As filed with the Securities and Exchange Commission on March 13, 1998.
Registration No. _______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
Delaware 3225 86-0708398 ------------------------------------------------------------------------------------------------------------------ (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) |
Copies to:
Nina Lopez Gordian, Esq.
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
Telephone: (602) 528-4000
FAX: (602) 253-8129
Approximate date of commencement of proposed sale to the public: As soon as practicable from time to time after the Registration Statement becomes effective.
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, 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, please 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, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering./ /
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box./ /
(1) Estimated solely for purposes of calculating the registration fee based
upon the average of the bid and asked price as of March 9, 1998.
(2) Includes up to 1,750,000 shares issuable upon conversion of Series C
Preferred Stock and exercise of Class G Warrants and Class H Warrants by
the Selling Securityholders.
Pursuant to Rule 416 under the Securities Act of 1933, as amended, there are also being registered such additional shares of Common Stock as may become issuable pursuant to anti-dilution provisions upon exercise of the Class G and Class H Warrants, and the conversion of Series C Preferred Stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MARCH 13, 1998
Prospectus
LIGHTPATH TECHNOLOGIES, INC.
1,758,490 Shares of Class A Common Stock
This Prospectus relates to an aggregate of up to 1,750,000 shares of Class A Common Stock, $.01 par value (the "Common Stock") of LightPath Technologies, Inc., a Delaware corporation (the "Company") issuable upon conversion of 375 shares of Series C Preferred Stock and exercise of 337,078 redeemable Class G Warrants and 58,427 redeemable Class H Warrants (collectively, the "Warrants") which were issued to investors in a private placement completed by the Company in February 1998. In addition, this Prospectus relates to 8,490 shares of Class A Common Stock outstanding as of the date of this Prospectus, all of which, were issued to the placement agent for services rendered in connection with the Series C Preferred Stock private placement (collectively the "Selling Securityholders" ). All of the shares covered by this Prospectus are being offered by the Selling Securityholders.
The securities offered by this Prospectus may be resold from time to time by the Selling Securityholders. The distribution of the securities offered hereby may be effected in one or more transactions that may take place on the over-the-counter market, including ordinary brokers' transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated paces. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by the Selling Securityholders.
None of the proceeds from the sale of the shares of Common Stock offered hereby will be received by the Company, however, the Company will receive proceeds from the exercise, if any, of the Warrants. Substantially all of the expenses in connection with the registration of the Common Stock will be borne by the Company, except for any underwriters', brokers', and dealers' commissions and/or discounts. See "Plan of Distribution".
The Common Stock of the Company is quoted on the Nasdaq SmallCap Market under the symbol "LPTHA". On March 9, 1998, the last reported bid price for the Common Stock, as reported by Nasdaq Stock Market was $7.25.
The Selling Securityholders and intermediaries through whom such securities are sold may be deemed "underwriters" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), with respect to the securities offered, and any profits realized or commissions received may be deemed underwriting compensation. The Company has agreed to indemnify the Selling Securityholders against certain liabilities, including liabilities under the Act. The Company will not receive any of the proceeds from the resale of securities by the Selling Securityholders.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING AT PAGE 8.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the "Commission"), a Registration Statement on Form S-3, of which this Prospectus forms a part, ("Registration Statement") under the Securities Act of 1933, as amended with respect to the securities offered hereby. Statements contained in this Prospectus as to the contents of any contract or other document referred to are not necessarily complete. In each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or incorporated by reference, each such statement being qualified in all respects by such reference.
The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") and in accordance therewith files reports, proxy statements and other information with the Commission. For further information with respect to the Company, its reports, proxy statements and other information and the securities offered hereby, reference is made to such reports, proxy statements and other information, the Registration Statement and the exhibits filed as part thereof. The Registration Statement and the reports and other information filed by the Company in accordance with the Exchange Act can be inspected and copied at the public reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: 7 World Trade Center, New York, New York, 10048 and Citicorp Center 500, West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such material may be obtained from the Public Reference Section of the Commission at its principal office 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed by the Commission. In addition the Commission maintains a website (http://www.sec.gov) that contains reports, proxy and information statements regarding registrants, such as the Company, that file electronically with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission by the Company and are hereby incorporated by reference into this Prospectus:
i. The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997. The report of KPMG Peat Marwick LLP on the
aforementioned 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 entity'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;
ii. The Company's Quarterly Report on Form 10-QSB for the quarterly period
ended September 30, 1997;
iii. The Company's Quarterly Report on Form 10-QSB for the quarterly period
ended December 31, 1997;
iv. The description of the Company's Class A Common Stock, Class A Warrants
and Class B Warrants contained in the Company's Registration Statement
on Form 8-A filed with the Commission pursuant to Section 15(d) of the
Exchange Act dated January 13, 1996; and
v. The Company's Proxy Statement relating to its 1997 Annual Meeting, as
filed with the Commission pursuant to Section 14 of the Exchange Act on
September 11, 1997.
All other documents and reports filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this Prospectus and prior to the termination of the offering shall be deemed to be incorporated by reference herein and shall be deemed to be a part hereof from the date of the filing of such reports and documents.
Any statement contained in a document incorporated or deemed incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any subsequently filed document that is also deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a Prospectus is delivered, upon written or oral request of each such
person, a copy of any document incorporated herein by reference, (not including
exhibits to the document that have been incorporated herein by reference unless
such exhibits are specifically incorporated by reference in this Prospectus).
Requests should be directed to Investor Relations, LightPath Technologies, Inc.,
6820 Academy Parkway East NE, Albuquerque, New Mexico, 87109, telephone
(505)342-1100.
PROSPECTUS SUMMARY
The Company
LightPath Technologies, Inc. ("LightPath" or the "Company") produces GRADIUM(R) glass and performs research and development on future GRADIUM glass applications. 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. The Company believes that GRADIUM glass lenses provide advantages over conventional lenses for certain applications. By reducing optical aberrations, the Company believes 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, the Company believes that GRADIUM glass can provide more efficient light transmission and greater brightness, lower production costs, and a simpler, smaller product. While the Company believes that other researchers have sought to produce optical quality lens material with the properties of GRADIUM glass, the Company is not aware of any other person or firm that has developed a repeatable manufacturing process for producing such material on a prescribable basis. LightPath has been issued fourteen patents and has pending filed patent applications related to its materials composition, product design and fabrication processes for the production of GRADIUM glass products. The Company continues to develop new GRADIUM glass materials with various refractive index and dispersion profiles, whole value added lens systems for a variety of optical applications, and multiplexers and interconnects for the telecommunications field.
The Company believes that GRADIUM glass can potentially be marketed for use in most optics and optoelectronics products. In an attempt to more rapidly establish initial sales volume, to date the Company has emphasized laser products that it believes may have the greatest immediate commercial impact with the least initial investment. Generally, optical designers can substitute GRADIUM glass components from the Company's 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, the Company believes and customers' test results confirm that GRADIUM glass has the ability to improve laser performance. The Company's growth strategy is to target 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 year 1997, the Company established relationships with seven foreign distributors and a Silicon Valley manufacturer representative. The Company believes these relationships will enable it to rapidly establish a presence in certain foreign and domestic markets. In addition to laser applications, the Company, through its printed and Internet on-line catalog, offers a standard line of GRADIUM glass lenses for commercial sales to optical designers developing particular systems for original equipment manufacturers ("OEMs") or in-house products.
The Company's growth strategy is also to develop strategic relationships with OEMs that incorporate or produce optical components. The Company believes OEM relationships may expand and develop the Company's technology base by evolving into more sophisticated joint development efforts and, as a result, complex products, although there can be no assurances in this regard. The Company's existing OEM relationships have resulted in the development of prototype lenses a leading manufacturer of endoscopes, Karl Storz GMBH & Co., camera television lenses, wafer chip inspection and the optimization of a high performance riflescope for a gunsight manufacturer.
Optoelectronics technologies represent an overlap of photonics and electronics and are key enablers of "Information Age" technologies, such as fiberoptic communications, optical data storage, laser printers, digital imaging, and sensors for machine vision and environmental monitoring. As part of its growth strategy, the Company has targeted various optoelectronic industry market niches and is currently developing additional GRADIUM glass products and key strategic alliances with technology and marketing partners to design, build and sell next generation integrated components and devices. The Company believes that GRADIUM glass can provide industry wide solutions to optoelectronic problems associated with light gathering, packaging and alignment.
Since its inception in 1985 until June 1996, the Company was a development stage enterprise that engaged in basic research and development. During fiscal year 1997, the Company's operational focus began to shift to product development and commercial sales. The Company believes that most of its product sales prior to fiscal year 1997 have been to persons evaluating the commercial application of GRADIUM glass or using the products for research and development. During 1997, numerous prototypes for production orders were completed. In addition, catalog sales of standard profiles were received. The Company currently offers standard, computer-based profiles of GRADIUM glass that engineers can use for product design. The current focus of the Company's technology department development efforts is the expansion of GRADIUM product's applications to the areas of multiplexers and interconnects for the telecommunications field, the addition of the Company's crown glass product line to supplement its existing flint products, development of acrylic axial gradient material to extend the range of existing product applications, and the upgrade of proprietary material design software and optical design tools to facilitate product design.
The Company was incorporated in Delaware in 1992. Its corporate headquarters are located at 6820 Academy Parkway East N.E., Albuquerque, New Mexico, 87109 and its telephone number is (505) 342-1100.
