Filed pursuant to Rule 424(b)(5)
Commission File No. 333-88950
Prospectus Supplement
(To prospectus dated July 10, 2002)
383,452 Shares
UNIVERSAL DISPLAY CORPORATION
Common Stock
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Universal Display Corporation is offering up to 383,452 shares of
common stock in this offering.
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Our common stock is traded on the Nasdaq National Market under the
symbol "PANL" and on the Philadelphia Stock Exchange under the symbol "PNL." The
last reported sale price of our common stock on the Nasdaq National Market on
September 24, 2002 was $5.70 per share.
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Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 4 of the attached prospectus and on page S-4 of this
prospectus supplement.
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Per Share Total
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Offering Price to Public.......................... $5.41 $2,074,475
Offering Proceeds to Us........................... $5.41 $2,074,475
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus supplement or the attached prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
We will deposit with The Depository Trust Company the shares to be
credited to the accounts of the investors against acceptance of investor funds.
We expect to deliver the shares of common stock to investors on September 27,
2002.
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September 24, 2002
TABLE OF CONTENTS
Prospectus Supplement
Page
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About This Prospectus Supplement................................................................................S-3
Risk Factors....................................................................................................S-4
Recent Developments.............................................................................................S-6
Use of Proceeds.................................................................................................S-6
Dilution........................................................................................................S-6
Plan of Distribution............................................................................................S-7
Legal Matters...................................................................................................S-8
Where You Can Find More Information.............................................................................S-8
Prospectus
Cautionary Statement Concerning Forward-Looking Statements........................................................1
About this Prospectus.............................................................................................2
Where You Can Find More Information...............................................................................2
Risk Factors......................................................................................................4
Our Company......................................................................................................12
Securities Offered by this Prospectus............................................................................12
Use of Proceeds..................................................................................................12
Certain Ratios...................................................................................................13
Description of Preferred Stock...................................................................................13
Description of Warrants..........................................................................................20
Plan of Distribution.............................................................................................21
Legal Matters....................................................................................................24
Experts..........................................................................................................24
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You should rely only on the information contained in this prospectus
supplement, the accompanying prospectus and the documents incorporated by
reference. We have not authorized anyone to provide you with information
different from that contained in any of these documents. The information
contained in these documents is accurate only as of the date of each document,
as the case may be, regardless of the time of delivery of this prospectus
supplement and accompanying prospectus or of any sale of common stock. Our
business, financial condition, results of operations and prospects may change
after the date set forth in each document in which the information is presented.
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S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
We provide information to you about this offering of shares of our
common stock in two separate documents: (a) the accompanying prospectus, which
provides general information, some of which may not apply to this offering; and
(b) this prospectus supplement, which describes the specific details regarding
this offering. Generally, when we refer to this "prospectus," we are referring
to both documents combined. Additional information is incorporated by reference
in this prospectus. See "Where You Can Find More Information."
If information in this prospectus supplement is inconsistent with the
accompanying prospectus, you should rely on this prospectus supplement.
This prospectus supplement, the accompanying prospectus and the
documents incorporated by reference contain some "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995 and information
relating to us that is based on the beliefs of our management, as well as
assumptions made by, and the information currently available to, our management.
Among other things, these statements include, but are not limited to, the
statements in this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference regarding:
o our commercialization and technology development strategy;
o the potential commercial applications of our OLED technology, including the
types of products in which it may be used;
o future demand for our technology;
o the comparative advantages of our OLED technology against competing
technologies;
o the nature and extent of the development that we will pursue in the future
with third parties;
o the amount and type of securities that we will issue in the future to these
parties;
o the potential limitations of the technology being developed by our
competitors;
o the protection afforded to us by the patents that we own or license;
o the nature of the technology that our competitors will seek to develop in the
future;
o the payments that will be made to us in the future under our existing
contracts;
o our future capital requirements;
o our future exposure to market risk;
o our use of proceeds from this offering; and
o our future revenues and results of operations.
In addition, when used in these documents, the words "estimate,"
"project," "believe," "anticipate," "intend," "expect" and similar expressions
are intended to identify forward-looking statements. These statements reflect
our current views with respect to future events and are subject to risks and
uncertainties that could cause actual results to differ materially from those
contemplated in these forward-looking statements, including those risks
discussed in this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference.
You are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this prospectus supplement, the
accompanying prospectus or the documents incorporated by reference, as the case
may be. Except for special circumstances in which a duty to update arises when
prior disclosure becomes materially misleading in light of subsequent events, we
do not intend to update any of these forward-looking statements to reflect
events or circumstances after the date of this prospectus or to reflect the
occurrence of unanticipated events.
S-3
RISK FACTORS
Before purchasing our common stock, you should carefully consider the
risks described below in this section, risks described under the heading "Risk
Factors" beginning on page 4 of the accompanying prospectus and the risks
described in the documents incorporated by reference in this prospectus
supplement and the accompanying prospectus.
The exercise price of certain warrants to purchase our shares of common stock
will be reduced following the issuance of the common stock being offered by this
prospectus.
On August 22, 2001, we issued to Pine Ridge Financial Inc. and Strong
River Investments, Inc. warrants to purchase an aggregate of 744,452 shares of
our common stock. The terms of these warrants were amended in November 2001. As
so amended, the warrants are exercisable at any time through and including
August 22, 2011. Warrants to purchase 429,492 shares of common stock had an
initial exercise price of $15.24 per share, while warrants to purchase the
remaining 314,960 shares of common stock had an initial exercise price of
$9.9225 per share.
The exercise price of these warrants is subject to "weighted average"
anti-dilution protection, and is reduced upon our issuance of shares of common
stock at a purchase price per share less than the applicable per share exercise
price of each respective warrant. Accordingly, upon our issuance of 1,277,014
shares of our common stock in an offering of common stock that we consummated on
August 8, 2002 at a purchase price per share of $5.09, the exercise price of the
warrants exercisable at an exercise price of $15.24 per share was reduced to
$14.5837 per share, while the exercise price of the warrants exercisable at an
exercise price of $9.9225 per share was reduced to $9.61 per share.
Upon our issuance of 383,452 shares of our common stock in this
offering at a purchase price per share of $5.41, the exercise price of the
warrants now exercisable at an exercise price of $14.5837 per share will be
further reduced to $14.42 per share, while the exercise price of the warrants
now exercisable at an exercise price of $9.61 per share will be further reduced
to $9.54 share.
In addition, on August 22, 2001, we issued to Gerard Klauer Mattison &
Co., Inc. warrants to purchase 186,114 shares of common stock, exercisable at
any time through and including August 21, 2008. These warrants had an initial
exercise price of $15.24 per share.
The exercise price of these warrants is subject to "weighted average"
anti-dilution protection in accordance with a formula contained in the form of
these warrants, and is reduced upon our issuance of shares of common stock at a
purchase price per share less than the applicable per share exercise price of
each respective warrant. Accordingly, upon our issuance of 1,277,014 shares of
our common stock in the offering of common stock consummated on August 8, 2002
at a purchase price per share of $5.09, the exercise price of these warrants was
reduced to $14.2546 per share.
S-4
Upon our issuance of shares of our common stock in this offering at a
purchase price per share of $5.41, and assuming a fair market value of the
common stock of $5.70 per share, the last reported sale price of the common
stock on the Nasdaq National Market on the date of this prospectus supplement,
the exercise price of these warrants will be further reduced to $14.10 per
share.
Sales of the shares issuable upon exercise of any of the warrants in
the future could reduce the market price of our common stock.
We are offering the common stock on a best efforts basis and we cannot be
certain that we will raise the full amount contemplated in this offering.
The closing of this offering is not conditioned on the sale of all of
the shares offered hereby, and we may sell all or any portion of such shares.
Accordingly, we cannot be certain of the number of shares that will be purchased
by investors. We currently anticipate that the closing will take place on
September 27, 2002, but we cannot be certain that this will be the case. If the
closing has not taken place within 10 business days after such date, the
offering will terminate and any funds transmitted to us will promptly be
returned to the investors. See "Plan of Distribution."
