UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Date of Report (Date of earliest event reported): December 20, 1996
ORA ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-_____ 95-4607830
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(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
9410 Owensmouth Avenue, Chatsworth, California 91311
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 772-2700
North American Energy of Delaware, Inc.
555 Madison Avenue
22nd Floor
New York, New York 10022
(Former names or former address, if changed from last report)
EXHIBIT INDEX AT PAGE: 66
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Item 1. CHANGE IN CONTROL OF COMPANY
On December 20, 1996, North American Energy of Delaware, Inc., a
Delaware corporation ("North American"), merged into ORA Electronics, Inc.,
a Delaware Corporation ("ORA" or the "Company"). ORA was the surviving
entity of such merger (the "North American Merger") and is the successor
reporting company to North American. The North American Merger was effected
pursuant to North American's Plan of Reorganization (the "Plan of
Reorganization") filed with the United States Bankruptcy Court for the
Southern District of New York on August 19, 1996 (the "Filing Date"). The
Order approving the Plan of Reorganization was signed by Judge Jeffrey H.
Gallet on November 22, 1996.
Pursuant to the North American Merger and the Plan of
Reorganization, in exchange for their shares of North American common
stock, the stockholders of North American and persons to whom North
American had committed to issue shares of its common stock (the "Committed
Shares") as set forth in the Plan of Reorganization received in the
aggregate 246,500 shares of ORA's common stock, $.001 par value ("Common
Stock"), 392,000 Class A Warrants to purchase Common Stock ("Class A
Warrants"), 588,000 Class B Warrants to purchase Common Stock ("Class B
Warrants"), 490,000 Class C Warrants to purchase Common Stock ("Class C
Warrants") and 686,000 Class D Warrants to purchase Common Stock ("Class D
Warrants"). The Class A Warrants, Class B Warrants, Class C Warrants and
Class D Warrants are collectively referred to herein as the "Warrants". In
addition, pursuant to the terms of the Plan of Reorganization, ORA issued
an aggregate of 3,500 shares of Common Stock to North American's creditors.
In consideration for funds advanced by certain officers of North American
to pay expenses incurred by North American, ORA also granted such officers
five year options to purchase an aggregate of 2,200 shares of Common Stock
at $1.50 per share (the "Reimbursement Options").
In addition to the shares of Common Stock and the Warrants
described above, each beneficial holder of North American common stock or
Committed Shares on the Filing Date who surrenders stock certificates (or,
in the case of the Committed Shares, other evidence satisfactory to ORA)
evidencing all shares of North American Common Stock or Committed Shares
held by such beneficial holders on the Filing Date to Continental Stock
Transfer & Trust Company, ORA's exchange agent, in accordance with the
terms of the North American Merger and the Plan of Reorganization will
receive additional shares of Common Stock and Warrants to the extent
necessary in order that the total number of shares of Common Stock and
Warrants of each class received by each such beneficial holder will be a
"round lot" of shares of Common Stock or Warrants (a "round lot" being a
multiple of 100 shares of Common Stock or 100 Warrants). Such issuance
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of additional shares of Common Stock and Warrants is referred to herein as
the "Round Up". No fractional shares of Common Stock or fractional Warrants
were issued in the North American Merger or otherwise under the Plan of
Reorganization.
The Class A Warrants have an exercise price of $5.00 per share and
are exercisable for 180 days following the date of grant. The Class B
Warrants have an exercise price of $10.00 per share and are exercisable for
18 months following the date of grant. The Class C Warrants have an
exercise price of $15.00 per share and are exercisable for 36 months
following the date of grant. The Class D Warrants have an exercise price of
$20.00 per share and are exercisable for 60 months following the date of
grant. The number of shares of Common Stock subject to, and the exercise
price of, the Warrants are subject to equitable adjustment in the event of
stock splits, stock combinations, stock dividends and similar events.
Pursuant to Rule 12g-3(a) promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), where, in connection with a
succession by merger, equity securities of an issuer not previously
registered pursuant to Section 12 of the Exchange Act are issued to the
holders of any class of equity securities of another issuer which is
registered pursuant to Section 12 of the Exchange Act, the class of
securities so issued is deemed to be registered under Section 12 of the
Exchange Act. As a result of the North American Merger, ORA was the
successor reporting company to North American and, accordingly, ORA's
Common Stock and the Warrants were automatically deemed registered under
Section 12 of the Exchange Act.
Prior to the North American Merger, the Company issued 160,566
shares of Common Stock to DLS Financial Services Inc. ("DLS"), an option to
purchase 14,772 shares of Common Stock (the "A Option"), an option to
purchase 20,208 shares of Common Stock (the "B Option"), an option to
purchase 17,478 shares of Common Stock (the "C Option") and an option to
purchase 23,022 shares of Common Stock (the "D Option") (collectively, the
"DLS Options" and, together with such shares of Common Stock, the "DLS
Securities") to DLS in consideration for financial advisory services
rendered by DLS to the Company. The A Option, B Option, C Option and D
Option have the same exercise prices and terms as the Class A Warrants,
Class B Warrants, Class C Warrants and Class D Warrants, respectively.
Following the effectiveness of the North American Merger, ORA
issued an additional 1,173,626 shares of Common Stock in full satisfaction
of indebtedness of approximately $4,368,130, representing both principal
and interest, and $1,500,000 in trade payables due an individual. Such
shares (the "Off-Shore Shares") were issued pursuant to Regulation S
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("Regulation S") promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act").
Following the North American Merger, the issuance of the DLS
Securities and the sale of the Off-Shore Shares, and assuming the issuance
of 100,000 shares of Common Stock and 360,000 Warrants in the aggregate due
to the Round-Up, the existing beneficial stockholders of ORA, a trust for
the benefit of the family of Gershon Cooper, ORA's Chairman, Chief
Executive Officer and President, and Ruth Cooper, a director of ORA (the
"Existing Stockholder" or the "Cooper Trust"), owned 5,000,000 shares or
approximately 74.8% of the outstanding Common Stock of ORA (approximately
53.9% on a fully diluted basis, assuming the exercise of all outstanding
options exercisable within 60 days of the date of the North American Merger
(the "Merger Date") and the Warrants). See "Principal Stockholders." Prior
to the North American Merger, no person controlled North American.
Item 2. ACQUISITION OF ASSETS
See Item 1 above for a description of the North American Merger.
North American had no business or operations for over five years prior to
the North American Merger and had no tangible assets as of the Merger Date.
Set forth below is a description of ORA and its business.
BUSINESS
General
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ORA is a developer and supplier of interface, connectivity
solutions and peripheral accessories for wireless communication devices,
including cellular telephones, personal communications systems ("PCS") and
pagers, computing devices and intelligent transportation systems ("ITS").
The Company currently carries over 2,000 products which are sold to over
1,200 customers in the United States, and throughout North, Central and
South America. Among ORA's customers are major retailers such as Circuit
City, Staples, Office Max and Macy's, service providers and cellular
carriers, such as AT&T Wireless and Bell Atlantic, original equipment
manufacturers ("OEMs"), such as Mitsubishi, auto manufacturers, regional
distributors and dealers.
ORA's goal is to continue to provide consumer-friendly, high
technology products that can be distributed in mass consumer markets, while
diversifying into other distribution channels. The Company has identified
several key non-traditional markets that it plans to aggressively pursue.
This anticipated expansion, coupled with the development of niche market
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strategies and innovative product offerings, is intended to be the
cornerstone for ORA's continued success and growth.
The Company's business began in 1974 and was incorporated in
California in 1979 under the name Alliance Research Corporation
("Alliance"). The Company's products have been primarily sold under the
"ORA" trade name. In December 1996, Alliance merged into ORA Electronics,
Inc. for the purposes of effecting its name change and reincorporation from
California to Delaware. References herein to "ORA" or the "Company" include
Alliance prior to the date of such merger (the "Reincorporation Merger"),
as applicable.
From April, 1987 to the Merger Date, the Company was taxed as an S
corporation under the Internal Revenue Code of 1986, as amended. From the
Merger Date forward, the Company will be taxed as a C corporation.
