-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VEdk5xrXN3XY1j19VfV/bdHq93qQlzzcRy7fH4Z4pGqvicbVDZzIJePyguXS0WYL SBFknU9Y8fX6VxjmbtX1rg== 0000950147-99-000955.txt : 19990831 0000950147-99-000955.hdr.sgml : 19990831 ACCESSION NUMBER: 0000950147-99-000955 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19990830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIGHTPATH TECHNOLOGIES INC CENTRAL INDEX KEY: 0000889971 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 860708398 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-86185 FILM NUMBER: 99703016 BUSINESS ADDRESS: STREET 1: 6820 ACADEMY PKWY E N E STREET 2: STE 103 CITY: ALBUQUERQUE STATE: NM ZIP: 87109 BUSINESS PHONE: 5053421100 S-3 1 FORM S-3 OF LIGHTPATH TECHNOLOGIES As filed with the Securities and Exchange Commission on August 30, 1999 Registration No.333- _______ ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ---------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- LIGHTPATH TECHNOLOGIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 3674 86-0708398 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.) 6820 Academy Parkway East, N.E., Albuquerque, New Mexico 87109 (505) 342-1100 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ---------- Donald Lawson Chief Executive Officer Lightpath Technologies, Inc. 6820 Academy Parkway East, N.E. Albuquerque, New Mexico 87109 (505) 342-1100 (Name, address, including zip code, and telephone number, including area code, of agent for service) ---------- Copy to: Nina Lopez Gordian, Esq. Squire, Sanders & Dempsey L.L.P. 350 Park Avenue New York, New York 10022 Telephone: (212) 872-9800 Facsimile: (212) 872-9815 APPROXIMATE DATE OF PROPOSED SALE TO PUBLIC: As soon as practicable after the effective date of this Registration Statement. 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, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________ If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] __________ If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] __________ CALCULATION OF REGISTRATION FEE ================================================================================ PROPOSED MAXIMUM PROPOSED AMOUNT OF TITLE OF SECURITIES AMOUNT TO BE AGGREGATE PRICE OFFERING REGISTRATION TO BE REGISTERED REGISTERED PER UNIT * PRICE FEE - -------------------------------------------------------------------------------- Common stock 2,684,500(1) $2.19 $5,879,000 $1,734.30 ================================================================================ * Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act of 1933, as amended, pursuant to Rules 457 (c) and 457 (h) under the Securities Act, on the basis of the average of the high and low prices for shares of Common Stock as reported by the Nasdaq SmallCap Market on August 24, 1999. In accordance with Rules 416 and 457 under the Securities Act of 1933, the shares of common stock registered hereby shall also be deemed to cover an indeterminate number of additional shares of common stock to be issued as a result of the conversion of the debentures or as a result of the exercise of the warrants referred to in footnote (1) below to prevent dilution resulting from stock splits, stock dividends or similar transactions. (1) Represents estimated number of shares issuable upon conversion of outstanding convertible debentures, as payment of interest on the debentures, in satisfaction of certain other obligations which might be due to the holders of the debentures, and upon exercise of Class I and Class J Warrants. 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 THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE SELLING SECURITYHOLDER MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS DECLARED EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED AUGUST 30, 1999 PROSPECTUS LIGHTPATH TECHNOLOGIES, INC. 2,684,500 SHARES OF COMMON STOCK THE ISSUER We manufacture, market and distribute optoelectronic, fiber telecommunication and traditional optics products that incorporate our proprietary GRADIUM glass and other fiber optic packaging technologies. Our current product line consists of glass lenses, single mode fiber collimators and fiberoptic optomechanical switches. To date, we have made sales primarily to laser manufacturers and third parties for their evaluation of our products as components of their own product offerings. We have not yet made substantial sales of telecommunication products for broad commercial use. We can be located at: LightPath Technologies, Inc. 6820 Academy Parkway, N.E. Albuquerque, New Mexico 87109 Telephone: (503) 342-1100 THE OFFERING All of the shares of common stock being offered in this prospectus will be issued by LightPath Technologies to the shareholders who are offering them for sale. The total shares covered by this prospectus will be issued to the selling shareholders upon exercise of their outstanding convertible debentures and upon exercise of their outstanding warrants. The selling shareholders can use this prospectus to sell all or part of the shares they receive through the exercise of their convertible debentures and warrants. NASDAQ SMALLCAP MARKET TRADING SYMBOL Trading Price Symbol on August 24, 1999 ------ ------------------ LPTHA $2.19 PROCEEDS FROM THIS OFFERING The shareholders selling the common stock in this offering will receive all of the proceeds from their sale, minus any commissions or expenses they incur but we will receive up to $1,270,170 from the exercise, if any, of warrants by the selling shareholders. We will bear all of the costs and expenses of registering the shares under the federal and state securities laws. These total costs and expenses are estimated to be $17,000. THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS. SEE "RISK FACTORS" BEGINNING AT PAGE 5. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is August 30, 1999. WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and current reports and other information with the U.S. Securities and Exchange Commission. You may read and copy any document that we have filed at the SEC's public reference facilities. Please call the SEC at 1-800-SEC-0330 for further information about its public reference facilities. Our SEC filings are also available to you free of charge at the SEC's web site at http://www.sec.gov. Copies of publicly available documents that we have filed with the SEC can also be inspected and copied at the offices of the National Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006. We have filed a registration statement on Form S-3 with the SEC that covers the resale of the common stock offered by this prospectus. This prospectus is a part of the registration statement, but the prospectus does not include all of the information included in the registration statement. You should refer to the registration statement for additional information about us and the common stock being offered in this prospectus. Statements that we make in this prospectus relating to any documents filed as an exhibit to the registration statement or any document incorporated by reference into the registration statement may not be complete and you should review the referenced document itself for a complete understanding of its terms. The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The documents that have been incorporated by reference are an important part of the prospectus, and you should be sure to review that information in order to understand the nature of any investment by you in the common stock. In addition to previously filed documents that are incorporated by reference, documents that we file with the SEC after the date of this prospectus will automatically update the registration statement. The documents that we have previously filed and that are incorporated by reference include the following: * our annual report on Form 10-KSB for the fiscal year ended June 30, 1999 All documents and reports filed by us pursuant to Sections 13 (a), 13 (c), 14 or 15 (d) of the Securities Exchange Act of 1934 after the date of this prospectus and prior to the date that this offering is terminated will automatically be incorporated by reference into this prospectus. We will provide you with copies of any of the documents incorporated by reference, at no charge to you, however, we will not deliver copies of any exhibits to those documents unless the exhibit itself is specifically incorporated by reference. If you would like a copy of any document, please write or call us at: LightPath Technologies, Inc. 6820 Academy Parkway, N.E. Albuquerque, New Mexico 87109 Attn: Corporate Secretary Telephone: (505) 342-1100 You should only rely upon the information included in or incorporated by reference into this prospectus or in any prospectus supplement that is delivered to you. We have not authorized anyone to provide you with additional or different information. You should not assume that the information included in or incorporated by reference into this prospectus or any prospectus supplement is accurate as of any date later than the date on the front of the prospectus or prospectus supplement. ii PROSPECTUS SUMMARY THE FOLLOWING SUMMARY SHOULD BE READ BY YOU TOGETHER WITH THE MORE DETAILED INFORMATION INCLUDED AT OTHER SECTIONS OF THIS PROSPECTUS. IN ADDITION, YOU SHOULD CAREFULLY CONSIDER THE FACTORS DESCRIBED UNDER "RISK FACTORS" AT PAGE 5 OF THIS PROSPECTUS. LIGHTPATH TECHNOLOGIES, INC. LightPath Technologies, Inc. is a Delaware corporation that produces GRADIUM(R) glass, utilizes otheR optical materials and specialized optical packaging concepts to manipulate light and performs research and development for optical solutions in the fiber telecommunications and traditional optics markets. Our fiscal year ends on June 30 and references to fiscal years are for the applicable years ended June 30. WHAT IS GRADIUM GLASS? GRADIUM glass is an optical quality glass material with varying refractive indices, capable of reducing optical aberrations inherent in conventional lenses and performing with a single lens tasks traditionally performed by multi-element conventional lens systems. We believe that GRADIUM glass lenses provide advantages over conventional lenses for certain applications. By reducing optical aberrations, we believe that GRADIUM glass lenses can provide sharper images, higher resolution, less image distortion, a wider usable field of view and a smaller focal spot size. By reducing the number of lenses in an optical system, GRADIUM glass can provide more efficient light transmission and greater brightness, lower production costs, and a simpler, smaller product. Although other researchers have likely sought to produce optical quality lens material with properties similar to that of GRADIUM glass, we are not aware of any other person or firm that has developed a repeatable manufacturing process for producing such material on a prescribable basis. LightPath has been issued seventeen US patents for GRADIUM glass products and currently has numerous filed patent applications pending related to our GRADIUM glass materials composition, product design and fabrication processes for production. Additional patent applications have been filed or are in process for laser fusion techniques and fiberoptic optomechanical switch technology. We are continually developing new GRADIUM glass materials with various refractive index and dispersion profiles and for the telecommunications field; fiberoptic optomechanical switches, multiplexers, interconnects and cross-connects. TO WHAT INDUSTRIES ARE LIGHTPATH'S GRADIUM GLASS PRODUCTS BEING MARKETED? We believe that GRADIUM glass and other optical materials can potentially be marketed for use in most optics and optoelectronics products. During 1998, we restructured our internal organization and marketing focus with the intended purpose of serving two separate markets: optoelectronics and fiber telecommunications and traditional optics (e.g. lasers, medical equipment, consumer optics, etc.). Optoelectronics technologies consist of an overlap of photonics and electronics and are key enablers of "Information Age" technologies, such as fiber optic communications, optical data storage, laser printers, digital imaging, and sensors for machine vision and environmental monitoring. Prior to 1998, we targeted various optoelectronic industry market niches as potential purchasers of our GRADIUM glass products. During 1998, we began to develop products for the emerging optoelectronics markets, specifically in the areas of fiber telecommunications. With the resolution of fiber optic issues concerning packaging and alignment and utilizing advances made by LightChip, an affiliate, in the area of WDM equipment, we began to produce and demonstrate a passive optoelectronic product, the single mode fiber collimator assembly. During 1999 we expanded this product line with the goal of demonstrating to the telecommunication optical components industry our ability to provide low cost products and provide solutions to their telecom needs. For traditional optics, we initially emphasized laser products because our management believed at that time that GRADIUM lenses could have a substantial immediate commercial impact in laser products with a relatively small initial financial investment. Generally, optical designers can substitute GRADIUM glass components from our standard line of products in lieu of existing conventional laser lens elements. Lasers are presently used extensively in a broad range of consumer and commercial products, including fiber optics, robotics, wafer chip inspection, bar code reading, document reproduction and audio and video compact disc machines. Because GRADIUM glass can concentrate light transmission into a much smaller focal spot than conventional lenses, we believe, and customers' test results confirm, that GRADIUM glass has the ability to improve the current standard of laser performance. One of our distributors, Permanova Lasersystems AB of Sweden, qualified GRADIUM YAG lenses into systems produced by Rofin-Sinar GmbH, a major OEM manufacturer of high-powered CO2 and YAG lasers headquartered in Germany. Our growth strategy is to increase our emphasis on key laser market niches and establish the necessary products and partnership alliances to sell into Europe and Asia as well as the U.S. market. During fiscal 1999, LightPath and Rodenstock Prazisionsoptik GmbH (Rodenstock) executed an agreement to transfer to Rodenstock the exclusive, application-related utilization and distribution of GRADIUM lenses throughout the whole of Europe. The agreement was for an initial five-year period. Rodenstock's one hundred years of experience in the field of advanced optical systems and employees over 6,000 people worldwide, will be a strong asset to the expansion of LightPath's presence in Europe. We have established relationships with eight foreign distributors. We believe these distributors will enable us to establish and maintain a presence in foreign and domestic markets without further investment in this product area. In addition to laser applications, we, through our printed and Internet on-line catalog, offer a standard line of GRADIUM glass lenses for commercial sales to optical