The common stock being offered by this prospectus ranks junior to our
outstanding shares of preferred stock.
In addition to our authorized but unissued shares of preferred stock,
our board has designated and issued two series of preferred stock which are
currently outstanding: (a) 200,000 shares of Series A Preferred Stock and (b)
300,000 shares of Series B Convertible Preferred Stock. In the event of a
liquidation, dissolution or winding-up of our company, the holders of these
shares of preferred stock will have the right to receive distributions of our
assets prior to distributions to the holders of our common stock. In addition,
the holders of these shares, under some circumstances, will have the right to
treat certain types of merger and similar transactions which we may effect in
the future as a liquidation event requiring the making of such a distribution.
This right could have one or more of the effects described in the prospectus
under the caption "Risk Factors -- We can issue shares of preferred stock that
can adversely affect your rights as a shareholder."
Our management will have broad discretion with respect to the use of proceeds of
this offering.
Our management will have broad discretion with respect to the use of
proceeds of this offering. You will be relying on the judgment of our management
regarding the application of the proceeds of this offering. The results and
effectiveness of the use of proceeds are uncertain.
S-5
RECENT DEVELOPMENTS
Change in Independent Public Accountants
On July 30, 2002, upon recommendation of the Audit Committee of our
Board of Directors, we dismissed Arthur Andersen LLP as our independent public
accountants, and engaged KPMG LLP to serve as our independent public accountants
for 2002. KPMG LLP has not audited or reviewed the financial statements referred
to in the prospectus under the caption "Experts."
In connection with the engagement of KPMG LLP, we reviewed certain of
our accounting policies, including our policies with respect to the treatment of
equity instruments that are conditionally transferred to another party and
subject to forfeiture for non-performance as issued. In connection with this
review, we identified a $2,486,000 overstatement of prepaid expenses and total
shareholders' equity as of March 31, 2002 relating to accounting for common
stock issued to PPG Industries, Inc. as consideration for future services. In
addition, we determined that the previously reported weighted average shares
outstanding for the quarter ended March 31, 2002 should be reduced by 258,924
shares. On August 6, 2002, we filed an amendment to our quarterly report on Form
10-Q for the three months ended March 31, 2002 to correct this overstatement and
to reduce the previously reported weighted average shares outstanding for the
quarter ended March 31, 2002 by 258,924 shares. The reclassification has no
effect on reported expenses, net loss, net loss per share and cash flow for the
quarter ended March 31, 2002. In addition, the revised accounting for the stock
issuance has no impact on the previously filed Annual Report on Form 10-K for
the years ended December 31, 2001 and 2000.
Amendment of Our Stock Incentive Plan
At our annual meeting of shareholders held on June 27, 2002, our
shareholders approved an increase in the number of shares of common stock that
may be issued upon the exercise of options granted under our Stock Incentive
Plan from 2,800,000 shares to 3,800,000 shares.
USE OF PROCEEDS
We expect the net proceeds from this offering to be up to approximately
$2.0 million after deducting certain fees due to Gerard Klauer Mattison & Co.,
Inc. and our estimated offering expenses, as described in Plan of Distribution.
The net proceeds from this offering will be used for working capital and general
corporate purposes. Pending such uses, we intend to invest any excess proceeds
in short-term, investment grade, interest-bearing securities.
DILUTION
Our net tangible book value as of June 30, 2002 was approximately $16.3
million, or $0.89 per share of common stock. Net tangible book value per share
is determined by dividing our net tangible book value, which consists of
tangible assets less total liabilities, by the number of shares of common stock
outstanding on that date. Without taking into account any other changes in the
net tangible book value after June 30, 2002, other than to give effect to our
receipt of the estimated net proceeds from the sale of the maximum number of
S-6
shares that may be sold in this offering (383,452 shares) at an offering price
of $5.41 per share, less the fees due to Gerard Klauer Mattison & Co., Inc. and
our estimated offering expenses, our net tangible book value as of June 30,
2002, after giving effect to the items above would have been approximately $18.3
million, or $0.98 per share. This represents an immediate increase in the net
tangible book value of $0.09 per share to existing stockholders and an immediate
dilution of $4.43 per share to new investors. The following table illustrates
this per share dilution:
Offering Price................................................................. $ 5.41
Net tangible book value per share before the offering..................... $ 0.89
Increase in net tangible book value per share attributable to the offering 0.09
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Net tangible book value per share, as amended, after the offering.............. 0.98
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Dilution per share to new investors............................................ $ 4.43
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This table is based on the number of outstanding shares as of June 30,
2002, as amended, and does not include the following:
o 2,223,855 shares of common stock issuable upon exercise of outstanding
stock options as of June 30, 2002 at a weighted average exercise price of
$7.59 per share;
o 4,732,841 shares of common stock issuable upon exercise of outstanding
warrants as of June 30, 2002 at a weighted average exercise price of $9.44
per share; and
o 1,073,729 shares of common stock issuable upon conversion of outstanding
convertible notes as of June 30, 2002 at a conversion price of $13.97.
PLAN OF DISTRIBUTION
We are offering the common stock on a best efforts basis principally to
selected institutional investors.
Arrangement with the Gerard Klauer Mattison & Co., Inc. Although we have not
used an underwriter or placement agent in connection with this offering, we have
used Gerard Klauer Mattison & Co., Inc. as a placement agent in connection with
past offerings, including our offering, consummated on August 8, 2002, in which
we sold 1,277,014 shares of common stock at a purchase price of $5.09 per share.
In connection with these past engagements, we are obligated in connection with
this offering to pay Gerard Klauer Mattison & Co., Inc. a fee equal to 3.0% of
the gross proceeds of this offering.
Offering and Closing Procedure. Confirmations and definitive
prospectuses will be distributed to all investors who agree to purchase shares
of the common stock at the time of pricing, informing investors of the closing
date. We currently anticipate that the closing will take place on September 27,
2002. Investors will also be informed of the date on which they must transmit
the purchase price into our account.
On the scheduled closing date, the following will occur:
o We will deposit with The Depository Trust Company the common stock to
be credited to the respective accounts of investors; and
S-7
o The investors will transfer to us funds in the amount of the purchase price
for their shares.
On or promptly following the closing date, Gerard Klauer Mattison &
Co., Inc. will be paid its fee.
The offering will not continue after the closing date. If the closing has
not taken place within 10 business days after September 27, 2002, the offering
will terminate and any funds deposited with us will promptly be returned to the
investors.
Negotiation of Price. We negotiated the price to the public for the
common stock offered in this offering with the investors. The factors considered
in determining the price to the public included the recent market price of our
common stock, the general condition of the securities market at the time of this
offering, the history of and prospects for the industry in which we compete, our
past and present operations, our historical results of operations and our
prospects for future earnings.
We estimate that the total expenses of this offering, excluding the
fees payable to Gerard Klauer Mattison & Co., Inc., will be approximately
$12,000, all of which will be paid by us.
Our common stock is listed on the Nasdaq National Market under the
symbol "PANL" and on the Philadelphia Stock Exchange under the symbol "PNL."
LEGAL MATTERS
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, has passed
upon the validity of the securities offered hereby.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. Therefore, we file reports, proxy statements
and other information with the SEC. You can read and copy all of our filings at
the SEC's public reference facilities in Washington, D.C., New York, New York
and Chicago, Illinois. You may obtain information on the operation of the SEC's
public reference facilities by calling the SEC at 1-800-SEC-0300. You can also
read and copy all of our filings at the offices of the Nasdaq Stock Market, 1735
K Street N.W., Washington, D.C. 20006. You may also obtain our SEC filings from
the SEC's Web site on the Internet that is located at http://www.sec.gov.
