of Class A Common Stock (which includes 71,102 options which the holder receives, upon exercise, 71,102 shares of Class A, 106,652 shares of Class E-1, 106,652 shares of Class E-2 and 71,102 shares of Class E-3 Common Stock);
+ 887,984 shares of Class A Common Stock reserved for issuance pursuant to future grants made under the Omnibus Incentive Plan and Directors Stock Incentive Plan.
For the life of such options, warrants and Preferred Stock, the holders will have the opportunity to profit from a rise in the price of the underlying common stock, with a resulting dilution in the interest of other holders of common stock upon exercise or conversion. Further, the option and warrant holders can be expected to exercise their options and warrants at a time when we would, in all likelihood, be able to obtain additional capital by an offering of our unissued common stock on terms more favorable to us than those provided by such options or warrants.
The eligibility of the foregoing shares to be sold to the public, whether pursuant to Rule 144 or an effective registration statement, may have a material adverse effect on the market value and trading price of the common stock.
WE HAVE AGREED TO CERTAIN LIMITATIONS UPON POTENTIAL LIABILITY OF OUR DIRECTORS.
Our Certificate of Incorporation provides that directors will not be personally liable for monetary damages to LightPath or its stockholders for a breach of fiduciary duty as a director, subject to limited exceptions. Although such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission, the presence of these provisions in the Certificate of Incorporation could prevent the recovery of monetary damages by LightPath or its stockholders.
THE LIQUIDITY OF OUR STOCK COULD BE SEVERELY REDUCED IF IT BECOMES CLASSIFIED AS PENNY STOCK.
If our securities were delisted from Nasdaq, they could become subject to Rule 15g-9 under the Exchange Act, which imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and "accredited investors".
The Commission has adopted regulations which generally define a "penny stock" to be any non-Nasdaq equity security that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require substantial additional disclosure obligations. The foregoing required penny stock restrictions will not apply to our securities so long as they continue to be listed on Nasdaq and have certain price and volume information provided on a current and continuing basis or meet certain minimum net tangible assets or average revenue criteria. There can be no assurance that the our securities will qualify for exemption from these restrictions. In any event, even if our securities were exempt from such restrictions, they would remain subject to Section 15(b)(6) of the Exchange Act, which gives the Commission the authority to prohibit any person that is engaged in unlawful conduct while participating in a distribution of a penny stock from associating with a broker-dealer or participating in a distribution of a penny stock, if the Commission finds that such a restriction would be in the public interest.
If our securities were subject to the existing rules on penny stocks, the market liquidity for our securities could be severely adversely affected.
WE MUST MAINTAIN COMPLIANCE WITH CERTAIN CRITERIA IN ORDER TO MAINTAIN LISTING OF OUR SHARES ON THE NASDAQ MARKET.
The Units, Class A Common Stock and Class A and Class B Warrants are currently traded on the Nasdaq SmallCap Market. Failure to meet the applicable quantitative and/or qualitative maintenance requirements of Nasdaq could result in our securities being delisted from Nasdaq, with the result that such securities would trade on the OTC Bulletin Board or in the "pink sheets" maintained by the National Quotation Bureau Incorporated. As a consequence of such delisting, an investor could find it more difficult to dispose of or to obtain accurate quotations as to the market value of our securities. Among other consequences, delisting from Nasdaq may cause a decline in the stock price and difficulty in obtaining future financing.
WE MAY NOT HAVE ENOUGH FUNDS AVAILABLE TO REDEEM OUTSTANDING SHARES OF PREFERRED STOCK .
In the event of automatic conversion of the Series F Preferred Stock, three years after issuance, or exercise of their accompanying Class K warrants in a manner that would cause an undue dilution of its common stock, LightPath has the right to redeem such preferred stock and warrants for cash. In addition, a Liquidation Event, as defined in the applicable Certificate of Designation, may require redemption of the Series F Preferred Stock for cash. There can be no assurance that in either of the foregoing events we will have adequate cash to effect such cash redemptions.
RISK THAT FORWARD-LOOKING STATEMENTS MAY NOT COME TRUE
This prospectus and the documents incorporated herein by reference, contain forward-looking statements that involve risks and uncertainties. We use words such as "believe", "expect," "anticipate," "plan" or similar words to identify forward-looking statements. Forward-looking statements are made based upon our belief as of the date that such statements are made. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties, many of which are beyond our control. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described above and elsewhere in this prospectus.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The Proxy Statement for the 1999 Annual Meeting contained information concerning the number of shares included in the Voting Trust that Leslie Danziger, former Chairwoman of the Board of Directors was entitled to vote. As of September 16, 1999, Ms. Danziger is no longer the Chairwoman of the Board and as a result the Voting Trust has dissolved by its terms. Information in the proxy statement or any other documents incorporated by reference into this prospectus concerning the Voting Trust is no longer applicable and all shares previously subject to the voting trust are now held directly by their beneficial owners, each of whom independently votes and has the power to dispose of such shares.
SELLING SHAREHOLDERS
On November 2, 1999, we issued 408 shares of Series F Preferred Stock for $4,080,000 and 489,600 attached Class K warrants to the selling shareholders in a private placement. 125,000 Class L Warrants were also issued to the placement agent as compensation for their services.
Each Class K and Class L Warrant entitles the holder to purchase one share of Class A Common Stock at $5.00 per share at any time through November 2, 2004. For a description of the Class K Warrants see Exhibit 4.4 to our registration statement. For a description of the Class L Warrants see Exhibit 4.5 to our registration statement. Each share of Series F Preferred Stock can be converted by the holder into a number of shares of our Class A Common Stock at the option of the holder at any time until November 2, 2004. The number of shares of Class A Common Stock issuable upon conversion of each share of preferred stock is determined by dividing its stated value on the date of conversion by a conversion price. The conversion price is defined as the lesser of (i) the fixed conversion price, $5.00, or (ii) 80% of the five day average closing bid price of our Class A Common Stock at the conversion date. For purposes of the information set forth in the table below, it is assumed that each outstanding share of Series F Preferred Stock was converted at $5.00 as of November 30, 1999. The stated value of the Preferred Stock increases at the rate of 7% per annum until conversion or a liquidation event.
Mr. Ripp's Warrant entitles the holder to purchase up to 281,250 shares of Class A Common Stock at $6.00 per share at any time through November 10, 2009. For a description of the Chairman's Warrant see Exhibit 4.6 to the registration statement.
This Prospectus covers shares of Class A Common Stock that may be acquired by the selling shareholders upon conversion of the Series F Preferred Stock and the shares issuable upon exercise of the Class K and Class L Warrants and the Chairman's Warrant.
The following table provides information as of November 30, 1999, with respect to the Class A Common Stock beneficially owned by each selling shareholder. For purposes of the information set forth in this table, it is assumed that each share of Series F Preferred Stock outstanding was converted at $5.00 as of November 30, 1999. Some of these selling shareholders have a material relationship with us. Information about these relationships is disclosed in the footnotes to the table. As part of that sale, we entered into certain agreements with the selling shareholders. These agreements are described under "Certain Relationships" below. We believe that the selling shareholders named in the following table have sole voting and investment power with respect to the respective shares of Class A Common Stock set forth opposite their names. The shares of Class A Common Stock offered by this prospectus may be offered from time to time by the selling shareholders named below or their nominees.
TOTAL SHARES OUTSTANDING 6,833,199 CLASS A COMMON STOCK
AS OF NOVEMBER 30, 1999
Beneficially Owned After Offering
Shares --------------------------------------
Beneficially Percent of Percent of
Owned Prior Number of Class A All Classes
to the Shares Number of Common of Common
Offering (1)(2) Being Offered(2) Shares(1) Stock(19) Stock
--------------- ---------------- --------- --------- -----
Cranshire Capital, LLP 553,493(3,4) 480,000(4) 73,493(3) 7.6% 4.9%
EP Opportunity Fund, LLC 489,810(5,6) 400,000(6) 89,810(5) 6.7% 4.4%
EP Opportunity Fund
International, LLC 24,000(7) 24,000(7) 0 * *
EP.com Fund, LLC 24,000(8) 24,000(8) 0 * *
EP.com Fund
International, LLC 25,600(9) 25,600(9) 0 * *
The dot Com Fund LLC 160,000(10) 160,000(10) 0 2.3% 1.5%
Keyway Investments Ltd. 572,926(11,12) 160,000(12) 412,926(11) 7.8% 5.1%
JRA Enterprises 38,869(13,14) 32,000(14) 4,869(13) * *
Eric S. Swartz 89,948 (19) 47,000 42,948(21) 1.3% *
Kendrick Family Partnership 62,309(19) 47,000 15,309(22) * *
P. Bradford Hathorn 5,500(19) 4,500 4,000(23) * *
Gerald D. Harris 9,500(19) 9,500 0 * *
Carlton M. Johnson, Jr. 10,000(19) 4,500 5,500(24) * *
Glenn R. Archer 4,500(19) 4,500 0 * *
Charles M. Whiteman 3,000(19) 3,000 0 * *
Dwight B. Bronnum 2,000(19) 1,500 500(25) * *
Robert L. Hopkins 2,000(19) 1,500 500(26) * *
H. Nelson Logan 1,000(19) 1,000 0 * *
James D. Mills 1,000(19) 1,000 0 * *
Robert Ripp 161,250(15) 161,250(16) 0 2.3% 1.5%
Irrevocable Trust for the
Benefit of Robert S. Ripp 60,833(17) 60,833(17) 0 * *
Irrevocable Trust for the
Benefit of Kathleen Desmond 60,833(17) 60,833(17) 0 * *
Irrevocable Trust for the
Benefit of Johnathan Ripp 60,834(17) 60,834(17) 0 * *
Donald Lawson 16,129(17) 11,097 5,032 * *
|
(1) Except as otherwise noted, and subject to community property laws, where
applicable, each person named in the table has sole voting power and
investment power with respect to all shares shown as beneficially owned.
(2) As noted below, the information set forth below for certain selling
shareholders includes shares of Class A Common Stock issuable upon
conversion of shares of our Series F Preferred Stock. Each share of Series
F Preferred Stock is convertible into a number of shares of Class A Common
Stock determined by dividing its stated value on the date of conversion by
a conversion price. The stated value is equal to the original issue price,
$10,000 per share and increases at a rate of 7% per annum. The conversion
price is defined as the lesser of (i) the fixed conversion price $5.00 or
(ii) 80% of the five day average closing bid price of our Class A Common
Stock at the conversion date. For purposes of the information set forth in
this table, it is assumed that each outstanding Series F Preferred Stock
was converted at $5.00 as of November 30, 1999.
As required by SEC regulations, the number of shares shown as beneficially owned includes shares which could be acquired within 60 days after the date of this prospectus. The actual number of shares of Class A Common Stock issuable upon the conversion of the Series F Preferred Stock is subject to adjustment and could be significantly more than the number estimated in the table. This variation is due to factors that cannot be predicted by us at this time. The most significant of these factors is the future market price of the Class A Common Stock.
(3) Includes 73,493 shares issuable the exercise of 34,542 Class E Warrants and
38,951 Class G Warrants to purchase Class A Common Stock.
(4) Represents 480,000 shares issuable upon (A) conversion of 150 shares of
Series F Preferred Stock and (B) the exercise of 180,000 Class K Warrants
to purchase Class A Common Stock.
(5) Represents 89,810 shares issuable the exercise of 89,810 Class E Warrants
to purchase Class A Common Stock.
(6) Represents 400,000 shares issuable upon (A) conversion of 125 shares of
Series F Preferred Stock and (B) the exercise of 150,000 Class K Warrants
to purchase Class A Common Stock.
(7) Represents 24,000 shares issuable upon (A) conversion of 7.5 shares of
Series F Preferred Stock and (B) the exercise of 9,000 Class K Warrants to
purchase Class A Common Stock.
(8) Represents 24,000 shares issuable upon (A) conversion of 7.5 shares of
Series F Preferred Stock and (B) the exercise of 9,000 Class K Warrants to
purchase Class A Common Stock.
(9) Represents 25,600 shares issuable upon (A) conversion of 8 shares of Series
F Preferred Stock and (B) the exercise of 9,600 Class K Warrants to
purchase Class A Common Stock.
(10) Represents 160,000 shares issuable upon (A) conversion of 50 shares of
Series F Preferred Stock and (B) the exercise of 60,000 Class K Warrants to
purchase Class A Common Stock.
(11) Includes 412,926 shares issuable upon the exercise of 70,000 Class C
Warrants, 138,169 Class E Warrants and 194,757 Class G Warrants to purchase
Class A Common Stock.
(12) Includes 160,000 shares issuable upon (A) conversion of 50 shares of Series
F Preferred Stock and (B) the exercise of 60,000 Class K Warrants to
purchase Class A Common Stock.
(13) Includes 4,869 shares issuable upon the exercise of 4,869 Class G Warrants
to purchase Class A Common Stock.
(14) Includes 32,000 shares issuable upon (A) conversion of 10 shares of Series
F Preferred Stock and (B) the exercise of 12,000 Class K Warrants to
purchase Class A Common Stock.
(15) Mr. Ripp was appointed as Chairman of the Board of Directors of LightPath
on November 11, 1999. Includes 161,250 shares issuable upon the exercise of
a Warrant to purchase Class A Common Stock. In addition, 62,500 shares of
Class A Common Stock and 120,000 shares issuable upon exercise of Warrants
are held by three Irrevocable Trusts for the benefit of Mr. Ripp's
Children.
(16) Includes shares issuable upon the exercise of Warrants.
(17) Includes 40,000 shares issuable upon the exercise of Warrants to purchase
Class A Common Stock.
(18) Mr. Lawson is currently President, Chief Executive Officer and a member of
the Board of Directors of LightPath.
(19) This person is an employee of Dunwoody Brokerage Services, Inc., which
acted as placement agent for the sale of the Series F Preferred Stock and
attached Class K Warrants. The Class L Warrants were originally issued to
Dunwoody as compensation for its services.
(20) The percentage interest of each selling shareholder is based on the
beneficial ownership of that selling shareholder divided by the sum of the
current outstanding shares of Class A Common Stock plus the additional
shares, if any, which would be issued to that selling shareholder (but not
any other selling shareholder) when converting Series F Preferred Stock or
exercising Warrants or other right in the future.
(21) Includes 42,948 shares issuable upon the exercise of 15,750 Class D
Warrants, 11,889 Class F Warrants and 15,309 Class H Warrants to purchase
Class A Common Stock.
(22) Includes 15,309 shares issuable upon the exercise of 15,309 Class H
Warrants to purchase Class A Common Stock.
(23) Includes 4,000 shares issuable upon the exercise of 2,000 Class F Warrants
and 2,000 Class H Warrants to purchase Class A Common Stock.
(24) Includes 5,500 shares issuable upon the exercise of 2,000 Class D Warrants,
2,000 Class F Warrants and 1,500 Class H Warrants to purchase Class A
Common Stock.