designers developing particular systems for original equipment manufacturers ("OEMs") or in-house products. HOW HAS LIGHTPATH DEVELOPED GRADIUM GLASS PRODUCTS? From our inception in 1985 until June 1996, we were classified as a development stage enterprise that engaged in basic research and development. We believe that most of our product sales made during this stage were to persons evaluating the commercial application of GRADIUM glass or using the products for research and development. During fiscal year 1997, our operational focus begin to shift to commercial product development and sales. We completed numerous prototypes for production orders and received our first orders for catalog sales of standard lens profiles. We also began to offer standard, computer-based profiles of GRADIUM glass that engineers use for product design. During fiscal 1998, sales of lenses 2 to the traditional optics market continued with significant increases in sales of lenses used in the YAG laser market, catalog and distributor sales and lenses used in the wafer inspection markets. In fiscal year 1998, we also began to explore the development of products for emerging markets such as optoelectronics, photonics and solar due to the number of potential customers inquiries into the ability of GRADIUM glass to solve optoelectronic problems, specifically in the areas of fiber telecommunications. With the resolution of packaging and alignment issues by us, and advances made by LightChip, an affiliate, with WDM equipment, it led us in 1998 to develop a strategy for entering the optoelectronic markets. Our first passive optoelectronic product, a single mode fiber collimator assembly, or SMF assembly, was demonstrated in February 1998. The SMF assembly is a key element in all fiber optic systems, including WDM equipment. The SMF assembly straighten and make parallel, diverging light as it exits a fiber. Beginning in fiscal 1999, we began offering, and have delivered for testing to potential customers, three product levels, the collimating lens, the SMF assembly and the large beam collimating assembly. The telecommunications collimator marketplace is currently estimated by industry experts to generate annual gross revenues of $125 million in 1999 with projected growth to $256 million in five years. The current focus of our development group has been to expand application of GRADIUM products to the areas of fiberoptic optomechanical switches, multiplexers, interconnects and cross-connects for the telecommunications field, further refinement of the crown glass product line to supplement its existing flint products, and further development of acrylic axial gradient material to extend the range of existing product applications. WHERE YOU CAN FIND US. LightPath was incorporated in Delaware in 1992. Our corporate headquarters are located at 6820 Academy Parkway East N.E., Albuquerque, New Mexico, 87109 and our telephone number is (505) 342-1100. 3 THE OFFERING Securities Offered by the Selling Shareholders.......... 2,684,500 shares of Class A Common Stock All of the common shares are issuable upon conversion of outstanding convertible debentures and upon exercise of Class I and Class J warrants. A description of the terms of these debentures and warrants is included in this prospectus under "Selling Shareholders" at page 13. Common Stock Outstanding as of June 30, 1999: Class A Common Stock 4,960,703 shares(1)(3) Class E-1 Common Stock 1,492,480 shares(2) Class E-2 Common Stock 1,492,480 shares(2) Class E-3 Common Stock 994,979 shares(2) Use of Proceeds................. We will not receive any of the proceeds of sales OF Common stock by the selling shareholders but we will receive up to $1,270,170 from the exercise, if any, of warrants by the selling shareholders. Risk Factors.................... The shares of common stock offered hereby involve a high degree of risk. See "Risk Factors" on page 5. Nasdaq SmallCap Market Symbol... Class A Common Stock - "LPTHA" Units - "LPTHU" Class A Warrants - "LPTHW" Class B Warrants - "LPTHZ" - ---------- (1) Does not include outstanding options at June 30, 1999 to purchase 1,244,851 shares of Class A Common Stock and 106,652 shares of Class E-1, 106,652 shares of Class E-2 and 71,102 shares of Class E-3 Common Stock which are exercisable at option exercise prices ranging from $2.84 to $51.56 per share and 970,077 shares of Class A Common Stock reserved for issuance upon future grants of options issuable under LightPath's stock option plans. (2) Each share of outstanding Class E-1 Common Stock, Class E-2 Common Stock and Class E-3 Common Stock, collectively referred to as the Class E shares, will, on a class basis, automatically convert into Class A Common Stock if and as the Company attains certain earnings levels with respect to each of the three separate classes. The Class E shares will be redeemed by LightPath for a nominal amount if such earnings levels are not achieved. (3) Does not include an aggregate of 12,580,586 shares of Class A Common Stock issuable upon exercise of (i) the Unit Purchase Option (160,000 Class A common shares) granted to the IPO underwriter and the 160,000 Class A and 160,000 Class B Common Stock Purchase Warrants underlying the Unit Purchase Option; (ii) the 160,000 additional Class B Warrants issuable upon exercise of the Class A Warrants referred to in (i); (iii) 1,828,749 Class A Warrants and 1,851,251 Class B Warrants forming part of the IPO Units; (iv) the 1,828,749 additional Class B Warrants issuable upon exercise of the Class A Warrants referred to in (iii); (v) the 839,000 Class A Warrants issued at the IPO; (vi) the 839,000 additional Class B Warrants issuable upon exercise of the Class A Warrants referred to in (iv) above, (vii) the additional 2,069,336 shares of Class A Common Stock issuable upon conversion of the Series A, Series B, and Series C Preferred Stock and exercise of the Class C, Class D, Class E, Class F, Class G and Class H Warrants, and (vi) the additional 2,684,500 shares of Class A Common Stock issuable upon conversion of the convertible debenture and exercise of the Class I and Class J Warrants. 4 RISK FACTORS BEFORE YOU BUY ANY OF THE SHARES OF COMMON STOCK BEING OFFERED BY THIS PROSPECTUS, YOU SHOULD CAREFULLY READ AND CONSIDER EACH OF THE RISK FACTORS WE HAVE DESCRIBED IN THIS SECTION. YOU SHOULD BE PREPARED TO ACCEPT ALL OF THESE RISKS, INCLUDING THE RISK THAT YOU MAY LOSE YOUR ENTIRE INVESTMENT, BEFORE YOU MAKE A DECISION TO BUY ANY OF THE SHARES OF COMMON STOCK. WE HAVE EXPERIENCED LOSSES IN PRIOR YEARS Our operations have never been profitable. We believe that our introduction of products for the telecommunication market in 1999 may generate sales in excess of amounts realized to date, although there can be no assurance in this regard. We expect to continue operating at a deficit during the current fiscal year and until such time, if ever, as our operations generate sufficient revenues to cover our costs. The likelihood of our financial success must be considered in light of the delays, uncertainties, difficulties and risks inherent in a new business, many of which are beyond our ability to control. These risks include, but are not limited to, unanticipated problems relating to product development, testing, manufacturing, marketing and competition, and additional costs and expenses that may exceed our current estimates. There can be no assurance that our revenues will increase significantly in the future or that, even if they do, our operations will ever be profitable. WE MAY BE UNABLE TO CONTINUE OPERATING AS A GOING CONCERN. We have received a report from our independent auditors that includes an explanatory paragraph regarding uncertainty as to our ability to continue as a going concern. The factors cited by the auditors as raising substantial doubt as to our ability to continue as a going concern are our recurring losses from operations and resulting continued dependence on external sources of capital. We may incur losses for the foreseeable future due to the significant costs associated with the development, manufacturing and marketing of our products and due to the continued research and development activities that will be necessary to further refine our technology and products and to develop products with additional applications. WE ANTICIPATE THE NEED FOR ADDITIONAL FUTURE FINANCING IN ORDER TO FUND OUR OPERATIONS AND PLANS FOR GROWTH. We anticipate that our projected product sales and the net proceeds from our private placement of convertible debentures and related warrants, completed in July 1999, will be used for working capital for fiscal 2000. In addition, our ability to fund capital requirements after the near term will depend on the extent that our products become commercially accepted, if at all, and if our marketing program is successful in generating sales sufficient to sustain our operations. At this time the Company does not believe product sales will reach the level required to sustain its operations and growth plans beyond the near term; therefore, the Company is actively pursuing additional financing. We do not have any commitments from others to provide such additional financing and there can be no assurance that any such additional financing will be available if needed or, if available, will be on terms favorable to us. In the event such needed financing is not obtained, our operations will be materially adversely affected and we will have to cease or substantially reduce operations. Any additional equity financing may be dilutive to stockholders, and debt financings, if available, may involve restrictive covenants. 5 WE MAY HAVE DIFFICULTIES IN MANAGING GROWTH We will need to grow our product sales and manufacturing output significantly in order to be successful. If we are unable to manage growth effectively, it could have a material adverse effect on our results of operations, financial condition or business. We cannot guarantee that we will successfully expand or that any expansion will enhance our profitability. We expect our planned growth will place a significant strain on our management and operations. Our future growth will depend in part on the ability of our officers and other key employees to implement and expand financial control systems and to expand, train and manage our employee base and provide support to an expanded customer base. OUR PRODUCTS ARE AT AN EARLY STAGE OF DEVELOPMENT AND MAY NOT ACHIEVE MARKET ACCEPTANCE. Through June 1996, our primary activities were basic research and development of glass material properties. Our current line of GRADIUM products have not generated sufficient revenues to sustain operations and the telecommunications products are still in the introduction phase. While we believe our existing products are commercially viable, we anticipate the need to educate the optical components market in order to generate market demand and market feedback may require us to further refine these products. Development of additional product lines will require significant further research, development, testing and marketing prior to commercialization. There can be no assurance that any proposed products will be successfully developed, demonstrate desirable optical performance, be capable of being produced in commercial quantities at reasonable costs or be successfully marketed. OUR PRODUCTS HAVE NOT BEEN DEMONSTRATED TO BE COMMERCIALLY SUCCESSFUL. Our telecommunication products have not yet achieved commercial acceptance while the traditional optics are not widely known. Although we are engaged in negotiations and discussions with potential customers, there can be no assurance that any such discussions will lead to development of commercially viable products or significant revenues, if any, or that any products currently existing or to be developed in the future will attain sufficient market acceptance to generate significant revenues. In order to persuade potential customers to purchase GRADIUM products, we will need to overcome industry resistance to, and suspicion of, gradient lens technology that has resulted from previous failed attempts by various researchers and manufacturers unrelated to us to develop a repeatable, consistent process for producing lenses with variable refractive indices. We must also satisfy industry-standard Bellcore Testing on telecommunication products to meet customer requirements, as well as satisfy prospective customers that we will be able to meet their demand for quantities of products, since we may be the sole supplier and licensor. We do not have demonstrated experience as a manufacturer and do not have a substantial net worth. We may be unable to accomplish any one or more of the foregoing to the extent necessary to develop market acceptance of our products. Prospective customers will need to make substantial expenditures to redesign products to incorporate GRADIUM lenses. There can be no assurances that potential customers will view product's benefits as sufficient to warrant such design expenditures. 6 WE DEPEND UPON KEY PERSONNEL Our inability to retain or attract key employees could have a material adverse effect on our business and results of operations. Our operations depend, to a great extent, upon the efforts of our CEO and President, Donald Lawson, who conceived our strategic plan and who is substantially responsible for planning and guiding our direction, and upon Mark Fitch, our senior vice president. We also depend upon our ability to attract additional members to our management and operations teams to support our expansion strategy. The loss of any of these key employees would adversely affect our business. We have obtained key employee life insurance policies in the amount $1,000,000 on the life of Mr. Lawson. We had twenty-five employees on August 1, 1999. Additional personnel will need to be hired if we are able to successfully expand our operations. There can be no assurance that we will be able to identify, attract and retain employees with skills and experience necessary and relevant to the future operations of our business. COMPETITION MAY ADVERSELY AFFECT OUR OPERATIONS AND FINANCIAL RESULTS The optical lens and telecommunication components markets are intensely competitive and numerous companies offer products and services competitive to those offered by us. Substantially all of these competitors have greater financial and other resources than we do. We compete with manufacturers of conventional spherical lens products and aspherical lens products, producers of optical quality glass and other developers of gradient lens technology and telecom products. In the markets for conventional and aspheric lenses, we are competing against, among others, established international industry giants. Many of these companies also are primary customers for optical components, and therefore have significant control over certain markets for our products. We are also aware of other companies that are attempting to develop radial gradient lens technology. There may also be others of which we are not aware that are attempting to develop axial gradient lens technology similar to our technology. There can be no assurance that existing or new competitors will not develop technologies that are superior to or more commercially acceptable than our existing and planned technology and products. WE HAVE LIMITED MARKETING AND SALES CAPABILITIES, AND MUST MAKE SALES IN A FRAGMENTED MARKET. Our operating results will depend to a large extent on our ability to educate the various industries utilizing optical glass about the advantages of GRADIUM and other optical materials to market products to the participants within those industries. We currently have very limited marketing capabilities and experience and will need to hire additional sales and marketing personnel, develop additional sales and marketing programs and establish sales distribution channels in order to achieve and sustain commercial sales of its products. Although we have developed a marketing plan, there can be no assurance that the plan will be implemented or, if implemented, will succeed in creating sufficient levels of customer demand for our products. The markets for optical lenses and telecommunication components are highly fragmented. Consequently, we will need to identify and successfully target particular market segments in which we believe we will have the most success. These efforts will require a substantial, but unknown, amount of effort and resources. The fragmented nature of the optical products market may impede our ability to achieve commercial acceptance for our products. In addition, our success will depend in great part on our ability to develop and implement a successful marketing and sales program. There can be no assurance that any marketing and sales efforts undertaken by us will be successful or will result in any significant product sales. 