The Offering
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Securities Offered by Selling 1,758,490 shares of Class A Common
Securityholders: Stock
1,750,000 shares of the Class A
Common Stock offered hereby are
issuable upon conversion of Series
C Preferred Stock and exercise of
outstanding Class G Warrants and
Class H Warrants. Each Class G
Warrant is exercisable at any time
on or before February 2001 to
purchase for $6.68 one share of
Class A Common Stock, subject to
adjustment. Each Class H Warrant is
exercisable at any time on or
before February 2003 to purchase
for $6.68 one share of Class A
Common Stock subject to adjustment.
8,490 shares of the Class A Common
Stock offered hereby are currently
outstanding. Each share of Series C
Preferred Stock has a stated value
and liquidation preference of
$10,000, plus an 8% per annum
premium.
Each share of Series C Preferred
Stock is convertible into a number
of shares of Class A Common Stock
at the option of holder, with
volume limitations, during the
first 9 months, based on its stated
value at the conversion date
divided by a conversion price. The
conversion price is defined as the
lesser of (i) $6.675 or (ii) 85% of
the average closing bid price of
the Company's Class A Common Stock
for the five days preceding the
conversion date.
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6
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1997(1)(3):
Class A Common Stock 2,988,746 shares(1)(3)
Class E-1 Common Stock 1,481,584 shares(2)
Class E-2 Common Stock 1,481,584 shares(2)
Class E-3 Common Stock 987,715 shares(2)
Use of Proceeds The Company intends to use the net
proceeds received upon the exercise
of the Warrants, if any, for
general corporate purposes and
|
working capital to support anticipated growth including research and development programs and continuing product development.
See "Use of Proceeds." All proceeds
received upon resale of any of the
shares of Class A Common Stock
offered hereby will be received by
the Selling Securityholders.
Risk Factors The securities offered
hereby involve a high degree of
risk and immediate substantial
dilution to public investors. An
investment in the Class A Common
Stock offered hereby should be made
only after a careful consideration
of the various risks which may
affect the Company and its
operations. See "Risk Factors"
Nasdaq Symbols Units - LPTHU
Class A Common Stock - LPTHA
Class A Warrants - LPTHW
Class B Warrants - LPTHZ
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RISK FACTORS
An investment in the securities offered hereby involves a high degree of risk and should only be made by investors who can afford the loss of their entire investment. Prospective investors, prior to making an investment decision, should give careful consideration, in addition to the other information contained in the documents incorporated herein by reference and the documents filed by the Company from time to time with the Securities and Exchange Commission, to the following risk factors.
Accumulated Deficit, Working Capital and Capital Deficiency; Limited Operating History. The Company's predecessor commenced operations in 1985, and the Company was a development stage company through June 30, 1996. Prior to fiscal year 1997, the Company's primary activities had been basic research and development. At June 30, 1997, the Company had an accumulated deficit of ($17,212,516). For the year ended June 30, 1997, the Company recognized revenues of $673,677 and had a net loss of ($2,998,290). For the six months ended December 31, 1997, the Company recognized revenues of $372,203 and a net loss of ($1,764,290). The Company's products currently are at an early stage of development and the Company believes that most of its product sales prior to fiscal year 1997 were to parties evaluating the commercial application of GRADIUM or using the products for research and development. During fiscal year 1997, numerous prototypes for production orders were completed but no commercial orders have been received to date. During fiscal year 1998, the Company's increase in lens sales has been primarily due to laser customers, distributors and wafer chip inspection markets. While the Company has been engaged in some marketing efforts over the past few years that have resulted in some collaborative arrangements or purchases by parties considering the incorporation of GRADIUM in their product designs, these efforts have not resulted in material sales revenues. The Company has continued to operate at a deficit and expects to continue to operate at a deficit for fiscal year 1998 and until such time, if ever, as the Company's operations generate sufficient revenues to cover its costs. The likelihood of the success of the Company must be considered in light of the delays, uncertainties, difficulties and risks inherent in a new business, many of which may be beyond the Company's control. These 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 current estimates. There can be no assurance that revenues will increase significantly in the future or that the Company will ever achieve profitable operations.
Independent Auditors' Report as to Company's Ability to Continue as a Going Concern. The Company has received a report from its independent auditors that includes an explanatory paragraph regarding uncertainty as to the ability of the Company to continue as a going concern. Among the factors cited by the auditors as raising substantial doubt as to the Company's ability to continue as a going concern are that the Company's recurring losses from operations and resulting continued dependence on external sources of capital raise substantial doubt about the entity's ability to continue as a going concern. The Company may incur losses for the foreseeable future due to the significant costs associated with the development, manufacturing and marketing of its GRADIUM products and due to the continued research and development activities that will be necessary to further refine the Company's technology and products and to develop products with additional applications.
Anticipation of Operating Losses; Need for Additional Financing. The Company anticipates continuing to incur substantial operating losses for fiscal year 1998 and until such time, if ever, as the Company's operations generate sufficient revenues to offset its costs. The Company expects to incur substantial expenses principally as the result of the various costs associated with the Company's implementation of a sales and marketing program, distribution channels, recruitment and training of personnel and other operating activities and its continuing research and development efforts to expand its product line, and capital expenditures for the scale-up of its manufacturing operations. The Company's potential receipt of revenues from product sales are subject to substantial contingencies, and there can be no assurances concerning the timing and amount of future revenues from product sales, if any. The Company anticipates that product sales and the net proceeds from the Company's private placements of preferred stock completed in July and October 1997 will be sufficient to finance the Company's working capital requirements for at least fiscal year 1998, although the Company's capital requirements are subject to numerous contingencies associated with a company in its early stages of
operations. The net proceeds from the Company's private placement completed in February 1998 provides working capital into fiscal 1999 and more rapid entrance into optoelectronics development and sales. The Company's capital requirements after such period will depend on the extent that GRADIUM glass becomes commercially accepted, if at all, and if the Company's marketing program is successful in generating sales sufficient to sustain its operations. There can be no assurance that the Company will generate sufficient revenues to fund its operations. The Company may be required to seek additional financing in the event the proceeds from its private placements of Series A Preferred Stock in July 1997, Series B Preferred Stock in October 1997 and Series C Preferred Stock in February 1998 are insufficient to offset costs associated with unanticipated delays, cost overruns, unanticipated expenses or in the event the Company does not realize anticipated revenues. The Company has no 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 acceptable to the Company. In the event such necessary financing is not obtained, the Company's operations will be materially adversely affected and the Company 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.
Early Stage of Development of Proposed Products; Need for Market Acceptance. Through June 1996, the Company's primary activities were basic research and development of glass material properties. The Company's current line of GRADIUM products have not been widely sold ( approximately 90 customers as of June 30, 1997) or marketed. While the Company believes its existing products are commercially viable, market feedback may require the Company to further refine these products. Development of additional product lines will require significant further research, development, testing and marketing prior to commercialization. In particular, the Company's lens technology will require substantial further refinement to develop products capable of correcting chromatic optical applications, which is required for many optical product applications. 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. In order for its products to achieve commercial acceptance, the Company must educate the optical components markets to create product awareness and demand, and, in large part, persuade potential customers to redesign existing products and retool existing assembly processes in order to substitute GRADIUM for existing materials. There can be no assurance that the Company can accomplish the foregoing to the extent necessary to develop market acceptance of its products.
Uncertainty of Commercialization of the Company's Technology; Limited
Number of Potential Customers Testing the Company's Technology. The Company's
existing products have not yet achieved commercial acceptance. Through fiscal
1996, product revenues received by the Company have been from purchasers engaged
in prototype development, evaluation of the commercial application of the
Company's products, or other research and development activities, and purchases
have not reached commercial quantities. Most of the Company's fiscal 1997 and
1998 product sales have been to laser customers, distributors and the wafer chip
inspection market. Although the Company is engaged in negotiations and
discussions with other potential customers, there can be no assurance that any
such discussions will lead to development of commercially viable products or
significant revenues for the Company, 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, the Company 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 the Company to develop a repeatable, consistent process for
producing lenses with variable refractive indices. The Company must also satisfy
prospective customers that it will be able to meet their demand for quantities
of GRADIUM products, since the Company will be the sole supplier and licensor.
The Company does not have demonstrated experience as a manufacturer and does not
have a substantial net worth. There can be no assurance that the Company can
accomplish the foregoing to the extent necessary to develop market acceptance of
its 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 GRADIUM's benefits as sufficient to warrant
such design expenditures.
Dependence on Key Personnel, Need for Additional Personnel. The operations of the Company depend to a significant extent upon the efforts of Leslie A. Danziger, the Company's Chairman of the Board and CEO, who conceived the Company's technology and strategic plan and who is substantially responsible for planning and guiding the Company's direction. In addition, the Company's success depends upon the contributions of Donald E. Lawson, the Company's President, whose responsibilities for the Company's operations are very substantial. Each of the foregoing officers has an employment agreement with the Company that provides, among other things, for severance compensation in certain events. The loss of any of these key employees would adversely affect the Company's business. The Company has obtained key employee life insurance policies in the amount of $3,000,000 on the life of Ms. Danziger and $1,000,000 on the life of Mr. Lawson. The Company had thirty-one employees on January 1, 1998. Additional personnel will need to be hired if the Company is able to successfully expand its operations. There can be no assurance that the Company will be able to identify, attract and retain employees with skills and experience necessary and relevant to the future operations of the Company's business.