(25) Includes 500 shares issuable upon the exercise of 250 Class F Warrants and
250 Class H Warrants to purchase Class A Common Stock.
(26) Includes 500 shares issuable upon the exercise of 250 Class F Warrants and
250 Class H Warrants to purchase Class A Common Stock.
USE OF PROCEEDS
The selling shareholders will receive the net proceeds from the sale of their shares of common stock. We will not receive any proceeds from these sales. We will however receive proceeds from the exercise of the warrants. Each Class K and Class L Warrant entitles the holder to purchase shares of common stock at a price of $5.00 and the Chairman's Warrant may be exercised for $6.00 per share. This purchase price is payable in cash or by surrendering a number of shares of our common stock having a fair market value equal to the applicable exercise price on the exercise date. If all of the warrants are exercised for cash, we will receive up to $4,760,500.
CERTAIN RELATIONSHIPS
All of the Class L Warrants were issued to Dunwoody Brokerage Services, Inc., together with a cash placement fee of $163,200 equal to 4% of the gross proceeds from the sale of Series F Preferred Stock as compensation for their services as placement agent in connection with the November 1999 private placement of 408 shares of LightPath's Series F Preferred Stock. Dunwoody subsequently transferred these warrants to the persons listed in the selling shareholders table. Dunwoody is affiliated with Swartz Investments LLC, which acted as placement agent in connection with the sales of our Series A, B and C Preferred Stock and associated warrants.
The purchasers of the Company's Series F Preferred Stock have a right of first offer to participate in any issuances of equity or debt securities by the Company during the one year period ending November 2, 2000. Dunwoody has the right to additional compensation as placement agent with respect to any future private financings by the Company during the three year period ending November 2002, if the private placement includes sales to any of the initial investors in the Series F Preferred Stock.
Mr. Ripp was appointed to serve as Chairman of the Board of Directors on November 11, 1999. Mr. Lawson is currently President, Chief Executive Officer and a member of the Board of Directors of LightPath.
DETERMINATION OF OFFERING PRICE
The selling shareholders may use this prospectus from time to time to sell their shares of common stock at a price determined by the shareholder making such sale. The price at which the common stock is sold may be based on market prices prevailing at the time of sale, at prices relating to such prevailing market prices, or at negotiated prices.
PLAN OF DISTRIBUTION
The common stock may be sold from time to time by the selling shareholders, or by pledgees, donees, transferees or other successors in interest. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The common stock may be sold in one or more of the following types of transactions:
(a) a block trade in which a selling shareholder will engage a broker-dealer who will then attempt to sell the common stock, or position and resell a portion of the block as principal to facilitate the transaction;
(b) purchases by a broker-dealer as principal and resale by such broker-dealer for its account pursuant to this prospectus;
(c) an exchange distribution in accordance with the rules of such exchange; and
(d) ordinary brokerage transactions and transactions in which the broker solicits purchasers. In effecting sales, broker-dealers engaged by the selling shareholders may arrange for other broker-dealers to participate in the resales.
In connection with distributions of the common stock or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers. In connection with such transactions, broker-dealers may engage in short sales of the common stock in the course of hedging the positions they assume with selling shareholders. The selling shareholders may also sell common stock short and redeliver the common stock to close out such short positions. The selling shareholders may also enter into option or other transactions with broker-dealers that require the delivery to the broker-dealer of the common stock, which the broker-dealer may resell or otherwise transfer pursuant to this prospectus. The selling shareholders may also loan or pledge common stock to a broker-dealer and the broker-dealer may sell the common stock so loaned or, upon a default, the broker-dealer may effect sales of the pledged common stock pursuant to this prospectus.
Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from the selling shareholders in amounts to be negotiated in connection with the sale. Such broker-dealers and any other participating broker-dealers may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales and any such commission, discount or concession may be deemed to be underwriting discounts or commissions under the Securities Act. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 may be sold in an unregistered transaction under Rule 144 rather than pursuant to this prospectus.
We are bearing all of the costs and expenses of registering under the Securities Act the sale of the common stock offered by this prospectus. Commissions and discounts, if any, attributable to the sales of the common stock will be borne by the selling shareholders.
We have agreed to indemnify the selling shareholders against certain liabilities in connection with the offering of the common stock, including liabilities arising under the Securities Act. The selling shareholders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the common stock against various liabilities, including liabilities arising under the Securities Act.
In order to comply with the securities laws of various states, if applicable, sales of the common stock made in those states will only be made through registered or licensed brokers or dealers. In addition, some states do not allow the securities to be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with by us and the selling shareholders.
Under applicable rules and regulations of the Exchange Act, any person engaged in the distribution of the common stock may not simultaneously engage in market-making activities with respect to our common stock for a period of up to five business days prior to the commencement of such distribution. In addition to those restrictions, each selling shareholder will be subject to the Exchange Act and the rules and regulations under the Exchange Act, including, Regulation M and Rule 10b-7, which provisions may limit the timing of the purchases and sales of our securities by the selling shareholders.
DESCRIPTION OF SECURITIES
We have previously registered our Class A Common Stock under the Exchange Act by filing a Form 8-A on January 13, 1996. Please refer to that registration statement for a description of the rights, privileges and preferences of our common stock.
LEGAL MATTERS
Certain legal matters have been passed upon for us by Squire, Sanders & Dempsey L.L.P., Phoenix, Arizona.
EXPERTS
Our financial statements as of June 30, 1999 and 1998, and for the years then ended, have been incorporated by reference in this Prospectus in reliance upon the report of KPMG LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.
The report of KPMG LLP covering the June 30, 1999, financial statements contains an explanatory paragraph that states that the Company's recurring losses from operations and resulting continued dependence on external sources of capital raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of that uncertainty.
INTERESTS OF NAMED EXPERTS AND COUNSEL
On October 13, 1997, James L. Adler, Jr. was appointed to serve as a director of LightPath until the 2000 annual meeting of shareholders. Mr. Adler is a partner of the law firm of Squire, Sanders & Dempsey L.L.P., which has issued an opinion as to the validity of the shares offered by this prospectus and also provides legal services to us on a regular basis. Mr. Adler owns options under the Directors Stock Option Plan to purchase 50,176 shares of Class A Common Stock at exercise prices ranging from $2.84 to $9.81. As of January 1, 2000, these shares represented less than 1% of the total outstanding shares of Class A Common Stock.
INDEMNIFICATION
Article TENTH of the Company's Certificate of Incorporation, as amended, provides as follows:
TENTH: No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that the foregoing clause shall not apply to any liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for any transaction from which the director derived an improper personal benefit, or (iv) under Section 174 of the DGCL. This Article shall not eliminate or limit the liability of a director for any act or omission occurring prior to the time this Article became effective.
Article VII of the Company's Bylaws provides, in summary, that the Company is required to indemnify to the fullest extent permitted by applicable law, any person made or threatened to be made a party or involved in a lawsuit, action or proceeding by reason that such person is or was an officer, director, employee or agent of the Company. Indemnification is against all liability and loss suffered and expenses reasonably incurred. Unless required by law, no such indemnification is required by the Company of any person initiating such suit, action or proceeding without board authorization. Expenses are payable in advance if the indemnified party agrees to repay the amount if he is ultimately found to not be entitled to indemnification. For a full text of Article VI of the Bylaws, see Exhibit 3.3 to this Registration Statement.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, the Act, may be permitted to directors, officers and controlling person of LightPath pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.
====================================== ====================================== NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE LIGHTPATH TECHNOLOGIES, INC. COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY 2,279,847 SHARES JURISDICTION IN WHICH SUCH OFFER OR CLASS A COMMON STOCK SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS PROSPECTUS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. |
TABLE OF CONTENTS
Page
----
Where You Can Find More
Information (ii)
Prospectus Summary 1
The Offering 4
Risk Factors 6
Security Ownership of Principal
Stockholders and Management 15
Selling Shareholders 15
Use of Proceeds 18
Certain Relationships 18
Determination of Offering Price 18
Plan of Distribution 19 January 10, 2000
Description of Securities 20
Legal Matters 20
Experts 20
Interest of Named Experts
and Counsel 20
Indemnification 21
====================================== ======================================
|
PART II TO FORM S-3
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
It is estimated that the following expenses will be incurred in connection with the proposed offering hereunder. All of such expenses will be borne by the Company:
Amount
------
SEC Registration Fee............................................ $12,564.24
Legal fees and expenses......................................... 15,000.00 (1)
Accounting fees and expenses.................................... 5,000.00 (1)
Printing expenses............................................... 2,000.00 (1)
----------
Total........................................................... $34,564.24
==========
(1) Estimated
|
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article TENTH of the Company's Certificate of Incorporation, as amended, provides as follows:
TENTH: No director of the corporation shall be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that the foregoing clause shall not apply to any liability of a director (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for any transaction from which the director derived an improper personal benefit, or (iv) under Section 174 of the DGCL. This Article shall not eliminate or limit the liability of a director for any act or omission occurring prior to the time this Article became effective.
Article VII of the Company's Bylaws provides, in summary, that the Company is required to indemnify to the fullest extent permitted by applicable law, any person made or threatened to be made a party or involved in a lawsuit, action or proceeding by reason that such person is or was an officer, director, employee or agent of the Company. Indemnification is against all liability and loss suffered and expenses reasonably incurred. Unless required by law, no such indemnification is required by the Company of any person initiating such suit, action or proceeding without board authorization. Expenses are payable in advance if the indemnified party agrees to repay the amount if he is ultimately found to not be entitled to indemnification. For a full text of Article VI of the Bylaws, see Exhibit 3.3 to this Registration Statement.
II-1
ITEM 16. EXHIBITS.
Exhibit Page Number or
Number Description Method of Filing
------ ----------- ----------------
3.2 Certificate of Designation filed November 2, 1999
with the Secretary of State of the State of Delaware *
4.1 Form of Warrant Agreement (1)
4.2 Form of Unit Purchase Option (1)
4.3 Specimen Certificate for the Class A Common Stock (1)
4.4 Form of Class K Warrants *
4.5 Form of Class L Warrants *
Form of Warrant, dated November 11, 1999, issued to
4.6 Robert Ripp *
5 Opinion and Consent of Squire, Sanders & Dempsey LLP *
23.1 Consent of KPMG LLP, Independent Auditors *
23.2 Consent of Squire, Sanders & Dempsey LLP Included in
Exhibit 5
24 Powers of Attorney See signature page
----------
|
* Filed herewith.
1. Previously filed as an exhibit to registrant's registration statement on Form SB-2 filed on December 7, 1995 (File No. 33-80119)(the "SB-2").
II-2
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that:
(1) It will file a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
(2) For purposes of determining any liability under the Securities Act, it will treat each post-effective amendment as a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) It will file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to include any additional or changed material information on the plan of distribution.
(4) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 15 hereof, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person thereof in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, there unto duly authorized, in the City of Albuquerque, State of New Mexico, on January 5, 2000.
LIGHTPATH TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ Donald Lawson ---------------------------- Donald Lawson Chief Executive Officer |
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned,
constitutes and appoints each of Robert Ripp and Donald E. Lawson, his true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all pre and post-effective amendments (including all
subsequent registration statements and amendments thereto filed pursuant to Rule
462(b)) to this Form S-3 Registration Statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting such attorney-in-fact and agents, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in person, hereby ratifying and confirming all that such
attorney-in-fact and agents may lawfully do or cause to be done by virtue
hereof. Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Robert Ripp Chairman of the Board January 5, 2000
----------------------------
Robert Ripp
/s/ Donald E. Lawson CEO, President and Treasurer January 5, 2000
---------------------------- (Principal Executive, Financial
Donald E. Lawson and Accounting Officer)
/s/ James A. Adler, Jr. Director January 5, 2000
----------------------------
James A. Adler, Jr.
/s/ Louis Leeburg Director January 5, 2000
----------------------------
Louis Leeburg
/s/ Leslie A. Danziger Director January 5, 2000
----------------------------
Leslie A. Danziger
/s/ Katherine Dietze Director January 5, 2000
----------------------------
Katherine Dietze
/s/ James A. Wimbush Director January 5, 2000
----------------------------
James A. Wimbush
II-4
|
EXHIBIT 3.2
CERTIFICATE OF DESIGNATION OF
SERIES F PREFERRED STOCK
OF
LIGHTPATH TECHNOLOGIES, INC.
It is hereby certified that:
1. The name of the Company (hereinafter called the "Company") is LightPath Technologies, Inc., a Delaware corporation.
2. The certificate of incorporation of the Company authorizes the issuance of five million (5,000,000) shares of preferred stock, $.01 par value per share, and expressly vests in the Board of Directors of the Company the authority provided therein to issue any or all of said shares in one (1) or more series and by resolution or resolutions to establish the designation and number and to fix the relative rights and preferences of each series to be issued.
3. The Board of Directors of the Company, pursuant to the authority expressly vested in it as aforesaid, has adopted the following resolutions creating a Series F issue of Preferred Stock:
RESOLVED, that five hundred (500) of the five million (5,000,000) authorized shares of Preferred Stock of the Company shall be designated Series F Preferred Stock, $.01 par value per share, and shall possess the rights and preferences set forth below:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall have a par value of $.01 per share and shall be designated as Series F Preferred Stock (the "Series F Preferred Stock," or the "Preferred Shares") and the number of shares constituting the Series F Preferred Stock shall be five hundred (500). The Series F Preferred Stock shall be offered at a purchase price of Ten Thousand Dollars ($10,000) per share (the "Original Series F Issue Price"), with a seven percent (7%) per annum accretion rate as set forth herein.
Section 2. RANK. The Series F Preferred Stock shall rank: (i) junior to any other class or series of capital stock of the Company hereafter created specifically ranking by its terms senior to the Series F Preferred Stock (collectively, the "Senior Securities"); (ii) prior to all of the Company's Class A, Class E-1, Class E-2, and Class E-3 Common Stock, all at a $.01 par value per share ("Common Stock"); (iii) prior to any class or series of capital stock of the Company hereafter created not specifically ranking by its terms senior to or on parity with any Series F Preferred Stock of whatever subdivision (collectively, with the Common Stock, "Junior Securities"); and (iv) on parity with the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and with any class or series of capital stock of the Company hereafter created specifically ranking by its terms on parity with the Series F Preferred Stock ("Parity Securities") in each case as to distributions of assets upon liquidation, dissolution or winding up of the Company, whether voluntary or involuntary (all such distributions being referred to collectively as "Distributions").
Section 3. DIVIDENDS. The Series F Preferred Stock will bear no dividends, and the holders of the Series F Preferred Stock ("Holders") shall not be entitled to receive dividends on the Series F Preferred Stock.
Section 4. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the Company ("Liquidation Event"), either voluntary or involuntary, the then Holders of shares of Series F Preferred Stock shall be entitled to receive, immediately after any distributions to Senior Securities required by the Company's Certificate of Incorporation or any certificate of designation, and prior in preference to any distribution to Junior Securities but in parity with any distribution to Parity Securities, an amount per share equal to the sum of (i) the Original Series F Issue Price for each outstanding share of Series F Preferred Stock and (ii) an amount equal to seven percent (7%) of the Original Series F Issue Price, per annum, accruing daily, for the period that has passed since the date that, in connection with the consummation of the purchase by Holder of shares of Series F Preferred Stock from the Company, the escrow agent first had in its possession funds representing full payment for the shares of Series F Preferred Stock (such amount being referred to herein as the "Premium"). If upon the occurrence of such event, and after payment in full of the preferential amounts with respect to the Senior Securities, the assets and funds available to be distributed among the Holders of the Series F Preferred Stock and Parity Securities shall be insufficient to permit the payment to such Holders of the full preferential amounts due to the Holders of the Series F Preferred Stock and the Parity Securities, respectively, then the entire assets and funds of the Company legally available for distribution shall be distributed among the Holders of the Series F Preferred Stock and the Parity Securities, pro rata, based on the respective liquidation amounts to which each such series of stock is entitled by the Company's Certificate of Incorporation and any certificate(s) of designation relating thereto.