Industry
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Cellular telephone service was developed as an alternative to
conventional landline systems and existing mobile telephone service, and
has become one of the fastest growing market segments in the
telecommunications industry. The first commercial license was granted by
the Federal Communications Commission ("FCC") for the Chicago market in
late 1983, marking the beginning of the wireless era. By 1990, FCC permits
had been issued in every major market in the United States. By the end of
1990, before most of the systems had even come on line, the cellular
subscriber count was, according to industry sources, more than five
million. By the end of November 1992, there were more than 11 million
cellular subscribers. According to industry sources, the number of cellular
subscribers had reached over 33.5 million by the end of 1995 and more than
38.2 million, or approximately 14.5% percent of the entire United States
population, by the end of June 1996. By the year 2000, it is estimated by
industry sources that there will be more than 69.8 million cellular
telephone users.
As the wireless industry continues to evolve, new technologies are
appearing in the market place. The upcoming new alternative technology to
cellular is PCS. PCS uses handsets and transmits at lower power and higher
frequencies than cellular services. PCS utilizes digital technology, unlike
cellular which consists mostly of analog technology, which means that PCS
handsets can be smaller and lighter weight than most cellular telephones.
Although in its infancy, the PCS market, like the cellular market, is
anticipated to show rapid growth. According to the Personal Communications
Industry Association, the PCS subscriber base is expected to reach 15
million subscribers by the year 2000, with almost 40 million subscribers by
2005.
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The Company believes that the wireless telecommunications equipment
industry will continue to benefit from the rapid growth of the cellular
communications market in general, the expected continuance of upgrades to
cellular technology and the emergence of new wireless communication
technologies, such as PCS.
Products
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The Company currently has over 2,000 proprietary and
non-proprietary products. ORA's products are packaged in distinctive,
multi-colored packaging to enhance marketability at the retail level.
Among ORA's comprehensive line of cellular accessory products are
hands-free solutions for portable cellular telephones and PCS handsets;
battery charging solutions (including quick and fast charging systems);
power/performance-enhancing products; other essentials for portable
cellular telephones and PCS handsets (including starter-kits, batteries,
power cords and carrying cases); speciality batteries (such as a vibrating
battery and a self conditioning battery); antennas; mounts; and cradles
which hold a cellular phone in place in a vehicle.
Sales of cellular accessory products accounted for approximately
76.9%, 90.21%, 89.6% and 91.5% of ORA's net sales for the fiscal years
ended in 1994, 1995 and 1996 and the six months ended September 30, 1996,
respectively. The various power cords offered by ORA as part of its
cellular phone accessory line accounted for approximately 24.2% of ORA's
net sales for the fiscal year ended March 31, 1996 and approximately 22.8%
of its net sales for the six months ended September 30, 1996. ORA offers 23
different stock keeping units of power cords which support different
cellular telephone models offered by 14 different manufacturers.
The Company also markets innovative connectivity solutions that
support the most popular computer systems, including IBM and Macintosh
compatible computers.
A new product category in ORA's line is ITS. ORA has developed
numerous proprietary ITS products that allow inter-connectivity between
automotive safety systems, entertainment systems, navigation systems and
cellular communications devices. Telecar(TM), a product developed in
cooperation with Delco Electronics, serves as an integration hub for ITS
products utilizing ORA's T bus(TM) data protocols. ORA has not commenced
sales of this product but anticipates sales to commence at the end of the
fourth quarter of its fiscal year-end March 31, 1997 or early the following
year. ORA is currently seeking patent protection on these technologies.
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Customers
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ORA sells its products to over 1,200 customers in the United States
and throughout North, Central and South America. Among ORA's customers are
major retailers, such as Circuit City, Staples, Office Max and Macy's,
service providers and cellular carriers, such as AT&T Wireless and Bell
Atlantic, OEMs, such as Mitsubishi, auto manufacturers, regional
distributors and dealers.
Pursuant to its distribution agreement with an unaffiliated
company, ORA Electronics (UK) Ltd. ("ORA UK"), the Company may not sell its
products bearing the "ORA" trade name and logo outside of North, Central
and South America. Under such agreement, which expires in 2010, the Company
does not generate any revenues with respect to sales made by ORA UK.
For the fiscal year ending March 31, 1996 and for the six months
ended September 30, 1996, one customer, Circuit City, accounted for 23.6%
and 38.6%, respectively, of the Company's net sales. For the fiscal year
ending March 31, 1996 and for the six months ended September 30, 1996, a
second customer, Staples, accounted for approximately 13.4% and 15.2%,
respectively, of the Company's net sales.
Marketing and Customer Support
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ORA places a strong emphasis on the marketing of its products.
Though its product line features many technologically sophisticated and
innovative products, the Company believes that its greatest strengths lie
in its ability to manufacture for, and communicate with, the mass market,
provide useable products and superior customer service, and introduce high
technology products to the market.
To ensure comprehensive control of the marketing process, ORA has a
complete in-house marketing services department. The marketing services
department provides a full range of services. In addition to ad design and
production, product photography, line brochures, packaging and catalogs,
the department provides a number of specialized customer services including
a complete planogram service, cooperative advertising programs, store
merchandising, in-store display design and production, customer-specific
collateral material, ad slicks, clip art services, semi-private labeling,
private label catalogs, mail inserts and trade show exhibit management.
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Sales and Distribution
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ORA's products are distributed via national and regional consumer
electronics retailers, office supply retailers, department stores, auto
parts chains and other multiple outlet retailers, cellular service
providers, catalog and mail order houses, and electronics distributors. In
addition, ORA designs and supplies products to manufacturers of wireless
communications devices, automobile manufacturers and other manufacturers
under "private label" and special products agreements.
In order to facilitate prompt deliveries to its retailer customers,
the Company carries high levels of inventories. ORA's policy is to provide
a 24-hour turnaround on a select group of its products which are stocked in
depth. In addition, an ongoing "stock balancing" program allows retailers
to return current, slow moving items every three months for an offsetting
double order. ORA's competitive return policy for non-sellable products,
including damaged products, results in significant returns for credit. ORA
products carry warranties for defects in material or workmanship. These
warranties vary from a year to lifetime on passive devices, with most
products carrying warranties of three to five years. The Company's payment
terms are typically 30 to 60 days. However, under special circumstances,
the Company will offer extended terms.
The Company's business is highly seasonal. For its fiscal
years ending March 31, 1994, 1995 and 1996, on average, approximately 30.9%
of the Company's net sales were in its third fiscal quarter and 18.6% in
its fourth fiscal quarter, with the balance split evenly between the first
and second fiscal quarters.
Backlog
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Most orders received by the Company are for immediate delivery. As
of October 31, 1996 and 1995, the Company had approximately $540,000 and
$245,000, respectively, in backlog orders, including orders for current
delivery, orders for later delivery, back orders and special orders, all of
which may be canceled or modified by the customer.
Research and Development
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The Company has always focused on innovation as a means of
maximizing margins and capturing and maintaining market share. During its
fiscal years ended March 31, 1994, 1995 and 1996, as reflected in its
audited financial statements, the Company spent approximately $45,000,
$60,000 and $77,000, respectively, on Company sponsored research and
development. In addition, the Company estimates that approximately an
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additional $210,000, $610,000 and $520,000 of its general and
administrative expenses for such periods, respectively, were spent on
research and development related activities. ORA maintains an in-house
research and development engineering staff. The acquisition of a product
development group in the beginning of 1994 increased the size and quality
of ORA's R&D staff. The Company maintains extensive research and testing
facilities (including an anechoic chamber) at its corporate headquarters,
thus allowing it to conduct such sophisticated operations as testing
radiation patterns for antennas and ensuring product safety. ORA also has
strategic relationships with other independent research and development
companies to utilize their specialized skills or equipment.
Many of ORA's products carry UL listings or FCC approvals. The
Company has been awarded the prestigious Innovation in Engineering Award
from the Electronics Industry Association three times. Additionally, ORA is
Underwriter Laboratories ISO 9000 certified and operates under the ISO 9002
quality standards.
Manufacturing and Packaging
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ORA out-sources the manufacturing of its products, using contract
manufacturers and "bid" manufacturing. Contract manufacturers are used
mainly for proprietary products such as Telecar, battery chargers and
hands-free adapters. Bid manufacturers are used mainly to produce commodity
items such as battery packs and power cords. Manufacturing plants are
located in the US, Taiwan, China, Hong Kong and Korea. ORA is not dependent
on any one manufacturer to produce products. The Company believes that such
production is "portable" and can be moved rapidly to other manufacturers
and assemblers. The Company is, however, dependent on the availability of
raw materials and labor, and is subject to customs regulations and quotas
both in the US and abroad.