7 WE ARE HIGHLY DEPENDENT ON OUR PATENTS AND PROPRIETARY TECHNOLOGY. Our success will depend, in part, on our ability to obtain protection for products and technologies under United States and foreign patent laws, to preserve trade secrets, and to operate without infringing the proprietary rights of others. There can be no assurance that patent applications relating to our products or potential products will result in patents being issued, that any issued patents will afford adequate protection or not be challenged, invalidated, infringed or circumvented, or that any rights granted will afford competitive advantages to us. Furthermore, there can be no assurance that others have not independently developed, or will not independently develop, similar products and/or technologies, duplicate any of our product or technologies, or, if patents are issued to, or licensed by, us, design around such patents. There can be no assurance that patents owned or licensed and issued in one jurisdiction will also issue in any other jurisdiction. Furthermore, there can be no assurance that we can adequately preserve proprietary technology and processes that we maintain as trade secrets. If we are unable to develop and adequately protect our proprietary technology and other assets, our business, financial condition and results of operations will be materially adversely affected. OUR BUSINESS DEPENDS UPON THE EFFORTS OF THIRD PARTIES. Our strategy for the research, development and commercialization of certain 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. We may also rely on its collaborative partners to conduct research efforts, product testing and to manufacture and market certain of our products. Although we believe that parties to any such arrangements would have an economic motivation to succeed in performing their contractual responsibilities, the amount and timing of resources to be devoted to these activities may not be within our control. There can also be no assurance that we will be successful in establishing any such collaborative arrangements or that, if established, the parties to such arrangements will assist us in commercializing products. Presently we have entered into a development agreement with a mechanical switch manufacturer and an endoscope manufacturer pursuant to which it has developed prototypes. There can be no assurance that such agreements will progress to a production phase or, if production commences, that we will receive significant revenues from this relationship. We have a non-exclusive agreement with a catalog company to distribute certain of its products. We have formalized relationships with eight foreign distributors to create markets for GRADIUM in their respective countries. There can be no assurance that these parties, or any future partners, will perform their obligations as expected or that any revenue will be derived from such arrangements. WE HAVE ONLY LIMITED MANUFACTURING CAPABILITIES. We believe that our present manufacturing facilities, with the clean room addition expected to be completed by the end of the calendar year 1999, are sufficient for our planned operations over the next several years. However, we do not have any experience manufacturing products in quantities sufficient to meet commercial demand. If we are unable to manufacture products in sufficient quantities and in a timely manner to meet customer demand, our business, financial condition and results of operations will be materially adversely affected. 8 WE FACE PRODUCT LIABILITY RISKS. The sale of our optical products will involve the inherent risk of product liability claims by others. We do not currently maintain product liability insurance coverage, although we do intend to procure such insurance in the future. Product liability insurance is expensive, subject to various coverage exclusions and may not be obtainable on terms acceptable to us. Moreover, the amount and scope of any coverage may be inadequate to protect us in the event that a product liability claim is successfully asserted. WE WILL RECOGNIZE A SUBSTANTIAL CHARGE TO INCOME UPON CONVERSION OF OUR CLASS E COMMON STOCK. In the event any shares of the Class E Common Stock held by stockholders who are officers, directors, employees or consultants of the Company are converted into shares of Class A Common Stock, we will record compensation expense for financial reporting purposes during the period in which such conversion occurs. Such charge will equal the fair market value of such shares on the date of release, which may be substantial. Although the amount of compensation expense recognized will not affect the total stockholders' equity, it may have a material negative effect on the market price of our securities, particularly the shares of Class A Common Stock. Since Class E shares are not treated as outstanding for purposes of earnings per share calculations, the increase in the number of shares of Class A Common Stock upon conversion of any series of Class E Common Stock may have a material adverse effect on our earnings per share. OUR OPERATIONS MAY BE ADVERSELY AFFECTED BY PROBLEMS ASSOCIATED WITH THE YEAR 2000 ISSUE. Some computer applications were originally designed to recognize calendar years by their last two digits. As a result, calculations performed using these truncated fields will not work properly with dates from the year 2000 and beyond. This problem is commonly referred to as the "Year 2000 Issue". We have determined that our internal computer systems, manufacturing equipment and software products were produced to be Year 2000 compliant and no material remediation costs have been incurred or are expected to be incurred by us. During the third quarter of fiscal 1999, we confirmed in writing whether the internal business operations of third parties with whom we have a material relationship will be affected by the Year 2000 Issue. Our assessment of third parties is complete and based on their responses, we believes our material third party relationships will not be adversely impacted by the Year 2000 Issue barring any unforeseen circumstances. Under a worst case scenario we may experience delays in receiving products and services thereby impacting product shipments. We plans on having adequate inventory levels to minimize such impact, if any. We will continue to monitor third parties throughout the remainder of calendar 1999 and develop contingency plans if a third party is subsequently found to be non-compliant. 9 OUR STOCK PRICE IS VOLATILE Broad market fluctuations or fluctuations in our operations may adversely affect the market price of our common stock. The market for our common stock is volatile. The trading price of our common stock has been and will continue to be subject to: * significant fluctuations in response to quarterly variations in operating results; * announcements regarding our business or the business of our competitors; * changes in prices of our or our competitors' products and services; * changes in product mix; and * changes in revenue and revenue growth rates for us as a whole or for geographic areas, and other events or factors. Statements or changes in opinions, rating or earnings estimates made by brokerage firms or industry analysts relating to the markets in which we operate or expect to operate could have an adverse effect on the market price of our common stock. In addition, the stock market as a whole has from time to time experienced extreme price and volume fluctuations which have particularly affected the market price for the securities of many small cap companies and which often have been unrelated to the operating performance of these companies. POTENTIAL CONTROL BY THE EXISTING MANAGEMENT AND SHAREHOLDERS If our management and shareholders act in concert, disposition of matters submitted to shareholders or the election of the entire Board of Directors may be hindered. The principal stockholders beneficially owned 12% of the total combined voting power of all of the Common Stock outstanding at August 19, 1999. In addition, certain stockholders holding approximately 12% 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 Chairwoman, is granted the authority to vote all of the shares subject to the voting trust on all matters that our stockholders are entitled to vote. Accordingly, Ms. Danziger will likely be able to influence the election of our directors and thereby direct the policies of the Company. These arrangements could make it difficult for others to elect the entire Board of Directors and to control the disposition of any matter submitted to a vote of stockholders. SOME PROVISIONS IN OUR CHARTER DOCUMENTS AND BYLAWS MAY HAVE ANTI-TAKEOVER EFFECTS Our Articles of Incorporation and Bylaws contain some provisions that could have the effect of discouraging a prospective acquirer from making a tender offer, or which may otherwise delay, defer or prevent a change in control. ABSENCE OF DIVIDENDS TO SHAREHOLDERS We do not anticipate paying dividends on the common stock in the foreseeable future. It is anticipated that earnings, if any, will be reinvested in the expansion of our business. 10 OUR WARRANTS AND OPTIONS MAY AFFECT OUR FUTURE FINANCING The existence of our options or warrants may adversely affect the terms on which we can obtain additional financing. As of June 30, 1999, there was outstanding * 2,667,749 Class A Warrants to purchase an aggregate of 2,667,749 shares of Class A Common Stock and 2,667,749 Class B Warrants; * 1,851,251 Class B Warrants to purchase 1,851,251 shares of Class A Common Stock; * the Unit Purchase Option to purchase an aggregate of 160,000 Units, each Unit consists of 160,000 Class A Common Stock, 160,000 Class A Warrants to purchase an aggregate of 160,000 shares of Class A Common Stock and 160,000 Class B Warrants; and 160,000 Class B Warrants; * 564,821 shares of Class A Common Stock issuable upon conversion of Series A Preferred Stock and exercise of Class C and Class D Warrants; * 373,914 shares of Class A Common Stock issuable upon conversion Series B Preferred Stock and exercise of Class E and Class F Warrants; * 1,130,601shares of Class A Common Stock issuable upon conversion Series C Preferred Stock and exercise of Class G and Class H Warrants; * Outstanding options to purchase an aggregate of 1,244,851 shares of Class A Common Stock which includes 71,102 whereby the holder receives 71,102 shares of Class A, 106,652 Class E-1, 106,652 shares of Class E-2 and 71,102 shares of Class E-3 Common Stock; * 970,077 shares of Class A Common Stock reserved for issuance under the Omnibus Incentive Plan and Directors Stock Incentive Plan. For the life of such options and warrants, the holders will have the opportunity to profit from a rise in the price of common stock, with a resulting dilution in the interest of other holders of common stock. Further, the option and warrant holders can be expected to exercise their options and warrants at a time when we would, in all likelihood, be able to obtain additional capital by an offering of our unissued common stock on terms more favorable to us than those provided by such options. The eligibility of the foregoing shares to be sold to the public, whether pursuant to Rule 144 or an effective registration statement, may have a material adverse effect on the market value and trading price of the common stock. WE HAVE AGREED TO CERTAIN LIMITATIONS UPON POTENTIAL LIABILITY OF OUR DIRECTORS. Our Certificate of Incorporation provides that directors will not be personally liable for monetary damages to LightPath or its stockholders for a breach of fiduciary duty as a director, subject to limited exceptions. Although such limitation of liability does not affect the availability of equitable remedies such as injunctive relief or rescission, the presence of these provisions in the Certificate of Incorporation could prevent the recovery of monetary damages against. 11 THE LIQUIDITY OF OUR STOCK COULD BE SEVERELY REDUCED IF IT BECOMES CLASSIFIED AS PENNY STOCK. If our securities were delisted from Nasdaq, they could become subject to Rule 15g-9 under the Exchange Act, which imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and "accredited investors". The Commission has adopted regulations which generally define a "penny stock" to be any non-Nasdaq equity security that has a market price (as therein defined) of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require substantial additional disclosure obligations. The foregoing required penny stock restrictions will not apply to our securities so long as they continue to be listed on Nasdaq and have certain price and volume information provided on a current and continuing basis or meet certain minimum net tangible assets or average revenue criteria. There can be no assurance that the our securities will qualify for exemption from these restrictions. In any event, even if our securities were exempt from such restrictions, they would remain subject to Section 15(b)(6) of the Exchange Act, which gives the Commission the authority to prohibit any person that is engaged in unlawful conduct while participating in a distribution of a penny stock from associating with a broker-dealer or participating in a distribution of a penny stock, if the Commission finds that such a restriction would be in the public interest. If our securities were subject to the existing rules on penny stocks, the market liquidity for our securities could be severely adversely affected. WE MUST MAINTAIN COMPLIANCE WITH CERTAIN CRITERIA IN ORDER TO MAINTAIN LISTING OF OUR SHARES ON THE NASDAQ MARKET. The Units, Class A Common Stock and Class A and Class B Warrants are currently traded on Nasdaq SmallCap Market. Failure to meet the applicable quantitative and/or qualitative maintenance requirements of Nasdaq could result in our securities being delisted from Nasdaq, with the result that such securities would trade on the OTC Bulletin Board or in the "pink sheets" maintained by the National Quotation Bureau Incorporated. As a consequence of such delisting, an investor could find it more difficult to dispose of or to obtain accurate quotations as to the market value of our securities. Among other consequences, delisting from Nasdaq may cause a decline in the stock price and difficulty in obtaining future financing. WE MAY NOT HAVE ENOUGH FUNDS AVAILABLE TO REDEEM OUTSTANDING SHARES OF PREFERRED STOCK OR CONVERTIBLE DEBENTURES. In the events of conversion of the Convertible Debentures and 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, LightPath has the right to redeem such debentures, preferred stock and warrants for cash. In addition, a Liquidation Event, as defined in the 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 we will have adequate cash to effect such cash redemptions. 