(b) Upon the completion of the distribution required by subsection
4(a), if assets remain in this Company, they shall be distributed to holders of
Junior Securities in accordance with the Company's Certificate of Incorporation
including any duly adopted certificate(s) of designation.
(c) At each Holder's option, a sale, conveyance or disposition of all or substantially all of the assets of the Company or the effectuation by the Company of a transaction or series of related transactions in which more than fifty percent (50%) of the voting power of the Company is disposed of shall be deemed to be a Liquidation Event as defined in Section 4(a); provided further that (i) a consolidation, merger, acquisition, or other business combination of the Company with or into any other publicly traded company or companies shall not be treated as a Liquidation Event as defined in Section 4(a) but instead shall be treated pursuant to Section 5(d) hereof, and (ii) a consolidation, merger, acquisition, or other business combination of the Company with or into any other non-publicly traded company or companies in which the surviving entity is not a publicly traded company shall be treated as a Liquidation Event as defined in Section 4(a). The Company shall not effect any transaction described in subsection 4(c)(ii) unless it first gives thirty (30) business days prior notice of such transaction during which time the Holder shall be entitled to immediately convert any or all of its shares of Series F Preferred Stock into Class A Common Stock at the Conversion Price, as defined below, then in effect, which conversion shall not be subject to the conversion restrictions set forth in Section 5(a).
(d) In the event that, immediately prior to the closing of a transaction described in Section 4(c) which would constitute a Liquidation Event, the cash distributions required by Section 4(a) or Section 6 have not been made, the Company shall either: (i) cause such closing to be reasonably postponed until such cash distributions have been made, (ii) cancel such transaction, in which event the rights of the Holders of Series F Preferred Stock shall be the same as existing immediately prior to such proposed transaction or (iii) agree, and shall require that any successor company resulting from a Liquidation Event agrees, to make such distributions as quickly after the closing of such Liquidation Event as reasonably practicable, upon the same terms and in the same amounts as the Company would have made if such distribution was made immediately prior to the closing of such transaction.
Section 5. CONVERSION. Subject to Section 4(c) herein, the record Holders of this Series F Preferred Stock shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. The record Holder of the Series F Preferred Stock shall be entitled to convert and the conversion restrictions herein below, any or all the aggregate principal amount of the Series F Preferred Stock on or after the date that is four (4) months after the Last Closing Date, as defined below, at the office of the Company or its designated transfer agent (the "Transfer Agent"), into that number of fully-paid and non-assessable shares of Class A Common Stock calculated in accordance with the following formula (the "Conversion Rate"):
Number of shares of Class A Common Stock issued upon conversion of one
(1) share of Series F Preferred Stock =
where,
* N= the number of days between (i) the date that, in connection with the consummation of the initial purchase by Holder of shares of Series F Preferred Stock from the Company, the escrow agent first had in its possession funds representing full payment for the shares of Series F Preferred Stock for which conversion is being elected, and (ii) the applicable Date of Conversion (as defined in Section 5(b)(iv) below) for the shares of Series F Preferred Stock for which conversion is being elected, and
* CONVERSION PRICE = the lesser of (x) $5.00 (the "Fixed Conversion Price"), or (y) 80% of the average Closing Bid Price, as that term is defined below, of the Company's Class A Common Stock for the five (5) trading days immediately preceding the Date of Conversion, as defined below (the "Variable Conversion Price"),
provided, however, that, unless otherwise indicated herein, beginning on the date that is four (4) months following the Last Closing Date, as defined below, the right of the Holder to convert into Class A Common Stock using the Variable Conversion Price initially shall be limited to a maximum of twenty percent (20%) of the aggregate principal amount of the Series F Preferred Stock issued to such Holder, and for each one (1) month period which expires thereafter, the Holder shall accrue the right to convert into Class A Common Stock an additional twenty
percent (20%) of the aggregate principal amount of the Series F Preferred Stock issued to such Holder, (the number of shares that may be converted at any given time using the Variable Conversion Price, in the aggregate, is referred to hereinafter as the "Conversion Quota"); and provided, further, in the event that the Holder elects not to convert its full Conversion Quota during any one (1) month period, the unconverted amount shall be carried forward and added to the Conversion Quota, and thereafter the Holder may, from time to time, convert any portion of the Conversion Quota at the Variable Conversion Price; and provided, further, that subsequent to the date that is nine (9) months following the Last Closing Date, there shall be no restrictions on the number of shares of Series F Preferred Stock that may be converted into Class A Common Stock using the Variable Conversion Price; and provided, further, that a Holder can convert one hundred percent (100%) of the Series F Preferred Stock, or any portion thereof, into Class A Common Stock using the Fixed Conversion Price on or after the date that is four (4) months after the Last Closing Date whether or not the Fixed Conversion Price is less than the Variable Conversion Price.
As used herein, "Last Closing Date" shall mean the date of the last closing of a purchase and sale of the Series F Preferred Stock that occurs pursuant to the offering of the Series F Preferred Stock by the Company.
For purposes hereof, any Holder which acquires shares of Series F Preferred Stock from another Holder (the "Transferor") and not upon original issuance from the Company shall be entitled to exercise its conversion right as to the percentages of such shares specified under Section 5(a) in such amounts and at such times such that the number of shares eligible for conversion by such Holder at any time shall be in the same proportion that the number of shares of Series F Preferred Stock acquired by such Holder from its Transferor bears to the total number of shares of Series F Preferred Stock originally issued by the Company to such Transferor (or its predecessor Transferor).
For purposes hereof, the term "Closing Bid Price" shall mean the closing bid price of the Company's Class A Common Stock on the Nasdaq Small Cap Market, or if no longer traded on the Nasdaq Small Cap Market, the closing bid price on the principal national securities exchange or the over-the-counter on which the Class A Common Stock is so traded and if not available, the mean of the high and low prices on the principal national securities exchange or the over-the-counter system on which the Class A Common Stock is so traded.
(b) MECHANICS OF CONVERSION. In order to convert Series F Preferred Stock into full shares of Class A Common Stock, the Holder shall (i) send via facsimile, on or prior to 11:59 p.m., New York City time (the "Conversion Notice Deadline") on the Date of Conversion, a copy of the fully executed notice of conversion ("Notice of Conversion") to the Company at the office of the Company and to its designated transfer agent (the "Transfer Agent") for the Series F Preferred Stock stating that the Holder elects to convert, which notice shall specify the Date of Conversion, the number of shares of Series F Preferred Stock to be converted, the applicable Conversion Price and a calculation of the number of shares of Class A Common Stock issuable upon such conversion (together with a copy of the front page of each certificate to be converted) and (ii) surrender to a common courier for delivery to the office of the Company or the Transfer Agent, the original certificates representing the Series F Preferred Stock being converted (the "Preferred Stock Certificates"), duly endorsed for transfer; provided, however, that the Company shall not be obligated to issue certificates evidencing the shares of Class A Common Stock issuable upon such conversion unless either the Preferred Stock Certificates are delivered to the Company or its Transfer Agent as provided above, or the Holder notifies the Company or its Transfer Agent that such certificates have been lost, stolen or destroyed
(subject to the requirements of subparagraph (i) below). Upon receipt by the Company of a facsimile copy of a Notice of Conversion, the Company shall immediately send, via facsimile, a confirmation of receipt of the Notice of Conversion to Holder which shall specify that the Notice of Conversion has been received and the name and telephone number of a contact person at the Company whom the Holder should contact regarding information related to the Conversion. In the case of a dispute as to the calculation of the Conversion Rate, the Company shall promptly issue to the Holder the number of Shares that are not disputed and shall submit the disputed calculations to its outside accountant via facsimile within three (3) days of receipt of Holder's Notice of Conversion. The Company shall cause the accountant to perform the calculations and notify the Company and Holder of the results no later than two business days from the time it receives the disputed calculations. Accountant's calculation shall be deemed conclusive absent manifest error.
(i) LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of any Preferred Stock Certificates representing shares of Series F Preferred Stock, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of the Preferred Stock Certificate(s), if mutilated, the Company shall execute and deliver new Preferred Stock Certificate(s) of like tenor and date. However, the Company shall not be obligated to re-issue such lost or stolen Preferred Stock Certificates if Holder contemporaneously requests the Company to convert such Series F Preferred Stock into Class A Common Stock.
(ii) DELIVERY OF COMMON STOCK UPON CONVERSION. The Company shall or shall cause the Transfer Agent to, no later than the close of business on the second (2nd) business day (the "Deadline") after receipt by the Company or the Transfer Agent of a facsimile copy of a Notice of Conversion and receipt by Company or the Transfer Agent of all necessary documentation duly executed and in proper form required for conversion, including the original Preferred Stock Certificates to be converted (or after provision for security or indemnification in the case of lost or destroyed certificates, if required), issue and surrender to a common courier for either overnight or (if delivery is outside the United States) two (2) day delivery to the Holder at the address of the Holder as shown on the stock records of the Company a certificate for the number of shares of Class A Common Stock to which the Holder shall be entitled as aforesaid.
(iii) NO FRACTIONAL SHARES. If any conversion of the Series F Preferred Stock would create a fractional share of Class A Common Stock or a right to acquire a fractional share of Class A Common Stock, such fractional share shall be disregarded and the number of shares of Class A Common Stock issuable upon conversion, in the aggregate, shall be the next higher number of shares.
(iv) DATE OF CONVERSION. The date on which conversion occurs (the "Date of Conversion") shall be deemed to be the date set forth in such Notice of Conversion, provided (i) that the advance copy of the Notice of Conversion is sent via facsimile to the Company before 11:59 p.m., New York City time, on the Date of Conversion, and (ii) that the original Preferred Stock Certificates representing the shares of Series F Preferred Stock to be converted are surrendered by depositing such certificates with a common courier, for delivery to the Company or the Transfer Agent as provided above, as soon as practicable after the Date of Conversion. The person or persons entitled to receive the
shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record Holder or Holders of such shares of Class A Common Stock on the Date of Conversion.
(c) AUTOMATIC CONVERSION OR REDEMPTION. Each share of Series F
Preferred Stock outstanding on the date which is three (3) years after the Last
Closing Date or, if not a business day, the first business day thereafter
("Termination Date") automatically shall, at the option of the Company, either
(i) be converted ("Automatic Conversion") into Class A Common Stock on such date
at the Conversion Rate then in effect (calculated in accordance with the formula
in Section 5(a) above), and the Termination Date shall be deemed the Date of
Conversion with respect to such conversion for purposes of this Certificate of
Designation, or (ii) be redeemed ("Automatic Redemption") by the Company for
cash in an amount equal to the Stated Value (as defined in Section 6(b)(i)
below) of the shares of Series F Preferred Stock being redeemed. If the Company
elects to redeem, on the Termination Date, the Company shall send to the Holders
of outstanding Series F Preferred Stock notice (the "Automatic Redemption
Notice") via facsimile of its intent to effect an Automatic Redemption of the
outstanding Series F Preferred Stock. If the Company does not send such notice
to Holder on such date, an Automatic Conversion shall be deemed to have
occurred. If an Automatic Conversion occurs, the Company and the Holders shall
follow the applicable conversion procedures set forth in this Certificate of
Designation; provided, however, that the Holders are not required to send the
Notice of Conversion contemplated by Section 5(b). If the Company elects to
redeem, each Holder of outstanding Series F Preferred Stock shall send their
certificates representing the Series F Preferred Stock to the Company within
five (5) days of the date of receipt of the Automatic Redemption Notice from the
Company, and the Company shall pay the applicable redemption price to each
respective Holder within five (5) days of the receipt of such certificates. The
Company shall not be obligated to deliver the redemption price unless the
certificates representing the Series F Preferred Stock are delivered to the
Company, or, in the event one or more certificates have been lost, stolen,
mutilated or destroyed, unless the Holder has complied with Section 5(b)(i). If
the Company elects to redeem under this Section 5(c) and the Company fails to
pay the Holders the redemption price within five (5) days of its receipt of the
certificates representing the shares of Series F Preferred Stock to be redeemed
as required by this Section 5(c), then an Automatic Conversion shall be deemed
to have occurred and, upon receipt of the Preferred Stock certificates, the
Company shall immediately deliver to the Holders the certificates representing
the number of shares of Class A Common Stock to which the Holders would have
been entitled upon Automatic Conversion.
(d) ADJUSTMENT TO CONVERSION RATE.
(i) ADJUSTMENT TO FIXED CONVERSION PRICE DUE TO STOCK SPLIT, STOCK DIVIDEND, ETC. If, prior to the conversion of all of the Series F Preferred Stock, the number of outstanding shares of Class A Common Stock is increased by a stock split, stock dividend, or other similar event, the Fixed Conversion Price shall be proportionately reduced, or if the number of outstanding shares of Common Stock is decreased by a combination or reclassification of shares, or other similar event, the Fixed Conversion Price shall be proportionately increased.
(ii) ADJUSTMENT TO VARIABLE CONVERSION PRICE. If, at any time when any shares of the Series F Preferred Stock are issued and outstanding, the number of outstanding shares of Class A Common Stock is increased or decreased by a stock split, stock dividend, or other similar event, which event shall have
taken place during the reference period for determination of the Conversion Price for any conversion of the Series F Preferred Stock, then the Variable Conversion Price shall be calculated giving appropriate effect to the stock split, stock dividend, combination, reclassification or other similar event for all five (5) trading days immediately preceding the Date of Conversion.
(iii) ADJUSTMENT DUE TO MERGER, CONSOLIDATION, ETC. If, prior to the conversion of all Series F Preferred Stock, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Class A Common Stock of the Company shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities of the Company or another entity or there is a sale of all or substantially all the Company's assets or there is a change of control transaction not deemed to be a liquidation pursuant to Section 4(c), then the Holders of Series F Preferred Stock shall thereafter have the right to receive upon conversion of Series F Preferred Stock, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Class A Common Stock immediately theretofore issuable upon conversion, such stock, securities and/or other assets which the Holder would have been entitled to receive in such transaction had the Series F Preferred Stock been converted immediately prior to such transaction, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holders of the Series F Preferred Stock to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Series F Preferred Stock) shall thereafter be applicable, as nearly as may be practicable in relation to any securities thereafter deliverable upon the exercise hereof. The Company shall not effect any transaction described in this subsection 5(d)(iii) unless (a) it first gives at least thirty (30) days prior notice of such merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event (during which time the Holder shall be entitled to convert its shares of Series F Preferred Stock into Class A Common Stock) and (b) the resulting successor or acquiring entity (if not the Company) assumes by written instrument the obligations of the Company under this Certificate of Designation including this subsection 5(d)(iii).