We "incorporate by reference" the information we file with the SEC,
which means that we can disclose important information to you by referring you
to another document we file with the SEC. The information incorporated by
reference is an important part of this prospectus supplement and accompanying
prospectus, and information that we file later with the SEC will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended,
after the date of this prospectus supplement but before the end of any offering
made under this prospectus supplement and accompanying prospectus:
S-8
o our annual report on Form 10-K for the fiscal year ended December 31, 2001;
o our quarterly reports on Form 10-Q for the quarters ended March 31, 2002 and
June 30, 2002;
o our current report on Form 8-K filed with the SEC on July 30, 2002;
o our proxy statement filed with the SEC on April 30, 2002; and
o the description of our common stock contained in our registration
statement on Form 8-A filed with the SEC on August 6, 1996.
You should read the information relating to us in this prospectus
supplement and accompanying prospectus together with the information in the
documents incorporated by reference.
Any statement contained in a document incorporated by reference herein,
unless otherwise indicated therein, speaks as of the date of the document.
Statements contained in this prospectus supplement and accompanying prospectus
may modify or replace statements contained in the documents incorporated by
reference. In addition, some of the statements contained in one or more of the
documents incorporated by reference may be modified or replaced by statements
contained in a document incorporated by reference that is filed thereafter.
You may request a copy of any or all of these filings, at no cost, by
writing or telephoning us at Universal Display Corporation, 375 Phillips
Boulevard, Ewing, New Jersey 08618, Attention: Investor Relations, Telephone:
(609) 671-0980.
S-9
PROSPECTUS
$50,000,000
UNIVERSAL DISPLAY CORPORATION
Common Stock
Preferred Stock
Warrants
Depositary Shares
We may offer up to $50,000,000 of our common stock, preferred stock,
warrants to purchase our common stock and preferred stock and depositary shares.
Our common stock is quoted on the Nasdaq National Market under the symbol
"PANL," and is also listed on the Philadelphia Stock Exchange under the symbol
"PNL."
We may offer these securities at prices and on terms to be set forth in
one or more supplements to this prospectus. These securities may be offered
directly, through agents on our behalf or through underwriters or dealers
An investment in our securities involves significant risks. You should
carefully consider the risk factors beginning on page 5 of this prospectus
before investing in our securities.
The securities described in this prospectus have not been approved by
the Securities and Exchange Commission or any state securities commission, nor
have they determined if this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
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The date of this prospectus is July 10, 2002
TABLE OF CONTENTS
Page
Cautionary Statement Concerning Forward-Looking Statements................... 1
About this Prospectus........................................................ 2
Where You Can Find More Information.......................................... 2
Risk Factors................................................................. 4
Our Company.................................................................. 12
Securities Offered by this Prospectus........................................ 12
Use of Proceeds.............................................................. 12
Certain Ratios............................................................... 13
Description of Preferred Stock............................................... 13
Description of Warrants...................................................... 20
Plan of Distribution......................................................... 21
Legal Matters................................................................ 24
Experts...................................................................... 24
i
CAUTIONARY STATEMENT
CONCERNING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve a
number of risks and uncertainties. For such statements, we claim the protection
of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. A number of factors could cause our
actual results, performance or achievements or those of the display technology
industry to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
factors include, but are not limited to:
o competition in the display technology industry in general and in our
specific target markets;
o changes in prevailing interest rates and the availability of and
terms of financing to fund the growth of our business;
o inflation;
o changes in costs of goods and services;
o economic conditions in general and in our specific target markets;
o changes in consumer preferences and tastes;
o demographic changes;
o changes in, or failure to comply with, federal, state, local or
foreign government regulation;
o liability and other claims asserted against us;
o changes in our commercialization strategy;
o the ability to attract and retain qualified personnel;
o changes in our capital expenditure plans; and
o other factors referred to in this prospectus
In addition, the forward-looking statements included in this prospectus
are not meant to predict future events or circumstances and may not be realized.
Forward-looking statements can be identified by, among other things, the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "seek," "pro forma," "anticipates," "intends," or "potential" or the
negative of, or any other variations on, those terms or comparable terminology,
or by discussion of strategy or intentions. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on these
forward-looking statements.
1
ABOUT THIS PROSPECTUS
This prospectus describes certain securities of Universal Display
Corporation, a Pennsylvania corporation. We sometimes refer to Universal Display
Corporation, together with its wholly owned subsidiary, UDC, Inc., using the
words "we," "our" or "us," or as the "Company." This prospectus is part of a
registration statement that we filed with the SEC utilizing a "shelf"
registration process, which allows us to offer and sell any combination of the
securities described in this prospectus in one or more offerings. Using this
prospectus, we may offer up to $50,000,000 worth of securities.
This prospectus contains a general description of the securities we may
offer. We will describe the specific terms of these securities, as necessary, in
supplements that we attach to this prospectus for each offering. Each supplement
will also contain specific information about the terms of the offering it
describes. The supplements may also add, update or change information contained
in this prospectus. In addition, as we describe below in the section entitled
"Where You Can Find More Information," we have filed and plan to continue to
file other documents with the SEC that contain information about us. Before you
decide whether to invest in our securities, you should read this prospectus, the
supplement that further describes the offering of those securities and the
information we otherwise file with the SEC.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information we file at the SEC's public
reference rooms located at Judiciary Plaza, 450 Fifth Street, N.W., Washington,
DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at "http://www.sec.gov."
This prospectus is part of our "shelf" registration statement. We have
filed the registration statement with the SEC under the Securities Act of 1933
to register the securities that we may offer by this prospectus and any
supplements. Not all of the information in the registration statement appears in
this prospectus, or will appear in any supplement. For more detail, you can read
the entire registration statement, and all of the exhibits filed with it, at the
SEC's offices or website as described above.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this prospectus, except for
any information superseded by information in this prospectus. This prospectus
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about us, our
business and our finances.
The documents that we are incorporating by reference are:
2
o Our Annual Report on Form 10-K for the year ended December 31, 2001;
o Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2002; and
o The description of our common stock that is contained in our
Registration Statement on Form 8-A filed with the SEC on August 6,
1996.
Any documents which we file pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this prospectus but before the end
of any offering of securities made under this prospectus will also be considered
to be incorporated by reference.
If you request, either orally or in writing, we will provide you with a
copy of any or all documents which are incorporated by reference. We will
provide such documents to you free of charge, but will not include any exhibits,
unless those exhibits are incorporated by reference into the document. You
should address written requests for documents to Sidney D. Rosenblatt, Executive
Vice President, Chief Financial Officer, Treasurer and Secretary, Universal
Display Corporation, 375 Phillips Boulevard, Ewing, New Jersey 08618.
3
RISK FACTORS
An investment in our securities involves a high degree of risk. In
addition to the other information contained in this prospectus, you should
carefully consider the following risk factors before making an investment
decision concerning our securities. You should not purchase our securities if
you cannot afford the loss of your entire investment.
We do not expect to be profitable in the foreseeable future, and may never be
profitable.
Since inception, we have generated limited product revenues, and have
incurred significant losses. We expect to incur losses for the foreseeable
future and until such time, if ever, as we are able to achieve sufficient levels
of revenue from the commercial exploitation of the OLED technology to support
our operations. You should note, however, that:
o OLED technology may never become commercially viable;
o markets for flat panel displays utilizing the OLED technology
may be limited; and
o we may never generate sufficient revenues from the commercial
exploitation of the OLED technology to become profitable.
Additionally, even if we find commercially viable applications for our
OLED technology, we may never recover our research and development costs.
If we do not receive additional financing in the future, we will not be able
continue the research, development and commercialization of our OLED technology.
Our capital requirements have been and will continue to be significant.
The completion of the research, development and commercialization of the OLED
technology for potential applications will require significant additional effort
and resources. Our cash on hand is not sufficient to meet all of our future
obligations. When we need additional funds, such funds may not be available on
commercially reasonable terms or at all. If we cannot obtain more money when we
need it, our business might fail. Additionally, if we attempt to raise money in
an offering of our common stock, the issuance of additional stock will dilute
our then existing shareholders.
If our OLED technology is not feasible for product applications, we may never
generate significant revenues.