12 RISK THAT FORWARD-LOOKING STATEMENTS MAY NOT COME TRUE This prospectus and the documents incorporated herein by reference, contain forward-looking statements that involve risks and uncertainties. We use words such as "believe", "expect," "anticipate," "plan" or similar words to identify forward-looking statements. Forward-looking statements are made based upon our belief as of the date that such statements are made. These forward-looking statements are based largely on our current expectations and are subject to a number of risks and uncertainties, many of which are beyond our control. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this prospectus. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described above and elsewhere in this prospectus. 13 SELLING SHAREHOLDERS On July 28, 1999, we issued $1,000,000 Convertible Debentures and 427,350 attached Class I warrants to the selling shareholders in a private placement. 150,000 Class J Warrants were also issued to Fahnestock & Co., Inc. as partial compensation for their services as placement agent. Each Class I and Class J Warrant entitles the holder to purchase one share of Class A Common Stock at $2.20 per share at any time through July 2004. For a description of the Class I Warrants see Exhibit 4.7 to the registration statement. For a description of the Class J Warrants see Exhibit 4.8 to the registration statement. Each convertible debenture can be converted by the holder into a number of shares of our Class A Common Stock at the option of the holder at any time until July 2002. The number of shares of Class A Common Stock issuable upon conversion of each convertible debenture is determined by dividing the outstanding principal amount plus 6% accrued interest, on the date of conversion by a conversion price. The conversion price is defined as the lesser of 80% of the average closing bid price of our Class A Common Stock for the five days preceding (i) the closing, $1.76 or (ii) the conversion date, except that the conversion price can not be lower than $.56 nor higher than $2.00. We have the right to redeem all or part of the Convertible Debentures at any time by advance notice to the holders. The redemption price is equal to 115% of the outstanding principal of the debenture plus accrued interest. If we do not make the redemption payment within 10 days of that notice, however, we will lose this redemption right. Interest at the rate of 6% per annum is payable on the principal of each Convertible Debenture on conversion or at maturity. At our option, interest may be paid in cash or in Class A Common Stock at the conversion price then in effect. The terms of the convertible debenture and the Class I and Class J Warrants specify that, with limited exceptions, a selling shareholder cannot convert the debenture or exercise its warrant to the extent that such conversion or exercise would result in the selling shareholder and its affiliates then owning more than 9.99% of the then outstanding Class A Common Stock. The limited exceptions include the automatic conversion of the debenture on maturity or the existence of a tender offer for our Class A Common Stock. We have also agreed with the debenture holders that under certain conditions if, within two years after the closing of their transaction, we issue Class A Common Stock of securities convertible into Class A Common Stock to a third party, we will issue additional shares to those holders. This obligation will apply if the transaction with the third party is determined to hive a higher yield than the Convertible Debenture holder's transaction. This Prospectus relates to the shares of Class A Common Stock that may be acquired by the selling shareholders upon conversion of the Convertible Debentures, the payment of interest on the debentures in shares of Class A Common Stock, the additional shares that may be issued to the debenture holders as a result of certain transactions we might enter into with third parties, and the shares issuable upon exercise of the Class I and Class J Warrants. The following table provides information as of August 1, 1999, with respect to the Class A Common Stock beneficially owned by each selling shareholder. For purposes of the information set forth in this table, it is assumed that each outstanding Convertible Debenture was converted at $1.755 as of August 1, 1999. None of these selling shareholders has a material relationship with us, with the exception of Fahnestock & Co., Inc., which acted as placement agent in connection with the sale of the Convertible Debentures and warrants to the other selling shareholders. As part of that sale, we entered into certain agreements with the selling shareholders. These agreements are described under "Certain Relationships" below. We believe that the selling shareholders named in the following table have sole voting and investment power with respect to the respective shares of Class A Common Stock set forth opposite their names. The shares of Class A Common Stock offered by this prospectus may be offered from time to time by the selling shareholders named below or their nominees. 14 Total Shares outstanding 5,088,431 Class A Common Stock As of August 1, 1999
Shares Beneficially Owned After Offering (1) Percent of Percent of Shares Beneficially Number of ------------- Class A All Owned Prior to the Shares Being Number of Common Classes of Offering (1)(2) Offered (2) Shares Stock(11) Common Stock --------------- ----------- ------ --------- ------------ The Aries Master Fund (9,10) 341,525 341,525(3) 0 6% 4% Aries Domestic Fund II LP (9,10) 4,986 4,986(4) 0 * * Aries Domestic Fund LP (9,10) 152,064 152,064(5) 0 2% 2% Alfons Melohn (9,10) 99,715 99,715(6) 0 2% 1% Donald G. Drapkin (9,10) 398,860 398,860(7) 0 7% 4% Fahnestock & Co. Inc. 150,000 150,000(8) 0 3% 2%
* 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 our Convertible Debentures. Each Convertible Debenture 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 80% of the average closing bid price of our Class A Common Stock for the five days preceding (i) the closing ($1.76) or (ii) the conversion date. The conversion price, however, cannot be lower than $.56 nor higher than $2.00 For purposes of the information set forth in this table, it is assumed that each outstanding Convertible Debenture was converted at $1.755 as of August 1, 1999. As required by SEC regulations, the number of shares shown as beneficially owned includes shares which could be acquired within 60 days after the date of this Prospectus. However, the provisions of the Convertible Debentures and the Class I and Class J Warrants limit each holder from converting its debentures or exercising its warrants to the extent that such conversion or exercise would result in the holder and its affiliates beneficially owning more that 9.99% of the then outstanding commons stock. Thus, some of the shares listed in the table might not be subject to purchase by a particular selling shareholder during that 60 day period, nonetheless those shares are included in this table. The actual number of shares of Class A Common Stock issuable upon the conversion of the Convertible Debentures is subject to adjustment and could be significantly more than the number estimated in the table. This variation is due to factors that cannot be predicted by us at this time. The most significant of these factors is the future market price of the Class A Common Stock. (3) Includes 341,525 shares issuable upon (A) conversion of $342,500 Convertible Debentures and (B) the exercise of 146,368 Class I Warrants to purchase Class A Common Stock. 15 (4) Includes 4,986 shares issuable upon (A) conversion of $5,000 Convertible Debentures and (B) the exercise of 2,137 Class I Warrants to purchase Class A Common Stock. (5) Includes 152,064 shares issuable upon (A) conversion of $152,500 Convertible Debentures and (B) the exercise of 65,170 Class I Warrants to purchase Class A Common Stock. (6) Includes 99,715 shares issuable upon (A) conversion of $100,000 Convertible Debentures and (B) the exercise of 42,735 Class I Warrants to purchase Class A Common Stock. (7) Includes 398,860 shares issuable upon (A) conversion of $400,000 Convertible Debentures and (B) the exercise of 170,940 Class I Warrants to purchase Class A Common Stock. (8) Includes 150,000 shares issuable upon the exercise of Class J Warrants. (9) The actual number of shares of Class A Common Stock issuable upon the conversion of the Convertible Debentures, in payment of interest and upon exercise of the Class I Warrants is subject to adjustment and could be materially less or more than the number estimated in the table. This variation is due to factors that cannot be predicted by us at this time. The most significant of these factors is the future market price of the common stock. In addition, we may have to issue additional shares to the Debenture holders based on transactions we enter into with other parties. The terms of such transactions, if any, are not known at this time. (10) The number of shares registered for resale by each selling shareholder under this Prospectus is equal to 254.173% of the amount specified in the table to take into account the floating conversion rate described in footnote 2 above, the amount of interest that might be paid in Class A Common Stock and the determination of the additional shares, if any, which we may be obligated to issue to the Convertible Debenture holders if we engage in certain transactions before July 31, 2001. (11) The percentage interest of each selling shareholder is based on the beneficial ownership of that selling shareholder divided by the sum of the current outstanding shares of Class A Common Stock plus the additional shares, if any, which would be issued to that selling shareholder (but not any other selling shareholder) when converting Debentures or exercising Warrants or other right in the future. For purposes of presentation in this table, the 9.99% limit referred to in footnote 2 above has been disregarded. USE OF PROCEEDS The selling shareholders will receive the net proceeds from the sale of their shares of common stock. We will not receive any proceeds from these sales. We will however receive proceeds from the exercise of the Warrants. Each warrant entitles the holder to purchase shares of common stock at a price of $2.20 per share. This purchase price is payable in cash or by surrendering shares of our common stock with an equal value. If all of the warrants are exercised for cash, we will receive up to $1,270,000. CERTAIN RELATIONSHIPS The selling shareholders each have a right to receive additional shares of common stock if we issue equity or debt securities at any time prior to July 31, 2001, at a discounted price greater than 80% of the fair market value of the Class A Common Stock at the time of such issuance. Fahnestock & Co., Inc. has the right of first refusal to act as placement agent with respect to any future private financings we may conduct during the one year period ending July 2000. 16 DETERMINATION OF OFFERING PRICE The selling shareholders may use this prospectus from time to time to sell their common stock at a price determined by the shareholder selling the common stock. The price at which the common stock is sold may be based on market prices prevailing at the time of sale, at prices relating to such prevailing market prices, or at negotiated prices. PLAN OF DISTRIBUTION The common stock may be sold from time to time by the selling shareholders, or by pledgees, donees, transferees or other successors in interest. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and at terms then prevailing or at prices related to the then current market price, or in negotiated transactions. The common stock may be sold in one or more of the following types of transactions: (a) a block trade in which a selling shareholder will engage a broker-dealer who will then attempt to sell the common stock, or position and resell a portion of the block as principal to facilitate the transaction; (b) purchases by a broker-dealer as principal and resale by such broker-dealer for its account pursuant to this prospectus; (c) an exchange distribution in accordance with the rules of such exchange; and (d) ordinary brokerage transactions and transactions in which the broker solicits purchasers. In effecting sales, broker-dealers engaged by the selling shareholders may arrange for other broker-dealers to participate in the resales. In connection with distributions of the common stock or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers. In connection with such transactions, broker-dealers may engage in short sales of the common stock in the course of hedging the positions they assume with selling shareholders. The selling shareholders may also sell common stock short and redeliver the common stock to close out such short positions. The selling shareholders may also enter into option or other transactions with broker-dealers which require the delivery to the broker-dealer of the common stock, which the broker-dealer may resell or otherwise transfer pursuant to this prospectus. The selling shareholders may also loan or pledge common stock to a broker-dealer and the broker-dealer may sell the common stock so loaned or, upon a default, the broker-dealer may effect sales of the pledged common stock pursuant to this prospectus. Broker-dealers or agents may receive compensation in the form of commissions, discounts or concessions from the selling shareholders in amounts to be negotiated in connection with the sale. Such broker-dealers and any other participating broker-dealers may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales and any such commission, discount or concession may be deemed to be underwriting discounts or commissions under the Securities Act. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 may be sold in an unregistered transaction under Rule 144 rather than pursuant to this prospectus. 