(iv) NO FRACTIONAL SHARES. If any adjustment under this Section 5(d) would create a fractional share of Class A Common Stock or a right to acquire a fractional share of Class A Common Stock, such fractional share shall be disregarded and the number of shares of Class A Common Stock issuable upon conversion shall be the next higher number of shares.
Section 6. Company's Right to Redeem at Its Election. Subject to Sections 6(iv) and 6(v) below, the Company shall have the right, in its sole discretion, to redeem ("Redemption at the Company's Election"), from time to time, any or all of the Preferred Shares at the Redemption Price at the Company's Election (as defined below). If the Company elects to redeem some, but not all, of the Preferred Shares, the Company shall redeem a pro rata amount from each holder of Preferred Shares based on the number of Preferred Shares held by such holder relative to the number of Preferred Shares outstanding.
(i) Redemption Price at the Company's Election. The "Redemption Price at the Company's Election" shall be an amount per Preferred Share equal to the product of (A) 1.3 multiplied by (B) the sum of (I) (.07)(P/365)($10,000) plus (II) $10,000; where "P" means the number of days from, but excluding, the issuance date of such Preferred Share through and including the Date of Redemption at the Company's Election (as defined in Section 6(ii)).
(ii) Mechanics of Redemption at the Company's Election. The Company shall effect each such redemption no sooner than 20 trading days nor later than 40 trading days after delivering written notice of its Redemption at the Company's Election via facsimile and overnight courier ("Notice of Redemption at the Company's Election") to (A) each holder of the Preferred Shares and (B) the Transfer Agent. Such Notice of Redemption at the Company's Election shall indicate (I) the number of Preferred Shares that have been selected for redemption, (II) the date that such redemption is to become effective (the "Date of Redemption at the Company's Election") and (III) the applicable Redemption Price at the Company's Election. Notwithstanding the above, any holder may convert into Common Stock pursuant to Section 5, on or prior to the date immediately preceding the Date of Redemption at the Company's Election, any Preferred Shares held by such holder (and, after such holder's receipt of the Notice of Redemption at the Company's Election, without regard to the conversion limitations set forth in Section 5), including Preferred Shares that have been selected for Redemption at the Company's Election pursuant to this Section 6.
(iii) Payment of Redemption Price. Each holder submitting Preferred Shares being redeemed under this Section 6 shall send such holder's Preferred Stock Certificates so redeemed to the Transfer Agent within five (5) business days after the Date of Redemption at the Company's Election, and the Company shall pay the applicable Redemption Price at the Company's Election to that holder in cash within three (3) business days after such holder's Preferred Stock Certificates are delivered to the Company or its Transfer Agent. If the Company shall fail to pay the applicable Redemption Price at the Company's Election to such holder on a timely basis as described in this Section 6(iii), in addition to any remedy such holder of Preferred Shares may have under this Certificate of Designations and the Subscription Agreement, the Fixed Conversion Price and Variable Conversion Price shall each be automatically reduced by ten percent (10%). Notwithstanding the foregoing, if the Company fails to pay the applicable Redemption Price at the Company's Election to a holder within the time period described in this Section 6 due to a dispute as to the arithmetic calculation of the Redemption Price at the Company's Election, such dispute shall be resolved pursuant to Section 5(b) above.
(iv) Company Must Have Immediately Available Funds or Credit Facilities. The Company shall not be entitled to send any Notice of Redemption at the Company's Election pursuant to Section 6(ii) above and begin the redemption procedure under this Section 6, unless it has:
(A) the full amount of the Redemption Price at the Company's Election in cash, available in a demand or other immediately available account in a bank or similar financial institution;
(B) credit facilities, with a bank or similar financial institutions that are immediately available and unrestricted for use in redeeming the Preferred Shares, in the full amount of the Redemption Price at the Company's Election;
(C) a written agreement with a standby underwriter or qualified buyer ready, willing and able to purchase from the Company a sufficient number of shares of stock to provide proceeds necessary to redeem any stock that is not converted prior to a Redemption at the Company's Election; or
(D) a combination of the items set forth in the preceding clauses (A), (B) and (C), aggregating the full amount of the Redemption Price at the Company's Election.
(v) Certain Conditions During Notice Period. The Company shall not be entitled to redeem the Preferred Shares on a Date of Redemption at the Election of the Company, unless each of the following conditions are satisfied as of the date of the Notice of Redemption at the Company's Election and on each day from such date until and including the later of the Date of Redemption at the Company's Election and the date on which the Company pays the applicable Redemption Price:
(A) The Registration Statement shall be effective and available for the sale of no less than 100% of the sum of (I) the number of shares of common stock then issuable upon the conversion of all outstanding Preferred Shares and (II) the number of shares of common stock then issuable upon exercise of all outstanding warrants held by the holders of Preferred Shares;
(B) The Common Stock is designated for quotation on the Nasdaq National Market, Nasdaq Small-Cap Market, The New York Stock Exchange, Inc. or The American Stock Exchange, Inc. and is not suspended from trading;
(C) The Company has delivered shares of common stock upon conversion of the Preferred Shares and exercise of the warrants held by the holders of Preferred Shares to the holders of Preferred Shares on a timely basis as set forth in Section 5 of this Certificate of Designations and as set forth in the warrants held by such holders, respectively; and
(D) The Company otherwise has satisfied its obligations and is not in default under this Certificate of Designations, the Subscription Agreement, the warrants held by the holders of Preferred Shares and the Registration Rights Agreement.
Section 7. VOTING RIGHTS. The Holders of the Series F Preferred Stock shall have no voting power whatsoever, except as otherwise provided by the General Corporation Law of the State of Delaware ("Delaware Law"), and no Holder of Series F Preferred Stock shall vote or otherwise participate in any proceeding in which actions shall be taken by the Company or the shareholders thereof or be entitled to notification as to any meeting of the shareholders.
Notwithstanding the above, the Company shall provide Holder with notification of any meeting of the shareholders regarding any major corporate events affecting the Company. In the event of any taking by the Company of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire any share of any class or any other securities or property (including by way of merger, consolidation or reorganization), or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Company, or any proposed liquidation, dissolution or winding up of the
Company, the Company shall mail a notice to Holder, at least ten (10) days prior to the record date specified therein, of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time.
To the extent that under Delaware Law the vote of the Holders of the Series F Preferred Stock, voting separately as a class, is required to authorize a given action of the Company, the affirmative vote or consent of the Holders of at least a majority of the shares of the Series F Preferred Stock represented at a duly held meeting at which a quorum is present or by written consent of a majority of the shares of Series F Preferred Stock (except as otherwise may be required under Delaware Law) shall constitute the approval of such action by the class. To the extent that under Delaware Law the Holders of the Series F Preferred Stock are entitled to vote on a matter with holders of Class A Common Stock, voting together as one (1) class, each share of Series F Preferred Stock shall be entitled to a number of votes equal to the number of shares of Class A Common Stock into which it is then convertible using the record date for the taking of such vote of stockholders as the date as of which the Conversion Price is calculated. Holders of the Series F Preferred Stock also shall be entitled to notice of all shareholder meetings or written consents with respect to which they would be entitled to vote, which notice would be provided pursuant to the Company's by-laws and applicable statutes.
Section 8. PROTECTIVE PROVISION. So long as shares of Series F Preferred Stock are outstanding, the Company shall not without first obtaining the approval (by vote or written consent, as provided by Delaware Law) of the Holders of at least seventy-five percent (75%) of the then outstanding shares of Series F Preferred Stock, and at least seventy-five percent (75%) of the then outstanding Holders:
(a) alter or change the rights, preferences or privileges of the Series F Preferred Stock or any securities so as to affect adversely the Series F Preferred Stock;
(b) create any new class or series of stock having a preference over or on parity with the Series F Preferred Stock with respect to Distributions (as defined in Section 2 above) or increase the size of the authorized number of Series F Preferred; or
(c) do any act or thing not authorized or contemplated by this Designation which would result in taxation of the holders of shares of the Series F Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as amended (or any comparable provision of the Internal Revenue Code as hereafter from time to time amended).
In the event Holders of at least seventy-five percent (75%) of the then outstanding shares of Series F Preferred Stock and at least seventy-five percent (75%) of the then outstanding Holders agree to allow the Company to alter or change the rights, preferences or privileges of the shares of Series F Preferred Stock, pursuant to subsection (a) above, so as to affect the Series F Preferred Stock, then the Company will deliver notice of such approved change to the Holders of the Series F Preferred Stock that did not agree to such alteration or change (the "Dissenting Holders") and Dissenting Holders shall have the right for a period of thirty (30) business days to convert pursuant to the terms of this Certificate of Designation as they exist prior to such alteration or change (notwithstanding the holding requirements set forth in Section 5(a) hereof), or continue to hold their shares of Series F Preferred Stock, as amended.
Section 9. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares of Series F Preferred Stock shall be converted or redeemed pursuant to Section 5 or Section 6 hereof, the shares so converted or redeemed shall be canceled, shall return to the status of authorized but unissued Preferred Stock of no designated series, and shall not be issuable by the Company as Series F Preferred Stock.
Section 10. PREFERENCE RIGHTS. Nothing contained herein shall be construed to prevent the Board of Directors of the Company from issuing one (1) or more series of Preferred Stock with dividend and/or liquidation preferences junior to the dividend and liquidation preferences of the Series F Preferred Stock.
Section 11. AUTHORIZATION AND RESERVATION OF SHARES OF COMMON STOCK.
(a) AUTHORIZED AND RESERVED AMOUNT. The Company shall have authorized and reserved and keep available for issuance one million nine hundred twenty-five thousand (1,925,000) shares of Class A Common Stock (the "Reserved Amount") solely for the purpose of effecting the conversion of the Series F Preferred Stock, and exercise of the warrants to acquire Class A Common Stock (the "Common Warrants") issued or to be issued to the Holders. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock a sufficient number of shares of Class A Common Stock to provide for the full conversion of all outstanding Series F Preferred Stock, and issuance of the shares of Class A Common Stock in connection therewith and the full exercise of the Common Warrants and issuance of the shares of Class A Common Stock in connection therewith.
(b) INCREASES TO RESERVED AMOUNT. Without limiting any other provision of this Section 11, if the Reserved Amount for any three (3) consecutive trading days (the last of such three (3) trading days being the "Reservation Trigger Date") shall be less than one hundred twenty-five percent (125%) of the number of shares of Class A Common Stock issuable upon conversion of this Series F Preferred Stock, and one hundred percent of the number of shares of Class A Common Stock issuable upon exercise of the Common Warrants on such trading days (a "Share Authorization Failure"), the Company shall immediately notify all Holders of such occurrence and shall take action as soon as possible, but in any event within sixty (60) days after a Reservation Trigger Date (including, if necessary, seeking shareholder approval to authorize the issuance of additional shares of Class A Common Stock) to increase the Reserved Amount to one hundred fifty percent (150%) of the number of shares of Class A Common Stock then issuable upon conversion of the Series F Preferred Stock, and one hundred percent of the number of shares of Class A Common Stock issuable upon exercise of the Common Warrants.
(c) REDUCTION OF RESERVED AMOUNT UNDER CERTAIN CIRCUMSTANCES. Prior to complete conversion of all Series F Preferred Stock the Company shall not reduce the number of shares required to be reserved for issuance under this Section 11 without the written consent of all Holders except for a reduction proportionate to a reverse stock split effected for a business purpose other than affecting the obligations of Holder under this Section 11, which reverse stock split affects all shares of Class A Common Stock equally. Following complete conversion of all the Series F Preferred Stock, the Company may, with fifteen
(15) days prior written notice to Holder, reduce the Reserved Amount to one
hundred twenty-five percent (125%) of the number of shares of Class A Common
Stock issuable upon the full exercise of the Common Warrants; provided, however,
that the Reserved Amount shall continue to be subject to increase pursuant to
Section 11 hereof.
(d) ALLOCATION OF RESERVED AMOUNT. Each increase to the Reserved Amount shall be allocated pro rata among the Holders based on the number of Series F Preferred Stock, and Common Warrants held by each Holder at the time of the establishment of or increase in the Reserved Amount. In the event a Holder shall sell or otherwise transfer any of such Holder's Series F Preferred Stock, or Common Warrants, each transferee shall be allocated a pro rata portion of such transferor's Reserved Amount. Any portion of the Reserved Amount which remains allocated to any person or entity which does not hold any Series F Preferred Stock shall be allocated to the remaining Holders, pro rata based on the number of Series F Preferred Stock, and Common Warrants then held by such Holders.
(e) CAP AMOUNT. Unless otherwise permitted by Nasdaq, in no event shall the total number of shares of Common Stock issued upon exercise of all of the Warrants and upon conversion of the Series F Preferred Stock exceed the maximum number of shares of Common Stock (the "Cap Amount") that the Company can, without shareholder approval, so issue pursuant to Nasdaq Rule 4460(i)(1)(d)(ii) (or any other applicable Nasdaq Rules or any successor rule) (the "Nasdaq 20% Rule"). The Cap Amount shall be allocated pro-rata to the holders of Series F Preferred Stock as provided in subsection (f) below. In the event the Company is prohibited from issuing shares of Common Stock as a result of the operation of this subsection (e), the Company shall comply with subsection (g) below.
(f) ALLOCATIONS OF CAP AMOUNT AND RESERVED AMOUNT. The initial Cap Amount and Reserved Amount shall be allocated pro rata among the Holders of Series F Preferred Stock based on the number of the shares of Series F Preferred Stock initially issued to each Holder. Each increase to the Cap Amount and Reserved Amount shall be allocated pro rata among the Holders of Series F Preferred Stock based on the number of the shares of Series F Preferred Stock held by each Holder at the time of the increase in the Cap Amount or Reserved Amount, as the case may be. In the event a holder shall sell or otherwise transfer any of such Holder's shares of Series F Preferred Stock, each transferee shall be allocated a pro rata portion of such transferor's Cap amount and Reserved Amount. Any portion of the Cap Amount or Reserved Amount which remains allocated to any person or entity which does not hold any Series F Preferred Stock shall be allocated to the remaining holders of shares of Series F Preferred Stock, pro rata based on the number of shares of Series F Preferred Stock then held by such Holders.
(g) INABILITY TO CONVERT DUE TO CAP AMOUNT.
(i) OBLIGATION TO CURE. If, on the last business day of any month, or at any time a Holder so notifies the Company in writing, the then unissued portion of any Holder's Cap Amount is less than 125% of the number of shares of Common Stock then issuable upon conversion of such Holder's shares of Series F Preferred Stock (a "Trading Market Trigger Event"), the Company shall immediately notify the Holders of Series F Preferred Stock of such occurrence and shall immediately take all necessary action (including, if necessary, approval of its shareholders to authorize the issuance of the full number of shares of Common Stock which would be issuable upon the conversion of Series F Preferred Stock but for the Cap Amount) to eliminate any prohibitions under applicable law or the rules or regulations of any stock exchange, interdealer
quotation system or other self-regulatory organization with jurisdiction over the Company or any of its securities on the Company's ability to issue shares of Common Stock in excess of the Cap Amount.