At this time, we are unable to determine the feasibility of our OLED
technology for the commercial viability of any potential applications. Before
products utilizing the OLED technology are manufactured and sold, we must make
substantial advances in our research and development efforts in a number of
areas, including:
o reliability;
o the development of more fully saturated colors for full color
displays;
o integration with drive electronics; and
o issues related to scalability and cost effective fabrication
technologies for product applications.
4
The development of an electrically pumped laser is also necessary
before products based on the organic laser research are manufactured and sold.
Our efforts may never demonstrate the feasibility of our OLED technology,
particularly for use in full color, large area, high resolution, high
information content flat panel display applications.
Our research and development efforts remain subject to all of the risks
associated with the development of new products based on emerging and innovative
technologies, including, without limitation, unanticipated technical or other
problems and the possible insufficiency of the funds allocated to complete its
development. Technical problems may result in delays and cause us to incur
additional expenses that would increase our losses. If we cannot complete our
research and development of the OLED technology successfully, or if we
experience delays in completing our research and development of the OLED
technology for use in potential applications, particularly after the occurrence
of significant expenditures, our business may fail.
Even if our technology is technically feasible, it may not be accepted by the
market.
The potential size, timing and viability of market opportunities
targeted by us are uncertain at this time. Market acceptance of the OLED
technology will depend, in part, upon such technology providing benefits
comparable to CRT and LCD technology (the current standard for display quality)
at an appropriate cost, and its adoption by consumers, neither of which have
been achieved. Many potential licensees of the OLED technology manufacture flat
panel displays utilizing competing technologies and may, therefore, be reluctant
to redesign their products or manufacturing processes to incorporate the OLED
technology. Potential licensees may never utilize the commercially viable OLED
technology.
If our research partners fail to make advances in their research, or if they
terminate their relationship with us, we might not succeed in commercializing
our OLED technology.
Research and development of commercially viable applications for OLED
technology is dependent on the success of the research efforts of our research
partners conducted under our sponsored research agreement with them. We cannot
assure you that our research partners will make additional advances in the
research and development of the OLED technology.
Although we fund the OLED technology research, the scope of and
technical aspects of the research as well as the resources and efforts directed
to such research is subject to the control of our research partners. Our
sponsored research agreement provides that if Dr. Forrest is unavailable to
continue to serve as a principal investigator, either because he is no longer
associated with Princeton or otherwise, and a successor acceptable to both us
and Princeton is not available, Princeton has the right to terminate the
sponsored research agreement. The 1997 sponsored research agreement expires in
July 2007. The termination of the sponsored research agreement or the 1997
license agreement would materially and adversely affect our ability to research,
develop and commercialize our OLED technology.
5
If we cannot form strategic relationships with companies that manufacture and
use products that incorporate our OLED technology, our commercialization
strategy will fail.
Our strategic plan depends upon the development of strategic licensing
relationships with high volume companies that will manufacture and use products
incorporating its OLED technology. We have not yet entered into any such
strategic relationships, although we have entered into
o a Joint Development Agreement with Samsung SDI Co. Ltd.;
o a Joint Development Agreement with Sony Corporation;
o a Development and License Agreement with PPG Industries, Inc.;
o a Development and License Agreement with Luxell Technologies
Inc.; and
o a Development and Licensing Agreement with Aixtron AG to
develop and commercialize a new type of production equipment
for OLEDs based upon our proprietary technology.
Our agreement with Motorola also includes the opportunity to meet with their
product development group, although there are no assurances that Motorola will
purchase any products from us or our licensees. Our agreements with PPG provide
us with the capability to sell chemicals to our licensees. In December 1999, we
moved into a new facility which includes a prototype pilot line and technology
transfer facility to accelerate the development and commercialization of our
technology, We cannot assure you that such a facility will allow us to enter
into such strategic relationships.
Our prospects will be significantly affected by our ability to
sublicense the OLED technology and successfully develop strategic alliances with
third parties for incorporation of the OLED technology into flat panel displays
manufactured by others. Strategic alliances may require financial or other
commitments by us. We might not be able, for financial or other reasons, to
enter into strategic alliances on commercially acceptable terms, or at all.
Failure to do so would have a material adverse effect on us.
If we cannot protect our intellectual property rights, or if our technology
infringes the rights of others, our business will suffer.
Our rights to the OLED technology are dependent on patents and other
intellectual property rights relating to the OLED technology that are licensed
to us by Princeton and USC. Fifty-nine U.S. patents have already been issued,
approximately 74 additional patent applications are pending in the United States
and many corresponding international patent applications have been filed to
cover major industrial countries. However, there can be no assurance that
additional patents applied for will be obtained or that any such patents will
afford us commercially significant protection of our OLED technology, or will be
found valid if challenged. In connection with our license agreement with
Motorola, Inc., we have obtained a license to 73 additional OLED-related U.S.
patents, five patent applications, related foreign patents and applications, and
the right to sublicense this technology.
6
The patent laws of other countries may differ from those of the United
States as to the patentability of the OLED technology and the degree of
protection afforded. Older companies and institutions may independently develop
equivalent or superior technologies and may obtain patent or similar rights with
respect thereto. There are a number of other companies and organizations that
have been issued patents and are filing additional patent applications relating
to OLED technology, including Eastman Kodak Corporation, which holds a number of
patents related to OLED technology. There can be no assurance that the exercise
of some aspects of our licensing rights respecting its OLED technology being
developed by Princeton and USC or those licensed from Motorola, Inc. will not
infringe on the patents of others, in which event we or our research partners
may be required to obtain a license, pay damages, modify their products or
method of operation or be prohibited from making, using, selling or offering to
sell some or all products incorporating our OLED technology. We also might not
have the financial or other resources necessary to enforce or defend a patent
infringement action, and the licensors of our licensed technology might not
enforce an action in a timely manner. If products incorporating our OLED
technology are found to infringe upon the patent or other intellectual property
rights of others, it could have a material adverse effect on us.
The federal government has rights to our OLED technology that might prevent us
from realizing its benefits.
The United States government, through the Defense Advanced Research
Projects Agency, has provided funding to Princeton and us for research
activities related to certain aspects of its OLED technology. The federal
government could obtain rights to this technology, which would affect our rights
as follows:
o If all or certain aspects of the OLED technology develop from
our funding to Princeton, and those aspects are deemed to fall
within the planned and committed activities of DARPA's
funding, the federal government, pursuant to federal law,
could have certain rights relating to the OLED technology.
o If the federal government determines that we have not taken
effective steps to achieve practical application of such
technology in a field of use in a reasonable time, it may
require us to grant licenses to other parties in any such
field of use.
o The federal government could restrict our ability to market
the OLED technology to the federal government for military and
other applications.
o The federal government's continued funding of ours and
Princeton's research activities may also give it rights to
aspects of the OLED technology developed in the future.
If so, we might not realize the benefits of that technology.
7
Because many of our competitors have better name-recognition, and greater
financial, technical, marketing and research capabilities than us, we may never
be able to compete successfully in the flat panel display industry.
The flat panel display industry is characterized by intense
competition. The market is currently, and will likely continue to be, dominated
by products utilizing LCD technology. Numerous companies are making substantial
investments in, and conducting research to improve characteristics of, LCD
technology. Several other flat panel display technologies have been, or are
being, developed, including field emission, inorganic electroluminescence,
polymeric light emitting diode, gas plasma and vacuum fluorescent displays. In
addition, other companies are engaged in research and development activities
with respect to technology using OLEDs. Advances in LCD technology or any of
these developing technologies may overcome their limitations or become the
leading technology for flat panel displays, either of which could limit the
potential market for flat panel displays utilizing the Company's OLED
technology.
Substantially all of these competitors have better name recognition and
greater financial, technical, marketing, personnel and research capabilities
than us. Our competitors may succeed in developing technologies and applications
that are more cost-effective or have fewer display limitations than our OLED
technology. We may never be able to compete successfully or develop commercial
applications for our OLED technology.