Competition. The optical lens and components markets are intensely competitive and numerous companies, substantially all of which have greater financial and other resources than the Company, provide products and services that compete with those offered by the Company. The Company competes with manufacturers of conventional spherical lens products and aspherical lens products, producers of optical quality glass and other developers of gradient lens technology and products. In the markets for conventional and aspheric lenses, the Company will be 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 the Company's products. The Company is aware of other companies that are attempting to develop radial gradient lens technology, and it is possible that other companies of which the Company is not yet aware are attempting to develop axial gradient lens technology similar to the Company's technology. There can be no assurance that existing or new competitors will not develop technologies that are superior to or more commercially acceptable than the Company's technology and products.
Limited Marketing and Sales Capabilities; Fragmented Market. The Company's operating results will depend to a large extent on its ability to educate the various industries utilizing optical glass about the advantages of GRADIUM and to market GRADIUM products to the participants within those industries. The Company currently has 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 its products. In October 1997, the Company hired a Vice President of Sales to develop its sales and marketing program and recruit personnel. While the Company has 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 the Company's products. The markets for optical lenses and components are highly fragmented. Consequently, the Company will need to target particular market segments in which it believes it may have the most success. It may be very difficult for the Company to penetrate any particular market segment, and any attempt will require a substantial, but unknown, amount of effort and resources. The fragmented nature of the optical products market may impede the Company's ability to achieve commercial acceptance for its products. In addition, the Company's success will depend in great part on its ability to develop and implement a successful marketing and sales program. There can be no assurance that any marketing and sales efforts undertaken by the Company will be successful or will result in any significant sales of the Company's products. If the sales and marketing efforts implemented by the Company do not generate expected revenues, the Company may be required to seek additional financing or alter its business plan.
Dependence on Patents and Proprietary Technology. The Company's success will depend, in part, on its ability to obtain protection for its products and technologies under United States and foreign patent laws, to preserve its trade secrets, and to operate without infringing the proprietary rights of third parties. There can be no assurance that patent applications relating to the Company's products or potential products will result in patents being issued, that any issued patents will afford adequate
protection to the Company or not be challenged, invalidated, infringed or circumvented, or that any rights granted thereunder will afford competitive advantages to the Company. 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 the Company's product or technologies, or, if patents are issued to, or licensed by, the Company, design around such patents. There can be no assurance that patents owned or licensed by the Company and issued in one jurisdiction will also issue in any other jurisdiction. Furthermore, there can be no assurance that the Company can adequately preserve proprietary technology and processes that it maintains as trade secrets. An inability by the Company to develop and adequately protect its proprietary technology and other assets could have a material adverse effect on the Company's business, financial condition and results of operations.
Dependence on Others. The Company's strategy for the research, development and commercialization of certain of its 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. The Company may also rely on its collaborative partners to conduct research efforts, product testing and to manufacture and market certain of the Company's products. Although the Company believes 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 the control of the Company. There can also be no assurance that the Company will be successful in establishing any such collaborative arrangements or that, if established, the parties to such arrangements will assist the Company in commercializing products. Presently the Company has entered into a development agreement with an endoscope manufacturer pursuant to which it has developed prototype lenses. There can be no assurance that such endoscope manufacturer will progress to a production phase or, if production commences, that the Company will receive significant revenues from this relationship. In 1996, the Company terminated its agreement with a catalog company to distribute certain of its products on an exclusive basis. While the Company has no agreement with such catalog company with respect to the future distribution of the Company's products, it anticipates continuing such relationship on a non-exclusive basis. In 1997, the Company formalized relationships with seven 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.
Limited Manufacturing Capability. Prior to the Company's February 1996 IPO, the Company had minimal experience in manufacturing optical components. In addition, the Company had limited resources to manufacture its products. Proceeds from the IPO were primarily used to expand its manufacturing facilities and hire personnel to scale-up production activities. In March 1996, the Company entered into a 5 year lease for a new corporate headquarters and larger manufacturing facility in Albuquerque, New Mexico. Within such 13,300 square foot facility, the Company established its present manufacturing processes. The Company believes that the present manufacturing facilities are sufficient for its planned operations over the next several years. However, the Company does not have any experience manufacturing products in quantities sufficient to meet commercial demand. If the Company is unable to manufacture its products in sufficient quantities and in a timely manner to meet customer demand, the Company's business, financial condition and results of operations will be materially adversely affected.
Product Liability Exposure. The sale of the Company's optical products will involve the inherent risk of product liability claims against the Company. The Company currently does not maintain product liability insurance coverage, but intends 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 the Company. Moreover, the amount and scope of any coverage may be inadequate to protect the Company in the event that a product liability claim is successfully asserted against the Company.
Immediate and Substantial Dilution. Purchasers of the securities offered hereby will incur immediate substantial dilution in the per share net tangible book value of their Class A Common Stock. Therefore, purchasers of the securities offered hereby will bear a proportionately greater risk of loss than
the Company's current stockholders.
Charge to Income in the Event of Conversion of Class E Common Stock. In the event any shares of the Company's 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, the Company will record compensation expense for financial reporting purposes during the period in which such conversion occurs. Therefore, if the Company attains any of the earnings thresholds or the Company's Class A Common Stock meets certain minimum bid prices required for the conversion of the shares of Class E Common Stock, such conversion will be deemed additional compensation expense of the Company. Accordingly, the Company will, in the event of the conversion of the Class E Common Stock, recognize during the period in which the reportable earnings thresholds are met or such minimum bid prices obtained, what could be a substantial charge that would have the effect of significantly increasing the Company's reportable loss or reducing or eliminating reportable earnings, if any, for such period. 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 by the Company will not affect the Company's total stockholders' equity, it may have a material negative effect on the market price of the Company's securities. 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 will have a material adverse effect on the Company's earnings per share.
Control by Present Holders of Common Stock; Voting Trust. The Company's principal stockholders beneficially owned 250,210 shares of Class A Common Stock, 1,106,809 shares of the combined Class E Common Stock, representing 9% of the outstanding Class A Common Stock, 28% of the combined outstanding Class E Common Stock, and 20% of the total combined voting power of all of the Common Stock outstanding at September 12, 1997. In addition, certain stockholders of the Company holding approximately 18% of the total voting power have entered into a voting trust agreement. Additional stockholders may subsequently join the voting trust. Pursuant to the voting trust, Leslie A. Danziger, the Company's Chairman and CEO, is granted the authority to vote all of the shares subject to the voting trust on all matters that the Company's stockholders are entitled to vote. Accordingly, Ms. Danziger will likely be able to influence the election of the Company's directors and thereby direct the policies of the Company. Holders of the Company's issued and outstanding Preferred Stock have no voting rights. Consequently, the holders thereof will have no such rights until and unless such shares are converted into Class A Common Stock.
Future Sales of Common Stock. As of February 22, 1998, less than 5% of the Company's outstanding Common Stock are "restricted securities" as that term is defined under Rule 144 promulgated under the Securities Act of 1933, as amended (the "Securities Act"), and under certain circumstances may be sold without registration pursuant to such rule. Although no significant sales have occurred, the Company is unable to predict the effect that sales made under Rule 144, or otherwise, may have on the then prevailing market price of the Company's securities although any future sales of substantial amounts of securities pursuant to Rule 144 could adversely affect prevailing market prices.
Dividends Unlikely. The Company has not paid any cash dividends on its Common Stock and does not intend to declare or pay cash dividends in the foreseeable future. The Company expects that it will retain all available earnings, if any, to finance and expand its business.
Arbitrary Determination of Warrant Exercise Price. The exercise price of the warrants and other terms of such securities have been arbitrarily established by negotiation between the Company and one Underwriter with respect to the Class A and Class B Warrants and with the placement agent with respect to the Class C, Class D, Class E, Class F, Class G and Class H Warrants, and do not necessarily bear any relationship to the Company's asset value, net worth or financial condition of the Company or any generally recognized criteria of value and should not be regarded as an indication of any future market price of the Company's securities.
Effect of Outstanding Options and Warrants. As of December 31, 1997, the Company had outstanding (i) 2,679,000 Class A Warrants to purchase an aggregate of 2,679,000 shares of Class A Common Stock and 2,679,000 Class B Warrants; (ii) 1,840,000 Class B Warrants to purchase 1,840,000
shares of Class A Common Stock; (iii) the Unit Purchase Option to purchase an aggregate of 240,000 Units; (iv) 832,000 shares of Class A Common Stock reserved for the conversion of Series A Preferred Stock and exercise of Class C and Class D Warrants, (v) 1,500,000 shares of Class A Common Stock reserved for the conversion Series B Preferred Stock and exercise of Class E and Class F Warrants; (vi) 1,750,000 shares of Class A Common Stock reserved for the Selling Securityholders Securities; and (vii) outstanding options to purchase an aggregate of 809,175 shares of Class A Common Stock, 117,862 shares of Class E-1, 117,862 shares of Class E-2 and 78,575 shares of Class E-3 Common Stock. As of December 31, 1997, the Company also has an additional 1,138,226 shares of Class A Common Stock reserved for issuance under its Omnibus Incentive Plan and Directors Stock Incentive Plan. For the respective terms of such Warrants, options and the Unit Purchase Option, the holders thereof are given an opportunity to profit from a rise in the market price of the Company's Class A Common Stock with a resulting dilution in the interests of the other stockholders. Further, the terms on which the Company may obtain additional financing during the period such options and Warrants remain exercisable may be adversely affected by the existence of such options and Warrants. The holders of the Company's outstanding Warrants may exercise them at a time when the Company might be able to obtain additional capital through a new offering of securities on terms more favorable than those provided therein.