(ii) REMEDIES. In the event the Company fails to eliminate all such prohibitions within one hundred twenty (120) days after the Trading Market Trigger Event (provided, however, that (A) the Company must file preliminary proxy materials with the SEC within thirty (30) days of the Trading Market Trigger Event and (B) officers and directors of the Company shall promptly upon the occasion of any such Trading Market Trigger event enter into irrevocable agreements to vote all of their shares in favor of eliminating such prohibitions), each Holder of Series F Preferred Stock shall thereafter have the option, exercisable in whole or in part at any time and from time to time by delivery of written notice ("Cap Redemption Notice") to the Company, to require the Company to purchase for cash, at an amount per share to the Redemption Price at the Company's Election (as defined in Section 6(i) above), a portion of the Holder's Series F Preferred Stock such that, after giving effect to such purchase, the holder's allocated portion of the Cap Amount exceeds 125% of the total number of shares of Common Stock issuable to such holder upon conversion of its Series F Preferred Stock on the date of such Cap Redemption Notice.
Section 12. FAILURE TO SATISFY CONVERSIONS.
(a) CONVERSION FAILURE PAYMENTS. If, at any time, (x) a Holder submits a Notice of Conversion (or is deemed to submit such notice pursuant to Section 5(d) hereof), and the Company fails for any reason to deliver, on or prior to the expiration of the Deadline ("Delivery Period") for such conversion, such number of shares of Class A Common Stock to which such Converting Holder is entitled upon such conversion, or (y) the Company provides notice to Holder at any time of its intention not to issue shares of Class A Common Stock upon exercise by Holder of its conversion rights in accordance with the terms of this Certificate of Designation (each of (x) and (y) being a "Conversion Failure"), then the Company shall pay to such Holder damages in an amount equal to the lower of:
(i) "Damages Amount" X "D" X .005, and
(ii) the highest interest rate permitted by applicable law,
where:
"D" means the number of days beginning the date of the Conversion Failure through and including the Cure Date with respect to such Conversion Failure;
"Damages Amount" means the Original Series F Issue Price for each share of Series F Preferred Stock subject to conversion plus all accrued and unpaid interest thereon as of the first day of the Conversion Failure.
"Cure Date" means (i) with respect to a Conversion Failure described in clause (x) of its definition, the date the Company effects the conversion of the shares of Series F Preferred Stock submitted for conversion and (ii) with respect to a Conversion Failure described in clause (y) of its definition, the date the Company undertakes in writing to issue Class A Common Stock in satisfaction of all conversions of Series F Preferred Stock in accordance with the terms of this Certificate of Designation.
The payments to which a Holder shall be entitled pursuant to this Section are referred to herein as "Conversion Failure Payments." The parties agree that the damages caused by a breach hereof would be difficult or impossible to
estimate accurately. A Holder may elect to receive accrued Conversion Failure Payments in cash or to convert all or any portion of such accrued Conversion Failure Payments, at any time, into Class A Common Stock at the lowest Conversion Price in effect during the period beginning on the date of the Conversion Failure through the Cure Date for such Conversion Failure. In the event a Holder elects to receive any Conversion Failure Payments in cash, it shall so notify the Company in writing no later than three (3) business days after the Deadline and failure to so notify the Company, shall entitle the Company, in its sole discretion, to elect to make such Conversion Failure Payments in cash, Class A Common Stock or some combination of the two. In the event a Holder elects to convert all or any portion of the Conversion Failure Payments, such Holder shall indicate on a Notice of Conversion such portion of the Conversion Failure Payments which such Holder elects to so convert in accordance with this Section 12(a) and such conversion shall otherwise be effected in accordance with provisions of Section 5.
(b) BUY-IN CURE. Unless a Conversion Failure described in clause (y)
of Section 12(a) hereof has occurred with respect to such a Holder, if (i) the
Company fails for any reason to deliver during the Delivery Period shares of
Class A Common Stock to a Holder upon a conversion of the Series F Preferred
Stock and (ii) after the applicable Delivery Period with respect to such
conversion, a Holder purchases (in an open market transaction or otherwise)
shares of Class A Common Stock to make delivery upon a sale by a Holder of the
shares of Class A Common Stock (the "Sold Shares") which such Holder anticipated
receiving upon such conversion (a "Buy-In"), the Company shall pay such Holder
(in addition to any other remedies available to Holder) the amount by which (x)
such Holder's total purchase price (including brokerage commission, if any) for
the shares of Class A Common Stock so purchased exceeds (y) the net proceeds
received by such Holder from the sale of the Sold Shares. For example, if a
Holder purchases shares of Class A Common Stock having a total purchase price of
$11,000 to cover a Buy-In with respect to shares of Class A Common Stock sold
for $10,000, the Company will be required to pay such Holder $1,000. A Holder
shall provide the Company written notification indicating any amounts payable to
Holder pursuant to this Section 12.
(c) ADJUSTMENT TO CONVERSION PRICE. If a Holder has not received certificates for all shares of Class A Common Stock within five (5) business days following the expiration of the Delivery Period with respect to a conversion of any portion of any of such Holder's Series F Preferred Stock for any reason, then the Conversion Price for the affected Series F Preferred Stock shall thereafter be the lesser of (i) the Fixed Conversion Price on the Conversion Date specified in the Notice of Conversion which resulted in the Conversion Failure and (ii) the lowest Conversion Price in effect during the period beginning on, and including, such Conversion Date through and including the Cure Date. If there shall occur a Conversion Failure of the type described in clause (y) of Section 12(a), then the Fixed Conversion Price with respect to any conversion thereafter shall be the lowest Conversion Price in effect at any time during the period beginning on, and including, the date of the occurrence of such Conversion Failure through and including the Cure Date. The Conversion Price shall thereafter be subject to further adjustment for any events described in Section 5(d).
Section 13. EVENTS OF DEFAULT.
(a) HOLDER'S OPTION TO DEMAND PREPAYMENT. Upon the occurrence of an Event of Default (as herein defined), each Holder shall have the right to elect at any time and from time to time prior to the cure by the Company of such Event
of Default to have all or any portion of such Holder's then outstanding Series F Preferred Stock prepaid by the Company for an amount equal to the Holder Demand Prepayment Amount (as herein defined).
(i) The right of a Holder to elect prepayment shall be exercisable upon the occurrence of an Event of Default by such Holder in its sole discretion by delivery of a Demand Prepayment Notice (as herein defined) in accordance with the procedures set forth in this Section 13. Notwithstanding the exercise of such right, the Holder shall be entitled to exercise all other rights and remedies available under the provisions of this Certificate of Designation and at law or in equity.
(ii) A Holder shall effect each demand for prepayment under this
Section 13 by giving at least two (2) business days prior to written notice (the
"Demand Prepayment Notice") of the date which such prepayment is to become
effective (the "Effective Date of Demand of Prepayment"), the Series F Preferred
Stock selected for prepayment and the Holder Demand Prepayment Amount to the
Company at the address and facsimile number provided in the stock records of the
Company, which Demand Prepayment Notice shall be deemed to have been delivered
on the business day after the date of transmission of Holder's facsimile (with a
copy sent by overnight courier to the Company) of such notice.
(iii) The Holder Demand Prepayment Amount shall be paid to a
Holder whose Series F Preferred Stock are being prepaid within one (1) business
day following the Effective Date of Demand of Prepayment; provided, however,
that the Company shall not be obligated to deliver any portion of the Holder
Demand Prepayment Amount until one (1) business day following either the date on
which the Series F Preferred Stock being prepaid are delivered to the office of
the Company or the Transfer Agent, or the date on which the Holder notifies the
Company or the Transfer Agent that such Series F Preferred Stock have been lost,
stolen or destroyed and delivers the documentation required in accordance with
Section 5(b)(i) hereof.
(b) HOLDER DEMAND PREPAYMENT AMOUNT. The "Holder Demand Prepayment Amount" means the greater of: (a) 1.3 times the Stated Value of the Series F Preferred Stock for which demand is being made, plus all accrued and unpaid interest thereon and accrued and unpaid Conversion Failure Payments (if any) through the date of prepayment and (b) the product of (1) the highest price at which the Class A Common Stock is traded on the date of the Event of Default (or the most recent highest closing bid price if the Class A Common Stock is not traded on such date) divided by the Conversion Price in effect as of the date of the Event of Default, and (2) the sum of the Stated Value and all accrued and unpaid Conversion Failure Payments (if any) through the date of prepayment.
(c) EVENTS OF DEFAULT. An "Event of Default" means any one of the following:
(i) a Conversion Failure described in Section 12(a) hereof;
(ii) a Share Authorization Failure described in Section 11(b) hereof, if such Share Authorization Failure continues uncured for ninety (90) days after the Reservation Trigger Date;
(iii) the Company fails, and such failure continues uncured for three (3) business days after the Company has been notified thereof in writing by a Holder, to satisfy the share reservation requirements of Section 11 hereof;
(iv) the Company fails to maintain an effective registration statement as required by Section 2, Section 3 and Section 6 of the Registration Rights Agreement, between the Company and the Holder(s) (the "Registration Rights Agreement") except where such failure lasts no longer than three (3) consecutive trading days and is caused solely by failure of the Securities and Exchange Commission to timely review the customary submission of or respond to the customary requests of the Company;
(v) for three (3) consecutive trading days or for an aggregate of ten (10) trading days in any nine (9) month period, the Class A Common Stock (including any of the shares of Class A Common Stock issuable upon conversion of the Series F Preferred Stock, and exercise of the Common Warrants) is (i) suspended from trading on any of NASDAQ SmallCap, NMS, NYSE, AMEX or the OTC Bulletin Board, or (ii) is not qualified for trading on at least one of NASDAQ SmallCap, NMS, NYSE, AMEX or the OTC Bulletin Board;
(vi) the Company fails, and such failure continues uncured for three (3) business days after the Company has been notified thereof in writing by a Holder, to remove any restrictive legend on any certificate for any shares of Class A Common Stock issued to a Holder upon conversion of any Series F Preferred Stock, or exercise of any Common Warrant as and when required by this Certificate of Designation, the Common Warrants, the Subscription Agreement, between the Company and the Holder(s) (the "Subscription Agreement") or the Registration Rights Agreement;
(vii) the Company breaches, and such breach continues uncured for three (3) business days after the Company has been notified thereof in writing by a Holder, any significant covenant or other material term or condition of this Certificate of Designation, the Subscription Agreement, the Common Warrants or the Registration Rights Agreement;
(viii) any representation or warranty of the Company made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Subscription Agreement and Registration Rights Agreement), shall be false or misleading in any material respect when made;
(ix) the Company or any subsidiary of the Company shall make an assignment for the benefit of its creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such receiver or trustee shall otherwise be appointed; or
(x) bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Company or any subsidiary of the Company (and such proceedings shall continue unstayed for thirty (30) days).
(d) FAILURE TO PAY DAMAGES AMOUNT. If the Company fails to pay the Holder Demand Prepayment Amount within five (5) business days of its receipt of a Demand Prepayment Notice, then such Holder shall have the right, at any time
and from time to time prior to the payment of the Holder Demand Prepayment Amount, to require the Company, upon written notice, to immediately convert (in accordance with the terms of Section 5) all or any portion of the Holder Demand Prepayment Amount, into shares of Class A Common Stock at the then current Conversion Price, provided that if the Company has not delivered the full number of shares of Class A Common Stock issuable upon such conversion within five (5) business days after the Company receives written notice of such conversion, the Conversion Price with respect to such Holder Demand Prepayment Amount shall thereafter be deemed to be the at the lowest Conversion Price in effect during the period beginning on the date of the Event of Default through the date on which the Company delivers to the Holder the full number of freely tradable shares of Class A Common Stock issuable upon such conversion. In the event the Company is not able to pay all amounts due and payable with respect to all Series F Preferred Stock subject to Holder Demand Prepayment Notices, the Company shall pay the Holders such amounts pro rata, based on the total amounts payable to such Holder relative to the total amounts payable to all Holders.
Signed on November 2, 1999.
/s/ Donald E. Lawson ----------------------------------- Donald E. Lawson, President |
EXHIBIT 4.4
FORM OF CLASS K WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SUBSCRIBERS MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE DOCUMENTS AS EXHIBIT F.
Warrant to Purchase
__________ shares
CLASS K WARRANT TO PURCHASE COMMON STOCK
OF
LIGHTPATH TECHNOLOGIES, INC.
THIS CERTIFIES that ________________ or any subsequent holder hereof ("Holder"), has the right to purchase from LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation (the "Company"), up to _______________ fully paid and nonassessable shares of the Company's Class A common stock, $.01 par value per share ("Common Stock"), subject to adjustment as provided herein, at a price equal to the Exercise Price as defined in Section 3 below, at any time beginning on the Date of Issuance (defined below) and ending at 5:00 p.m., New York, New York time, on November, 2004 (the "Exercise Period").
Holder agrees with the Company that this Warrant to Purchase Common Stock of LightPath Technologies, Inc. (this "Warrant") is issued and all rights hereunder shall be held subject to all of the conditions, limitations and provisions set forth herein.
1. DATE OF ISSUANCE.
This Warrant shall be deemed to be issued on November 2, 1999 ("Date of Issuance").
2. EXERCISE.
(a) MANNER OF EXERCISE. During the Exercise Period, this Warrant may be exercised as to all or any lesser number of full shares of Common Stock covered hereby upon surrender of this Warrant, with the Exercise Form attached hereto as Exhibit A (the "Exercise Form") duly completed and executed, together with the full Exercise Price (as defined below) for each share of Common Stock as to which this Warrant is exercised, at the office of the Company, 6820 Academy Parkway East NE, Albuquerque, New Mexico 87109; Attention: President, Telephone No. (505) 342-1100, Telecopy No. (505) 342-1111, or at such other office or agency as the Company may designate in writing, by overnight mail, with an advance copy of the Exercise Form sent to the Company and its Transfer Agent by facsimile (such surrender and payment of the Exercise Price hereinafter called the "Exercise of this Warrant").
(b) DATE OF EXERCISE. The "Date of Exercise" of the Warrant shall be defined as the date that the advance copy of the completed and executed Exercise Form is sent by facsimile to the Company, provided that the original Warrant and Exercise Form are received by the Company as soon as practicable thereafter. Alternatively, the Date of Exercise shall be defined as the date the original Exercise Form is received by the Company, if Holder has not sent advance notice by facsimile.
(c) CANCELLATION OF WARRANT. This Warrant shall be canceled upon the Exercise of this Warrant, and, as soon as practical after the Date of Exercise, Holder shall be entitled to receive Common Stock for the number of shares purchased upon such Exercise of this Warrant, and if this Warrant is not exercised in full, Holder shall be entitled to receive a new Warrant (containing terms identical to this Warrant) representing any unexercised portion of this Warrant in addition to such Common Stock.