If we cannot keep our key employees or hire other talented persons as we grow,
our business might not succeed.
Our performance is substantially dependent on the continued services of
senior management and other key personnel, and its ability to offer competitive
salaries and benefits to its employees. We do not have employment agreements
with any of our management or key personnel. Additionally, competition for
highly skilled technical, managerial and other personnel is intense. We might
not be able to attract, hire, train, retain and motivate the highly skilled
managers and employees we need to be successful. If we fail to attract and
retain the necessary technical and managerial personnel, we will suffer and
might fail.
We can issue shares of preferred stock that can adversely affect your rights as
a shareholder.
Our articles of incorporation authorize us to issue up to 5,000,000
shares of preferred stock with designations, rights and preferences determined
from time-to-time by our board of directors. Accordingly, our board is
empowered, without shareholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights superior to those of our common
shareholders. For example, an issuance of shares of preferred stock could:
o adversely affect the voting power of the common shareholders;
o make it more difficult for a third party to gain control of us;
o discourage bids for our common stock at a premium; or
o otherwise adversely affect the market price of the common stock.
8
Our board has designated and issued two series of preferred stock which
are currently outstanding (a) 200,000 shares of Series A Preferred Stock, all of
which are held by an entity controlled by Sherwin Seligsohn and (b) 300,000
shares of Series B Convertible Preferred Stock. The Series B Convertible
Preferred Stock is convertible into shares of our common stock in accordance
with our articles of incorporation. As of May 20, 2002, 83,256 shares of our
common stock are issuable upon conversion of the 75,000 shares of our Series B
Convertible Preferred Stock that are currently convertible into our common
stock. We may issue additional shares of our authorized preferred stock at any
time in the future.
The market price of our common stock might be highly volatile.
The market price of our common stock might be highly volatile, as has
been the case with the securities of other emerging growth companies. Factors
such as:
o our operating results;
o announcements by us or our competitors of technological developments,
new product applications or license arrangements; and
o other factors affecting the flat panel display industry generally may
have a significant impact on the market price of our common stock.
In recent years, the stock market has experienced a high level of price and
volume volatility and market prices for the stock of many companies,
particularly small and emerging-growth companies.
If we are delisted, trading in our common stock may become subject to additional
regulation that could further limit the liquidity of your investment.
In addition, if our common stock were to become delisted from trading
on Nasdaq and the trading price of the common stock were to remain below $5.00
per share, trading in the common stock would also be subject to the requirements
of additional rules under the Exchange Act. These rules require additional
disclosure by broker-dealers in connection with any trades involving any
non-Nasdaq equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Such rules require the delivery, prior to any
so-called penny stock transaction, of a disclosure schedule explaining the penny
stock market and the risks associated with it, and impose various sales practice
requirements on broker-dealers who sell penny stocks to persons other than
established customers and accredited investors. For these types of transactions,
the broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to sale. The broker-dealer also must disclose the commissions payable to
the broker-dealer, current bid and offer quotations for the penny stock and, if
the broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Such information
must be provided to the customer orally or in writing prior to effecting the
transaction and in writing before or with the customer confirmation. Monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks. The
additional burdens imposed upon broker-dealers by such requirements may
discourage broker-dealers from effecting transactions in our common stock, which
could severely limit the market liquidity of your investment.
9
This offering, as well as the issuance of other publicly traded shares, could
drive our stock price down.
To the extent other shares of our common stock that are currently
subject to restriction on sale become freely salable, whether through an
effective registration statement or under Rule 144 of the Securities Act, or we
issue additional shares that might be or become freely salable, including
without limitation shares issuable upon conversion of our Series B Convertible
Preferred Stock, you could expect our stock price to decrease.
If our stock price goes down, we may have to issue more shares than we
anticipate under the terms of a license and development agreement.
Pursuant to the development and license agreement we entered into with
PPG Industries, Inc., we are required to issue to PPG, for the services they
expect to render to us during a particular calendar year during the term of the
agreement, shares of common stock based on the value of such services at the
beginning of the year. If, at the time of issuance, the price of our common
stock has declined materially since the date we executed the agreement with PPG,
we may be required to issue to PPG more shares of common stock than we initially
anticipated. This increase in the number of shares available for public sale
could cause people to sell our shares, including in short sales, which could
drive the price of our common stock down, thus reducing the value of your
investment and perhaps hindering our ability to raise additional funds in the
future. In addition, this increase in the number of shares outstanding would
further dilute our existing stockholders.
Our executive officers and directors own a large percentage of our voting stock
and could exert significant influence over matters requiring shareholder
approval after this offering, including takeover attempts.
Our executive officers and directors, and their respective affiliates,
beneficially own as of April 17, 2002, approximately 13.7% of our outstanding
common stock. Moreover, Pine Ridge Financial Inc. and Strong River Investments,
Inc. assigned to management of the Company their rights to vote the shares of
common stock issuable upon the conversion of the preferred stock, notes and
warrants issued or to be issued to them in a August 22, 2001 private placement
transaction. Accordingly, these shareholders and members of management may, as a
practical matter, be able to exert significant influence over matters requiring
approval by our shareholders, including the election of directors and the
approval of mergers or other business combinations. This concentration could
also have the effect of delaying or preventing a change of control.
10
Our use of Arthur Andersen LLP as our independent auditor may pose risks to us
and limit your ability to seek potential recoveries from them related to their
work.
Our consolidated financial statements as of and for each of the three
years in the period ended December 31, 2001, were audited by Arthur Andersen
LLP. On March 14, 2002, Andersen was indicted on federal obstruction of justice
charges arising from the government's investigation of Enron Corporation.
Andersen has stated publicly that it intends to contest vigorously the
indictment. While our audit committee and board of directors have no reason to
question the quality or integrity of the audit and other assurance services
previously provided to us by Andersen, some investors, including significant
funds and institutional investors, may choose not to invest in or hold
securities of a company whose financial statements were audited by Andersen.
Additionally, SEC rules require us to present our audited financial
statements in various SEC filings, along with Andersen's consent to our
inclusion of its audit report in those filings. Andersen has indicated to us
that it will be unable to provide a consent to us related to our inclusion in
any future SEC filings of its report on our consolidated financial statements as
of and for each of the three years in the period ended December 31, 2001.
Andersen also will be unable to provide us with assurance services, such as
advice customarily given to underwriters of our securities offerings and other
similar market participants. The SEC recently has provided regulatory relief
designed to allow companies that file reports with the SEC to dispense with the
requirement to file a consent of Andersen in certain circumstances.
Notwithstanding this relief, the inability of Andersen to provide its consent or
to provide assurance services to us could negatively affect our ability to,
among other things, access the public capital markets. Any delay or inability to
access the public markets as a result of this situation could have a material
adverse impact on our business. Also, an investor's ability to seek potential
recoveries from Andersen related to any claims that an investor may assert as a
result of the work performed by Andersen may be limited significantly both in
the absence of a consent and the diminished amount of assets of Andersen that
are or may in the future be available for claims.
11
OUR COMPANY
Universal Display Corporation is engaged in the research, development
and commercialization of organic light emitting diode, or OLED, technology for
use in flat panel displays, lasers and light generating devices. We expect the
initial market for our technology to be in the electronic flat panel display
industry. This industry includes such products as:
o cellular phone displays;
o portable personal digital assistants and Internet access-type
devices;
o laptop computers; and
o television and computer monitors.
Our executive offices are located at 375 Phillips Boulevard, Ewing, New
Jersey 08618. Our phone number is (609) 671-0980. Our web site can be found at
www.universaldisplay.com.
SECURITIES OFFERED BY THIS PROSPECTUS
Using this prospectus, the Company may offer from time to time, in one
or more series, together or separately, at prices and on terms to be determined
at the time of offering:
o shares of common stock, $0.01 par value
o shares of preferred stock, $0.01 par value
o warrants to purchase shares of common stock or preferred stock
o depositary shares
The shares of preferred stock may, at the option of the Company, be
issued in the form of depositary shares evidenced by depositary receipts, and
may be convertible into or exchangeable for shares of common stock or other
securities of the Company.