17 We are bearing all of the costs and expenses of registering the common stock offered by this prospectus. Commissions and discounts, if any, attributable to the sales of the common stock will be borne by the selling shareholders. We have agreed to indemnify the selling shareholders against certain liabilities in connection with the offering of the common stock, including liabilities arising under the Securities Act. Insofar as indemnification for liabilities arising under the securities act may be permitted to directors, officers or persons controlling us, we have 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. The selling shareholders may agree to indemnify any broker-dealer or agent that participates in transactions involving sales of the common stock against various liabilities, including liabilities arising under the Securities Act. In order to comply with the securities laws of various states, if applicable, sales of the common stock made in those states will only be through registered or licensed brokers or dealers. In addition, some states do not allow the securities to be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with by us and the selling shareholders. Under applicable rules and regulations of the Exchange Act, any person engaged in the distribution of the common stock may not simultaneously engage in market-making activities with respect to our common stock for a period of up to five business days prior to the commencement of such distribution. In addition to those restrictions, each selling shareholder will be subject to the Exchange Act and the rules and regulations under the Exchange Act, including, Regulation M and Rule 10b-7, which provisions may limit the timing of the purchases and sales of our securities by the selling shareholders. 18 DESCRIPTION OF SECURITIES We have previously registered our Class A Common Stock under the Exchange Act by filing a Form 8-A on January 13, 1996. LEGAL MATTERS Certain legal matters have been passed upon for us by Squire, Sanders & Dempsey L.L.P., Phoenix, Arizona. EXPERTS Our financial statements as of June 30, 1999 and 1998, and for the years then ended, have been incorporated by reference in this Prospectus in reliance upon the report of KPMG LLP, independent certified public accountants, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. The report of KPMG LLP covering the June 30, 1999, financial statements contains an explanatory paragraph that states that the Company's recurring losses from operations and resulting continued dependence on external sources of capital raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of that uncertainty. INTERESTS OF NAMED EXPERTS AND COUNSEL On October 13, 1997, James L. Adler, Jr. was appointed to serve as a director of LightPath until the 2000 annual meeting of shareholders. Mr. Adler is a partner of the law firm of Squire, Sanders & Dempsey L.L.P., which provides legal services to us. Mr. Adler owns options under the Directors Stock Option Plan to purchase 43,510 shares of Class A Common Stock at exercise prices ranging from $2.84 to $9.81. As of August 20, 1999 these shares represented approximately 1% of the outstanding shares of the Company's Class A Common Stock. 19 NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF LIGHTPATH TECHNOLOGIES, INC. THE SECURITIES OFFERED HEREBY 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 IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE 2,684,500 SHARES HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION COMMON STOCK THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. TABLE OF CONTENTS Page PROSPECTUS ---- Where You Can Find More Information (ii) Prospectus Summary 1 The Offering 4 Risk Factors 5 Selling Shareholders 14 Use of Proceeds 16 Certain Relationships 16 Determination of Offering Price 17 Plan of Distribution 17 Description of Securities 19 Legal Matters 19 August 30, 1999 Experts 19 Interest of Named Experts and Counsel 19 PART II TO FORM S-3 INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION It is estimated that the following expenses will be incurred in connection with the proposed offering hereunder. All of such expenses will be borne by the Company: Amount(1) --------- SEC Registration Fee..................................... $ 2,000.00 Legal fees and expenses.................................. 8,000.00 Accounting fees and expenses............................. 5,000.00 Printing expenses........................................ 2,000.00 ---------- Total................................................. $17,000.00 ========== (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 (3) 4.1 Form of Warrant Agreement (1) 4.2 Form of Unit Purchase Option (2) Form of Voting Trust Agreement dated among certain 4.3 stockholders of the Registrant (1) 4.4 Specimen Certificate for the Class A Common Stock (2) 4.5 Form of 6% Convertible Debentures * 4.7 Form of Class I Warrants * 4.8 Form of Class J Warrants * 5.1 Opinion of Squire, Sanders & Dempsey LLP * 23.1 Consent of KPMG LLP, Independent Auditors * 23.2 Consent of Squire, Sanders & Dempsey LLP Included in Exhibit 5.1 24 Powers of Attorney See signature page - ---------- * 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. 3. This exhibit was filed as an exhibit to the Company's Registration Statement on Form S-3 (File No: 333-47905) dated March 13, 1998 and is incorporated herein by reference thereto. II-2 ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933 (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; (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) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions described in Item 15 hereof, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person thereof in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-3 SIGNATURES 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 August 30, 1999. LIGHTPATH TECHNOLOGIES, INC., a Delaware corporation By: /s/ DONALD LAWSON --------------------------------- Donald Lawson Chief Executive Officer SPECIAL POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, constitutes and appoints each of 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 Securities and Exchange Commission, granting such attorney-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done in person, hereby ratifying and confirming all that such attorney-in-fact and agents may lawfully do or cause to be done by virtue hereof. 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 August 30,1999 - -------------------------- Leslie A. Danziger /s/ Donald E. Lawson CEO, President and Treasurer August 30,1999 - -------------------------- (Principal Executive, Financial Donald E. Lawson and Accounting Officer) /s/ James A. Adler, Jr. - -------------------------- Director August 30,1999 James A. Adler, Jr. /s/ Louis Leeburg - -------------------------- Director August 30,1999 Louis Leeburg /s/ Katherine Dietze - -------------------------- Director August 30,1999 Katherine Dietze /s/ Haydock H. Miller, Jr. - -------------------------- Director August 30,1999 Haydock H. Miller, Jr. /s/ James A. Wimbush - -------------------------- Director August 30,1999 James A. Wimbush II-4 EX-4.5 2 FORM OF 6% CONVERTIBLE DEBENTURE EXHIBIT 4.5 FORM OF 6% CONVERTIBLE DEBENTURE DEBENTURE NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), AS AMENDED. THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE 1933 ACT PURSUANT TO REGISTRATION OR EXEMPTION OR SAFE HARBOR THEREFROM. No. 99- US $ ____________ ------------- LIGHTPATH TECHNOLOGIES, INC. 6% CONVERTIBLE DEBENTURE DUE JULY 31, 2002 THIS DEBENTURE is one of a duly authorized issue of up to $1,000,000 in Debentures of LightPath Technologies, Inc., a corporation organized and existing under the laws of the State of Delaware (the "COMPANY") designated as its 6% Convertible Debentures. Such Debentures may be issued in series, each of which may have a different maturity date, but which otherwise have substantially similar terms. Capitalized terms not defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement, dated July ___, 1999, by and among the Company and the Buyers (as that term is defined therein) (the "SECURITIES PURCHASE AGREEMENT"). FOR VALUE RECEIVED, the Company promises to pay to ______________________, the registered holder hereof (the "HOLDER"), the principal sum of ____________________ and 00/100 Dollars (US $_______________) on July 31, 2002 (the "MATURITY DATE") and to pay interest on the principal sum outstanding from time to time in arrears (i) upon conversion as provided herein, (ii) upon redemption as provided herein or (iii) on the Maturity Date, at the rate of 6% per annum accruing from July 28, 1999, the date of initial issuance of this Debenture. Accrual of interest shall commence on the first such business day to occur after the date hereof and shall continue to accrue on a daily basis until payment in full of the principal sum has been made or duly provided for. This Debenture is subject to the following additional provisions: 1. The Debentures are issuable in denominations of Ten Thousand and 00/100 Dollars (US $10,000.00) and integral multiples thereof. The Debentures are exchangeable for an equal aggregate principal amount of Debentures of 1 different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange. 2. The Company shall be entitled to withhold from all payments of principal of, and interest on, this Debenture any amounts required to be withheld under the applicable provisions of the United States income tax laws or other applicable laws at the time of such payments, and Holder shall execute and deliver all required documentation in connection therewith. 3. This Debenture has been issued subject to investment representations of the original purchaser hereof and may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (the "1933 ACT"), and other applicable state and foreign securities laws. In the event of any proposed transfer of this Debenture, the Company may require, prior to issuance of a new Debenture in the name of such other person, that it receive reasonable transfer documentation including legal opinions that the issuance of the Debenture in such other name does not and will not cause a violation of the 1933 Act or any applicable state or foreign securities laws. Prior to due presentment for transfer of this Debenture, the Company and any agent of the Company may treat the person in whose name this Debenture is duly registered on the Company's Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. 4. (A) The Holder of this Debenture is entitled, at its option, subject to the following provisions of this Section 4, to convert all or a portion of this Debenture into shares of Class A Common Stock of the Company, $.01 par value per share ("COMMON STOCK") of the Company at any time (except as set forth in this Section 4(A) or in Section 4(C) hereunder) prior to the Maturity Date, at a conversion price (the "Conversion Price") for each share of Common Stock equal to 80% of the Market Price of the Common Stock as of (X) the Closing Date or (Y) the Conversion Date, whichever is lower (but the Conversion Price shall in no event be less than $0.56 (the "MINIMUM CONVERSION PRICE") or more than $2.00), as such amounts may be equitably adjusted in accordance with Sections 8, 9 and 10 hereof, if applicable. The minimum principal amount a Buyer may convert is the lower of (x) at least US $10,000 (unless if at the time of such election to convert the aggregate principal amount of all Debentures registered to the Holder is less than US $10,000, then the whole amount thereof) or (y) the maximum amount which the Holder can then convert pursuant to the terms of Section 4(C) hereof. (B) Conversion shall be effectuated by delivery by facsimile or other delivery to the Company of the form of conversion notice attached hereto as EXHIBIT A executed by the Holder of the Debenture evidencing such Holder's intention to convert this Debenture or a specified portion hereof ("NOTICE OF CONVERSION"), and accompanied, if required by the Company, by proper assignment hereof in blank. Subject to the provisions of Section 4(C) hereof, interest accrued or accruing from the date of issuance to the date of conversion shall, at the option of the Company, be paid in cash or Common Stock upon conversion at the Conversion Price applicable to such conversion. No fractional shares of Common Stock or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. The date on which notice of conversion is given shall be deemed to 2 be the date on which the Holder faxes or otherwise delivers the Notice of Conversion, duly executed, to the Company (the "CONVERSION DATE"), provided that the Holder shall deliver to the Company the original Debentures being converted within five (5) business days thereafter. Facsimile delivery of the Notice of Conversion shall be accepted by the Company at facsimile number (505) 342-1111; ATTN: PRESIDENT. Certificates representing Common Stock upon conversion will be delivered within three (3) business days following the Conversion Date. (C) Notwithstanding any other provision hereof, of the Warrants or of any of the other Transaction Agreements (as those terms are defined in the Securities Purchase Agreement), in no event (except (i) with respect to an automatic or mandatory conversion, if any, of a Debenture as provided in the Debentures, (ii) as specifically provided in this Debenture as an exception to this provision, or (iii) while there is outstanding a tender offer for any or all of the shares of the Company's Common Stock) shall the Holder be entitled to convert any Debenture or shall the Company have the obligation, to convert all or any portion of this Debenture (and the Company shall not have the right to pay interest on this Debenture in the form of Common Stock ) to the extent that, after such conversion, the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Debentures or unexercised portion of the Warrants), and (2) the number of shares of Common Stock issuable upon the conversion of the Debentures or exercise of the Warrants with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock (after taking into account the shares to be issued to the Holder upon such conversion or exercise). For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 ACT"), except as otherwise provided in clause (1) of such sentence. The Holder, by its acceptance of this Debenture, further agrees that if the Holder transfers or assigns any of the Debentures to a party who or which would not be considered such an affiliate, such assignment shall be made subject to the transferee's or assignee's specific agreement to be bound by the provisions of this Section 4(C) as if such transferee or assignee were the original Holder hereof. (D) The Holder recognizes that the Company may be limited in the number of shares of Common Stock it may issue by (i) reason of its authorized shares, or (ii) the applicable rules and regulations of the principal securities market on which the Common Stock is listed or traded (collectively, the "CAP REGULATIONS"). Without limiting the other provisions hereof, (i) the Company will take all steps reasonably necessary