(d) HOLDER OF RECORD. Each person in whose name any Warrant for shares of Common Stock is issued shall, for all purposes, be deemed to be the Holder of record of such shares on the Date of Exercise of this Warrant, irrespective of the date of delivery of the Common Stock purchased upon the Exercise of this Warrant. Nothing in this Warrant shall be construed as conferring upon Holder any rights as a stockholder of the Company.
3. PAYMENT OF WARRANT EXERCISE PRICE.
The Exercise Price shall equal $5.00 per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a combination thereof, at the election of Holder:
(i) CASH EXERCISE: cash, bank or cashiers check or wire transfer; or
(ii) CASHLESS EXERCISE: subject to the last sentence of this Section 3, surrender of this Warrant at the principal office of the Company together with notice of cashless election, in which event the Company shall issue Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being exercised.
A = the Market Price of one (1) share of Common Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined as the average closing bid price of the Common Stock for the five (5) trading days prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as reported by the National Association of Securities Dealers Automated Quotation System ("Nasdaq") Small Cap Market, or if the Common Stock is not traded on the Nasdaq Small Cap Market, the Average Closing Price in any other over-the-counter market; provided, however, that if the Common Stock is listed on a stock exchange, the Market Price shall be the Average Closing Price on such exchange for the five (5) trading days prior to the date of exercise of the Warrants. If the Common Stock is/was not traded during the five (5) trading days prior to the Date of Exercise, then the closing price for the last publicly traded day shall be deemed to be the closing price for any and all (if applicable) days during such five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood and acknowledged that the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it is intended, understood and acknowledged that the holding period for the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction shall be deemed to have commenced on the date this Warrant was issued.
Notwithstanding anything to the contrary contained herein, this Warrant may not be exercised in a cashless exercise transaction if, on the Date of Exercise, the shares of Common Stock to be issued upon exercise of this Warrant would upon such issuance (x) be immediately transferable in the United States free of any restrictive legend, including without limitation under Rule 144; (y) be then registered pursuant to an effective registration statement filed pursuant to that certain Registration Rights Agreement dated on or about November 1, 1999 by and among the Company and certain investors; or (z) otherwise be registered under the Securities Act of 1933, as amended.
4. TRANSFER AND REGISTRATION.
(a) TRANSFER RIGHTS. Subject to the provisions of Section 8 of this Warrant, this Warrant may be transferred on the books of the Company, in whole or in part, in person or by attorney, upon surrender of this Warrant properly completed and endorsed. This Warrant shall be canceled upon such surrender and, as soon as practicable thereafter, the person to whom such transfer is made shall be entitled to receive a new Warrant or Warrants as to the portion of this Warrant transferred, and Holder shall be entitled to receive a new Warrant as to the portion hereof retained.
(b) REGISTRABLE SECURITIES. The Common Stock issuable upon the exercise of this Warrant constitutes "Registrable Securities" under that certain Registration Rights Agreement dated on or about November 1, 1999 between the Company and certain investors and, accordingly, has the benefit of the registration rights pursuant to that agreement.
5. ANTI-DILUTION ADJUSTMENTS.
(a) STOCK DIVIDEND. If the Company shall at any time declare a dividend payable in shares of Common Stock, then Holder, upon Exercise of this Warrant after the record date for the determination of holders of Common Stock entitled to receive such dividend, shall be entitled to receive upon Exercise of this Warrant, in addition to the number of shares of Common Stock as to which this Warrant is exercised, such additional shares of Common Stock as such Holder would have received had this Warrant been exercised immediately prior to such record date and the Exercise Price will be proportionately adjusted.
(b) RECAPITALIZATION OR RECLASSIFICATION. If the Company shall at any time effect a recapitalization, reclassification or other similar transaction of such character that the shares of Common Stock shall be changed into or become exchangeable for a larger or smaller number of shares, then upon the effective date thereof, the number of shares of Common Stock which Holder shall be entitled to purchase upon Exercise of this Warrant shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in the number of shares of Common Stock by reason of such recapitalization, reclassification or similar transaction, and the Exercise Price shall be, in the case of an increase in the number of shares, proportionally decreased and, in the case of decrease in the number of shares, proportionally increased. The Company shall give Holder the same notice it provides to holders of Common Stock of any transaction described in this Section 5(b).
(c) DISTRIBUTIONS. If the Company shall at any time distribute for no consideration to holders of Common Stock cash, evidences of indebtedness or other securities or assets (other than cash dividends or distributions payable out of earned surplus or net profits for the current or preceding year) then, in any such case, Holder shall be entitled to receive, upon Exercise of this Warrant, with respect to each share of Common Stock issuable upon such exercise, the amount of cash or evidences of indebtedness or other securities or assets which Holder would have been entitled to receive with respect to each such share of Common Stock as a result of the happening of such event had this Warrant been exercised immediately prior to the record date or other date fixing shareholders to be affected by such event (the "Determination Date") or, in lieu thereof, if the Board of Directors of the Company should so determine at the time of such distribution, a reduced Exercise Price determined by multiplying the Exercise Price on the Determination Date by a fraction, the numerator of which is the result of such Exercise Price reduced by the value of such distribution applicable to one share of Common Stock (such value to be determined by the Board of Directors of the Company in its discretion) and the denominator of which is such Exercise Price.
(d) NOTICE OF CONSOLIDATION OR MERGER. In the event of a merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities or other assets of the Company or another entity or there is a sale of all or substantially all the Company's assets (a "Corporate Change"), then this Warrant shall be exerciseable into such class and type of securities or other assets as Holder would have received had Holder exercised this Warrant immediately prior to such Corporate Change; provided, however, that Company may not affect any Corporate Change unless it first shall have given thirty (30) days notice to Holder hereof of any Corporate Change.
(e) EXERCISE PRICE ADJUSTED. As used in this Warrant, the term "Exercise Price" shall mean the purchase price per share specified in Section 3 of this Warrant, until the occurrence of an event stated in subsection (a), (b) or (c) of this Section 5, and thereafter shall mean said price as adjusted from time to time in accordance with the provisions of said subsection. No such adjustment under this Section 5 shall be made unless such adjustment would change the Exercise Price at the time by $.01 or more; provided, however, that all adjustments not so made shall be deferred and made when the aggregate thereof would change the Exercise Price at the time by $.01 or more. No adjustment made pursuant to any provision of this Section 5 shall have the net effect of increasing the Exercise Price. The number of shares of Common Stock subject hereto shall increase proportionately with each decrease in the Exercise Price.
(f) ADJUSTMENTS: ADDITIONAL SHARES, SECURITIES OR ASSETS. In the event that at any time, as a result of an adjustment made pursuant to this Section 5, Holder shall, upon Exercise of this Warrant, become entitled to receive shares and/or other securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 5.
6. FRACTIONAL INTERESTS.
No fractional shares or scrip representing fractional shares shall be issuable upon the Exercise of this Warrant, but on Exercise of this Warrant, Holder may purchase only a whole number of shares of Common Stock. If, on Exercise of this Warrant, Holder would be entitled to a fractional share of Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock issuable upon exercise shall be the next higher number of shares.
7. RESERVATION OF SHARES.
The Company shall at all times reserve for issuance such number of authorized and unissued shares of Common Stock (or other securities substituted therefor as herein above provided) as shall be sufficient for the Exercise of this Warrant and payment of the Exercise Price. The Company covenants and agrees that upon the Exercise of this Warrant, all shares of Common Stock issuable upon such exercise shall be duly and validly issued, fully paid, nonassessable and not subject to preemptive rights, rights of first refusal or similar rights of any person or entity.
8. RESTRICTIONS ON TRANSFER.
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant has been issued in a transaction exempt from the registration requirements of the Act by virtue of Regulation D and exempt from state registration under applicable state laws. The Warrant and the Common Stock issuable upon the Exercise of this Warrant may not be pledged, transferred, sold or assigned except pursuant to an effective registration statement or an exemption to the registration requirements of the Act and applicable state laws.
(b) ASSIGNMENT. If Holder can provide the Company with reasonably satisfactory evidence that the conditions of (a) above regarding registration or exemption have been satisfied, Holder may sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver a written notice to Company, substantially in the form of the Assignment attached hereto as Exhibit B, indicating the person or persons to whom the Warrant shall be assigned and the respective number of warrants to be assigned to each assignee. The Company shall effect the assignment within ten (10) days, and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants of like tenor and terms for the appropriate number of shares.
9. BENEFITS OF THIS WARRANT.
Nothing in this Warrant shall be construed to confer upon any person other than the Company and Holder any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be for the sole and exclusive benefit of the Company and Holder.
10. APPLICABLE LAW.
This Warrant is issued under and shall for all purposes be governed by and construed in accordance with the laws of the state of Delaware, without giving effect to conflict of law provisions thereof.
11. LOSS OF WARRANT.
Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date.
12. NOTICE OR DEMANDS.
Notices or demands pursuant to this Warrant to be given or made by Holder
to or on the Company shall be sufficiently given or made if sent by certified or
registered mail, return receipt requested, postage prepaid, and addressed, until
another address is designated in writing by the Company, to Attention:
President, 6820 Academy Parkway East NE, Albuquerque, New Mexico 87109,
Telephone No. (505) 342-1100, Telecopy No. (505) 342-1111. Notices or demands
pursuant to this Warrant to be given or made by the Company to or on Holder
shall be sufficiently given or made if sent by certified or registered mail,
return receipt requested, postage prepaid, and addressed, to the address of
Holder set forth in the Company's records, until another address is designated
in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 2nd day of November, 1999.
LIGHTPATH TECHNOLOGIES, INC.
By: /s/ Donald E. Lawson
-----------------------------------------
Donald E. Lawson, President
|
EXHIBIT A
EXERCISE FORM FOR CLASS K WARRANT
TO: LIGHTPATH TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________ of the shares of Class A Common Stock (the "Common Stock") of LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation (the "Company"), evidenced by the attached warrant (the "Warrant"), and herewith makes payment of the exercise price with respect to such shares in full, all in accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any of the Common Stock obtained on exercise of the Warrant, except in accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued free of any restrictive legend, if appropriate, and a warrant representing any unexercised portion hereof be issued, pursuant to the Warrant in the name of the undersigned and delivered to the undersigned at the address set forth below:
Dated: _________________________
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the "Warrant") hereby sells, assigns and transfers unto the person or persons below named the right to purchase _______ shares of the Class A Common Stock of LIGHTPATH TECHNOLOGIES, INC., evidenced by the attached Warrant and does hereby irrevocably constitute and appoint _______________________ attorney to transfer the said Warrant on the books of the Company, with full power of substitution in the premises.
Dated: ___________ ____________________________________________ Signature
Fill in for new registration of Warrant:
EXHIBIT 4.5
FORM OF CLASS L WARRANT
THIS WARRANT AND THE SECURITIES RECEIVABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. SUBSCRIBERS MUST RELY ON THEIR OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE DOCUMENTS AS EXHIBIT F.
Warrant to Purchase
125,000 shares
SERIES L WARRANT TO PURCHASE COMMON STOCK
OF
LIGHTPATH TECHNOLOGIES, INC.
THIS CERTIFIES that Dunwoody Brokerage Services, Inc. or any subsequent
("Holder") hereof, has the right to purchase from LIGHTPATH TECHNOLOGIES, INC.,
a Delaware corporation (the "Company"), not more than 125,000 fully paid and
nonassessable shares of the Company's Class A Common Stock, $.01 par value
("Common Stock"), at a price equal to the Exercise Price as defined in Section 3
below, subject to adjustment as provided herein, at any time on or before 5:00
p.m., Atlanta, Georgia time, on November 2, 2004.
The Holder of this Warrant agrees with the Company that this Warrant is issued and all rights hereunder shall be held subject to all of the conditions, limitations and provisions set forth herein.
1. DATE OF ISSUANCE.
This Warrant shall be deemed to be issued on November 2, 1999 ("Date of Issuance").
2. EXERCISE.
(a) MANNER OF EXERCISE. This Warrant may be exercised as to all or any lesser number of full shares of Common Stock covered hereby upon surrender of this Warrant, with the Exercise Form attached hereto duly completed and executed, together with the full Exercise Price (as defined in Section 3) for each share of Common Stock as to which this Warrant is exercised, at the office of the Company, LightPath Technologies, Inc., 6820 Academy Parkway East NE, Albuquerque, New Mexico 87109, Attention: President, Telephone No. (505) 342-1100, Telecopy No. (505) 342-1111, or at such other office or agency as the Company may designate in writing, by overnight mail, with an advance copy of the Exercise Form attached as Exhibit A ("Exercise Form") sent by facsimile to the Company and its Transfer Agent (such surrender and payment of the Exercise Price hereinafter called the "Exercise of this Warrant").
(b) DATE OF EXERCISE. The "Date of Exercise" of the Warrant shall be
defined as the date that the advance copy of the completed and executed Exercise
Form is sent by facsimile to the Company and its Transfer Agent, provided that
the original Warrant and Exercise Form are received by the Company within five
(5) business days thereafter. The original Warrant and Exercise Form must be
received within five (5) business days of the Date of Exercise, or the exercise may, at the Company's option, be considered void. Alternatively, the Date of Exercise shall be defined as the date the original Exercise Form is received by the Company, if Holder has not sent advance notice by facsimile.
(c) CANCELLATION OF WARRANT. This Warrant shall be canceled upon its Exercise, and, as soon as practical after the Date of Exercise, the Holder hereof shall be entitled to receive Common Stock for the number of shares purchased upon such Exercise, and if this Warrant is not exercised in full, the Holder shall be entitled to receive a new Warrant or Warrants (containing terms identical to this Warrant) representing any unexercised portion of this Warrant in addition to such Common Stock.
(d) HOLDER OF RECORD. Each person in whose name any Warrant for shares of Common Stock is issued shall, for all purposes, be deemed to have become the Holder of record of such shares on the Date of Exercise of this Warrant, irrespective of the date of delivery of such shares of Common Stock. Nothing in this Warrant shall be construed as conferring upon the Holder hereof any rights as a shareholder of the Company.
3. PAYMENT OF WARRANT EXERCISE PRICE.
The Exercise Price ("Exercise Price") shall equal $5.00 ("Initial Exercise Price") or, if the Date of Exercise is more than one (1) year after the Date of Issuance, the lesser of (i) the Initial Exercise Price or (ii) the "Lowest Reset Price", as that term is defined below. The Company shall calculate a "Reset Price" on each six month anniversary date of the Date of Issuance which shall equal one hundred percent (100%) of the average Closing Price of the Company's Common Stock for the five (5) trading days ending on such six month anniversary date of the Date of Issuance. The "Lowest Reset Price" shall equal the lowest Reset Price determined on any six month anniversary date of the Date of Issuance preceding the Date of Exercise, taking into account, as appropriate, any adjustments made pursuant to Section 5 hereof.
For purposes hereof, the term "Closing Price" shall mean the closing bid price on the National Association of Securities Dealers Automated Quotation System ("Nasdaq") Small Cap Market or OTC Bulletin Board, or if no longer traded on the Nasdaq Small Cap Market or OTC Bulletin Board, the closing price on the principal national securities exchange or the over-the-counter system on which the Common Stock is so traded and, if not available, the mean of the high and low prices on the principal national securities exchange or the National Securities Exchange on which the Common Stock is so traded.