USE OF PROCEEDS
Unless otherwise provided in the applicable prospectus supplement
accompanying this prospectus, the net proceeds, if any, from the sale of the
securities offered hereby will be used for general corporate purposes, including
the acquisition or development of properties, assets, entities or technologies,
and the repayment of indebtedness. At the date of this prospectus, we have not
identified as probable any specific material proposed uses of funds. If, as of
the date of any prospectus supplement, we have identified any such purchases, we
will describe them in such prospectus supplement. The amount of securities
offered from time to time pursuant to this prospectus and any prospectus
supplement, and the precise amounts and timing of the application of net
proceeds from the sale of such securities, will depend upon our funding
requirements. If we elect at the time of an issuance of securities to make
different or more specific use of proceeds than set forth herein, such use will
be described in the applicable prospectus supplement.
12
CERTAIN RATIOS
The ratios of our earnings to combined fixed charges and preferred
stock dividends for the three months ended March 31, 2002 and the years ended
December 31, 2001, 2000, 1999, 1998 and 1997 are not meaningful because we did
not have earnings during any of those periods. The dollar amount of the
deficiency (i.e., the amount of our combined fixed charges and preferred stock
dividends) in each of such periods was $1,193,218, $4,504,129, $110,107,
$103,999, $30,489 and $26,026, respectively.
For the purpose of computing the amount of our combined fixed charges
and preferred stock dividends, fixed charges consist of interest costs, whether
expensed or capitalized, and amortization of debt discounts. Preferred stock
dividends consist of deemed dividends relating to beneficial conversion features
of certain of the outstanding series of preferred stock.
DESCRIPTION OF PREFERRED STOCk
General
The rights, preferences, privileges and restrictions of the shares of
preferred stock in respect of which this prospectus is delivered shall be
described in the prospectus supplement relating to those shares of preferred
stock. Among the terms of the preferred stock which may be specified in the
related prospectus supplement are the following:
o the annual dividend rate, if any, or the means by which the
dividend rate may be calculated, including without limitation
the possibility that the rate of the dividends may bear an
inverse relationship to some index or standard;
o the date or dates from which dividends shall accrue and the
date or dates on which dividends shall be paid and whether
dividends shall be cumulative;
o the price at which and the terms and conditions on which the
series of preferred stock described in the prospectus
supplement may be redeemed, including the period of time
during which the shares may be redeemed, any premium to be
paid over and above the par value of the preferred stock, and
whether and to what extent accumulated dividends on the
preferred stock will be paid upon the redemption of the
shares;
o the liquidation preference, if any, over and above the par
value of the shares of preferred stock and whether and to what
extent the holders of the shares shall be entitled to
accumulated dividends in the event of the voluntary or
involuntary liquidation, dissolution or winding-up of our
affairs;
13
o whether the preferred stock shall be subject to the operation
of a retirement or sinking fund and, if so, a description of
the operation of the retirement or sinking fund;
o the terms and conditions, if any, on which the preferred stock
may be convertible into, or exchangeable for, shares of any
other class or classes of our equity interests, including the
price or rate of conversion or exchange and the method for
effecting the conversion or exchange, provided that no shares
of preferred stock will be convertible into shares of a class
that has superior rights or preferences as to dividends or
distributions of our assets upon the voluntary or involuntary
dissolution or liquidation of the Company;
o a description of the voting rights, if any, of the preferred
stock; and
o other preferences, rights, qualifications or restrictions or
material terms of the preferred stock.
The Pennsylvania Business Corporation Law and our Articles of
Incorporation provide that no shareholder shall be personally liable for any of
our obligations. Our Articles of Incorporation and By-laws further provide that
we shall indemnify each shareholder against any claim or liability to which the
holder may become subject by reason of being or having been a shareholder, and
that we shall reimburse each shareholder for all legal or other expenses
reasonably incurred by the holder in connection with any such claim or
liability. It should be noted, however, that with respect to tort claims, claims
for taxes and certain statutory liabilities, shareholders may, in some
jurisdictions, be personally liable to the extent that these claims are not
satisfied by us. Because we will carry public liability insurance in amounts
that it considers adequate, any risk of personal liability to shareholders will
be limited to situations in which our assets, together with its insurance
coverage, would be insufficient to satisfy the claims against us and the
shareholders, or in which the claim is not covered by our liability insurance
policies.
The description of the foregoing provisions of the preferred stock as
set forth in the related prospectus supplement is only a summary, is not
complete and is subject to, and is qualified in its entirety by, reference to
the definitive Articles of Amendment to our Articles of Incorporation relating
to that series of preferred stock. In connection with any offering of preferred
stock, the Articles of Amendment will be filed with the Commission as an exhibit
to or incorporated by reference in the registration statement of which this
prospectus is a part.
Rank
Unless otherwise specified in the applicable prospectus supplement,
each series of preferred stock will, with respect to dividend rights and rights
upon liquidation, dissolution or winding up of the Company, rank:
o senior to all classes or series of common shares, and to all
equity securities ranking junior to that series of preferred
stock;
14
o on a parity with all equity securities issued by us the terms
of which specifically provide that those equity securities
rank on a parity with that series of preferred stock; and
o junior to all equity securities issued by us the terms of
which specifically provide that those equity securities rank
senior to that series of preferred stock.
For these purposes, the term "equity securities" does not include
convertible debt securities.
Dividends
Holders of the preferred stock of each series will be entitled to
receive, when, as and if declared by our Board of Directors, out of our assets
legally available for payment, cash dividends, or dividends in kind or in other
property if expressly permitted and described in the applicable prospectus
supplement, at the rates and on the dates as will be set forth in the applicable
prospectus supplement. Each dividend shall be payable to holders of record as
they appear in our shareholder records at the close of business on the record
dates as shall be fixed by the Board of Directors.
Dividends on any series of preferred stock may be cumulative or
non-cumulative, as provided in the applicable prospectus supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable prospectus supplement. If the Board of Directors fails to declare a
dividend payable on a dividend payment date on any series of preferred stock for
which dividends are non-cumulative, then the holders of that series of preferred
stock will have no right to receive a dividend in respect of the dividend period
ending on that dividend payment date, and we will have no obligation to pay the
dividend accrued for that period, whether or not dividends on the series are
declared payable on any future dividend payment date.
Unless otherwise specified in the prospectus supplement, if any shares
of preferred stock of any series are outstanding, no full dividends shall be
declared or paid or set apart for payment on any of our capital shares of any
other series ranking, as to dividends, on a parity with or junior to the
preferred stock of that series for any period unless (i) if the series of
preferred stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment on the preferred stock of that series
for all past dividend periods and the then current dividend period or (ii) if
the series of preferred stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for the payment on the preferred stock of that series. When dividends
are not paid in full (or a sum sufficient for such full payment is not so set
apart) upon preferred stock of any series and the shares of any other series of
preferred stock ranking on a parity as to dividends with the preferred stock of
that series, all dividends declared upon preferred stock of that series and any
other series of preferred stock ranking on a parity as to dividends with the
preferred stock shall be declared pro rata so that the amount of dividends
declared per share of preferred stock of that series and the other series of
preferred stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the preferred stock of that series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such shares of preferred stock do not have a cumulative dividend) and
the other series of preferred stock bear to each other. No interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend payment
or payments on preferred stock of such series which may be in arrears.