The products manufactured for the Company in Asia, which represent
substantially all of its products, are purchased by the Company from a
foreign trading company, Data-Spec Taiwan, Limited ("Data-Spec Taiwan").
Data-Spec Taiwan negotiates purchases with the various contract
manufacturers and "bid" manufacturers and remits payment to these companies
for the products. Data-Spec Taiwan also represents ORA in negotiations with
respect to procurement, specifications compliance and quality assurance.
Data-Spec Taiwan is ISO 9000 certified. See "Certain Transactions."
Competition
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The consumer electronics and wireless telecommunications accessory
market is highly fragmented and subject to intense competition. ORA's
competitors include (a) various companies which offer broad lines of
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consumer electronic accessories, (b) other accessory companies which offer
certain product lines and (c) manufacturers of brand name consumer
electronics hardware, which market their own lines of similar accessories.
Certain of the Company's existing and potential competitors have greater
financial, technical, marketing or manufacturing resources and may develop
new accessories and other products that are superior to those of the
Company. The Company competes primarily on the basis of product variety and
quality, customer service and support, product reliability, company and
brand name recognition, ability to meet customer delivery needs, price,
product features and proprietary products.
Trademark and Patents
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The Company has actively pursued a program of protecting its
intellectual property by seeking patent protection for its products
whenever possible. The Company has 33 patents and seven pending patent
applications covering certain of its products in the United States. All of
the Company's U.S. patents have a majority of their 17 year life remaining.
The Company also owns 20 trademarks registered on the Principal Trademark
Register of the United States under which it sells its goods and offers its
services. The Company has copyrighted all of its sales and product
literature and manuals. The Company also holds copyrights for numerous
software codes necessary to control and operate several of its processor
controlled products and systems.
Financing Arrangements
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In December, 1996, Sanwa Bank California ("Sanwa") committed,
subject to final documentation, to extend the Company's line of credit with
Sanwa until March 31, 1997 and to convert such line into a revolving credit
facility on a conforming basis pursuant to which Sanwa will sweep excess
funds from the Company's account at Sanwa on a daily basis and Sanwa will
lend against eligible collateral (receivables and inventory). Interest on
such facility shall accrue at the rate of 1.75% above Sanwa's Reference
Rate (8.25% on December 19, 1996) and shall be payable monthly. As of
December 19, 1996, the Company had $4.5 million outstanding under such
facility which has total availability of $4.5 million. Under the extended
Sanwa facility, the Company is required to make a principal reduction in
the amount of $1 million by no later than December 27, 1996 and is required
to reduce its borrowing availability by $1 million by no later than January
31, 1997 and by an additional $1 million by no later than February 28,
1997. The Company has a commitment for a $1 million loan from an
unaffiliated third party. Such loan will be used to pay the initial $1
million reduction in principal under the Sanwa facility. Such loan bears
interest at 8% per annum and all principal and interest is due and payable
upon maturity on December 31, 2001. The Company is confident that it will be
able to secure additional financing in order to meet its other principal
reduction obligations under the Sanwa facility, although no assurances can
be given.
The loan from the Aid Association for Lutherans ("AAL") obtained by
the Company to purchase its headquarters and distribution facility in
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Chatsworth, California is, by its terms, callable by AAL upon six months
notice. As of September 30, 1996, the outstanding principle balance of such
loan was approximately $4.7 million. Such loan bears interest at 9.875% per
year, is payable in monthly installments of $43,418, representing both
principal and interest, matures in February 2019 and is secured by the real
property on which the facility is located.
Employees
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As of November 30, 1996, the Company had 75 employees. None of the
Company's employees is covered by a collective bargaining agreement. The
Company believes that its relationship with its employees is good.
Properties
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The Company owns its 80,000 square foot headquarters and
distribution facility in Chatsworth, California.
Legal Proceedings
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ORA filed suit in 1994 in Federal District Court seeking a
declaratory judgment that certain patents held by Telular Corporation
("Telular") are invalid or, even if valid, the Company's cellular/data link
product ("CDL") does not infringe such patents. Telular counter-claimed,
contending that its patents are valid and that CDL infringes on such
patents. In early 1996, the District Court granted Telular's motion for
partial summary judgment against ORA, determining that Telular's patents
are valid and that CDL infringes such patents, and permanently enjoining
ORA from further sales of CDL. However, the Company has appealed the
District Court's ruling to the United States Court of Appeals in the
Federal Circuit. The Company filed a motion in such Court requesting a stay
of the permanent injunction pending the hearing of such appeal. The Federal
Circuit Court granted the motion in part. The Federal Circuit Court lifted
the injunction with respect to Motorola compatible CDLs. The Company
expects the Federal Circuit Court to rule on its appeal in early 1997.
Given that its appeal is still pending, ORA is unable to predict the
outcome of the proceedings. Possible outcomes range from no liability or
injunction being imposed on ORA to the payment by ORA to Telular of
potentially material damages and costs and ORA being enjoined from all
future CDL sales or non-Motorola CDL sales only. ORA intends to continue
vigorously contesting Telular's claims. CDLs accounted for approximately
$1,170,000 and $211,000 or 4.6% and 0.88% of ORA's net sales, in its fiscal
years ended March 31, 1995 and 1996, respectively. Of such amounts,
approximately $1,045,000 and $180,000 (or 4.1% and 0.75% of ORA's total net
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sales) were from Motorola compatible CDLs. CDLs also accounted for
approximately $38,000 or .005% of ORA's net sales in the six months ended
September 30, 1996. All such CDL sales were of Motorola compatible CDLs.
Sales in fiscal year 1996 and the six months ended September 30, 1996 were
impacted by the injunction discussed above.
The Company is involved in various other routine legal proceedings
incident to the ordinary course of business. Management believes that the
outcome of all other pending legal proceedings in the aggregate will not
have a materially adverse effect on the financial condition or results of
operations of the Company.
Forward Looking Information
- ---------------------------
The matters discussed herein with respect to the anticipated
growth of the cellular telephone industry and the development of new
wireless communications technologies, the introduction of new products by
the Company, the Company's ability to secure future financing and the
potential outcome of pending litigation involving the Company, among
others, are forward looking statements and are subject to uncertainties
associated with such statements. Such uncertainties include regulatory and
technological developments impacting the wireless telecommunications
industry in general and telecommunications equipment manufacturers in
particular, market acceptance of new products and competitive responses
thereto, as well as market conditions and other factors outside of the
Company's control.
DIVIDEND POLICY
The Company expects to retain earnings to finance the expansion and
development of its business and has no plans to pay cash dividends in the
foreseeable future. Any future determination relating to dividend policy
will be made at the discretion of the Company's Board of Directors and will
depend on a number of factors, including contractual restrictions in loan
and other financial agreements, the future earnings, capital requirements
and operating and financial condition of the Company, and such other
factors as the Board of Directors may deem relevant.
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MANAGEMENT
Directors and Executive Officers
- --------------------------------
The following table sets forth certain information concerning the
directors and executive officers of the Company:
NAME AGE POSITION
---- --- --------
Gershon N. Cooper 47 Chairman of the Board, Chief Executive
Officer and President
John M. Burris 49 Chief Financial Officer, Vice President
and Director
Matthew F. Jodziewicz 47 Vice President of Technology and Legal
Affairs, Secretary and Director
Richard J. Baccigaluppi 51 Vice President of Sales and Marketing
Ruth Cooper 45 Director
Uri Zarif 47 Director
Mr. Cooper founded the Company's business in 1974 and has been
Chairman of the Board and President of the Company since its incorporation
in 1979. He became Chief Executive Officer of ORA in December 1996.
Mr. Burris, a certified public accountant, joined ORA in 1987 as
its General Manager in charge of accounting and finances. From 1990 through
November 1996, he continued to work in such capacity, but as an independent
contractor. In December 1996, Mr. Burris became ORA's Vice President and
Chief Financial Officer and an employee and director of the Company.
Mr. Jodziewicz, a registered patent attorney, joined ORA in March
1995 as in-house counsel. He became Vice President of Technology and Legal
Affairs, Secretary and a director in December 1996. Prior to joining ORA,
Mr. Jodziewicz was in the private practice of law and provided legal
services, primarily in the intellectual property area, to the Company along
with other clients.
Mr. Baccigaluppi joined the Company in August, 1996 as its Vice
President of Sales and Marketing. From March 1993 to August 1996, Mr.