to be in a position to issue shares of Common Stock on conversion of the Debentures without violating the Cap Regulations and (ii) if, despite taking such steps, the Company still cannot issue such shares of Common Stock without violating the Cap Regulations, the Holder of this Debenture (to the extent the same can not be converted in compliance with the Cap Regulations (an "UNCONVERTED DEBENTURE")), shall have the option, exercisable in the Holder's sole and absolute discretion, to elect any one of the following remedies: (x) if permitted by the Cap Regulations, require the Company to issue shares of Common Stock in accordance with such Holder's Notice 3 of Conversion relating to the Unconverted Debenture at a conversion purchase price equal to the average of the closing bid price per share of Common Stock for any five (5) consecutive trading days (subject to the equitable adjustments for certain events occurring during such period as provided in this Debenture) during the sixty (60) trading days immediately preceding the date of the Notice of Conversion; or (y) require the Company to redeem each Unconverted Debenture for an amount (the "CAP REDEMPTION AMOUNT"), payable in cash, equal to: V x M ----- CP where: "V" means the outstanding principal plus accrued interest through the Cap Redemption Date (as defined below) of an Unconverted Debenture; "CP" means the Conversion Price in effect on the date of redemption (the "CAP REDEMPTION DATE") specified in the notice from the Holder electing this remedy; and "M" means the highest closing ask price during the period beginning on the Cap Redemption Date and ending on the date of payment of the Cap Redemption Amount. The holder of an Unconverted Debenture may elect one of the above remedies with respect to a portion of such Unconverted Debenture and the other remedy with respect to other portions of the Unconverted Debenture. (E) Anything herein to the contrary notwithstanding, in the event the Company breaches the provisions of Section 4(f) of the Securities Purchase Agreement, the Conversion Price shall be amended to be equal to 90% of the Conversion Price determined in accordance with Section 4(A) of this Debenture, and the Holder may require the Company to immediately redeem the outstanding portion of this Debenture in accordance with clause (y) of Section 4(D). (F) Any Debentures not previously converted as of the Maturity Date, shall be deemed to be automatically converted, without further action of any kind by the Company or any of its agents, employees or representatives, as of the Maturity Date at the Conversion Price applicable on the Maturity Date ("MANDATORY CONVERSION"). 5. REDEMPTION. This Debenture can be redeemed for cash at any time, in whole or in part, by the Company. To redeem the Debenture, the Company must (i) send a written notice to the Holder not less than five (5) nor more than ten (10) business days prior to the date on which it wishes to redeem the Debenture, and (ii) pay the Holder cash or immediately available funds in the amount of 4 115% times the principal amount of the Debenture then outstanding plus all accrued but unpaid interest. If the Company does not pay the redemption price to the Holder on or before the date of redemption specified in the notice, the Holder will have the right to deem such notice of redemption to be null and void and the Company will lose its right to further redeem this Debenture. A holder may convert all or any part of this Debenture up to the amount redeemed pursuant to such notice at any time during the first five (5) business days following the notice of redemption and without regard to the provisions of Section 4(C). 6. Subject to the terms of the Securities Purchase Agreement, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture and all other Debentures now or hereafter issued of similar terms are direct obligations of the Company. 7. No recourse shall be had for the payment of the principal of, or the interest on, this Debenture, or for any claim based hereon, or otherwise in respect hereof, against any incorporator, shareholder, officer or director, as such, past, present or future, of the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. 8. If the Company merges or consolidates with another corporation or sells or transfers all or substantially all of its assets to another person and the holders of the Common Stock are entitled to receive stock, securities or property in respect of or in exchange for Common Stock, then as a condition of such merger, consolidation, sale or transfer, the Company and any such successor, purchaser or transferee agree that the Debenture may thereafter be converted on the terms and subject to the conditions set forth above into the kind and amount of stock, securities or property receivable upon such merger, consolidation, sale or transfer by a holder of the number of shares of Common Stock into which this Debenture might have been converted immediately before such merger, consolidation, sale or transfer, subject to adjustments which shall be as nearly equivalent as may be practicable. In the event of any proposed merger, consolidation or sale or transfer of all or substantially all of the assets of the Company (a "SALE"), the Holder hereof shall have the right to convert this Debenture by delivering a Notice of Conversion to the Company within fifteen (15) days of receipt of notice of such Sale from the Company. In the event the Holder hereof elects not to convert, the Company may prepay all outstanding principal and accrued interest on this Debenture pursuant to Section 5 hereof, less all amounts required by law to be deducted, upon which tender of payment following such notice, the right of conversion shall terminate. 9. If, for any reason, prior to the conversion or redemption, the Company spins off or otherwise divests itself of a part of its business or operations or disposes all of or a substantial part of its assets in a transaction (the "SPIN OFF") in which the Company does not receive compensation for such business, operations or assets, but causes securities of another entity (the "SPIN OFF SECURITIES") to be issued to security holders of the Company, then the Company shall cause (i) to be reserved Spin Off Securities equal to the number thereof which would have been issued to the Holder had all of the Holder's Debentures outstanding on the record date (the "RECORD DATE") for determining the amount and number of Spin Off Securities to be issued to security holders of the 5 Company (the "OUTSTANDING DEBENTURES") been converted as of the close of business on the trading day immediately before the Record Date (the "RESERVED SPIN OFF SHARES"), and (ii) to be issued to the Holder on the conversion of all or any of the Outstanding Debentures, such amount of the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the numerator is the principal amount of the Outstanding Debentures then being converted, and (II) the denominator is the principal amount of the Outstanding Debentures. 10. If, at any time while any portion of this Debenture remains outstanding, the Company effectuates a stock split or reverse stock split of its Common Stock or issues a dividend on its Common Stock consisting of shares of Common Stock, the Conversion Price shall be equitably adjusted to reflect such action. By way of illustration, and not in limitation, of the foregoing: (i) if the Company effectuates a 2:1 split of its Common Stock, thereafter, with respect to any conversion for which the Company issues the shares after the record date of such split, the Conversion Price shall be deemed to be one-half of the Conversion Price calculated in Section 4(A); (ii) if the Company effectuates a 1:10 reverse split of its Common Stock, thereafter, with respect to any conversion for which the Company issues the shares after the record date of such reverse split, the Conversion Price shall be deemed to be ten times the Conversion Price calculated in Section 4(A); and (iii) if the Company declares a stock dividend of one share of Common Stock for every 10 shares outstanding, thereafter, with respect to any conversion for which the Company issues the shares after the record date of such dividend, the Conversion Price shall be deemed to be the amount of the Conversion Price calculated in Section 4A multiplied by a fraction, of which the numerator is the number of shares (10) for which a dividend share will be issued and the denominator is such number of shares plus the dividend share(s) issuable or issued thereon (11). 11. All payments contemplated hereby to be made "in cash" shall be made in immediately available good funds in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments of cash and each delivery of shares of Common Stock issuable to the Holder as contemplated hereby shall be made to the Holder at the address last appearing on the Debenture Register of the Company as designated in writing by the Holder from time to time; except that the Holder can designate, by notice to the Company, a different delivery address for any one or more specific payments or deliveries. 12. The Holder of the Debenture, by acceptance hereof, agrees that this Debenture is being acquired for investment purposes and that such Holder will not offer, sell or otherwise dispose of this Debenture or the Shares of Common Stock issuable upon conversion thereof except under circumstances which will not result in a violation of the Act or any applicable state Blue Sky or foreign laws or similar laws relating to the sale of securities. 13. This Debenture shall be governed by and construed in accordance with the laws of the State of Delaware. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of Wilmington or the state courts of the State of Delaware sitting in the City of Wilmington in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on FORUM NON COVENIENS, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, 6 the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Holder in enforcement of or protection of any of its rights under any of this Debenture. 14. The following shall constitute an "Event of Default": a. The Company shall default in the payment of principal or interest on this Debenture and same shall continue for a period of ten (10) days; or b. Any of the representations or warranties made by the Company herein, in the Securities Purchase Agreement, the Registration Rights Agreement or in any certificate or financial or other written statements heretofore or hereafter furnished by the Company in connection with the execution and delivery of this Debenture or the Securities Purchase Agreement shall be false or misleading in any material respect at the time made; or c. The Company fails to issue shares of Common Stock to the Holder or to cause its Transfer Agent to issue shares of Common Stock upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Debenture, fails to transfer or to cause its Transfer Agent to transfer any certificate for shares of Common Stock issued to the Holder upon conversion of this Debenture and when required by this Debenture or the Registration Rights Agreement, and such transfer is otherwise lawful, or fails to remove any restrictive legend or to cause its Transfer Agent to transfer on any certificate or any shares of Common Stock issued to the Holder upon conversion of this Debenture as and when required by this Debenture, the Agreement or the Registration Rights Agreement and such legend removal is otherwise lawful, and any such failure shall continue uncured for five (5) business days. d. The Company shall fail to perform or observe, in any material respect, any other covenant, term, provision, condition, agreement or obligation of any Debenture in this series and such failure shall continue uncured for a period of thirty (30) days after written notice from the Holder of such failure; or e. The Company shall fail to perform or observe, in any material respect, any covenant, term, provision, condition, agreement or obligation of the Company under the Securities Purchase Agreement or the Registration Rights Agreement and such failure shall continue uncured for a period of thirty (30) days after written notice from the Holder of such failure (other than a failure to cause the Registration 7 Statement to become effective no later than the Required Effective Date, as defined and provided in the Registration Rights Agreement, as to which no such cure period shall apply); or f. The Company shall (1) admit in writing its inability to pay its debts generally as they mature; (2) make an assignment for the benefit of creditors or commence proceedings for its dissolution; or (3) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; or g. A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or h. Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company and shall not be dismissed within sixty (60) days thereafter; or i. Any money judgment, writ or warrant of attachment, or similar process in excess of Two Hundred Thousand ($200,000) Dollars in the aggregate shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of sixty (60) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or j. Bankruptcy, reorganization, insolvency 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 and, if instituted against the Company, shall not be dismissed or stayed within sixty (60) days after such institution or the Company shall by any action or answer approve of, consent to, or acquiesce in any such proceedings or admit the material allegations of, or default in answering a petition filed in any such proceeding; or k. The Company shall have its Common Stock suspended or delisted from an exchange or over-the-counter market from trading for in excess of five (5) trading days; or l. The Company fails to file the Registration Statement within sixty (60) days following the Closing Date or the Registration 8 Statement is not declared effective within one hundred fifty (150) days following the Closing Date. Then, or at any time thereafter, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Debenture immediately due and payable, without presentment, demand, protest or notice of any kinds, all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. 15. Nothing contained in this Debenture shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or receive notice as a shareholder in respect of any meeting of shareholders or any rights whatsoever as a shareholder of the Company, unless and to the extent converted in accordance with the terms hereof. 