15
Except as provided in the immediately preceding paragraph, unless (i)
if the series of preferred stock has a cumulative dividend, full cumulative
dividends on the shares of preferred stock of that series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period, and (ii) if the series of preferred stock does not have
a cumulative dividend, full dividends on the shares of preferred stock of that
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for payment for the then
current dividend period, no dividends (other than in common shares or other
capital shares ranking junior to the shares of preferred stock of such series as
to dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution upon the common shares, or any other of our
capital shares ranking junior to or on a parity with the preferred stock of that
series as to dividends or upon liquidation, nor shall any common shares, or any
other of our capital shares ranking junior to or on a parity with the preferred
stock of that series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any monies be paid to or made
available for a sinking fund for the redemption of any such shares) by us
(except by conversion into or exchange for other of our capital shares ranking
junior to the shares of preferred stock of that series as to dividends and upon
liquidation).
Redemption
If so provided in the applicable prospectus supplement, the preferred
stock will be subject to mandatory redemption or redemption at our option, in
whole or in part, in each case upon the terms, at the times and at the
redemption prices set forth in the applicable prospectus supplement.
The prospectus supplement relating to a series of shares of preferred
stock that is subject to mandatory redemption will specify the number of those
shares of preferred stock that shall be redeemed by us in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such shares of preferred stock do not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in cash
or other property, as specified in the applicable prospectus supplement. If the
redemption price for shares of preferred stock of any series is payable only
from the net proceeds of the issuance of our capital shares, the terms of those
shares of preferred stock may provide that, if no such capital shares shall have
been issued or to the extent the net proceeds from any issuance are insufficient
to pay in full the aggregate redemption price then due, the shares of preferred
stock shall automatically and mandatorily be converted into the applicable
capital shares pursuant to conversion provisions specified in the applicable
prospectus supplement.
16
Notwithstanding the foregoing, unless (i) if the series of preferred
stock has a cumulative dividend, full cumulative dividends on all shares of
preferred stock of any series shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the current dividend period and (ii)
if the series of preferred stock does not have a cumulative dividend, full
dividends of the shares of preferred stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of preferred stock of any series shall be redeemed unless all outstanding
shares of preferred stock of that series are simultaneously redeemed; provided,
however, that the foregoing shall not prevent the purchase or acquisition of
shares of preferred stock of such series pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of preferred
stock of such series. In addition, unless (i) if the series of preferred stock
has a cumulative dividend, full cumulative dividends on all outstanding shares
of any series of preferred stock have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividends periods and the then current dividend period, and
(ii) if the series of preferred stock does not have a cumulative dividend, full
dividends on the shares of preferred stock of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, we
shall not purchase or otherwise acquire directly or indirectly any shares of
preferred stock of that series (except by conversion into or exchange for our
capital shares ranking junior to the shares of preferred stock of such series as
to dividends and upon liquidation); provided, however, that the foregoing shall
not prevent the purchase or acquisition of shares of preferred stock of such
series pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of preferred stock of such series.
If fewer than all of the outstanding shares of preferred stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by us and those shares may be redeemed pro rata from the holders of
record of those shares in proportion to the number of those shares held or for
which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by us.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of record of shares of
preferred stock of any series to be redeemed at the address shown on our share
transfer books. Each notice shall state:
o the redemption date;
o the number and series of shares of preferred stock to be
redeemed;
o the place or places where the shares of preferred stock are to
be surrendered for payment of the redemption price;
o that dividends on the shares to be redeemed will cease to
accrue on the redemption date; and
o the date upon which the holder's conversion rights, if any, as
to such shares shall terminate.
17
If fewer than all of the shares of preferred stock of any series are to
be redeemed, the notice mailed to each holder of shares of that series shall
also specify the number of shares of preferred stock to be redeemed from that
holder. If notice of redemption of any shares of preferred stock has been given
and if the funds necessary for redemption have been set aside by us from and
after the redemption date dividends will cease to accrue on those shares of
preferred stock, and all rights of the holders of those shares will terminate,
except the right to receive the redemption price.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding
up of our affairs, then, before any distribution or payment shall be made to the
holders of any common shares or any other class or series of our capital shares
ranking junior to the shares of preferred stock in the distribution of assets
upon any liquidation, dissolution or winding up of the Company, the holders of
shares of each series of preferred stock shall be entitled to receive out of our
assets legally available for distribution to shareholders liquidating
distributions in the amount of the liquidation preference per share (set forth
in the applicable prospectus supplement), plus an amount equal to all dividends
accrued and unpaid thereon (which shall not include any accumulation in respect
of unpaid dividends for prior dividend periods if such shares of preferred stock
do not have a cumulative dividend). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of shares of
preferred stock will have no right or claim to any of our remaining assets. In
the event that, upon any such voluntary or involuntary liquidation, dissolution
or winding up, our available assets are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of preferred stock and the
corresponding amounts payable on all shares of other classes or series of our
capital shares ranking on a parity with the shares of preferred stock in the
distribution of assets, then the holders of the shares of preferred stock and
all other such classes or series of capital shares shall share ratably in any
such distribution of assets in proportion to the full liquidating distributions
to which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all
holders of shares of preferred stock, our remaining assets shall be distributed
among the holders of any other classes or series of capital shares ranking
junior to the shares of preferred stock upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares. For these purposes, the
consolidation or merger of the Company with or into any other corporation, trust
or entity, or the sale, lease or conveyance of all or substantially all of our
property or business, shall not be deemed to constitute a liquidation,
dissolution or winding up of the Company.
Voting Rights
Holders of shares of preferred stock will not have any voting rights
except as indicated in the applicable prospectus supplement.
18
Conversion Rights
The terms and conditions, if any, upon which shares of any series of
shares of preferred stock are convertible into shares of common stock will be
set forth in the applicable prospectus supplement relating to that series. These
terms will include the number of shares of common stock into which the shares of
preferred stock are convertible, the conversion price or manner of calculation
thereof, the conversion period, provisions as to whether conversion will be at
the option of the holders of the shares of preferred stock or us, the events
requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of that series of shares of preferred
stock.
Shareholder Liability
As discussed above under "Description of Preferred Stock -- General,"
applicable Pennsylvania law provides that no shareholder, including holders of
shares of preferred stock, shall be personally liable for our acts and
obligations and that our funds and property shall be the only recourse for such
acts or obligations.
Registrar and Transfer Agent
The Registrar and Transfer Agent for the preferred stock will be set
forth in the applicable prospectus supplement.
Depositary Shares
We may, at our option, elect to offer fractional shares of preferred
stock, rather than full shares of preferred stock. In the event such option is
exercised, we will issue receipts for depositary shares, each of which will
represent a fraction (to be set forth in the prospectus supplement relating to
the shares of preferred stock) of a share of such shares of preferred stock.
The shares of preferred stock represented by depositary shares will be
deposited under a deposit agreement between us and a bank or trust company
selected by us having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000 (the "Depositary Shares
Depositary"). Subject to the terms of the deposit agreement, each owner of a
depositary share will be entitled, in proportion to the applicable fraction of a
preferred share represented by the depositary share, to all the rights and
preferences of the preferred share, represented thereby (including dividend,
voting, redemption, conversion and liquidation rights).
The above description of the depositary shares is only a summary, is
not complete and is subject to, and is qualified in its entirety by, the
description in the related prospectus supplement and the provisions of the
deposit agreement, which will contain the form of depositary receipt. A copy of
the deposit agreement will be filed with the Commission as an exhibit to or
incorporated by reference in the registration statement of which this prospectus
is a part.
19
DESCRIPTION OF WARRANTS
We may issue separately, or together with any common stock or preferred
stock offered by any prospectus supplement, warrants for the purchase of other
shares of common stock or preferred stock ("Warrants"). The Warrants may be
issued under warrant agreements (each, a "Warrant Agreement") to be entered into
between us and a bank or trust company, as warrant agent (the "Warrant Agent"),
or may be represented by certificates evidencing the Warrants (the "Warrant
Certificates"), all as set forth in the prospectus supplement relating to the
particular series of Warrants. The following summaries of certain provisions of
the Warrants do not purport to be complete and are subject to, and are qualified
in their entirety by reference to, all the provisions of any related Warrant
Agreement and Warrant Certificate, respectively, including the definitions
therein of certain terms. Wherever defined terms of the Warrant Agreement are
summarized herein or in a prospectus supplement, it is intended that such
defined terms shall be incorporated herein or therein by reference. In
connection with any offering of Warrants, any such Warrant Agreement or a form
of any such Warrant Certificate will be filed with the Commission as an exhibit
to or incorporated by reference in the registration statement.