Baccigaluppi was President of Renaissance Marketing and Sales, a private
marketing company. From March 1987 to March 1993, Mr. Baccigaluppi was Vice
President of Marketing and Sales of Infinity Systems, an audio speaker
manufacturer.
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Ms. Cooper joined ORA upon its formation in 1974 and has served in
many capacities. From the Company's incorporation in 1979 to December,
1996, she was an Executive Vice President. She is the wife of Mr. Cooper.
Mr. Zarif became a director of the Company in December 1996. Since
April 1994, Mr. Zarif has been a Senior Vice President of Investments at
Dean Witter & Co. Mr. Zarif was a Vice President of Investments at
Prudential Securities from April 1990 to April 1994.
Board of Directors
- ------------------
The Company's Bylaws provide that the Company's Board of
Directors shall consist of between five and nine directors, inclusive, with
the specific number of authorized directors being set within such range
from time to time by a resolution of the Board of Directors. Currently, the
authorized number of directors is five and the current members of the Board
of Directors are Messrs. Cooper, Burris, Jodziewicz and Zarif and Ms.
Cooper. All directors serve until the next annual meeting of the Company's
stockholders and until their successors are duly elected.
Compensation and Indemnification of Directors
- ---------------------------------------------
Directors who are employees of the Company receive no compensation
for serving on the Board of Directors. Directors who are not employees of
the Company will receive a retainer fee of $1,000 per meeting attended for
their services. All directors are reimbursed for expenses incurred in
connection with attendance at board or committee meetings. In addition,
each director not employed by the Company, upon joining the Board of
Directors, will receive an option to purchase 5,000 shares of Common Stock
and will receive an option to purchase an additional 500 shares of Common
Stock on each anniversary of joining the Board of Directors. See "-- Stock
Plans."
The Delaware General Corporation Law provides that a company may
indemnify its directors and officers as to certain liabilities. The
Company's Certificate of Incorporation and Bylaws provide for the
indemnification of its directors and officers to the fullest extent
permitted by law, and the Company has entered into separate indemnification
agreements with each of its directors and officers which also provide for
such indemnification. The effect of such provisions is to indemnify, to the
fullest extent permitted by law, the directors and officers of the Company
against all costs, expenses and liabilities incurred by them in connection
with any action, suit or proceeding in which they are involved by reason of
their affiliation with the Company. The Company has also purchased
directors and officers liability insurance.
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Executive Compensation
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CASH COMPENSATION.
The following table sets forth the cash compensation paid by ORA to
its President and the three other most highly compensated executive
officers for the fiscal year ended March 31, 1996.
<TABLE>
Summary Compensation Table
--------------------------
<CAPTION>
Annual Compensation
-----------------------------------------------------
Year All Other
Ended Salary Bonus Compensation<F1>
Name And Principal Position March 31 ($) ($) ($)
--------------------------- -------- ------ ------ ----------------
<S> <C> <C> <C> <C>
Gershon N. Cooper<F2> 1996 $265,000 -- $ 4,200
Chief Executive Officer
John M. Burris<F3> 1996 $ 88,800 -- --
Chief Financial Officer
Matthew F. Jodziewicz 1996 $120,000 -- $ 250
Secretary
Ruth Cooper<F2><F4> 1996 $259,000 -- $ 4,200
<FN>
<F1> Represents the Company's contribution to the Company's 401(k) defined
contribution plan in the case of Mr. Jodziewicz, and an auto allowance
in the case of Mr. Cooper and Ms. Cooper.
<F2> See "Certain Transactions" with respect to the payment of personal
expenses made by the Company on behalf of Mr. Cooper and Ms. Cooper
and loans made to such individuals by the Company in connection with
such payment.
<F3> During ORA's fiscal year ended March 31, 1996, Mr. Burris was
compensated by ORA as an independent contractor.
<F4> Ms. Cooper was an executive officer of the Company during its fiscal
year ended March 31, 1996. She is not currently an officer or employee
of the Company.
</TABLE>
Page 15 of 198
<PAGE>
Employment Agreement
- --------------------
Mr. Cooper entered into an employment agreement with the Company in
December 1996 pursuant to which Mr. Cooper will continue to serve as the
Company's Chief Executive Officer and President. The agreement has a term
of three years and contains a non-competition provision effective through
the term of employment and for an additional three years from the end of
such term. Pursuant to the agreement with Mr. Cooper, the Company will pay
to Mr. Cooper a base salary of $330,000 per year (subject to increase but
not decrease by the Board of Directors), an auto allowance of $1,000 per
month and, at the discretion of the Board of Directors, a bonus. In
addition, Mr. Cooper will also be entitled to certain fringe benefits.
Commencing on the expiration of the term of the employment agreement, or
earlier should the employment agreement be terminated prior to the end of
the term, the Company and Mr. Cooper will enter into a three-year
consulting agreement under which he will render certain consulting services
for which the Company will pay an annual consulting fee of $100,000 per
year. If Mr. Cooper is terminated other than for cause, death or
disability, the Company will continue to pay Mr. Cooper an amount equal to
his base salary then in effect for the remaining term of the agreement.
Stock Plans
- -----------
1996 STOCK PLAN. The 1996 Stock Plan was adopted by the Board of
Directors and ratified by the Existing Stockholder in December 1996. The
total number of shares of Common Stock subject to issuance under the 1996
Stock Plan is 2,000,000, subject to adjustments as provided in the 1996
Stock Plan. The 1996 Stock Plan provides for the grant of stock options
(including incentive stock options as defined in Section 422 of the
Internal Revenue Code of 1986, as amended and non-qualified stock options),
stock appreciation rights ("SARs") and other stock awards (including
restricted stock awards and stock bonuses) to employees of the Company or
its affiliates or any consultant or advisor engaged by the Company who
renders bona fide services to the Company or the Company's affiliates in
connection with its business; provided, that such services are not in
connection with the offer or sale of securities in a capital raising
transaction. The 1996 Stock Plan will be administered by the Company's
Board of Directors or, when and if formed, the Compensation Committee of
the Board of Directors (the "Committee"). Stock options may be granted by
the Board of Directors or Committee on such terms, including vesting and
payment forms, as it deems appropriate in its discretion; provided, that no
option may be exercised later than ten years after its grant, and the
purchase price for incentive stock options and non-qualified stock options
shall not be less than 100% and 85% of the fair market value of the Common
Stock at the time of grant, respectively. SARs may be granted by the Board
Page 16 of 198
<PAGE>
of Directors or Committee on such terms, including payment forms, as the
Board of Directors or Committee deems appropriate; provided, that a SAR
granted in connection with a stock option shall become exercisable and
lapse according to the same vesting schedule and lapse rules established
for the stock option (which shall not exceed ten years from the date of
grant). A SAR shall not be exercisable during the first six months of its
term and only when the fair market value of the underlying Common Stock
exceeds the SAR's exercise price and is exercisable subject to any other
conditions on exercise imposed by the Board of Directors or the Committee.
In the event of a change in control of the issuer, the Board of Directors
or the Committee retains the discretion to accelerate the vesting of stock
options and SARs and to remove restrictions on transfer of restricted stock
awards. Unless terminated by the Board of Directors, the 1996 Stock Plan
continues until December 2006. The Board of Directors has authorized the
grant of options to certain officers and key employees to purchase
approximately 133,000 shares of Common Stock under the 1996 Stock Plan at
an exercise price of $5.00 per share. All such options have a term of five
years and become exercisable (i.e. vest) in equal 25% installments over
four years beginning on the first anniversary of the date of grant.
The following table presents certain information concerning the
number of shares of Common Stock subject to options that have been granted
to executive officers pursuant to the 1996 Stock Plan:
Number of Shares
Name Of Individual Underlying Options
------------------ ------------------
John M. Burris 30,000
Matthew F. Jodziewicz 15,000
Richard J. Baccigaluppi 15,000
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN. The Company's 1996
Non-Employee Directors Stock Option Plan (the "Directors Plan") was adopted
by the Board of Directors and ratified by the Existing Stockholder in
December 1996. A total of 100,000 shares are available for grant under the
Directors Plan. The Directors Plan provides for the automatic grant to each
of the Company's non-employee directors of (i) an option to purchase 5,000
shares of Common Stock on the date of such director's initial election or
appointment to the Board of Directors (the "Initial Grant") and (ii) an
option to purchase 500 shares of Common Stock on each anniversary thereof
on which the director remains on the Board of Directors (the "Annual
Grant"). The options will have an exercise price of 100% of the fair market
Page 17 of 198
<PAGE>
value of the Common Stock on the date of grant and have a ten-year term.