Potential Adverse Effect of Redemption of IPO Warrants. Commencing February 22, 1997, the Class A and Class B Warrants may be redeemed by the Company at a redemption price of $.05 per Warrant upon 30 days' notice provided the average closing bid price (as defined herein) of the Class A Common Stock for any 30 consecutive trading days ending within 15 days of the notice of redemption exceeds $9.10, in the case of the Class A Warrants, or $12.25, in the case of the Class B Warrants (subject to adjustment in each case). Redemption of the Warrants could force the holders to exercise the Warrants and pay the exercise price at a time when it may be disadvantageous for the holders to do so, to sell the Warrants at the then current market price when they might otherwise wish to hold the Warrants, or to accept the redemption price, which is likely to be substantially less than the market value of the Warrants at the time of redemption.
Possible Adverse Effects of Authorization of Preferred Stock, Anti-Takeover Provisions. The Company's Certificate of Incorporation authorizes the issuance of 5,000,000 shares of "blank check" Preferred Stock with such designations, rights and preferences as may be determined from time to time by the Board of Directors. Accordingly, the Board of Directors is empowered, without stockholder approval, to issue additional Preferred Stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of the Company's Common Stock. In the event of issuance, Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. As of the date of this Prospectus, the Company has authorized 250 shares of Series A Preferred Stock, 300 shares of Series B Preferred Stock, and 500 shares of Series C Preferred Stock, of which 180, 230 and 375 shares, respectively, have been issued and 55, 225 and 375 shares respectively, were outstanding. Although the Company has no present intention to issue any additional shares of Preferred Stock, there can be no assurance that the Company will not do so in the future. In addition, the Company's Certificate of Incorporation requires a super majority vote of stockholders to approve certain transactions, a classified Board of Directors and certain other provisions that may have the effect of discouraging a change of control of the Company. Further, the Company is subject to the provisions of Section 203 of the Delaware General Corporation Law which may have the effect of discouraging persons from pursuing a non-negotiated takeover of the Company and delaying or preventing certain changes of control.
Limitation of Liability of Directors. The Company's Certificate of
Incorporation provides that directors of the Company shall not be personally
liable for monetary damages to the Company 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
against directors of the Company.
Possible Adverse Effect on the Liquidity of the Company's Securities Due to Securities and Exchange Commission Investigation of the IPO Underwriter and Blair & Co. and Recent Settlement by Blair & Co. with NASD. The Securities and Exchange Commission (the "Commission") is conducting an investigation concerning various business activities of the Underwriter in the Company's IPO (the "IPO Underwriter") and D.H. Blair & Co., Inc., ("Blair & Co.") a selling group member which distributed a substantial portion of the IPO Units. The Company has been advised by the IPO Underwriter that the investigation has been ongoing since at least 1989 and that it is cooperating with the investigation. The IPO Underwriter cannot predict whether this investigation will ever result in any type of formal enforcement action against the IPO Underwriter or Blair & Co.
In July 1997, Blair & Co., its Chief Executive Officer and its head trader consented, without admitting or denying any violations, to a settlement with the NASD Regulation, Inc. ("NASDR"), the regulatory oversight subsidiary of the National Association of Securities Dealers, Inc. ("NASD") District Business Conduct Committee for District No. 10 to resolve allegation of NASD rule and securities law violations in connection with mark-up and pricing practices and adequacy of disclosures to customers regarding market-making activities of Blair & Co. in connection with certain securities issues during the period from June 1993 through May 1995 where Blair & Co. was the primary selling group member. NASDR alleged the firm failed to accurately calculate the contemporaneous cost of securities in instances where the firm dominated and controlled after-market trading, thereby causing the firm to charge its customers excessive mark-ups. NASDR also alleged the firm did not make adequate disclosure to customers about its market-making activities in two issues. As part of the settlement, Blair & Co. has consented to censure and has agreed to pay a $2 million fine, make $2.4 million in restitution to retail customers, employ an independent consultant for two years to review and make recommendations to strengthen the firm's compliance procedures, and has undertaken for twelve months not to sell to its retail customers (excluding banks and other institutional investors) more than 60% of the total securities sold in any securities offering in which it participates as an underwriter or selling group member. The Chief Executive Officer of Blair & Co. has agreed to settle failure to supervise charges by consenting to a censure, the imposition of a $300,000 fine and a 90-day suspension from associating with any member firm and has undertaken to take certain requalification examinations. The settlement with NASDR does not involve or relate to the IPO Underwriter, its chief executive officer or any of its other officers or directors.
Blair & Co. currently makes a market in the Company's securities see "Possible Restrictions and Potential Effect of Blair & Co. Acquisition on Market-Making Activities in Company's Securities." The Company is unable to predict whether Blair & Co.'s settlement with the NASDR or any unfavorable resolution of the Commission's investigation will have any effect on such firm's ability to make a market in the Company's securities and, if so, whether the liquidity or price of the Company's securities would be adversely affected.
Possible Restrictions and Potential Effect of Blair & Co. Acquisition
on Market-Making Activities in Company's Securities. On January 9, 1998,
Barington Capital Group L.P. , a New York investment bank, agreed to acquire
most of the assets of Blair & Co. The Company is not able to determine the
impact, if any, this acquisition will have on the Company's securities. Blair &
Co. currently makes a market in the Company's securities. In addition,
Regulation M, which was adopted to replace Rule 10b-6 under the Exchange Act may
prohibit Blair & Co. from engaging in any market-making activities with regard
to the Company's securities for the period of up to five business days (or such
other applicable period as Regulation M may provide) prior to any solicitation
by the IPO Underwriter of the exercise of Class A and Class B Warrants until the
later of the termination of such solicitation activity or the termination (by
waiver or otherwise) of any right that such IPO Underwriter may have to receive
a fee for the exercise of Warrants following such solicitation. As a result,
Blair & Co. may be unable to provide a market for the Company's securities
during certain periods while the Warrants are exercisable. In addition, under
applicable rules and regulations under the Exchange Act, any person engaged in
the distribution of the Class A Warrants issued to the Bridge Securityholders in
the Company's IPO and offered for sale may not simultaneously engage in
market-making activities with respect to any securities of the Company for the
applicable restricted period prior to the commencement of such distribution.
Accordingly, in the event the IPO Underwriter or Blair & Co. engages in a
distribution of any of the Bridge
Securityholders' Warrants, neither of such firms will be able to make a market in the Company's securities during the applicable restrictive period. Any temporary cessation of such market-making activities could have an adverse effect on the market price of the Company's securities.
Risk of Low-Priced Stock. If the Company's securities were delisted from Nasdaq (See "Risk Factors--Nasdaq Listing and Maintenance Requirements"), they could become subject to Rule 15g-9 under the Exchange Act, which imposes additional sales practice requirements on broker-dealers which sell such securities to persons other than established customers and "accredited investors" (generally, individuals with net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, such rule may adversely affect the ability of broker-dealers to sell the Company's securities and may adversely affect the ability of purchasers in the IPO to sell any of the securities acquired hereby in the secondary market.
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 delivery, prior to any transaction in a penny stock, of a disclosure schedule prepared by the Commission relating to the penny stock market. Disclosure is also required to be made about commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
The foregoing required penny stock restrictions will not apply to the Company's securities if such securities are 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 Company's securities will qualify for exemption from these restrictions. In any event, even if the Company's securities were exempt from such restrictions, it 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 the Company's securities were subject to the existing rules on penny stocks, the market liquidity for the Company's securities could be severely adversely affected.
Non-Registration in Certain Jurisdictions of Shares Underlying the Warrants and Preferred Stock; Need for Current Prospectus. Although none of the shares of Common Stock offered hereby will knowingly be sold to purchasers in jurisdictions in which such securities are not registered or otherwise qualified for sale, purchasers may buy such securities in the aftermarket in, or may move to, jurisdictions in which such shares of Common Stock are not so registered or qualified during the period that the Warrants are exercisable or the Preferred Stock is convertible. In this event, the Company would be unable to issue shares to those persons desiring to exercise their Warrants or convert their Preferred Stock unless and until the underlying securities could be qualified for sale in jurisdictions in which such purchasers reside, or an exemption to such qualification exists in such jurisdiction. In addition, investors will not be able to exercise their Warrants or convert their Preferred Stock, unless at the time of exercise the Company has a current prospectus covering the shares of Class A Common Stock underlying the Warrants and Preferred Stock, as the case may be. No assurances can be given that the Company will be able to effect any required registration or qualification or maintain a current prospectus.
Nasdaq Listing and Maintenance Requirements, Risk of Delisting. The Units, Class A Common Stock and Class A and Class B Warrants are currently traded on Nasdaq SmallCap Market ("Nasdaq"). Under the rules for continued listing on Nasdaq SmallCap Market, a company is required to maintain at least $2,000,000 in "net tangible assets" ("net tangible assets" equals total assets less total liabilities and goodwill) or at least $35,000,000 in total market capitalization or at least $500,000 in net income in two out of its last three fiscal years, as well as at least 500,000 shares in public float, at least
$4,000,000 in market value of the public float and a bid price of not less than $1.00 per share, and meet certain corporate governance standards. Upon notice of a deficiency in one or more of the maintenance requirements, the Company would be given between 10 to 90 days (depending on the criteria which is not satisfied) to comply with the maintenance standards. Failure of the Company to meet the maintenance requirements of Nasdaq could result in the Company's securities being delisted from Nasdaq, with the result that the Company's 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 the Company's securities. Among other consequences, delisting from Nasdaq may cause a decline in the stock price and difficulty in obtaining future financing.