General
The prospectus supplement relating to the particular series of Warrants
offered thereby will describe the terms of the offered Warrants, any related
Warrant Agreement and Warrant Certificate, including the following, to the
extent applicable:
o if the Warrants are offered for separate consideration, the
offering price and the currency for which Warrants may be
purchased;
o if applicable, the number of shares of common stock
purchasable upon exercise of common stock warrants and the
price at which such number of shares of common stock may be
purchased upon such exercise;
o the date, if any, on and after which the offered warrants and
the related shares of common stock will be separately
transferable;
o the date on which the right to exercise the offered Warrants
shall commence and the date on which such right shall expire
("Expiration Date");
o a discussion of the specific U.S. federal income tax,
accounting and other considerations applicable to the Warrants
or to any securities purchasable upon the exercise of the
Warrants;
o whether the offered Warrants represented by Warrant
Certificates will be issued in registered or bearer form, and
if registered, where they may be transferred and registered;
o any applicable anti-dilution provisions;
o any applicable redemption or call provisions;
o any applicable book-entry provisions; and
o any other terms of the offered Warrants.
20
Warrant Certificates will be exchangeable on the terms specified in the
related prospectus supplement for new Warrant Certificates of different
denominations and Warrants may be exercised at the corporate trust office of the
Warrant Agent or any other office indicated in the prospectus supplement
relating thereto. Prior to the exercise of their Warrants, holders of Warrants
will not have any of the rights of holders of the shares of common stock
purchasable upon such exercise, including the right to receive payments of
dividends or distributions of any kind, if any, on the shares of common stock or
preferred stock purchasable upon exercise or to exercise any applicable right to
vote.
Exercise of Warrants
Each Warrant will entitle the holder thereof to purchase such number of
shares of common stock or preferred stock at such exercise price as shall in
each case be set forth in, or be determinable from, the prospectus supplement
relating to such Warrant, by payment of such exercise price in full in the
currency and in the manner specified in such prospectus supplement. Warrants may
be exercised at any time up to the close of business on the expiration date (or
any later date to which we may extend such expiration date); unexercised
Warrants will become null and void.
Upon receipt at the corporate trust office of the Warrant Agent or any
other office indicated in the related prospectus supplement of (a) payment of
the exercise price and (b) the Warrant Certificate properly completed and duly
executed, we will, as soon as practicable, forward the shares of common stock or
preferred stock purchasable upon such exercise to the holder of such Warrant. If
less than all of the Warrants represented by such Warrant Certificate are
exercised, a new Warrant Certificate will be issued for the remaining number of
Warrants.
PLAN OF DISTRIBUTION
We may sell the securities being offered hereby: (a) directly to
purchasers; (b) through agents; (c) through underwriters; (d) through dealers;
or (e) through a combination of any such methods of sale.
The distribution of the securities may be effected from time to time in
one or more transactions: (a) at a fixed price or at final prices, which may be
changed; (b) at market prices prevailing at the time of sale; (c) at prices
related to such prevailing market prices; or (d) at negotiated prices. Offers to
purchase securities may be solicited directly by us, or by agents designated by
us, from time to time. Any such agent, which may be deemed to be an underwriter
as that term is defined in the Securities Act of 1933, as amended (the
"Securities Act"), involved in the offer or sale of the securities in respect of
which this prospectus is delivered will be named, and any commissions payable by
us to such agent will be set forth, in the applicable prospectus supplement.
21
If an underwriter is, or underwriters are, utilized in the offer and
sale of securities in respect of which this prospectus and the accompanying
prospectus supplement are delivered, we will execute an underwriting agreement
with such underwriter(s) for the sale to it or them and the name(s) of the
underwriter(s) and the terms of the transaction, including any underwriting
discounts and other items constituting compensation of the underwriters and
dealers, if any, will be set forth in such prospectus supplement, which will be
used by the underwriter(s) to make resales of the securities in respect of which
this prospectus and such prospectus supplement are delivered to the public. The
securities will be acquired by the underwriters for their own accounts and may
be resold from time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If a dealer is utilized in the sale of the securities in respect of
which this prospectus is delivered, we will sell such securities to the dealer,
as principal. The Dealer may then resell such securities to the public at
varying prices to be determined by such dealer at the time of resale. The name
of the dealer and the terms of the transaction will be identified in the
applicable prospectus supplement.
If an agent is used in an offering of securities being offered by this
prospectus, the agent will be named, and the terms of the agency will be
described, in the applicable prospectus supplement relating to the offering.
Unless otherwise indicated in the prospectus supplement, an agent will act on a
best efforts basis for the period of its appointment.
If indicated in the applicable prospectus supplement, the issuer(s) of
the securities to which the prospectus supplement relates will authorize
underwriters or their other agents to solicit offers by certain institutional
investors to purchase securities from the issuer(s) pursuant to contracts
providing for payment and delivery at a future date. Institutional investors
with which these contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others. In all cases, these purchasers must be
approved by the issuer(s) of the securities. The obligations of any purchaser
under any of these contracts will not be subject to any conditions except that
(a) the purchase of the securities must not at the time of delivery be
prohibited under the laws of any jurisdiction to which that purchaser is subject
and (b) if the securities are also being sold to underwriters, the issuer(s)
must have sold to these underwriters the securities not subject to delayed
delivery. Underwriters and other agents will not have any responsibility in
respect of the validity or performance of these contracts.
Certain of the underwriters, dealers or agents utilized by us in any
offering hereby may be customers of, including borrowers from, engage in
transactions with, and perform services for us or one or more of our affiliates
in the ordinary course of business. Underwriters, dealers, agents and other
persons may be entitled, under agreements which may be entered into with us, to
indemnification against certain civil liabilities, including liabilities under
the Securities Act.
22
Until the distribution of the securities is completed, rules of the
Commission may limit the ability of the underwriters and certain selling group
members, if any, to bid for and purchase the securities. As an exception to
these rules, the representatives of the underwriters, if any, are permitted to
engage in certain transactions that stabilize the price of the securities. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the securities.
If underwriters create a short position in the securities in connection
with the offering thereof, (i.e., if they sell more securities than are set
forth on the cover page of the applicable prospectus supplement), the
representatives of such underwriters may reduce that short position by
purchasing securities in the open market. Any such representatives also may
elect to reduce any short position by exercising all or part of any
over-allotment option described in the applicable prospectus supplement.
Any such representatives also may impose a penalty bid on certain
underwriters and selling group members. This means that if the representatives
purchase securities in the open market to reduce the underwriters' short
position or to stabilize the price of the securities, they may reclaim the
amount of the selling concession from the underwriters and selling group members
who sold those shares as part of the offering thereof.
In general, purchases of a security for the purpose of stabilization or
to reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the offering.
Neither we nor any of the underwriters, if any, makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the securities. In
addition, neither we nor any of the underwriters, if any, makes any
representation that the representatives of the underwriters, if any, will engage
in such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The anticipated date of delivery of the securities offered by this
prospectus will be described in the applicable prospectus supplement relating to
the offering. The securities offered by this prospectus may or may not be listed
on a national securities exchange or a foreign securities exchange. We cannot
give any assurances that there will be a market for any of the securities
offered by this prospectus and any prospectus supplement.
We estimate that the total expenses we will incur in offering the
securities to which this prospectus relates, excluding underwriting discounts
and commissions, if any, will be approximately $400,000.
23
LEGAL MATTERS
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, will pass on the
validity of the securities.
EXPERTS
The audited financial statements incorporated by reference in this
prospectus and elsewhere in this registration statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in giving said reports.
24
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383,452 Shares
UNIVERSAL DISPLAY CORPORATION
Common Stock
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Prospectus Supplement
September 24, 2002
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