Initial Grants become exercisable in two equal annual installments
commencing on the first anniversary of the date of grant thereof and Annual
Grants become fully exercisable beginning on the first anniversary of the
date of grant. Both Initial and Annual Grants are subject to acceleration
in the event of certain corporate transactions. Any options which are
vested at the time the optionee ceases to be a director shall be
exercisable for one year thereafter; provided, that options which are
vested on the date the optionee ceased to be a director due to death or
disability generally remain exercisable for five years thereafter. Options
which are not vested automatically terminate in the event the optionee
ceases to be a director of the Company. If the Company is a party to a
transaction involving a sale of substantially all of its assets, a merger
or consolidation, all then outstanding options under the Directors Plan may
be canceled. However, during the 30 day period preceding the effective date
of such transaction, all partly or wholly unexercised options will be
exercisable, including those not yet exercisable pursuant to the vesting
schedule. Mr. Zarif received his initial option grant covering 5,000 shares
of Common Stock in December 1996. Such option has an exercise price of
$5.00 per share.
Page 18 of 198
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table and the notes thereto set forth information
relating to beneficial ownership (as defined in Rule 13d-3 of the Exchange
Act) of the Company's equity securities by the Company's stockholders
owning five percent or more of its outstanding Common Stock and the
Company's directors and executive officers, both individually and as a
group, following consummation of the North American Merger, the issuance of
the DLS Securities and the sale of the Off-Shore Shares:
Beneficial Ownership
Of Common Stock
----------------------------
Name Of Beneficial Owners Number Percent<F1>
- ------------------------- -------- -----------
The Cooper Family Trust<F2><F3> 5,000,000 74.8%
Gershon N. Cooper<F2><F4> 5,000,000 74.8
John M. Burris<F2><F5> 0 0
Matthew F. Jodziewicz<F2><F6> 0 0
Richard J. Baccigaluppi<F2><F7> 0 0
Ruth Cooper<F2><F4> 5,000,000 74.8
Uri Zarif<F2><F8> 0 0
Jack D.W. Song<F9> 1,173,626 17.6
All directors and executive officers as a 5,000,000 74.8
group (six persons)<F4>
[FN]
<F1> Assumes the issuance of 100,000 shares of Common Stock pursuant to
the Round-Up. Excludes 2,516,000 shares of Common Stock subject to
the Warrants (assuming that 360,000 Warrants in the aggregate are
issued in the Round Up), 2,200 shares of Common Stock subject to
the Reimbursement Options and the 75,480 shares subject to the DLS
Options, all of which are exercisable within 60 days of the Merger
Date. Excludes 138,000 shares subject to options granted under the
1996 Stock Plan and Directors Plan, none of which are exercisable
within sixty days of the Merger Date. See "Management--Stock
Plans."
<F2> The mailing address of such person is c/o ORA Electronics, Inc.,
9410 Owensmouth Ave., Chatsworth, California 91311.
<F3> The shares held by the Cooper Family Trust are deemed beneficially
owned by Gershon N. Cooper and Ruth Cooper, who have shared voting
and investment power.
<F4> All shares held by this person are held of record by the Cooper
Family Trust.
<F5> Does not include 30,000 shares subject to options granted under
the 1996 Stock Plan, none of which are exercisable within 60 days
from the Merger Date.
Page 19 of 198
<PAGE>
<F6> Does not include 15,000 shares subject to options granted under
the 1996 Stock Plan, none of which are exercisable within 60 days
of the Merger Date.
<F7> Does not include 15,000 shares subject to options granted under
the 1996 Stock Plan, none of which are exercisable within 60 days
of the Merger Date.
<F8> Does not include 5,000 shares subject to options granted under the
Directors' Plan, none of which are exercisable within 60 days of
the Merger Date.
<F9> Mr. Song's address is 6F #219 Chingshan South Section 2, Taipei,
Taiwan, ROC
CERTAIN TRANSACTIONS
During its fiscal year ended March 31, 1996, the Company
paid personal expenses on behalf of Mr. Cooper and Ms. Cooper totaling
$243,982. Such amount was converted to a loan by the Company to the Coopers
which is evidenced by a promissory note which bears interest at 5.05% per
annum. Such loan was originally repayable on March 31, 1997. In December
1996, the Company extended such loan until March 31, 1999. All principal
and accrued interest is due and payable by the Coopers on such date.
From April 1, 1996 to December 4, 1996, the Company paid
personal expenses of the Coopers totaling $280,855. Such amount is
evidenced by a promissory note which bears interest at 5.05% per annum. All
principal and accrued interest under such note is due and payable by the
Coopers to the Company on December 1, 1999.
The Off-Shore Shares were issued after consummation of the
North American Merger in complete satisfaction of approximately $4,368,130
of indebtedness, consisting of $2,524,200 in principal and $1,843,930 in
accrued interest (the "Indebtedness"), and $1,500,000 in trade payables
(the "Trade Payables") due Jack D.W. Song, who beneficially owns over 10%
of the outstanding Common Stock. The Indebtedness, which is evidenced by
three promissory notes, was incurred by the Company in February 1987, April
1990 and May 1991 to provide working capital, bore interest at 7% per
annum, was payable upon maturity and matured on June 2000 ($650,000 of
original principal) and February 2001 ($1,874,200 of original principal).
The Trade Payables were originally incurred by the Company
to Data-Spec Taiwan. Mr. Song is the controlling shareholder of Data-Spec
Taiwan. The Trade Payables were assigned by Data-Spec Taiwan to Mr. Song.
In its fiscal year ending March 31, 1996 and the six months ended September
30, 1996, the Company purchased approximately $13,400,000 and $6,390,000,
respectively, of products from Data-Spec Taiwan. As of November 30, 1996,
Page 20 of 198
<PAGE>
the Company had total trade payables of approximately $3,710,000 with
Data-Spec Taiwan, of which $1.5 million represent the Trade Payables.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of the North American Merger, the issuance of
the DLS Securities and the sale of the Off-Shore Shares, the Company had
approximately 6,684,192 shares of Common Stock outstanding, assuming the
issuance of 100,000 shares pursuant to the Round-Up.
The shares of Common Stock, the Warrants and the Reimbursement
Options issued under the Plan of Reorganization, including pursuant to the
Round-Up, the shares of Common Stock issued upon the exercise of the
Warrants, and the shares of Common Stock issued upon the exercise of the
Reimbursement Options (collectively, the "Plan Securities"), were issued
pursuant to Section 1145(a) ("Section 11215(a)") of the United States
Bankruptcy Code (the "Bankruptcy Code"). Pursuant to Section 1145(a), such
issuance (including the issuance of the Common Stock underlying the
Warrants and the Reimbursement Options upon exercise thereof) was exempt
from the registration requirements of the Securities Act and the
qualification requirements of applicable state securities laws. Plan
Securities may be resold without registration under the Securities Act
unless the selling stockholder is an "underwriter" as defined in Section
1145(b) of the Bankruptcy Code.
The Off-Shore Shares were issued pursuant to Regulation S. The
Off-Shore Shares may not be sold to a "U.S. person" (as defined in
Regulation S) for a period of 40 days after the date originally sold
pursuant to Regulation S unless such sale is registered under the
Securities Act or an exemption from such registration as available.
Thereafter, such shares may be freely sold to U.S. persons except for sales
by an affiliate of the Company which must meet the requirements of Rule 144
described below (other than the two year holding period) or another
available exemption as described below.
The 5,000,000 outstanding shares of Common Stock held by the Cooper
Trust, which have been held for over two years, and the 160,556 shares of
Common Stock, the DLS Options and the shares of Common Stock underlying the
DLS Options issued to DLS are "restricted securities" for purposes of Rule
144. Restricted securities may not be resold except in compliance with the
registration requirements of the Securities Act or pursuant to an exemption
therefrom, including the exemption provided by Rule 144.