Stock Market Volatility. There have been periods of extreme volatility in the stock market, which in many cases were unrelated to the operating performance of, or announcements concerning, the issuers of the affected stock. General market price declines or market volatility in the future could adversely affect the price of the Common Stock. In certain cases, volatility in the price of a given security can result from the short-term trading strategies of certain market segments. Such volatility can distort market value and can be particularly severe in the case of smaller capitalization stocks and immediately before or after an important corporate event such as a public offering.
Risk of Insufficient Funds Available to Effect Redemptions. In the events of conversion of the Series A, Series B or Series C Preferred Stock or exercise of their accompanying Class C, Class E and Class G Warrants, respectively, in a manner that would cause an undue dilution of its Common Stock, the Company has the right to redeem such preferred stock and warrants for cash. In addition, a Liquidation Event (as defined in the Company's applicable Certificates of Designation) may require redemption of the Series A, Series B or Series C Preferred Stock for cash. There can be no assurance that in either of the foregoing events that the Company will have adequate cash to effect such cash redemptions.
USE OF PROCEEDS
All proceeds from the resale of any securities offered hereby will be received by the respective Selling Securityholders. In the event that all of the 337,078 outstanding Class G Warrants, and all of the 58,427 outstanding Class H Warrants are exercised, the Company would receive net proceeds of approximately $2,642,000. Holders of Warrants are not obligated to exercise their Warrants. There can be no assurance that the Warrantholders will choose to exercise all or any of their Warrants. The Company intends to use the net proceeds received upon the exercise of the Warrants, if any, for general corporate purposes and working capital, including but not limited to marketing efforts, research and development programs and continuing product development.
DETERMINATION OF OFFERING PRICE
An aggregate of up to 1,750,000 of the 1,758,490 shares of Common Stock offered are issuable upon the exercise of the Class G and Class H Warrants and the conversion of the Series C Preferred Stock. The subsequent sale of the shares of Common Stock received upon exercise of the Warrants and conversion of the Series C Preferred Stock and the sale of the remaining 8,490 shares of Common Stock currently outstanding will be determined by the respective Selling Securityholder at prices and on terms then prevailing or at prices related to the then current market price, or in negotiated transactions.
SELLING SECURITYHOLDERS
An aggregate of 1,758,490 shares of Class A Common Stock may be offered for resale by the Selling Securityholders from time to time. The shares of Class A Common Stock offered hereby include 1,750,000 shares which are issuable upon exercise of 337,078 Class G Warrants, and 58,427 Class H Warrants and upon conversion of 375 shares of Series C Preferred Stock, all of which are currently outstanding. Each Class G and Class H Warrant is exercisable for one share of Class A Common Stock. Each share of Series C 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 conversion price is defined as the lesser of (i) $6.675 or (ii) 85% of the average closing bid price of the Company's Class A Common Stock for the five days preceding the conversion date. All of the Class G Warrants, Class H Warrants, Series C Preferred Stock and Class A Common Stock were acquired by the Selling Securityholders in connection with a private placement completed by the Company in February 1998.
The following table sets forth certain information with respect to the beneficial ownership of Common Stock as of February 1, 1998, and as adjusted to reflect the sale of the Class A Common Stock being offered hereby, by the Selling Securityholders. Except as described below, there are no material relationships between any of the Selling Securityholders and the Company, nor have any such material relationships existed within the past three years.
---------------------------------------------
Shares Beneficially owned
After Offering (1)
--------------------- ----------------- ---------------------------------------------
Shares Beneficially Number of Number Percent of Percent of
owned Prior to the Shares Being Class A All
Offering (1)(2)(3) Offered (3) Common Stock Classes of
Common Stock
--------------------- ----------------- ---------------- -------------- -------------
Cranshire Capital LLP 200,513(4) 93,035(5) 107,478(4) 3% 1.5%
EP Opportunity Fund, LLC 548,295(6) 232,588(7) 310,307(6) 8% 4%
JRA Enterprises 11,629(8) 11,629 -0- * *
Kopin Rice Corporation 69,776(9) 69,776 -0- * *
Keyway Investments, LTD 908,206(10) 465,175(11) 443,031(10) 12% 6%
Swartz Family Partnership, LP 42,948(12)(21) 15,309 27,639(12) * *
KendrickFamily Partnership LLP 33,549(13)(21) 15,309 18,240(13) * *
Brad Hathorn 4,928(14)(21) 2,000 2,925(14) * *
Jerry Harris 8,698(15)(21) 2,500 6,198(15) * *
Carl Johnson 5,500(17)(21) 1,500 4,000(17) * *
Davis Holden 6,500(18)(21) 1,500 5,000(18) * *
Frank Mauro 32,810(16)(21) 15,309 27,640(16) * *
Chuck Whiteman 4,265(19)(21) 1,500 2,765(19) * *
Dwight Bronnum 1,000(20)(21) 250 750(20) * *
Robert Hopkins 1,000(20)(21) 250 750(20) * *
H. Nelson Logan 1,000(21) 1,000 0 * *
James Mills 1,000(21) 1,000 0 * *
Kelley Smith 1,000(21) 1,000 0 * *
Swartz Investments LLC 8,490 8,490 0 * *
|
* Represents beneficial ownership of less than 1%.
(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 includes shares of Class A
Common Stock issuable upon conversion of shares of the Company's Series A
and Series B Preferred Stock which are presently outstanding. Each share of
Series A and Series B 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 Series A and Series B conversion price is defined as
the lesser of (i) $5.625 and $7.2375 respectively, or (ii) 85% of the
average closing bid price of the Company's Class A Common Stock for the
five days preceding the conversion date. For purposes of the information
set forth in this table, it is assumed that each outstanding share of
Series A and Series B Preferred Stock was converted as of March 1, 1998
into approximately 1,872 and 1,427 shares, respectively, of Class A Common
Stock.
(3) As noted below, the information set forth below includes shares of Class A
Common Stock issuable upon conversion of shares of the Company's Series C
Preferred Stock which are presently outstanding. Each share of Series C
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 conversion price is defined as the lesser of (i)
$6.675 or (ii) 85% of the average closing bid price of the Company's Class
A Common Stock for the five days preceding the conversion date. For
purposes of the information set forth in this table, it is assumed that
each share of Series C Preferred Stock was converted as of March 1, 1998
into approximately 1,505 shares of Class A Common Stock.
(4) Includes 200,513 shares of which 44,396 were received from the conversion
of 15 shares of Series A Preferred Stock and related Class C Warrants and
156,117 shares issuable upon (A) conversion of (i) 20 shares of Series B
Preferred Stock and (ii) 40 shares of Series C Preferred Stock and upon (B)
the exercise of (i) 34,542 Class E Warrants and (ii) 35,955 Class G
Warrants to purchase shares of Class A Common Stock.
(5) Includes 93,035 shares issuable upon conversion of 40 shares of Series C
Preferred Stock and assumes the exercise of Class G Warrants to purchase
35,955 shares of Class A Common Stock.
(6) Includes 548,295 shares issuable upon (A) conversion of (i) 35 shares of
Series A Preferred Stock (ii) 65 shares of Series B Preferred Stock and
(iii) 100 shares of Series C Preferred Stock and upon (B) the exercise of
(i) Class C Warrants to purchase 62,222 shares, (ii) 89,810 Class E
Warrants and (iii) 89,888 Class G Warrants to purchase shares of Class A
Common Stock.
(7) Includes 232,588 shares issuable upon conversion of 100 shares of Series C
Preferred Stock and assumes the exercise of Class G Warrants to purchase
89,888 shares of Class A Common Stock.
(8) Includes 11,629 shares issuable upon conversion of 5 shares of Series C
Preferred Stock and assumes the exercise of Class G Warrants to purchase
4,494 shares of Class A Common Stock.
(9) Includes 69,776 shares issuable upon conversion of 30 shares of Series C
Preferred Stock and assumes the exercise of Class G Warrants to purchase
26,966 shares of Class A Common Stock.
(10) Includes 908,206 shares which 82,162 were received from the conversion of
45 shares of Series A Preferred Stock and 826,044 shares issuable upon (A)
conversion of (i) 100 shares of Series B Preferred Stock and (ii) 200
shares of Series C Preferred Stock and upon (B) the exercise of (i) 80,000
Class C Warrants (ii) 138,169 Class E Warrants and (ii) 179,775 Class G
Warrants to purchase shares of Class A Common Stock.
(11) Includes 465,175 shares issuable upon conversion of 200 shares of Series C
Preferred Stock and assumes the exercise of Class G Warrants to purchase
179,775 shares of Class A Common Stock.
(12) 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.
(13) Includes 33,549 shares of which 6,351 were received from the exercise of
Class D Warrants and 27,198 shares issuable upon the exercise of 11,889
Class F Warrants and 15,309 Class H Warrants.
(14) Includes 4,928 shares of which 928 were received from the exercise of Class
D Warrants and 4000 shares issuable upon the exercise of 2,000 Class F
Warrants and 2,000 Class H Warrants.
(15) Includes 8,698 shares of which 2,198 were received from the exercise of
Class D Warrants and 6,500 shares issuable upon the exercise of 4,000 Class
F Warrants and 2,000 Class H Warrants.