16. In the event for any reason, any payment by or act of the Company or the Holder shall result in payment of interest which would exceed the limit authorized by or be in violation of the law of the jurisdiction applicable to this Debenture, the obligation of the Company to pay interest or perform such act or requirement shall be reduced to the limit authorized under such law, so that in no event shall the Company be obligated to pay any such interest, perform any such act or be bound by any requirement which would result in the payment of interest in excess of the limit so authorized. In the event any payment by or act of the Company shall result in the extraction of a rate of interest in excess of a sum which is lawfully collectible as interest, then such amount (to the extent of such excess not returned to the Company) shall, without further agreement or notice between or by the Company or the Holder, be deemed applied to the payment of principal, if any, hereunder immediately upon receipt of such excess funds by the Holder, with the same force and effect as though the Company had specifically designated such sums to be so applied to principal and the Holder had agreed to accept such sums as an interest-free prepayment of this Debenture. If any part of such excess remains after the principal has been paid in full, whether by the provisions of the preceding sentences of this Section 16 or otherwise, such excess shall be deemed to be an interest-free loan from the Company to the Holder, which loan shall be payable immediately upon demand by the Company. The provisions of this Section 16 shall control every other provision of this Debenture. 9 IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized. Dated: __________________, 1999 LIGHTPATH TECHNOLOGIES, INC. By: ------------------------ ------------------------ (Print Name) ------------------------ (Title) 10 EXHIBIT A NOTICE OF CONVERSION (To be Executed by the Registered Holder in order to Convert the Debenture) The undersigned hereby irrevocably elects to convert $ ________________ of the principal amount of the above Debenture No. ___ into Shares of Common Stock of LightPath Technologies, Inc. (the "COMPANY") according to the conditions hereof, as of the date written below. Conversion Date* ----------------------------------------------------- Applicable Conversion Price ----------------------------------------------------- Signature ----------------------------------------------------- [Name] Address: ----------------------------------------------------- ----------------------------------------------------- * This original Debenture must be received by the Company by the fifth business date following the Conversion Date. EX-4.7 3 FORM OF WARRANT EXHIBIT 4.7 FORM OF WARRANT THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (the "1933 Act," AS AMENDED, AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION. LIGHTPATH TECHNOLOGIES, INC. COMMON STOCK PURCHASE CLASS I WARRANT 1. ISSUANCE; CERTAIN DEFINITIONS. In consideration of good and valuable consideration, the receipt of which is hereby acknowledged by LightPath Technologies, Inc., a Delaware corporation (the "COMPANY"), [___________________________________] or registered assigns (the "HOLDER") is hereby granted the right to purchase at any time until 5:00 P.M., New York City time, on July 31, 2004, (the "EXPIRATION DATE"), ______________________________ (__________)(1) fully paid and nonassessable shares of the Company's Class A Common Stock, par value $0.01 per share (the "COMMON STOCK") at an initial exercise price per share (the "EXERCISE PRICE") of $2.20, subject to further adjustment as set forth herein. This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement, dated as of July 28, 1999 (the "SECURITIES PURCHASE AGREEMENT"), to which the Company and Holder (or Holder's predecessor in interest) are parties. Capitalized terms not defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement. 2. EXERCISE OF WARRANTS. 2.1. GENERAL. This Warrant is exercisable in whole or in part at any time and from time to time at the Exercise Price per share of Common Stock payable hereunder, payable in cash or by certified or official bank check, or by "cashless exercise," by means of tendering this Warrant Certificate to the Company to receive a number of shares of Common Stock equal in Market Value to the difference between the Market Value of the shares of Common Stock issuable upon exercise of this Warrant and the total cash exercise price thereof. Upon surrender of this Warrant Certificate with the attached Notice of Exercise Form duly executed (which Notice of Exercise Form may be submitted either by delivery to the Company or by facsimile transmission as provided in Section 8 hereof), together with payment of the Exercise Price for the shares of Common Stock purchased, the Holder shall be entitled to receive a certificate or certificates for the shares of Common Stock so purchased. For the purposes of this Section 2, "Market Value" shall be an amount equal to the Market Price of the Common Stock on the day immediately preceding the Company's receipt of the Notice of Exercise Form duly executed, multiplied by the number of shares of Common Stock to be issued upon surrender of this Warrant Certificate. - ---------- (1) Number of shares = (the Purchase Price of the Debentures issued to the Holder on the Closing Date / the Conversion Price of the Debentures on the Closing Date) x 75%. -1- 2.2. LIMITATION ON EXERCISE. Notwithstanding the provisions of this Warrant, the Securities Purchase Agreement or the other Transaction Agreements (as defined in the Securities Purchase Agreement), the Holder cannot exercise this Warrant, nor shall the Company have the obligation to issue shares upon such exercise of all or any portion of this Warrant, to the extent that, after such exercise the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Debenture or unexercised portion of the Warrants), and (2) the number of shares of Common Stock issuable upon the exercise of the Warrants with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock (after taking into account the shares to be issued to the Holder upon such exercise), subject to the following exceptions: (i) as specifically provided in this Warrant as an exception to this provision, or (ii) while there is outstanding a tender offer for any or all of the shares of the Company's Common Stock. For purposes of this Section 2.2, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 ACT"), except as otherwise provided in clause (1) of this Section 2.2. The Holder, by its acceptance of this Warrant, further agrees that if the Holder transfers or assigns any of the Warrants to a party who or which would not be considered such an affiliate, such assignment shall be made subject to the transferee's or assignee's specific agreement to be bound by the provisions of this Section 2.2 as if such transferee or assignee were the original Holder hereof. 3. RESERVATION OF SHARES. The Company hereby agrees that at all times during the term of this Warrant it will reserve for issuance upon exercise of this Warrant such number of shares of its Common Stock as may be required for issuance upon exercise of this Warrant (the "Warrant Shares"). 4. MUTILATION OR LOSS OF WARRANT. (a) Upon receipt by the Company of evidence satisfactory to it of the loss, theft, or destruction of this Warrant, and receipt of reasonably satisfactory indemnification, or (b) in the case of mutilation, upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void. 5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. 6. PROTECTION AGAINST DILUTION. 6.1. ADJUSTMENT MECHANISM. If an adjustment of the Exercise Price is required pursuant to this Section 6, the Holder shall be entitled to purchase such number of additional shares of Common Stock as will cause the total number of shares of Common Stock Holder is entitled to purchase pursuant to this Warrant, multiplied by the adjusted Exercise Price per share, to equal the dollar amount of the total number of shares of Common Stock Holder is entitled to purchase before adjustment multiplied by the total Exercise Price before adjustment. 6.2. CAPITAL ADJUSTMENTS. In case of any stock split or reverse stock split, stock dividend, reclassification of the Common Stock, recapitalization, merger or consolidation, or like capital adjustment affecting the Common Stock of the Company, the provisions of this Section 6 shall be applied as if such capital adjustment event had occurred immediately prior to the date of this Warrant and the original Exercise Price had been fairly allocated to the stock resulting from such capital adjustment; and in other respects the provisions of this Section shall be applied in a fair, equitable and reasonable manner so as to give effect, as nearly as may be, to the purposes hereof. A rights offering to stockholders shall be deemed a stock dividend to the extent of the bargain purchase element of the rights. -2- 6.3. ADJUSTMENT FOR SPIN OFF. If, for any reason, prior to the exercise of this Warrant in full, the Company spins off or otherwise divests itself of a substantial part of its business or operations or disposes of all or substantially all of its assets in a transaction (the "SPIN OFF") in which the Company does not receive compensation for such business, operations or assets, but causes securities of another entity (the "SPIN OFF SECURITIES") to be issued to security holders of the Company, then; (a) the Company shall cause (i) to be reserved Spin Off Securities equal to the number which would have been issued to the Holder had all of the Holder's unexercised Warrants outstanding on the record date (the "RECORD DATE") for determining the amount and number of Spin Off Securities to be issued to security holders of the Company (the "OUTSTANDING WARRANTS") been exercised as of the close of business on the trading day immediately before the Record Date (the "RESERVED SPIN OFF SHARES"), and (ii) to be issued to the Holder on the exercise of all or any of the Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the numerator is the amount of the Outstanding Warrants then being exercised, and (II) the denominator is the amount of the Outstanding Warrants; and (b) the Exercise Price on the Outstanding Warrants shall be adjusted immediately after consummation of the Spin Off by multiplying the Exercise Price by a fraction, the numerator of which is the Market Price of the Common Stock on the eleventh trading day immediately following the fifth trading day after the Record Date, and the denominator of which is the Market Price of the Common Stock on the Record Date; and such adjusted Exercise Price shall be deemed to be the Exercise Price with respect to the Outstanding Warrants after the Record Date. 7. TRANSFER TO COMPLY WITH THE SECURITIES ACT; REGISTRATION RIGHTS. 7.1. TRANSFER. This Warrant has not been registered under the Securities Act of 1933, as amended, (the "1933 ACT") and has been issued to the Holder for investment and not with a view to the distribution of either the Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may be sold, transferred, pledged or hypothecated in the absence of an effective registration statement under the 1933 Act relating to such security or an opinion of counsel satisfactory to the Company that registration is not required under the 1933 Act. Each certificate for the Warrant, the Warrant Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section. 7.2. REGISTRATION RIGHTS. Reference is made to the Registration Rights Agreement (as that term is defined in the Securities Purchase Agreement). The Company's obligations under the Registration Rights Agreement and the other terms and conditions thereof with respect to the Warrant Shares, including, but not necessarily limited to, the Company's commitment to file a registration statement including the Warrant Shares, to have the registration of the Warrant Shares completed and effective, and to maintain such registration, are incorporated herein by reference. 8. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered (i) personally, (ii) by facsimile transmission with confirmed receipt by facsimile and simultaneous delivery by Federal Express, or (iii) sent by certified, registered or express mail, postage pre-paid. Any such notice shall be deemed given when so delivered personally, sent by facsimile transmission with simultaneous delivery by Federal Express, or, if mailed, upon receipt of confirmed delivery and acceptance, as follows: -3- (i) if to the Company, to: LightPath Technologies, Inc. 6820 Academy Parkway East, N.E. Albuquerque, NM 87109 Attn: President Telephone No.: (505) 342-1100 Telecopier No.: (505) 342-1111 (ii) if to the Holder, to: ------------------------------- ------------------------------- ------------------------------- Attn:__________________________ Telephone No.: (___) _________ Telecopier No.: (___) _________ with a copy to: Krieger & Prager, Esqs. 319 Fifth Avenue New York, New York 10016 Telephone No.: (212) 689-3322 Telecopier No. (212) 213-2077 Any party may, by notice given in accordance with this Section to the other parties, designate another address or person for receipt of notices hereunder. 9. Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than expressly contained herein and therein. 10. Governing Law. This Warrant shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of Delaware applicable to contracts to be made and performed entirely within Delaware. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of Wilmington or the state courts of the State of Delaware sitting in the City of Wilmington in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under this Warrant. 11. Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. 12. Descriptive Headings. Descriptive headings of the several Sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. -4- IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the 28 day of July, 1999. LIGHTPATH TECHNOLOGIES, INC. By: /s/ Donald Lawson ------------------------------------ Name: Donald Lawson Its: President & CEO Attest: __________________________ Name:_____________________ Title:____________________ -5- NOTICE OF EXERCISE OF WARRANT The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant Certificate dated as of , 1999, to purchase shares of the Common Stock, par value $0.01 per share, of LightPath Technologies, Inc. and [Check one] _____ tenders herewith payment of $____________ (the Exercise Price multiplied by the number of shares); _____ elects a cashless exercise in accordance with Section 2.1 of the Warrant for the number of shares of Common Stock equal in Market Value to the difference between the Market Value of _______ shares of Common Stock issuable upon exercise of this Warrant and the total cash exercise price thereof. "Market Value" shall be an amount equal to the Market Price of the Common Stock on the day of the Company's receipt of this Notice of Exercise Form duly executed, multiplied by the number of shares of Common Stock above. Please deliver the stock certificate to: Dated:______________________________ By:_________________________________ -6- EX-4.8 4 FORM OF WARRANT EXHIBIT 4.8 FORM OF WARRANT THESE SECURITIES AND THE SECURITIES ISSUABLE UPON THEIR EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (the "1933 Act," AS AMENDED, AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, A "NO ACTION" LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144 OF THE SECURITIES AND EXCHANGE COMMISSION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION. LIGHTPATH TECHNOLOGIES, INC. COMMON STOCK PURCHASE CLASS J WARRANT 1. ISSUANCE; CERTAIN DEFINITIONS. In consideration of good and valuable consideration, the receipt of which is hereby acknowledged by LightPath Technologies, Inc., a Delaware corporation (the "Company"), Fahnestock & Co., Inc. or registered assigns (the "Holder") is hereby granted the right to purchase at any time until 5:00 P.M., New York City time, on July 31, 2004, (the "Expiration Date"), One Hundred Fifty Thousand (150,000) fully paid and nonassessable shares of the Company's Class A Common Stock, par value $0.01 per share (the "Common Stock") at an initial exercise price per share (the "Exercise Price") of $2.20, subject to further adjustment as set forth herein. This Warrant is being issued pursuant to the terms of that certain Securities Purchase Agreement, dated as of July 28, 1999 (the "Securities Purchase Agreement"), to which the Company and Holder (or Holder's predecessor in interest) are parties. Capitalized terms not defined herein shall have the meanings ascribed to them in the Securities Purchase Agreement. 