Page 21 of 198
<PAGE>
Generally, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated), including a person who may be deemed
to be an "affiliate" of the Company as that term is defined under the
Securities Act, is entitled to sell within any three-month period a number
of shares beneficially owned for at least two years that does not exceed
the greater of (i) 1% of the then outstanding shares of Common Stock or
(ii) the average weekly trading volume of the outstanding shares of Common
Stock during the four calendar weeks preceding such sale. Sales under Rule
144 are also subject to certain requirements as to the manner of sale,
notice and the availability of current public information about the
Company. However, a person (or persons whose shares are aggregated) who is
not an "affiliate" of the Company during the 90 days preceding a proposed
sale by such person and who has beneficially owned "restricted securities"
for at least three years is entitled to sell such shares under Rule 144
without regard to the volume, manner of sale or notice requirements. As
defined in Rule 144, an "affiliate" of an issuer is a person that directly
or indirectly controls, or is controlled by, or is under common control
with such issuer. The Cooper Trust may be considered an "affiliate" of the
Company within the meaning of Rule 144.
In connection with the Reincorporation Merger, the Company granted
the Cooper Trust certain registration rights which permit the Cooper Trust
to require the Company under certain circumstances to register its shares
for resale under the Securities Act and applicable state securities laws
and to participate in such registrations initiated by the Company. In
addition, the Company has granted DLS certain registration rights which
permit DLS to participate in registrations initiated by the Company under
certain circumstances. As a result of such registration rights, the Cooper
Trust and DLS may be able to sell shares of Common Stock in excess of the
volume limitations set forth under Rule 144 and without compliance with the
other requirements of such Rule.
The Company granted options covering approximately 138,000 shares
of its Common Stock to certain of its employees and directors under the
1996 Stock Plan and the Directors Plan. After such grant, an aggregate of
approximately 1,962,000 shares will remain available for future option
grants and other awards under the 1996 Stock Plan and the Directors Plan.
See "Management - Stock Plans." The Company intends to file a registration
statement under the Securities Act to register all of the shares of Common
Stock reserved for issuance, including shares subject to previously granted
options, under the 1996 Stock Plan and the Directors Plan. Such
registration statement is expected to be filed as soon as practicable after
the date of this Report and will automatically become effective upon
filing. Shares issued under the 1996 Stock Plan and the Directors Plan
after the registration statement is filed may thereafter be sold in the
open market, subject, in the case of various holders, as applicable, to the
Rule 144 volume limitations applicable to affiliates.
Page 22 of 198
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and
certain provisions of the Company's Restated Certificate of Incorporation
(the "Certificate") and Bylaws ("Bylaws") is a summary and is qualified in
its entirety by the provisions of the Certificate and Bylaws.
The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock, $.001 par value, and 5,000,000 shares of Preferred
Stock, $.001 par value.
Common Stock
- ------------
Subject to preferences that may be applicable to any Preferred
Stock outstanding at the time, holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to
time by the Board of Directors out of funds legally available therefor. See
"Dividend Policy." Holders of Common Stock are entitled to one vote per
share on all matters to be voted upon by the stockholders. In the event of
a liquidation, dissolution or winding up of the Company, holders of Common
Stock are entitled to share ratably in all assets remaining after payment
of the Company's liabilities and the liquidation preference, if any, of any
outstanding shares of Preferred Stock. Holders of Common Stock have no
preemptive rights and no rights to convert their Common Stock into any
other securities and there are no redemption provisions with respect to
such shares. All of the outstanding shares of Common Stock are fully paid
and non-assessable. The rights, preferences and privileges of holders of
Common Stock are subject to, and may be adversely affected by, the rights
of the holders of shares of any series of Preferred Stock which the Company
may designate and issue in the future. The transfer agent for the Common
Stock is Continental Stock Transfer & Trust Company.
Preferred Stock
- ---------------
The Board of Directors, without further action by the stockholders,
may issue shares of the Preferred Stock in one or more series and may fix
or alter the relative, participating, optional or other rights,
preferences, privileges and restrictions, including the voting rights,
redemption provisions (including sinking fund provisions), dividend rights,
dividend rates, liquidation preferences and conversion rights, and the
description of and number of shares constituting any wholly unissued series
of Preferred Stock. The Board of Directors, without further stockholder
Page 23 of 198
<PAGE>
approval, can issue Preferred Stock with voting and conversion rights which
could adversely affect the voting power of the holders of Common Stock. No
shares of Preferred Stock presently are outstanding and the Company
currently has no plans to issue shares of Preferred Stock. The issuance of
Preferred Stock in certain circumstances may have the effect of delaying or
preventing a change of control of the Company without further action by the
stockholders, may discourage bids for the Company's Common Stock at a
premium over the market price of the Common Stock and may adversely affect
the market price and the voting and other rights of the holders of Common
Stock.
Warrants
- --------
See Item 1 for a description of the Warrants. Continental Stock
Transfer & Trust Company is the transfer agent for the Warrants.
Delaware Law and Certain Corporate Provisions
- ---------------------------------------------
The Company is subject to the provisions of Section 203 of the
General Corporation Law ("GCL") of Delaware. In general, this statute
prohibits a publicly held Delaware corporation from engaging under certain
circumstances in a "business combination" with an "interested stockholder,"
for a period of three years after the date of the transaction in which the
person became an interested stockholder, unless (i) prior to the date on
which the stockholder became an interested stockholder the Board of
Directors approved either the business combination or the transaction which
resulted in the person becoming an interested stockholder, (ii) the
stockholder owned more than 85% of the outstanding voting stock of the
corporation (excluding shares held by directors who are officers or shares
held in certain employee stock plans) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, or
(iii) the business combination is approved by the Board of Directors and by
two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder) at a meeting of stockholders
(and not by written consent) held on or subsequent to the date of the
business combination. An "interested stockholder" is a person who (i) owns
15% or more of the corporation's voting stock or (ii) is an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the prior
three years. Section 203 defines a "business combination" to include,
without limitation, mergers, consolidations, stock sales and asset based
transactions and other transactions resulting in a financial benefit to the
interested stockholder.
The Company's Restated Certificate of Incorporation and Bylaws
contain a number of provisions relating to corporate governance and to the
Page 24 of 198
<PAGE>
rights of stockholders. Certain of these provisions may be deemed to have a
potential "anti-takeover" effect in that such provisions may delay or
prevent a change of control of the Company. These provisions include (a)
the authority of the Board of Directors to issue series of Preferred Stock
with such voting rights and other powers as the Board of Directors may
determine; (b) a provision that a vote of not less than two-thirds of the
outstanding shares entitled to vote thereon is required for an amendment to
the Bylaws; (c) a requirement that a vote of not less than two-thirds of
the voting power of shares entitled to vote generally for the election of
directors is required to amend provisions of the Certificate relating to
(i) the calling of special stockholder meetings, (ii) the amendment of the
Bylaws; and (d) notice requirements in the Bylaws relating to nominations
to the Board of Directors and to the raising of business matters at
stockholders meetings.
The Restated Certificate of Incorporation provides that the Company
is subject to the provision of Section 302 of the GCL. In general, this
statute allows any court of equitable jurisdiction in the State of
Delaware, upon proper application by the Company or any of its creditors or
stockholders, to order a meeting of creditors or stockholders whenever a
compromise or arrangement is proposed between the Company and its creditors
or the Company and its stockholders. Any compromise, arrangement or
reorganization of the Company that is approved by a majority in number
representing three-fourths in value of the creditors or stockholders, as
the case may be, and sanctioned by the court to which the application was
made shall be binding on all of the creditors or stockholders, as the case
may be, and the Company.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired.
(1) Audited balance sheets of Alliance
Research Corporation, a California corporation and
predecessor of ORA Electronics, Inc. ("Alliance"), at March
31, 1995 and 1996 and audited statements of income and cash
flows for the fiscal years ended March 31, 1994, 1995 and
1996.
(2) Unaudited balance sheets of Alliance at
September 30, 1995 and 1996 and unaudited statements of
income and cash flows for the six months then ended.
Page 25 of 198
<PAGE>
(b) Pro Forma Financial Information.
(1) Pro Forma unaudited balance sheet at
September 30, 1996 of ORA Electronics, Inc. and unaudited
pro forma statements of income and cash flows for the sixth
month period then ended giving effect to the Reincorporation
Merger, the North American Merger, the termination of S
Corp. status, the issuance of the DLS Securities and the
issuance of the Off-Shore Shares.
(c) Exhibits.
2.1 Plan of Reorganization of North American
Energy of Delaware, Inc. (incorporated
by reference from North American's
Current Report on Form 8-K/A dated
December 10, 1996).
2.2 Agreement and Plan of Merger between
ORA Electronics, Inc., a Delaware
corporation, and North American Energy
of Delaware, Inc., a Delaware
corporation, dated December 20, 1996.