(16) Includes 32,810 shares of which 5,611 were received from the exercise of
Class D Warrants and 27,199 shares issuable upon the exercise of 11,890
Class F Warrants and 15,309 Class H Warrants.
(17) Includes 5,500 shares issuable upon the exercise of (i) 2,000 Class D
Warrants, (ii) 2,000 Class F Warrants and (iii) 1,500 Class H Warrants.
(18) Includes 6,500 shares issuable upon the exercise of (i) 3,000 Class D
Warrants, (ii) 2,000 Class F Warrants and (iii) 1,500 Class H Warrants..
(19) Includes 4,265 shares of which 1,265 were received from the exercise of
Class D Warrants and 3,000 shares issuable upon the exercise of 1,500 Class
F Warrants and 1,500 Class H Warrants.
(20) Includes 1,000 shares of which 500 were received from the exercise of Class
D Warrants and 500 shares issuable upon the exercise of 250 Class F
Warrants and 250 Class H Warrants.
(21) Each of these persons were designated by Swartz Investments, LLC to receive
certain securities issuable to Swartz. See "Certain Relationships".
CERTAIN RELATIONSHIPS
All of the Class D and Class F Warrants were issued to Swartz Investments, LLC or its designees (collectively "Swartz") along with cash placement fees as consideration for its services as placement agent in connection with the Company's sales of Series A Preferred Stock in July 1997 and Series B Preferred Stock in October 1997, respectively.
All of the Class G Warrants were issued to Swartz with a cash placement fee of $187,500 and 8,490 shares of unregistered Class A Common Stock equal to 1 1/2% of the gross proceeds from the sale of Series C Preferred Stock as compensation for their services as placement agent in connection with the February 1998 private placement of 375 shares of its Series C Preferred Stock.
The purchasers of the Company's Series A, Series B and Series C Preferred Stock have a right of first offer to participate in any issuances of equity or debt securities by the Company during the respective one year period commencing on the date which such shares of Series A, Series B or Series C Preferred Stock, as the case may be, were sold. Swartz Investments LLC has the right of first refusal to act as placement agent with respect to any future private financings by the Company during the one year period ended July 1998.
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby the ("Selling
Securityholders' Securities") may be sold from time to time by the Selling
Securityholders, or by pledgees, donees, transferees or other successors in
interest. Such sales may be made 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 Selling Securityholders'
Securities may be sold in one or more of the following types of transactions:
(a) a block trade in which the broker-dealer so engaged will attempt to sell the
Selling Securityholders' Securities as agent but may 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 Securityholders may arrange for other broker-dealers to
participate in the resales.
In connection with distributions of the Selling Securityholders' Securities or otherwise, the Selling Securityholders may enter into hedging transactions with broker-dealers. In connection with such transactions, broker-dealers may engage in short sales of the Selling Securityholders' Securities in the course of hedging the positions they assume with Selling Securityholders. The Selling Securityholders may also sell Selling Securityholders' Securities short and redeliver the Selling Securityholders' Securities to close out such short positions. The Selling Securityholders may also enter into option or other transactions with broker-dealers which require the delivery to the broker-dealer of the Selling Securityholders' Securities, which the broker-dealer may resell or otherwise transfer pursuant to this Prospectus. The Selling Securityholders may also loan or pledge Selling Securityholders' Securities to a broker-dealer and the broker-dealer may sell the Selling Securityholders' Securities so loaned or, upon a default, the broker-dealer may effect sales of the pledged Selling Securityholders' Securities pursuant to this Prospectus.
Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from the Selling Securityholders 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 under the Securities Act may be sold under Rule 144 rather than pursuant to this Prospectus.
All costs, expenses and fees in connection with the registration of the Selling Securityholders' Securities offered hereby will be borne by the Company. Commission and discounts, if any, attributable to the sales of the Selling Securityholders' Securities will be borne by the respective Selling
Securityholders. The Selling Securityholders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the Selling Securityholders' Securities against certain liabilities, including liabilities arising under the Securities Act. The Company and the Selling Securityholders have agreed to indemnify certain persons including broker-dealers or agents against certain liabilities in connection with the offering of the Selling Securityholders' Securities, including liabilities arising under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company, the Company has been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
DESCRIPTION OF SECURITIES
For a description of the Company's Class A Common Stock see the Company's Registration Statement on Form SB-2 filed with the Commission on December 7, 1995 and incorporated by reference into this Prospectus.
Each Class G Warrant entitles the holder to purchase one share of Class A Common Stock at $6.68 per share at any time through February 2001. Each Class H Warrant entitles the holder to purchase one share of Class A Common Stock at $6.68 per share at any time through February 2003. For a description of the Class G Warrants and Class H Warrants see Exhibit 4.7 and Exhibit 4.8 to the Registration Statement.
Each share of Series C Preferred Stock is convertible into a number of shares of Class A Common Stock at the option of the holder at any time commencing in June, 1998, subject to certain volume limitations applicable until November, 1998. The number of shares of Class A Common Stock issuable upon conversion of the Series C Preferred Stock is determined by dividing the stated value of the Series C Preferred Stock on the date of conversion by a conversion price. The conversion price is defined as the lesser of (i) $6.675 or (ii) 85% of the average closing bid price of the Company's Class A Common Stock for the five days preceding the conversion date. Each share of Series C Preferred Stock has a stated value of $10,000 plus an 8% per annum premium.
LEGAL MATTERS
Certain legal matters with respect to the Company and the validity of the securities offered hereby will be passed upon for the Company by Squire, Sanders & Dempsey L.L.P., Phoenix, Arizona.
INTERESTS OF NAMED EXPERTS AND COUNSEL
On October 13, 1997, James L. Adler, Jr. was appointed to serve as a Director of the Company for a two year term. Mr. Adler is a partner of the law firm of Squire, Sanders & Dempsey, L.L.P.
EXPERTS
The financial statements of the Company as of June 30, 1997, and for the year then ended, have been incorporated by reference in this Prospectus in reliance upon the report of KPMG Peat Marwick 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 Peat Marwick LLP covering the June 30, 1997, 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 entity'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.
The statements of operations, stockholders' equity (deficiency in net assets), and cash flows of the Company, for the year ended June 30, 1996, incorporated by reference in this Prospectus, have been audited by Ernst & Young LLP, independent auditors, to the extent indicated in their report thereon also incorporated by reference (which contains an explanatory paragraph with respect to going concern mentioned in the Notes to the financial statements). Such financial statements have been incorporated herein by reference in reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
No dealer, salesman or any other person has been authorized to give any information or to make any representations other than those contained in this Prospectus in connection with the offer made by this Prospectus and, if given or made, such information and representations must not be relied upon as having been authorized by the Company or the Selling Securityholders. This Prospectus does not constitute an offer to sell or the solicitation of any offer to buy any security other than the shares of Class A Common Stock offered by this Prospectus, nor does it constitute an offer to sell or a solicitation of any offer to buy the shares of Class A Common Stock by anyone in any jurisdiction in which such offer or 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 unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that information contained herein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
----
Available Information 3
Prospectus Summary 4
Risk Factors 8
Use of Proceeds 16
Determination of Offering Price 16
Selling Securityholders 17
Certain Relationships 19
Plan of Distribution 19
Description of Securities 20
Legal Matters 20
Experts 20
------------------
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LIGHTPATH TECHNOLOGIES, INC.
1,758,490 Shares of Class A Common Stock
PROSPECTUS
March 13, 1998
PART II
INFORMATION NOT REQUIRED IN 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(1)
---------
Legal fees and expenses ......... $ 7,000.00
Accounting fees and expenses..... 5,000.00
Printing expenses ............... 2,000.00
----------
Total ...................... $14,000.00
==========
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(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 and Financial Statement Schedules.
Page Number or
Exhibit Method of
Number Description Filing
------ ----------- ------
3.2 Certificate of Designation filed February 6, 1998 with *
the Secretary of State of the State of Delaware
4.1 Form of Warrant Agreement (1)
4.2 Form of Unit Purchase Option (2)
4.3 Form of Voting Trust Agreement dated among certain (1)
stockholders of the Registrant
4.4 Specimen Certificate for the Class A Common Stock (2)
4.5 Specimen Certificate for the Class A. Warrants (2)
4.6 Specimen Certificate for the Class B Warrants (2)
4.7 Form of Class G Warrants *
4.8 Form of Class H Warrants *
5.1 Opinion and Consent of Squire, Sanders & Dempsey LLP *
23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors *
23.2 Consent of Ernst & Young LLP, Independent Auditors *
23.3 Consent of Squire, Sanders & Dempsey LLP Included in
Exhibit 5.1
24 Powers of Attorney See signature page
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* Filed herewith.
1. Previously filed as Exhibit 4.1 to registrant's registration statement on
Form SB-2 filed on December 7, 1995 (File No. 33-80119)(the "SB-2").
2. Previously filed as Exhibit to the SB-2.
II-2
Item 17. Undertakings
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be 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:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof), which, individually or in the aggregate,
represent a fundamental change in the information set forth in the Registration
Statement; and
(iii) Include any additional or changed material information
on the plan of distribution not previously disclosed in the Registration
Statement.
(4) It will file a post-effective amendment to remove from registration any of the securities that remain unsold at the termination of the offering. 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 14 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 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 Act and will be governed by the final adjudication of such issue.
(5) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) of Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference into this registration statement shall be deemed to be 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.