Payment of the Exercise Price may be made by either of the following or a combination thereof, at the election of Holder:
(i) CASH EXERCISE: cash, bank or cashiers check or wire transfer; or
(ii) CASHLESS EXERCISE: surrender of this Warrant at the principal office of the Company together with notice of cashless election, in which event the Company shall issue Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being exercised.
A = the Market Price of one (1) share of Common Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined as the average closing price of the Common Stock for the five (5) trading days prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as reported by Nasdaq or if the Common Stock is not traded on Nasdaq, the Average Closing Price in the over-the-counter market; provided, however, that if the Common Stock is listed on a stock exchange, the Market Price shall be the Average Closing Price on such exchange. If the Common Stock is/was not traded during the five (5) trading days prior to the Date of Exercise, then the closing price for the last publicly traded day shall be deemed to be the closing price for any and all (if applicable) days during such five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood and acknowledged that the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it is intended, understood and acknowledged that the holding period for the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction shall be deemed to have commenced on the date this Warrant was issued.
4. TRANSFER AND REGISTRATION.
(a) TRANSFER RIGHTS. Subject to the provisions of Section 8 of this Warrant, this Warrant may be transferred on the books of the Company, in whole or in part, in person or by attorney, upon surrender of this Warrant properly completed and endorsed. This Warrant shall be canceled upon such surrender and, as soon as practicable thereafter, the person to whom such transfer is made shall be entitled to receive a new Warrant or Warrants as to the portion of this Warrant transferred, and the Holder of this Warrant shall be entitled to receive a new Warrant or Warrants as to the portion hereof retained.
(b) REGISTRABLE SECURITIES. The Common Stock issuable upon the exercise of this Warrant constitute "Registrable Securities" under that certain Registration Rights Agreement dated on or about October ___, 1999 by and between the Company and Dunwoody Brokerage Services, Inc., and, accordingly, has the benefit of the registration rights pursuant to that agreement.
5. ANTI-DILUTION ADJUSTMENTS.
(a) STOCK DIVIDEND. If the Company shall at any time declare a dividend payable in shares of Common Stock, then the Holder hereof, upon Exercise of this Warrant after the record date for the determination of Holders of Common Stock entitled to receive such dividend, shall be entitled to receive upon Exercise of this Warrant, in addition to the number of shares of Common Stock as to which this Warrant is Exercised, such additional shares of Common Stock as such Holder would have received had this Warrant been Exercised immediately prior to such record date and the Exercise Price will be proportionately adjusted.
(b) RECAPITALIZATION OR RECLASSIFICATION. If the Company shall at any time effect a recapitalization, reclassification or other similar transaction of such character that the shares of Common Stock shall be changed into or become exchangeable for a larger or smaller number of shares, then upon the effective date thereof, the number of shares of Common Stock which the Holder hereof shall be entitled to purchase upon Exercise of this Warrant shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in the number of shares of Common Stock by reason of such recapitalization, reclassification or similar transaction, and the Exercise Price shall be, in the case of an increase in the number of shares, proportionally decreased and, in the case of decrease in the number of shares, proportionally increased. The Company shall give the Warrant Holder the same notice it provides to holders of Common Stock of any transaction described in this Section 5(b).
(c) DISTRIBUTIONS. If the Company shall at any time distribute to Holders of Common Stock cash, evidences of indebtedness or other securities or assets (other than cash dividends or distributions payable out of earned surplus or net profits for the current or preceding year) then, in any such case, the Holder of this Warrant shall be entitled to receive, upon exercise of this Warrant, with respect to each share of Common Stock issuable upon such Exercise, the amount of cash or evidences of indebtedness or other securities or assets which such Holder would have been entitled to receive with respect to each such share of Common Stock as a result of the happening of such event had this Warrant been Exercised immediately prior to the record date or other date fixing shareholders to be affected by such event (the "Determination Date") or, in lieu thereof, if the Board of Directors of the Company should so determine at the time of such distribution, a reduced Exercise Price determined by multiplying the Exercise Price on the Determination Date by a fraction, the numerator of which is the result of such Exercise Price reduced by the value of such distribution applicable to one share of Common Stock (such value to be determined by the Board in its discretion) and the denominator of which is such Exercise Price.
(d) NOTICE OF CONSOLIDATION OR MERGER. In the event of a merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Company shall
be changed into the same or a different number of shares of the same or another class or classes of stock or securities or other assets of the Company or another entity or there is a sale of all or substantially all the Company's assets (a "Corporate Change"), then this Warrant shall be assumed by the acquiring entity or any affiliate thereof and thereafter this Warrant shall be exercisable into such class and type of securities or other assets as the Holder would have received had the Holder exercised this Warrant immediately prior to such Corporate Change; provided, however, that Company may not affect any Corporate Change unless it first shall have given thirty (30) days notice to the Holder hereof of any Corporate Change.
(e) EXERCISE PRICE ADJUSTED. As used in this Warrant, the term "Exercise Price" shall mean the purchase price per share specified in Section 3 of this Warrant, as it may be reset from time to time, until the occurrence of an event stated in subsection (a), (b) or (c) of this Section 5 and thereafter shall mean said price as adjusted from time to time in accordance with the provisions of said subsection. No such adjustment under this Section 5 shall be made unless such adjustment would change the Exercise Price at the time by $.01 or more; provided, however, that all adjustments not so made shall be deferred and made when the aggregate thereof would change the Exercise Price at the time by $.01 or more. No adjustment made pursuant to any provision of this Section 5 shall have the effect of increasing the total consideration payable upon Exercise of this Warrant in respect of all the Common Stock as to which this Warrant may be exercised. Notwithstanding anything to the contrary contained herein, the Exercise Price shall not be reduced to an amount below the par value of the Common Stock.
(f) ADJUSTMENTS: ADDITIONAL SHARES, SECURITIES OR ASSETS. In the event that at any time, as a result of an adjustment made pursuant to this Section 5, the Holder of this Warrant shall, upon Exercise of this Warrant, become entitled to receive shares and/or other securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 5.
6. FRACTIONAL INTERESTS.
No fractional shares or scrip representing fractional shares shall be issuable upon the Exercise of this Warrant, but on Exercise of this Warrant, the Holder hereof may purchase only a whole number of shares of Common Stock. If, on Exercise of this Warrant, the Holder hereof would be entitled to a fractional share of Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock issuable upon conversion shall be the next higher number of shares.
7. RESERVATION OF SHARES.
The Company shall at all times reserve for issuance such number of authorized and unissued shares of Common Stock (or other securities substituted therefor as herein above provided) as shall be sufficient for Exercise and payment of the Exercise Price of this Warrant. The Company covenants and agrees that upon Exercise of this Warrant, all shares of Common Stock issuable upon such Exercise shall be duly and validly issued, fully paid, nonassessable and not subject to preemptive rights, rights of first refusal or similar rights of any person or entity.
8. RESTRICTIONS ON TRANSFER.
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant and the Common Stock issuable on Exercise hereof have not been registered under the Securities Act of 1933, as amended, and may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of in the absence of registration or the availability of an exemption from registration under said Act. All shares of Common Stock issued upon Exercise of this Warrant shall bear an appropriate legend to such effect, if applicable.
(b) ASSIGNMENT. Assuming the conditions of (a) above regarding registration or exemption have been satisfied, the Holder may sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver a written notice to Company, substantially in the form of the Assignment attached hereto as Exhibit B, indicating the person or persons to whom the Warrant shall be assigned and the respective number of warrants to be assigned
to each assignee. The Company shall effect the assignment within ten days, and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants of like tenor and terms for the appropriate number of shares.
(c) INVESTMENT INTENT. The Warrant and Common Stock issuable upon conversion are intended to be held for investment purposes and not with an intent to distribution, as defined in the Act.
9. BENEFITS OF THIS WARRANT.
Nothing in this Warrant shall be construed to confer upon any person other than the Company and the Holder of this Warrant any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be for the sole and exclusive benefit of the Company and the Holder of this Warrant.
10. APPLICABLE LAW.
This Warrant is issued under and shall for all purposes be governed by and construed in accordance with the laws of the state of Georgia, without giving effect to conflict of law provisions thereof.
11. LOSS OF WARRANT.
Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date.
12. NOTICE OR DEMANDS.
Notices or demands pursuant to this Warrant to be given or made by the
Holder of this Warrant to or on the Company shall be sufficiently given or made
if sent by certified or registered mail, return receipt requested, postage
prepaid, and addressed, until another address is designated in writing by the
Company, LightPath Technologies, Inc., 6820 Academy Parkway East NE,
Albuquerque, New Mexico 87109, Attention: President, Telephone No. (505)
342-1100, Telecopy No. (505) 342-1111. Notices or demands pursuant to this
Warrant to be given or made by the Company to or on the Holder of this Warrant
shall be sufficiently given or made if sent by certified or registered mail,
return receipt requested, postage prepaid, and addressed, Attn: Holder, address:
c/o Eric S. Swartz, 200 Roswell Summit, Suite 285, 1080 Holcomb Bridge Road,
Roswell, Georgia 30076, until another address is designated in writing by
Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 2 day of November, 1999.
LIGHTPATH TECHNOLOGIES, INC.
EXHIBIT A
EXERCISE FORM FOR SERIES L WARRANT
TO: ___________________.
The undersigned hereby irrevocably exercises the right to purchase ____________ of the shares of Common Stock of LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation, evidenced by the attached Series L Warrant, and herewith makes payment of the Exercise Price with respect to such shares in full, all in accordance with the conditions and provisions of said Warrant.
The undersigned agrees not to offer, sell, transfer or otherwise dispose of any of such Common Stock, except in accordance with the provisions of Section 8 of the Warrant, and consents that the following legend may be affixed to the stock certificates for the Common Stock hereby subscribed for, if such legend is applicable:
"The securities represented hereby have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), or any provincial or state securities law, and may not be sold, transferred, pledged, hypothecated or otherwise disposed of until either (i) a registration statement under the Securities Act and applicable provincial or state securities laws shall have become effective with regard thereto, or (ii) an exemption from registration under the Securities Act or applicable provincial or state securities laws is available in connection with such offer, sale or transfer."
The undersigned requests that stock certificates for such shares be issued, and a warrant representing any unexercised portion hereof be issued, pursuant to the Warrant in the name of the Registered Holder and delivered to the undersigned at the address set forth below:
Dated:
EXHIBIT B
ASSIGNMENT
(To be executed by the registered Holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned Holder of the attached Warrant hereby sells, assigns and transfers unto the person or persons below named the right to purchase _______ shares of the Common Stock of LIGHTPATH TECHNOLOGIES, INC. evidenced by the attached Series L Warrant and does hereby irrevocably constitute and appoint _______________________ attorney to transfer the said Warrant on the books of the Company, with full power of substitution in the premises.
Dated: __________________ ________________________________________
Signature
Fill in for new Registration of Warrant:
-----------------------------------
Name
-----------------------------------
Address
-----------------------------------
Please print name and address of
assignee (including zip code number)
|
EXHIBIT 4.6
FORM OF WARRANT
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR EXERCISED UNLESS (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER, SALE OR TRANSFER.
AN INVESTMENT IN THESE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE SUBSCRIBER MUST RELY ON HIS OWN ANALYSIS OF THE INVESTMENT AND ASSESSMENT OF THE RISKS INVOLVED. SEE THE RISK FACTORS SET FORTH IN THE ATTACHED DISCLOSURE DOCUMENTS AS EXHIBIT C.
Warrant to Purchase
281,250 shares
WARRANT TO PURCHASE CLASS A COMMON STOCK
OF
LIGHTPATH TECHNOLOGIES, INC.
THIS CERTIFIES that the ROBERT RIPP or any subsequent holder hereof ("Holder"), has the right to purchase from LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation (the "Company"), up to 281,250 fully paid and nonassessable shares of the Company's Class A common stock, $.01 par value per share ("Common Stock"), subject to adjustment as provided herein, at a price equal to the Exercise Price as defined in Section 3 below, at any time beginning on the Date of Issuance (defined below) and ending at 5:00 p.m., New York, New York time, on November 10, 2009 (the "Exercise Period").
Holder agrees with the Company that this Warrant to Purchase Common Stock of LightPath Technologies, Inc. (this "Warrant") is issued and all rights hereunder shall be held subject to all of the conditions, limitations and provisions set forth herein.
By accepting this Warrant, Holder acknowledges that this Warrant has been issued by the Company in reliance upon those representations and warranties made by the Holder in that certain Subscription Agreement previously delivered to the Company, and further affirms that all of such representations and warranties are true and correct in all material respects as of the date of this Warrant.
The issuance of this Warrant and the Holder's rights hereunder are not conditional on the Holder's status as a director of the Company and this Warrant shall not be forfeited or otherwise affected if the Holder is not a director of the Company.
1. DATE OF ISSUANCE. This Warrant shall be deemed to be issued on November 11, 1999 ("Date of Issuance").
2. EXERCISE
(a) MANNER OF EXERCISE. During the Exercise Period, this Warrant may be exercised as to all or any lesser number of full shares of Common Stock covered hereby upon surrender of this Warrant, with the Exercise Form attached hereto as Exhibit A (the "Exercise Form") duly completed and executed, together with the full Exercise Price (as defined below) for each share of Common Stock as to which this Warrant is exercised, at the office of the Company, 6820 Academy Parkway East NE, Albuquerque, New Mexico 87109; Attention: President, Telephone No. (505) 342-1100, Telecopy No. (505) 342-1111, or at such other office or agency as the Company may designate in writing, by overnight mail, with an advance copy of the Exercise Form sent to the Company and its Transfer Agent by facsimile (such surrender and payment of the Exercise Price hereinafter called the "Exercise of this Warrant").
(b) DATE OF EXERCISE. The "Date of Exercise" of the Warrant shall be defined as the date that the advance copy of the completed and executed Exercise Form is sent by facsimile to the Company, provided that the original Warrant and Exercise Form are received by the Company as soon as practicable thereafter. Alternatively, the Date of Exercise shall be defined as the date the original Exercise Form is received by the Company, if Holder has not sent advance notice by facsimile.
(c) CANCELLATION OF WARRANT. This Warrant shall be canceled upon the Exercise of this Warrant, and, as soon as practical after the Date of Exercise, Holder shall be entitled to receive certificates representing a number of shares of Common Stock purchased upon such Exercise of this Warrant, and if this Warrant is not exercised in full, Holder shall be entitled to receive a new Warrant (containing terms identical to this Warrant) representing any unexercised portion of this Warrant in addition to such Common Stock.
(d) HOLDER OF RECORD. Each person in whose name any Warrant for shares of Common Stock is issued shall, for all purposes, be deemed to be the Holder of record of such shares on the Date of Exercise of this Warrant, irrespective of the date of delivery of the Common Stock purchased upon the Exercise of this Warrant. Nothing in this Warrant shall be construed as conferring upon Holder any rights as a stockholder of the Company.