3.1 Restated Certificate of Incorporation
of ORA Electronics, Inc.
3.2 Bylaws of ORA Electronics, Inc.
4.1 Specimen Common Stock Certificate
of ORA Electronics, Inc.
4.2 Specimen Class A Warrant Certificate.
4.3 Specimen Class B Warrant Certificate.
4.4 Specimen Class C Warrant Certificate.
4.5 Specimen Class D Warrant Certificate.
4.6 Warrant Agreement between ORA Electronics,
Inc. and Continental Stock Transfer
and Trust Company dated as of
December 20, 1996.
Page 26 of 198
<PAGE>
23.1 Independent Auditors' Consent of
Tanner, Mainstain & Hoffer.
23.2 Independent Auditors' Consent of
Richard & Hedrick.
99.1 Letter Agreement dated as of December 19,
1996 between ORA Electronics, Inc. and
DLS Financial Services, Inc.
99.2 Registration Rights Agreement between
ORA Electronics, Inc. and The Cooper
Family Living Trust dated as of
December 20, 1996.
27 Financial Data Schedule.
Pursuant to the requirement of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 20, 1996
ORA ELECTRONICS, INC.,
as successor to North American
Energy of Delaware, Inc.
By: /s/ Gershon N. Cooper
------------------------------------
Gershon N. Cooper
Chief Executive Officer and President
Page 27 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
FINANCIAL STATEMENTS
MARCH 31, 1996, 1995 AND 1994
Page 28 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
TABLE OF CONTENTS
Page
----
Independent Auditors' Report of Tanner, Mainstain & Hoffer ........... 1
Independent Accountants' Report of Richard & Hedrick................... 2
Balance Sheets ....................................................... 3-4
Statements of Operations and Retained Earnings ....................... 5
Statements of Cash Flows ............................................. 6-7
Notes to Financial Statements ........................................ 8-14
-ii-
Page 29 of 198
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
ALLIANCE RESEARCH CORPORATION
We have audited the accompanying balance sheet of Alliance Research
Corporation (an S corporation) as of March 31, 1996, and the related
statements of operations and retained earnings and the statements of
cash flows for the years ended March 31, 1996 and 1994. These
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
statements based on our audits. The financial statements of Alliance
Research Corporation as of March 31, 1995, were audited by other
auditors whose report dated September 30, 1996, expressed an
unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Alliance
Research Corporation as of March 31, 1996, and the results of its
operations and cash flows for the years ended March 31, 1996 and 1994,
in conformity with generally accepted accounting principles.
TANNER, MAINSTAIN & HOFFER
AN ACCOUNTANCY CORPORATION
Los Angeles, California
November 6, 1996
-1-
Page 30 of 198
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
September 30, 1996
To the Board of Directors and Stockholders
of Alliance Research Corporation
In our opinion, the accompanying balance sheet and the related
statements of income and retained earnings and of cash flows present
fairly, in all material respects, the financial position of Alliance
Research Corporation at March 31, 1995, and the results of its
operations and its cash flows for the year then ended in conformity
with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
The financial statements of Alliance Research Corporation for the
years ended March 31, 1994 and 1993 were audited by other independent
accountants whose report dated September 7, 1994 expressed an
unqualified opinion on those statements.
RICHARD & HEDRICK
-2-
Page 31 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
BALANCE SHEETS
MARCH 31, 1996 AND 1995
ASSETS
------
1996 1995
---- ----
Current assets:
Cash and cash equivalents (NOTE 1) $ 357,995 $ 657,803
Trade accounts receivable, less
allowance for doubtful accounts of
$2,184,718 and $1,042,000 (NOTE 1) 3,333,820 3,150,450
Inventories (NOTES 1 AND 9) 5,812,730 5,668,446
Loan receivable, officer (NOTE 3) 243,982 --
Prepaid expenses (NOTE 2) 448,115 494,994
----------- -----------
Total current assets 10,196,642 9,971,693
----------- -----------
Property and equipment, at cost:
(NOTE 1)
Land 2,900,000 2,900,000
Building and improvements 4,161,669 4,145,353
Machinery and equipment 744,061 701,679
Computer equipment 645,327 440,242
Furniture and fixtures 491,534 491,534
----------- -----------
8,942,591 8,678,808
Less: Accumulated depreciation
and amortization 2,372,893 2,056,996
----------- -----------
Total property and equipment, net 6,569,698 6,621,812
----------- -----------
Other assets 362,603 427,438
----------- -----------
TOTAL ASSETS $17,128,943 $17,020,943
=========== ===========
See accompanying notes to financial statements.
-3-
Page 32 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
BALANCE SHEETS
MARCH 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1996 1995
---- ----
Current liabilities:
Current portion of long-term debt $ 57,267 $ 51,905
(NOTE 5)
Note payable, bank (NOTE 4) 4,000,000 3,000,000
Accounts payable (NOTE 8) 1,838,641 1,270,147
Accrued interest (NOTE 5) 1,674,960 1,398,246
Other accrued expenses 536,187 838,227
Notes payable (NOTE 10) 275,000 350,000
Accrued salaries and commissions 279,769 170,178
----------- -----------
Total current liabilities 8,661,824 7,078,703
Long-term debt (NOTE 5) 7,188,902 7,246,168
----------- -----------
Total liabilities 15,850,726 14,324,871
----------- -----------
Commitments and contingencies
(NOTES 4, 5 AND 11)
Stockholders' equity:
Common stock, $10 par value;
authorized 25,000 shares; issued
and outstanding 1,000 shares 10,000 10,000
Retained earnings 1,268,217 2,686,072
----------- -----------
Total stockholders' equity 1,278,217 2,696,072
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $17,128,943 $17,020,943
=========== ===========
See accompanying notes to financial statements.
-4-
Page 33 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Net sales (NOTE 8) $ 24,110,436 $ 25,308,778 $ 20,398,962
Cost of goods sold 15,354,206 15,687,331 10,559,143
------------ ------------ ------------
Gross profit 8,756,230 9,621,447 9,839,819
------------ ------------ ------------
Operating expenses:
Selling and shipping expenses 3,997,970 4,161,196 3,767,825
General and administrative
expenses 5,202,191 4,407,590 4,183,391
------------ ------------ ------------
Total operating expenses 9,200,161 8,568,786 7,951,216
------------ ------------ ------------
Other (income) expenses:
Interest expense 1,056,529 898,534 782,647
Interest/other income (58,783) (56,790) (3,989)
------------ ------------ ------------
Total other expenses, net 997,746 841,744 778,658
------------ ------------ ------------
Total expenses 10,197,907 9,410,530 8,729,874
------------ ------------ ------------
Income (loss) before income taxes (1,441,677) 210,917 1,109,945
Provision for taxes (benefit) (23,822) 27,861 32,633
------------ ------------ ------------
NET INCOME (LOSS) (1,417,855) 183,056 1,077,312
RETAINED EARNINGS,
BEGINNING OF YEAR 2,686,072 3,253,016 2,175,704
LESS: DIVIDENDS PAID -- (750,000) --
------------ ------------ ------------
RETAINED EARNINGS,
END OF YEAR $ 1,268,217 $ 2,686,072 $ 3,253,016
============ ============ ============
See accompanying notes to financial statements.
-5-
Page 34 of 198
<PAGE>
<TABLE>
ALLIANCE RESEARCH CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows used in operating activities:
Net income (loss) $(1,417,855) $ 183,056 $ 1,077,312
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 321,659 283,473 309,019
Provision for losses and returns on
accounts receivable 1,142,718 553,000 (54,082)
Gain on sale of fixed assets (600) -- (1,000)
Changes in assets and liabilities:
Accounts receivable (1,326,089) (1,659,405) (45,464)
Tax refund receivable -- -- 27,227
Inventories (144,284) (991,593) (1,570,642)
Prepaid expenses 46,879 (206,569) (6,818)
Other assets 64,835 (346,485) (116,998)
Accounts payable, accrued interest
and other accrued expenses 543,168 1,357,967 483,517
Accrued salaries and commissions 109,591 (38,841) (21,538)
----------- ----------- -----------
Net cash provided by (used in)
operating activities (659,978) (865,397) 80,533
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of fixed assets 600 -- 1,000
Loan receivable, officer (243,982) -- --
Capital expenditures (269,544) (250,750) (56,654)
----------- ----------- -----------
Net cash used in investing activities (512,926) (250,750) (55,654)
----------- ----------- -----------
Cash flows from financing activities:
Payment of Dividends -- (750,000) --
Borrowings from notes -- 350,000 --
Repayment of note payable (75,000) -- --
Repayment of trust deed payable (51,904) (47,042) (42,635)
Net borrowings under line of credit 1,000,000 1,800,000 200,000
----------- ----------- -----------
Net cash provided by financing activities 873,096 1,352,958 157,365
----------- ----------- -----------
(continued on next page)
</TABLE>
See accompanying notes to financial statements.