II-3
SIGNATURES
In accordance with the requirement 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 Registration Statement and duly authorized this Registration Statement to be signed on its behalf by the undersigned, in the City of Albuquerque and State of New Mexico on March 12, 1998.
LIGHTPATH TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ LESLIE A. DANZIGER
-------------------------------------
Leslie A. Danziger
Chairman of the Board and
Chief Executive Officer
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Special Power of Attorney
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, constitutes and appoints each of Leslie A. Danziger 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 amendments 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 Securites 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. In accordance with the requirement of the Securities Act of 1933, this Registration Statement was signed below by the following persons in the capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ LESLIE A. DANZIGER Chairman of the Board (Principal March 12,1998
---------------------- Executive Officer)
Leslie A. Danziger
/s/ DONALD E. LAWSON President and Treasurer (Principal March 12,1998
-------------------- Financial and Accounting Officer)
Donald E. Lawson
/s/ James A. Adler, Jr. Director March 12,1998
-----------------------
James A. Adler, Jr.
/s/ Louis Leeburg Director March 12,1998
-----------------
Louis Leeburg
/s/ Milton Klein, M.D. Director March 12,1998
----------------------
Milton Klein, M.D.
/s/ Haydock H. Miller, Jr. Director March 12,1998
--------------------------
Haydock H. Miller, Jr.
|
II-4
Exhibit 3.2
CERTIFICATE OF DESIGNATION OF SERIES C PREFERRED STOCK
OF LIGHTPATH TECHNOLOGIES, INC. Filed February 6, 1998
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 C 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 C 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 C 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 C Preferred Stock (the "Series C Preferred Stock") and the number of shares constituting the Series C Preferred Stock shall be five hundred (500). The Series C Preferred Stock shall be offered at a purchase price of Ten Thousand Dollars ($10,000) per share (the "Original Series C Issue Price"), with an eight percent (8%) per annum accretion rate as set forth herein.
Section 2. Rank. The Series C 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 C 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 C 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 and with any class or series of capital stock of the Company hereafter created specifically ranking by its terms on parity with the Series C 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 C Preferred Stock will bear no dividends, and the holders of the Series C Preferred Stock ("Holders") shall not be entitled to receive dividends on the Series C 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 C 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 C Issue Price for each outstanding share of Series C
Preferred Stock and (ii) an amount equal to eight percent (8%) of the Original
Series C 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 C Preferred Stock from the Company, the escrow agent
first had in its possession funds representing full payment for the shares of
Series C 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 C 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 C
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 C 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 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 C 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 C 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 C Preferred Stock shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. The record Holder of the Series C Preferred Stock shall be entitled to convert, subject to the Company's right of redemption set forth in Section 6(a) and the conversion restrictions herein below, any or all the aggregate principal amount of the Series C 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 C Preferred Stock =
where,
o 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 C Preferred Stock from the Company, the escrow agent first had in its possession funds representing full payment for the shares of Series C 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 C Preferred Stock for which conversion is being elected, and
o Conversion Price = the lesser of (x) 100% 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 ending on January 28, 1998, which is $6.675 (the "Fixed Conversion Price"), or (y) 85% 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 C 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 C 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 C 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 C 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 C Preferred Stock that occurs pursuant to the offering of the Series C Preferred Stock by the Company.
For purposes hereof, any Holder which acquires shares of Series C 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 C Preferred Stock acquired by such Holder from its Transferor bears to the total number of shares of Series C 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 C 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 C Preferred Stock stating that the Holder elects to convert, which notice shall specify the Date of Conversion, the number of shares of Series C 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 C 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 C 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 C 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 C 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 C 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 C
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 C Preferred Stock being redeemed. If the Company elects to redeem, on the Termination Date, the Company shall send to the Holders of outstanding Series C Preferred Stock notice (the "Automatic Redemption Notice") via facsimile of its intent to effect an Automatic Redemption of the outstanding Series C 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 C Preferred Stock shall send their certificates representing the Series C 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 C 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 C 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 C Preferred Stock, the number of outstanding shares of 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 C Preferred Stock are issued and outstanding, the number of outstanding shares of 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 C 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 C 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 C Preferred Stock shall thereafter have the right to receive upon conversion of Series C 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 C 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 C 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 C 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 C 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. Redemption by Company.
(a) Company's Right to Redeem Upon Receipt of Notice of Conversion. If the Variable Conversion Price of the Company's Class A Common Stock is less than the Fixed Conversion Price (as defined in Section 5(a)), at the time of receipt of a Notice of Conversion pursuant to Section 5(b), the Company shall have the right, in its sole discretion, to redeem in whole or in part any Series C Preferred Stock submitted for conversion at the Redemption Rate (as defined below), immediately prior to and in lieu of conversion ("Redemption Upon Receipt of Notice of Conversion"). If the Company elects to redeem some, but not all, of the Series C Preferred Stock submitted for conversion, the Company shall redeem from among the Series C Preferred Stock submitted by the various shareholders for conversion on the applicable date, a pro-rata amount from each such Holder so submitting Series C Preferred Stock for conversion.
(i) Redemption Price Upon Receipt of a Notice of Conversion. The redemption price of Series C Preferred Stock under this Section 6(a) shall be calculated as follows ("Redemption Rate"): 120% of the Stated Value, where Stated Value shall have the same meaning as defined in Section 6(b)(i) below.
(ii) Mechanics of Redemption Upon Receipt of Notice of Conversion. The Company shall effect each such redemption by giving notice of its election to redeem, by facsimile, by 5:00 p.m. New York City time the next business day following receipt of a Notice of Conversion from a Holder, and the Company shall provide a copy of such redemption notice by overnight or two (2) day courier, to (A) the Holder of the Series C Preferred Stock submitted for conversion at the address and facsimile number of such Holder appearing in the Company's register for the Series C Preferred Stock and (B) the Company's Transfer Agent. Such redemption notice shall indicate whether the Company will redeem all or part of the Series C Preferred Stock submitted for conversion and the applicable redemption price.
(iii) Redemption Buy-In. If (i) subsequent to the
tender of a Notice of Conversion, but prior to its receipt of a Notice of
Redemption Upon Notice of Conversion, the Holder sells shares of Class A Common
Stock (the "Redemption Sold Shares") which such Holder anticipated receiving
upon such conversion, (ii) the Company effects a Redemption Upon Receipt of
Notice of Conversion with respect to such conversion, and (iii) the Holder
purchases (in an open market transaction), no later than the close of trading on
the trading day following its receipt of the Notice of Redemption Upon Notice of
Conversion, shares of Class A Common Stock to make delivery upon the sale of the
Redemption Sold Shares (a "Redemption Buy-In"), the Company shall pay such
Holder (in addition to the applicable Redemption Rate) the amount by which (x)
such Holder's total purchase price (including brokerage commission, if any) for
the shares of Class A Common Stock purchased in the Redemption Buy-In exceeds
(y) the net proceeds received by such Holder from the sale of the Redemption
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 Redemption 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 (and trading records, if reasonably requested by the Company)
indicating any amounts payable to Holder pursuant to this Section.
(b) Company's Right to Redeem at its Election. At any time,
commencing twelve (12) months and one (1) day after the Last Closing Date, the
Company shall have the right, in its sole discretion, to redeem ("Redemption at
Company's Election"), from time to time, any or all of the Series C Preferred
Stock; provided (i) the Company shall first provide thirty (30) days advance
written notice as provided in subparagraph 6(b)(ii) below (which can be given
beginning thirty (30) days prior to the date which is twelve (12) months and one
(1) day after the Last Closing Date), and (ii) that the Company shall only be
entitled to redeem Series C Preferred Stock having an aggregate Stated Value (as
defined below) of at least Three Hundred Seventy-five Thousand Dollars
($375,000). If the Company elects to redeem some, but not all, of the Series C
Preferred Stock, the Company shall redeem a pro-rata amount from each Holder of
the Series C Preferred Stock.
(i) Redemption Price At Company's Election. The "Redemption Price At Company's Election" shall be calculated as a percentage of Stated Value, as that term is defined below, of the Series C Preferred Stock redeemed pursuant to this Section 6(b), which percentage shall vary depending on the date of Redemption at Company's Election (as defined below), and shall be determined as follows:
Date of Notice of Redemption at Company's Election % of Stated Value -------------------------------------------------- ----------------- 12 months and 1 day to 18 months following Last Closing Date 130% 18 months and 1 day to 24 months following Last Closing Date 125% 24 months and 1 day to 30 months following Last Closing Date 120% 30 months and 1 day to 36 months following Last Closing Date 115% |
For purposes hereof, "Stated Value" shall mean the Original Series C Issue Price (as defined in Section 1) of the shares of Series C Preferred Stock being redeemed pursuant to this Section 6(b), together with the accreted but unpaid Premium (as defined in Section 4(a)).
(ii) Mechanics of Redemption at Company's Election. The Company shall effect each such redemption by giving at least thirty (30) days prior written notice ("Notice of Redemption At Company's Election") to (A) the Holders of the Series C Preferred Stock selected for
redemption, at the address and facsimile number of such Holder appearing in the
Company's Series C Preferred Stock register and (B) the Transfer Agent, which
Notice of Redemption At Company's Election shall be deemed to have been
delivered three (3) business days after the Company's mailing (by overnight or
two (2) day courier, with a copy by facsimile) of such Notice of Redemption At
Company's Election. Such Notice of Redemption At Company's Election shall
indicate (i) the number of shares of Series C Preferred Stock that have been
selected for redemption, (ii) the date which such redemption is to become
effective (the "Date of Redemption At Company's Election") and (iii) the
applicable Redemption Price At Company's Election, as defined in subsection
(b)(i) above. Notwithstanding the above, Holder may convert into Class A Common
Stock pursuant to Section 5, prior to the close of business on the Date of
Redemption at Company's Election, any Series C Preferred Stock which it is
otherwise entitled to convert, including Series C Preferred Stock that has been
selected for redemption at the Company's election pursuant to this subsection
6(b); provided, however, that the Company shall still be entitled to exercise
its right to redeem upon receipt of a Notice of Conversion pursuant to Section
6(a).