3. PAYMENT OF WARRANT EXERCISE PRICE. The Exercise Price shall equal $6.00 per share ("Exercise Price").
Payment of the Exercise Price may be made by either of the following, or a combination thereof, at the election of Holder:
(i) CASH EXERCISE: cash, bank or cashiers check or wire transfer; or
(ii) CASHLESS EXERCISE: subject to the last sentence of this Section 3, surrender of this Warrant at the principal office of the Company together with notice of cashless election, in which event the Company shall issue Holder a number of shares of Common Stock computed using the following formula:
X = Y (A-B)/A
where: X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock for which this Warrant is being exercised.
A = the Market Price of one (1) share of Common Stock (for purposes of this Section 3(ii), the "Market Price" shall be defined as the average closing bid price of the Common Stock for the five (5) trading days prior to the Date of Exercise of this Warrant (the "Average Closing Price"), as reported by the National Association of Securities Dealers Automated Quotation System ("Nasdaq") Small Cap Market, or if the Common Stock is not traded on the Nasdaq Small Cap Market, the Average Closing Price in any other over-the-counter market; provided, however, that if the Common Stock is listed on a stock exchange, the Market Price shall be the Average Closing Price on such exchange for the five (5) trading days prior to the date of exercise of the Warrant. If the Common Stock is/was not traded during the five (5) trading days prior to the Date of Exercise, then the closing price for the last publicly traded day shall be deemed to be the closing price for any and all (if applicable) days during such five (5) trading day period.
B = the Exercise Price.
For purposes of Rule 144 and sub-section (d)(3)(ii) thereof, it is intended, understood and acknowledged that the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction shall be deemed to have been acquired at the time this Warrant was issued. Moreover, it is intended, understood and acknowledged that the holding period for the Common Stock issuable upon exercise of this Warrant in a cashless exercise transaction shall be deemed to have commenced on the date this Warrant was issued.
Notwithstanding anything to the contrary contained herein, this Warrant may not be exercised in a cashless exercise transaction if, on the Date of Exercise, the shares of Common Stock to be issued upon exercise of this Warrant would upon such issuance (x) be immediately transferable in the United States free of any restrictive legend, including without limitation under Rule 144; or (y) otherwise be registered under the Securities Act of 1933, as amended.
4. TRANSFER. Neither this Warrant nor any shares of Common Stock acquired upon exercise of this Warrant may be transferred within twelve months of the Date of Issuance without the approval of the Company's Board of Directors; provided, however, that the Holder may transfer this Warrant and any shares of Common Stock acquired upon exercise of this Warrant to a spouse, children and grandchildren and trusts for his or their benefit. Subject to the provisions of this Section 4 and Section 8 of this Warrant, this Warrant may be transferred on the books of the Company, in whole or in part, in person or by attorney, upon surrender of this Warrant properly completed and endorsed. This Warrant shall be canceled upon such surrender and, as soon as practicable thereafter, the person to whom such transfer is made shall be entitled to receive a new Warrant or Warrants as to the portion of this Warrant transferred, and Holder shall be entitled to receive a new Warrant as to the portion hereof retained.
5. ANTI-DILUTION ADJUSTMENTS
(a) STOCK DIVIDEND. If the Company shall at any time declare a dividend payable in shares of Common Stock, then Holder, upon Exercise of this Warrant after the record date for the determination of holders of Common Stock entitled to receive such dividend, shall be entitled to receive upon Exercise of this Warrant, in addition to the number of shares of Common Stock as to which this Warrant is exercised, such additional shares of Common Stock as such Holder would have received had this Warrant been exercised immediately prior to such record date and the Exercise Price will be proportionately adjusted.
(b) RECAPITALIZATION OR RECLASSIFICATION. If the Company shall at any time effect a recapitalization, reclassification or other similar transaction of such character that the shares of Common Stock shall be changed into or become exchangeable for a larger or smaller number of shares, then upon the effective date thereof, the number of shares of Common Stock which Holder shall be entitled to purchase upon Exercise of this Warrant shall be increased or decreased, as the case may be, in direct proportion to the increase or decrease in the number of shares of Common Stock by reason of such recapitalization, reclassification or similar transaction, and the Exercise Price shall be, in the case of an increase in the number of shares, proportionally decreased and, in the case of decrease in the number of shares, proportionally increased. The Company shall give Holder the same notice it provides to holders of Common Stock of any transaction described in this Section 5(b).
(c) DISTRIBUTIONS. If the Company shall at any time distribute for no consideration to holders of Common Stock cash, evidences of indebtedness or other securities or assets (other than cash dividends or distributions payable out of earned surplus or net profits for the current or preceding year) then, in any such case, Holder shall be entitled to receive, upon Exercise of this Warrant, with respect to each share of Common Stock issuable upon such exercise, the amount of cash or evidences of indebtedness or other securities or assets which Holder would have been entitled to receive with respect to each such share of Common Stock as a result of the happening of such event had this Warrant been exercised immediately prior to the record date or other date fixing shareholders to be affected by such event (the "Determination Date") or, in lieu thereof, if the Board of Directors of the Company should so determine at the time of such distribution, a reduced Exercise Price determined by multiplying the Exercise Price on the Determination Date by a fraction, the numerator of which is the result of such Exercise Price reduced by the value of such distribution applicable to one share of Common Stock (such value to be determined by the Board of Directors of the Company in its discretion) and the denominator of which is such Exercise Price.
(d) NOTICE OF CONSOLIDATION OR MERGER. In the event of a merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities or other assets of the Company or another entity or there is a sale of all or substantially all the Company's assets (a "Corporate Change"), then this Warrant shall be exercisable into such class and type of securities or other assets as Holder would have received had Holder exercised this Warrant immediately prior to such Corporate Change; provided, however, that Company may not affect any Corporate Change unless it first shall have given thirty (30) days notice to Holder hereof of any Corporate Change.
(e) EXERCISE PRICE ADJUSTED. As used in this Warrant, the term "Exercise Price" shall mean the purchase price per share specified in Section 3 of this Warrant, until the occurrence of an event stated in subsection (a), (b) or (c) of this Section 5, and thereafter shall mean said price as adjusted from time to time in accordance with the provisions of said subsection. No such adjustment under this Section 5 shall be made unless such adjustment would change the Exercise Price at the time by $.01 or more; provided, however, that all adjustments not so made shall be deferred and made when the aggregate thereof would change the Exercise Price at the time by $.01 or more. No adjustment made pursuant to any provision of this Section 5 shall have the net effect of increasing the Exercise Price. The number of shares of Common Stock subject hereto shall increase proportionately with each decrease in the Exercise Price.
(f) ADJUSTMENTS: ADDITIONAL SHARES, SECURITIES OR ASSETS. In the event that at any time, as a result of an adjustment made pursuant to this Section 5, Holder shall, upon Exercise of this Warrant, become entitled to receive shares and/or other securities or assets (other than Common Stock) then, wherever appropriate, all references herein to shares of Common Stock shall be deemed to refer to and include such shares and/or other securities or assets; and thereafter the number of such shares and/or other securities or assets shall be subject to adjustment from time to time in a manner and upon terms as nearly equivalent as practicable to the provisions of this Section 5.
6. FRACTIONAL INTERESTS. No fractional shares or scrip representing fractional shares shall be issuable upon the Exercise of this Warrant, but on Exercise of this Warrant, Holder may purchase only a whole number of shares of Common Stock. If, on Exercise of this Warrant, Holder would be entitled to a fractional share of Common Stock or a right to acquire a fractional share of Common Stock, such fractional share shall be disregarded and the number of shares of Common Stock issuable upon exercise shall be the next higher number of shares.
7. RESERVATION OF SHARES. The Company shall at all times reserve for issuance such number of authorized and unissued shares of Common Stock (or other securities substituted therefor as herein above provided) as shall be sufficient for the Exercise of this Warrant and payment of the Exercise Price. The Company covenants and agrees that upon the Exercise of this Warrant, all shares of Common Stock issuable upon such exercise shall be duly and validly issued, fully paid, nonassessable and not subject to preemptive rights, rights of first refusal or similar rights of any person or entity.
8. RESTRICTIONS ON TRANSFER
(a) REGISTRATION OR EXEMPTION REQUIRED. This Warrant has been issued in a transaction exempt from the registration requirements of the Act by virtue of Regulation D and exempt from state registration under applicable state laws. The Warrant and the Common Stock issuable upon the Exercise of this Warrant may not be pledged, transferred, sold or assigned except pursuant to an effective registration statement or an exemption to the registration requirements of the Act and applicable state laws.
(b) ASSIGNMENT. Subject to Section 4 hereof, if Holder can provide the Company with reasonably satisfactory evidence that the conditions of (a) above regarding registration or exemption have been satisfied, Holder may sell, transfer, assign, pledge or otherwise dispose of this Warrant, in whole or in part. Holder shall deliver a written notice to Company, substantially in the form of the Assignment attached hereto as Exhibit B, indicating the person or persons to whom the Warrant shall be assigned and the respective number of warrants to be assigned to each assignee. The Company shall effect the assignment within ten (10) days, and shall deliver to the assignee(s) designated by Holder a Warrant or Warrants of like tenor and terms for the appropriate number of shares.
9. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to confer upon any person other than the Company and Holder any legal or equitable right, remedy or claim under this Warrant and this Warrant shall be for the sole and exclusive benefit of the Company and Holder.
10. APPLICABLE LAW. This Warrant is issued under and shall for all purposes be governed by and construed in accordance with the laws of the state of Delaware, without giving effect to conflict of law provisions thereof.
11. LOSS OF WARRANT. Upon receipt by the Company of evidence of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of indemnity or security reasonably satisfactory to the Company, and upon surrender and cancellation of this Warrant, if mutilated, the Company shall execute and deliver a new Warrant of like tenor and date.
12. NOTICE OR DEMANDS. Notices or demands pursuant to this Warrant to be given or made by Holder to or on the Company shall be sufficiently given or made if sent by certified or registered mail, return receipt requested, postage prepaid, and addressed, until another address is designated in writing by the Company, to Attention: President, 6820 Academy Parkway East NE, Albuquerque, New Mexico 87109, Telephone No. (505) 342-1100, Telecopy No. (505) 342-1111. Notices or demands pursuant to this Warrant to be given or made by the Company to or on Holder shall be sufficiently given or made if sent by certified or registered mail, return receipt requested, postage prepaid, and addressed, to the address of Holder set forth in the Company's records, until another address is designated in writing by Holder.
IN WITNESS WHEREOF, the undersigned has executed this Warrant as of the 20th day of December, 1999.
LIGHTPATH TECHNOLOGIES, INC.
By: /s/ Donald E. Lawson
---------------------------------------
Donald E. Lawson, President
|
EXHIBIT A
EXERCISE FORM FOR WARRANT
TO: LIGHTPATH TECHNOLOGIES, INC.
The undersigned hereby irrevocably exercises the right to purchase ____________ of the shares of Class A Common Stock (the "Common Stock") of LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation (the "Company"), evidenced by the attached warrant (the "Warrant"), and herewith makes payment of the exercise price with respect to such shares in full, all in accordance with the conditions and provisions of said Warrant.
1. The undersigned agrees not to offer, sell, transfer or otherwise dispose of any of the Common Stock obtained on exercise of the Warrant, except in accordance with the provisions of Section 8(a) of the Warrant.
2. The undersigned requests that stock certificates for such shares be issued with appropriate restrictive legend(s), if any, and a warrant representing any unexercised portion hereof be issued, pursuant to the Warrant in the name of the undersigned and delivered to the undersigned at the address set forth below:
Dated:
The signature to the foregoing Exercise Form must correspond to the name as written upon the face of the attached Warrant in every particular, without alteration or enlargement or any change whatsoever.
EXHIBIT B
ASSIGNMENT
(To be executed by the registered holder
desiring to transfer the Warrant)
FOR VALUE RECEIVED, the undersigned holder of the attached warrant (the "Warrant") hereby sells, assigns and transfers unto the person or persons below named the right to purchase _______ shares of the Class A Common Stock of LIGHTPATH TECHNOLOGIES, INC., evidenced by the attached Warrant and does hereby irrevocably constitute and appoint _______________________ attorney to transfer the said Warrant on the books of the Company, with full power of substitution in the premises.
Dated: ___________ ____________________________________________ Signature
Fill in for new registration of Warrant:
The signature to the foregoing Assignment must correspond to the name as written upon the face of the attached Warrant in every particular, without alteration or enlargement or any change whatsoever.
Squire, Sanders & Dempsey L.L.P.
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Phone: (602) 528-4000
Facsimile: (602) 253-8129
January 5, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: LightPath Technologies, Inc.
Registration Statement on Form S-3 (Registration No. ________)
Ladies and Gentlemen:
This firm is counsel for LightPath Technologies, Inc., a Delaware corporation (the "Company"). As such, we are familiar with the Certificate of Incorporation, as amended, and Bylaws of the Company, as well as resolutions adopted by its Board of Directors authorizing the issuance and sale of 2,279,847 shares of the Company's $.01 par value Class A Common Stock (the "Common Stock"), including 2,206,250 shares of Common Stock issuable upon conversion of 408 shares of outstanding Series F Preferred Stock and upon exercise of outstanding Class K Warrants, Class L Warrants and Chairman's Warrants, which are the subject of a Registration Statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as amended. We have also examined all such instruments, documents and records, and undertaken such further inquiry, as we have deemed relevant and necessary for the basis of our opinion hereinafter expressed. In such examination, we have assumed the genuineness and authority of all signatures and the authenticity of all documents submitted to us as originals and the conformity to the originals of all documents submitted to us as copies. In giving our opinion hereinafter expressed, we have assumed further that the Company has properly reserved the number of authorized and unissued shares of Common Stock required to be issued upon the conversion of the outstanding Series F Preferred Stock and exercise of the Class K Warrants, Class L Warrants and Chairman's Warrants and that as of the date of such issuance the Company continues to exist. Our opinion is based solely on the General Corporation Law of the State of Delaware.
Based upon the foregoing, it is our opinion that the 73,597 shares of Common Stock are validly issued, fully paid and nonassessable and that, upon receipt by the Company of the consideration provided for upon conversion of the Series F Preferred Stock and upon exercise of the Class K Warrants, Class L Warrants and Chairman's Warrants, respectively, the 2,206,250 shares of Common Stock, when issued in compliance with the Series F Preferred Stock and the Class K Warrants, Class L Warrants and Chairman's Warrants, respectively, will be validly issued, fully paid and nonassessable.
We acknowledge that we are referred to under the heading "Legal Matters" in the Prospectus which is part of the Registration Statement and we hereby consent to the use of our name in such Registration Statement. We further consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and with the state regulatory agencies in such states as may require such filing in connection with the registration of the Common Stock for offer and sale in such states.
Respectfully submitted,
/s/ SQUIRE, SANDERS & DEMPSEY L.L.P. |
[LETTERHEAD OF KPMG LLP]
The Board of Directors
LightPath Technologies, Inc.
We consent to the use of our report incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus.
Our report dated August 10, 1999, except for note 5 which is as of December 14, 1999, contains an explanatory paragraph that states that the Company has suffered recurring losses from operations and is dependent on external sources of capital, which raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of that uncertainty.
/s/ KPMG LLP
Albuquerque, New Mexico
January 5, 2000
|