2. EXERCISE OF WARRANTS. 2.1 GENERAL. This Warrant is exercisable in whole or in part at any time and from time to time at the Exercise Price per share of Common Stock payable hereunder, payable in cash or by certified or official bank check, or by "cashless exercise," by means of tendering this Warrant Certificate to the Company to receive a number of shares of Common Stock equal in Market Value to the difference between the Market Value of the shares of Common Stock issuable upon exercise of this Warrant and the total cash exercise price thereof. Upon surrender of this Warrant Certificate with the attached Notice of Exercise Form duly executed (which Notice of Exercise Form may be submitted either by delivery to the Company or by facsimile transmission as provided in Section 8 hereof), together with payment of the Exercise Price for the shares of Common Stock purchased, the Holder shall be entitled to receive a certificate or certificates for the shares of Common Stock so purchased. For the purposes of this Section 2, "Market Value" shall be an amount equal to the Market Price of the Common Stock on the day immediately preceding the Company's receipt of the Notice of Exercise Form duly executed, multiplied by the number of shares of Common Stock to be issued upon surrender of this Warrant Certificate. 2.2 LIMITATION ON EXERCISE. Notwithstanding the provisions of this Warrant, the Securities Purchase Agreement or the other Transaction Agreements (as defined in the Securities Purchase Agreement), the Holder cannot exercise this Warrant, nor shall the Company have the obligation to issue shares upon such exercise of all or any portion of this Warrant, to the extent that, after such exercise the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Debenture or unexercised portion of the Warrants), and (2) the number of shares of Common Stock issuable upon the exercise of the Warrants with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock (after taking into account the shares to be issued to the Holder upon such exercise), subject to the following exceptions: -1- (i) as specifically provided in this Warrant as an exception to this provision, or (ii) while there is outstanding a tender offer for any or all of the shares of the Company's Common Stock. For purposes of this Section 2.2, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the "1934 ACT"), except as otherwise provided in clause (1) of this Section 2.2. The Holder, by its acceptance of this Warrant, further agrees that if the Holder transfers or assigns any of the Warrants to a party who or which would not be considered such an affiliate, such assignment shall be made subject to the transferee's or assignee's specific agreement to be bound by the provisions of this Section 2.2 as if such transferee or assignee were the original Holder hereof. 3. RESERVATION OF SHARES. The Company hereby agrees that at all times during the term of this Warrant it will reserve for issuance upon exercise of this Warrant such number of shares of its Common Stock as may be required for issuance upon exercise of this Warrant (the "WARRANT SHARES"). 4. MUTILATION OR LOSS OF WARRANT. (a) Upon receipt by the Company of evidence satisfactory to it of the loss, theft, or destruction of this Warrant, and receipt of reasonably satisfactory indemnification, or (b) in the case of mutilation, upon surrender and cancellation of this Warrant, the Company will execute and deliver a new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void. 5. RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein. 6. PROTECTION AGAINST DILUTION. 6.1 ADJUSTMENT MECHANISM. If an adjustment of the Exercise Price is required pursuant to this Section 6, the Holder shall be entitled to purchase such number of additional shares of Common Stock as will cause the total number of shares of Common Stock Holder is entitled to purchase pursuant to this Warrant, multiplied by the adjusted Exercise Price per share, to equal the dollar amount of the total number of shares of Common Stock Holder is entitled to purchase before adjustment multiplied by the total Exercise Price before adjustment. 6.2 CAPITAL ADJUSTMENTS. In case of any stock split or reverse stock split, stock dividend, reclassification of the Common Stock, recapitalization, merger or consolidation, or like capital adjustment affecting the Common Stock of the Company, the provisions of this Section 6 shall be applied as if such capital adjustment event had occurred immediately prior to the date of this Warrant and the original Exercise Price had been fairly allocated to the stock resulting from such capital adjustment; and in other respects the provisions of this Section shall be applied in a fair, equitable and reasonable manner so as to give effect, as nearly as may be, to the purposes hereof. A rights offering to stockholders shall be deemed a stock dividend to the extent of the bargain purchase element of the rights. 6.3 ADJUSTMENT FOR SPIN OFF. If, for any reason, prior to the exercise of this Warrant in full, the Company spins off or otherwise divests itself of a substantial part of its business or operations or disposes of all or substantially all of its assets in a transaction (the "SPIN OFF") in which the Company does not receive compensation for such business, operations or assets, but causes securities of another entity (the "SPIN OFF SECURITIES") to be issued to security holders of the Company, then; (a) the Company shall cause (i) to be reserved Spin Off Securities equal to the number which would have been issued to the Holder had all of the Holder's unexercised Warrants outstanding on the record date (the "RECORD DATE") for determining the amount and number of Spin Off Securities to be issued to security holders of the Company (the "OUTSTANDING WARRANTS") been exercised as of the close of business on the trading day immediately before the Record Date (the "RESERVED SPIN OFF SHARES"), and (ii) to be issued to the Holder on the exercise of all or any of the Outstanding Warrants, such amount of the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the numerator is the amount of the Outstanding Warrants then being exercised, and (II) the denominator is the amount of the Outstanding Warrants; and -2- (b) the Exercise Price on the Outstanding Warrants shall be adjusted immediately after consummation of the Spin Off by multiplying the Exercise Price by a fraction, the numerator of which is the Market Price of the Common Stock on the eleventh trading day immediately following the fifth trading day after the Record Date, and the denominator of which is the Market Price of the Common Stock on the Record Date; and such adjusted Exercise Price shall be deemed to be the Exercise Price with respect to the Outstanding Warrants after the Record Date. 7. TRANSFER TO COMPLY WITH THE SECURITIES ACT; REGISTRATION RIGHTS. 7.1 TRANSFER. This Warrant has not been registered under the Securities Act of 1933, as amended, (the "1933 Act") and has been issued to the Holder for investment and not with a view to the distribution of either the Warrant or the Warrant Shares. Neither this Warrant nor any of the Warrant Shares or any other security issued or issuable upon exercise of this Warrant may be sold, transferred, pledged or hypothecated in the absence of an effective registration statement under the 1933 Act relating to such security or an opinion of counsel satisfactory to the Company that registration is not required under the 1933 Act. Each certificate for the Warrant, the Warrant Shares and any other security issued or issuable upon exercise of this Warrant shall contain a legend in form and substance satisfactory to counsel for the Company, setting forth the restrictions on transfer contained in this Section. 7.2 REGISTRATION RIGHTS. Reference is made to the Registration Rights Agreement (as that term is defined in the Securities Purchase Agreement). The Company's obligations under the Registration Rights Agreement and the other terms and conditions thereof with respect to the Warrant Shares, including, but not necessarily limited to, the Company's commitment to file a registration statement including the Warrant Shares, to have the registration of the Warrant Shares completed and effective, and to maintain such registration, are incorporated herein by reference. 8. NOTICES. Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered (i) personally, (ii) by facsimile transmission with confirmed receipt by facsimile and simultaneous delivery by Federal Express, or (iii) sent by certified, registered or express mail, postage pre-paid. Any such notice shall be deemed given when so delivered personally, sent by facsimile transmission with simultaneous delivery by Federal Express, or, if mailed, upon receipt of confirmed delivery and acceptance, as follows: (i) if to the Company, to: LightPath Technologies, Inc. 6820 Academy Parkway East, N.E. Albuquerque, NM 87109 Attn: President Telephone No.: (505) 342-1100 Telecopier No.: (505) 342-1111 (ii) if to the Holder, to: -------------------------------- -------------------------------- -------------------------------- Attn:___________________________ Telephone No.: (___) __________ Telecopier No.: (___) _________ with a copy to: Krieger & Prager, Esqs. 319 Fifth Avenue New York, New York 10016 Telephone No.: (212) 689-3322 Telecopier No. (212) 213-2077 Any party may, by notice given in accordance with this Section to the other parties, designate another address or person for receipt of notices hereunder. -3- 9. SUPPLEMENTS AND AMENDMENTS; WHOLE AGREEMENT. This Warrant may be amended or supplemented only by an instrument in writing signed by the parties hereto. This Warrant contains the full understanding of the parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or understandings other than expressly contained herein and therein. 10. GOVERNING LAW. This Warrant shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of Delaware applicable to contracts to be made and performed entirely within Delaware. Each of the parties consents to the jurisdiction of the federal courts whose districts encompass any part of the City of Wilmington or the state courts of the State of Delaware sitting in the City of Wilmington in connection with any dispute arising under this Warrant and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, the Company shall reimburse the Holder for any reasonable legal fees and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under this Warrant. 11. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. 12. DESCRIPTIVE HEADINGS. Descriptive headings of the several Sections of this Warrant are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. IN WITNESS WHEREOF, the parties hereto have executed this Warrant as of the ____ day of July 28, 1999. LIGHTPATH TECHNOLOGIES, INC. By: /s/ Donald Lawson ------------------------------------ Name: Donald Lawson Its: President & CEO Attest: - -------------------------- Name:_____________________ Title:____________________ -4- NOTICE OF EXERCISE OF WARRANT The undersigned hereby irrevocably elects to exercise the right, represented by the Warrant Certificate dated as of , 1999, to purchase shares of the Common Stock, par value $0.01 per share, of LightPath Technologies, Inc. and [Check one] _____ tenders herewith payment of $______________ (the Exercise Price multiplied by the number of shares); _____ elects a cashless exercise in accordance with Section 2.1 of the Warrant for the number of shares of Common Stock equal in Market Value to the difference between the Market Value of _______ shares of Common Stock issuable upon exercise of this Warrant and the total cash exercise price thereof. "Market Value" shall be an amount equal to the Market Price of the Common Stock on the day of the Company's receipt of this Notice of Exercise Form duly executed, multiplied by the number of shares of Common Stock above. Please deliver the stock certificate to: Dated:__________________________________ By:_____________________________________ -5- EX-5.1 5 OPINION & CONSENT OF SQUIRE SANDERS & DEMPSEY EXHIBIT 5.1 Opinion and Consent of Squire, Sanders, & Dempsey LLP August 27, 1999 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 2,684,500 shares of the Company's $.01 par value Common Stock (the "Common Stock"), issuable upon conversion of outstanding 6% Convertible Debentures and upon exercise of outstanding Class I Warrants and Class J Warrants (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 giving our opinion we have assumed the Company has properly reserved the number of authorized and unissued shares of Common Stock required to be issued upon the conversion of the outstanding 6% Convertible Debentures and/or exercise of the Class I Warrants and Class J Warrants and that as of the date of such issuance the Company continues to exist. Our opinion is based solely on the General Corporation Law of the State of Delaware. 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 upon receipt by the Company of the consideration provided for upon conversion of the 6% Convertible Debentures and upon exercise of the Class I Warrants and Class J Warrants, respectively, the Common Stock, when issued in compliance with the 6% Convertible Debentures and Class I Warrants and Class J Warrants, respectively, will be validly issued, fully paid and nonassessable. We acknowledge that we are referred to under the heading "Legal Matters" in the Prospectus which is part of the Registration Statement and we hereby consent to the use of our name in such Registration Statement. We further consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and with the state regulatory agencies in such states as may require such filing in connection with the registration of the Common Stock for offer and sale in such states. Respectfully yours, SQUIRE, SANDERS & DEMPSEY L.L.P. EX-23.1 6 CONSENT OF KPMG LLP Exhibit 23.1 Consent of KPMG 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 heading "Experts" in the prospectus. Our report dated August 10, 1999, contains an explanatory paragraph that states that the Company has suffered recurring losses from operations and is dependent on external sources of capital, which raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of that uncertainty. KPMG LLP Albuquerque, New Mexico August 27, 1999 -----END PRIVACY-ENHANCED MESSAGE-----