(c) Company Must Have Immediately Available Funds or Credit Facilities. The Company shall not be entitled to send any Redemption Notice and begin the redemption procedure under Sections 6(a) and 6(b) unless it has:
(i) the full amount of the redemption price in cash, available in a demand or other immediately available account in a bank or similar financial institution; or
(ii) immediately available credit facilities, in the full amount of the redemption price with a bank or similar financial institution; or
(iii) an agreement with a standby underwriter willing 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 redemption; or
(iv) a combination of the items set forth in (i),
(ii) and (iii) above, aggregating the full amount of the redemption price.
If the foregoing conditions of this Section 6(c) are satisfied and the Company complies with Section 6(d) hereof, then any shares of Series C Preferred Stock called for by a Redemption at Company's Election shall cease to be outstanding for all purposes hereunder (including the right to convert or to accrete additional Premium or to exercise any other right or privilege hereunder) on the Date of Redemption at Company's Election and shall instead represent the right to receive the Redemption Price at Company's Election without interest from and after the Date of Redemption at Company's Election.
(d) Payment of Redemption Price.
(i) Each Holder submitting Preferred Stock being redeemed under this Section 6 shall send their Series C Preferred Stock Certificates so redeemed to the Company or its Transfer Agent, and the Company shall pay the applicable redemption price to that Holder within five (5) business days of the Date of Redemption at Company's Election. The Company shall not be obligated to deliver the redemption price unless the Preferred Stock Certificates so redeemed are delivered to the Company or its Transfer Agent, or, in the event one (1) or more certificates have been lost, stolen, mutilated or destroyed, unless the Holder has complied with Section 5(b)(i).
(ii) If the Company elects to redeem pursuant to
Section 6(a) hereof, and the Company fails to pay Holder the redemption price
within the time frame as required by this Section 6(d), then the Company shall
issue shares of Class A Common Stock to any such Holder who has submitted a
Notice of Conversion in compliance with Section 5(b) hereof. The shares to be
issued to Holder pursuant to this provision shall be the number of shares
determined using a Conversion Price (as defined in Section 5 hereof) that equals
the lesser of (i) the Conversion Price on the date Holder sends its Notice of
Conversion to Company or Transfer Agent via facsimile or (ii) the Conversion
Price on the date the Transfer Agent issues Class A Common Stock pursuant to
this Section 6(d)(ii).
(e) Blackout Period. Notwithstanding the foregoing, the Company may not either send out a redemption notice or effect a redemption pursuant to Section 6(b) above during a Blackout Period (defined as a period during which the Company's officers or directors would be prohibited from buying or selling stock pursuant to the Securities Exchange Act of 1934, as amended, because of their holding of material non-public information), unless the Company shall first disclose the non-public information that resulted in the Blackout Period; provided, however, that no redemption shall be effected until at least ten (10) days after the Company shall have given the Holder written notice that the Blackout Period has been lifted.
Section 7. Voting Rights. The Holders of the Series C 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 C 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 C 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 C 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 C 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 C
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 C 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 C 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 C 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 C 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 C Preferred Stock or any securities so as to affect adversely the Series C Preferred Stock;
(b) create any new class or series of stock having a preference over or on parity with the Series C Preferred Stock with respect to Distributions (as defined in Section 2 above) or increase the size of the authorized number of Series C 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 C 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 C 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 C Preferred Stock, pursuant to subsection (a) above, so as to affect the Series C Preferred Stock, then the Company will deliver notice of such approved change to the Holders of the Series C 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 C Preferred Stock, as amended.
Section 9. Status of Converted or Redeemed Stock. In the event any
shares of Series C 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 C
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 C 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 seven hundred fifty thousand (1,750,000) shares of Class A Common Stock (the "Reserved Amount") solely for the purpose of effecting the conversion of the Series C 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 C 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 C Preferred Stock, and 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 C Preferred Stock, and exercise of the Common Warrants.
(c) Reduction of Reserved Amount Under Certain Circumstances.
Prior to complete conversion of all Series C 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 C 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 C 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 C 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 C Preferred Stock shall be allocated to the remaining Holders, pro rata based on the number of Series C Preferred Stock, and Common Warrants then held by such Holders.
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 C Issue Price for each share of Series C 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 C 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 C 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 C
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 C Preferred Stock for any reason, then the Conversion Price for the affected Series C 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 Borrower of such Event of Default to have all or any portion of such Holder's then outstanding Series C 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 C Preferred Stock selected for prepayment and the Holder Demand Prepayment Amount to the Borrower 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 Borrower) of such notice.
(iii) The Holder Demand Prepayment Amount shall be paid to a Holder whose Series C Preferred Stock are being prepaid within one (1) business day following the Effective Date of Demand of Prepayment; provided, however, that the Borrower 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 C Preferred Stock being prepaid are delivered to the office of the Borrower or the Transfer Agent, or the date on which the Holder notifies the Borrower or the
Transfer Agent that such Series C 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 C 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 C 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 C 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 C 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 February 6, 1998
/s/Donald E. Lawson ----------------------------------- Donald E. Lawson, President |
Exhibit 4.7 Class G 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 G 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 February 6, 2001 (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.
This Warrant shall be deemed to be issued on February 6, 1998 ("Date of Issuance").
(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.
The Exercise Price shall equal $ 6.675 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 February 6, 1998 by and among the Company and certain investors; or (z) otherwise be registered under the Securities Act of 1933, as amended.
(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 February 6, 1998 between the Company and certain investors and, accordingly, has the benefit of the registration rights pursuant to that agreement.
(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.
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.
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.
(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.
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.
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.
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.
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 ______ day of February, 1998.
LIGHTPATH TECHNOLOGIES, INC.
EXHIBIT A
EXERCISE FORM FOR CLASS G 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:
NOTICE
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.
Fill in for new registration of Warrant:
NOTICE
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.
Exhibit 4.8 Form of Class H 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
___________ shares
Class H Warrant to Purchase Common Stock
of
LIGHTPATH TECHNOLOGIES, INC.
THIS CERTIFIES that ________________or any subsequent ("Holder") hereof, has the right to purchase from LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation (the "Company"), not more than 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 February 6, 2003.
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.
This Warrant shall be deemed to be issued on February 6,1998 ("Date of Issuance").
(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.
The Exercise Price ("Exercise Price") shall equal $6.675 ("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 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 anniversary date of the Date of Issuance. The "Lowest Reset Price" shall equal the lowest Reset Price determined on an 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.
(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 February 6, 1998 by and between the Company and Swartz Investments, LLC and, accordingly, has the benefit of the registration rights pursuant to that agreement.
(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 exerciseable 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.
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.
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.
(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.
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.
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.
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.
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 Swartz Investments,
LLC, 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 ____ day of February, 1998.
LIGHTPATH TECHNOLOGIES, INC.
EXHIBIT A
EXERCISE FORM FOR CLASS H 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 Class H 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 Class H 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.
Fill in for new Registration of Warrant:
NOTICE
The signature to the foregoing Exercise Form or 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.
Exhibit 5.1
Opinion and Consent of Squire, Sanders, & Dempsy LLP
March 12, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: LightPath Technologies, Inc.
Dear 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 1,750,000 shares of the Company's $.01 par value Common Stock (the "Common Stock"), issuable upon conversion of outstanding shares of Series C Preferred Stock and upon exercise of outstanding Class G Warrants and Class H Warrants and 8,490 shares of Class A Common Stock (collectively referred to as the "Securities"), 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 acted as counsel for the Company with respect to certain matters in connection with the sale of the Securities and in preparation of the required filings with the Securities and Exchange Commission. In addition, we have examined such documents and undertaken such further inquiry as we consider necessary for rendering the opinions hereinafter set forth below:
Based upon the foregoing, it is our opinion that the Securities, when issued 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 Securities for offer and sale in such states.
Respectfully yours,
/s/ SQUIRE, SANDERS & DEMPSEY L.L.P. SQUIRE, SANDERS & DEMPSEY L.L.P. |
Exhibit 23.1
Consent of KPMG Peat Marwick LLP, Independent Auditors
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 headings "Incorporation of Certain Documents by Reference" and "Experts" in the prospectus.
Our report dated August 1, 1997, 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 Peat Marwick LLP
KPMG Peat Marwick LLP
Albuquerque, New Mexico
March 11, 1998
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Exhibit 23.2
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the Registration Statement (Form S-3) of LightPath Technologies, Inc. for the registration of 1,758,490 shares of its Class A common stock and to the incorporation by reference therein of our report dated August 2, 1996, with respect to the statements of operations, stockholders' equity (deficiency in net assets), and cash flows of LightPath Technologies, Inc. for the year ended June 30, 1996, included in the Annual Report (Form 10KSB) for the year ended June 30, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Ernst & Young LLP
Tucson, Arizona
March 12, 1998
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