-6-
Page 35 of 198
<PAGE>
<TABLE>
ALLIANCE RESEARCH CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
(CONTINUED):
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net increase (decrease) in cash and
cash equivalents $(299,808) $ 236,811 $ 182,244
Cash and cash equivalents at
beginning of year 657,803 420,992 238,748
--------- --------- ---------
Cash and cash equivalents at end of year $ 357,995 $ 657,803 $ 420,992
========= ========= =========
Supplemental disclosure of cash flow
information:
Interest paid $ 758,018 $ 675,490 $ 544,972
========= ========= =========
Income taxes paid $ 6,500 $ 27,861 $ 20,893
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
-7-
Page 36 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
--------
Alliance Research Corporation ("the Company") is a wholesale
distributor of electronic parts and accessories with customers
throughout the United States. In addition, the Company undertakes
research in connection with the development of its own products with
customers throughout the United States. The Company is organized into
divisions comprising cellular telephone antennas and accessories,
computer cables and inter-connect accessories, stereo and video
installation accessories and consumer electronic original and
replacement parts and accessories.
Cash Equivalents
----------------
Cash equivalents include short-term investments with original
maturities of 90 days or less.
Allowance For Sales Returns And Doubtful Accounts
-------------------------------------------------
The Company reduces gross sales by the amount of discounts and
returns to determine net sales. The Company estimates a reserve for
returns based on historical experience and the amount of gross sales.
The reserve is adjusted periodically to reflect the Company's actual
return experience. The Company provides allowances for doubtful
accounts receivable when it determines that such amounts are
uncollectible. Actual bad debt and sales return experience has been
in line with management's expectations. As of March 31, 1996 and
1995, the allowances are as follows:
March 31,
---------
1996 1995
---- ----
Doubtful accounts $ 570,111 $ 175,000
Sales returns 1,614,607 867,000
---------- ----------
$2,184,718 $1,042,000
========== ==========
Inventories
-----------
Inventories are stated at the lower of cost (determined on a weighted
average cost basis) or market. Market value is based upon net
realizable value. Appropriate consideration is given to
deterioration, obsolescence, and other factors in evaluating net
realizable value.
Property And Equipment
----------------------
Property and equipment are stated at cost. Major renewals and
improvements are capitalized while maintenance and repairs are
-8-
Page 37 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
expensed as incurred. Property and equipment are depreciated on the
straight-line and accelerated methods over the estimated useful lives
of the property as follows:
Assets Useful Life
------ -----------
Building and improvements 31.5-39 years
Machinery and equipment 5-7 years
Computer equipment 5 years
Furniture and fixtures 5-7 years
Interest and taxes have been capitalized in connection with the
construction of building improvements. The capitalized interest and
taxes are included in the cost of the building and are being
amortized over the building's estimated useful life.
Depreciation expense charged to operations was $321,659, $283,473,
and $309,019 for the years ended March 31, 1996, 1995, and 1994,
respectively.
Revenues
--------
Revenues are recognized upon shipment of product to customers.
Reclassifications
-----------------
Certain accounts in the March 31, 1995 and 1994, financial statements
were reclassified to be consistent with the current year presentation.
The reclassifications have no effect on net income previously reported.
Goodwill
--------
Goodwill consists of the excess of consideration paid over the fair
value of net assets acquired and is amortized on a straight-line
basis over 40 years. Goodwill of $299,188 and $320,985 at March 31,
1996 and 1995, respectively, is included in other assets with
accumulated amortization of $13,805 and $5,646 at March 31, 1996 and
1995, respectively. (NOTE 10)
Use Of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Advertising
-----------
Advertising costs are charged to operations when incurred.
-9-
Page 38 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
NOTE 2 - ELECTION OF S CORPORATION STATUS:
The Company, with the consent of its shareholders, elected S
corporation status effective April 1, 1987, for both federal and
state income tax purposes. In lieu of federal corporate income taxes,
the shareholders of an S corporation are taxed on their proportionate
share of the Company's taxable income. For state purposes, S
corporations are taxed at a rate of 1 1/2% of taxable income for the
years ended March 31, 1996 and 1995, and 2.5% for the year ended
March 31, 1994. Accordingly, a provision for state income taxes is
reflected in the accompanying statement of operations and retained
earnings.
In connection with the S corporation election, the Company also
elected to retain its fiscal year of March 31. According to Internal
Revenue Service regulations, to compensate the government for the tax
deferral obtained through the use of a taxable year other than the
required taxable year of December 31, the Company is obligated to
make an annual "required payment" on May 15. This payment is
considered a deposit and is refundable when there is no longer a tax
deferral resulting from the use of a fiscal year end other that
December 31. The amounts deposited as "required payments" for the
years ended March 31, 1996 and 1995, are $219,927 and $332,022,
respectively, and are reflected as part of prepaid expenses in the
accompanying balance sheet.
NOTE 3 -LOAN RECEIVABLE, OFFICER:
At March 31, 1996, the Company had advanced a total of $243,982 to
its officers/shareholders. This loan bears interest at a rate of
5.05% and it is expected to be repaid during the fiscal year ending
March 31, 1997. As of March 31, 1996, the Company had accrued
interest receivable on this loan in the amount of $20,080. Subsequent
to March 31, 1996, the Company made advances of an additional
$150,000 to its officers/shareholders. These advances are also
expected to be repaid during the fiscal year ending March 31, 1997.
NOTE 4 - NOTE PAYABLE, BANK:
At March 31, 1996 and 1995, the Company had a line of credit
available in the amount of $5,000,000. As of these dates, the Company
had drawn on the line of credit $4,000,000 and $3,000,000,
respectively. The line of credit is secured by all inventory,
equipment, and accounts receivable of the Company and are personally
guaranteed by the Company's officers/shareholders. The revolving line
of credit agreement is effective through October 31, 1996, and has
been extended to December 31, 1996. At the Company's election,
borrowings incur interest at the bank's prime rate (8.25% and 9.0% at
-10-
Page 39 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
NOTE 4 - NOTE PAYABLE, BANK (CONTINUED):
March 31, 1996 and 1995, respectively) or the Eurodollar rate (LIBOR)
plus 2.00%.
Under the line of credit facility, the Company is required to maintain
various covenants. These covenants include meeting certain tangible
net worth, debt to equity ratios, and certain restrictions on the
amount of capital expenditures, additional indebtedness, and the
payment of dividends. At March 31, 1996, and since then, the Company
has not been in compliance with various bank covenants relating to
tangible net worth and certain liquidity ratios. The bank has waived
all covenant violations and limited the amount to be drawn on the line
to $4,500,000. The Company is currently negotiating with lending
institutions for a total financing plan which would include retiring
the line of credit when it becomes due and payable.
In August 1996, the Company drew an additional $500,000 from their line
of credit.
NOTE 5 - LONG-TERM DEBT:
1996 1995
---- ----
Long-term debt consists of the following:
Trust deed payable, secured by certain real
estate, payable in monthly installments of
$43,418 including interest at 9.875% per
annum, due February 2019 $4,721,969 $4,773,873
Note payable to contractor of services,
unsecured, payable interest only accruing
at a rate of 7% per annum, due February 2001,
subordinated to the bank line of credit 1,374,200 1,374,200
Note payable to former contractor of services,
unsecured, payable interest only accruing at
a rate of 7% per annum, due February 2001,
subordinated to the bank line of credit 500,000 500,000
Note payable to contractor of services,
unsecured, payable interest only accruing at
a rate of 7% per annum, due June 2000,
subordinated to the bank line of credit 650,000 650,000
---------- ----------
7,246,169 7,298,073
Less: current portion 57,267 51,905
---------- ----------
$7,188,902 $7,246,168
========== ==========
-11-
Page 40 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
NOTE 5 - LONG-TERM DEBT (CONTINUED):
At March 31, 1996 and 1995, accrued interest on the subordinated
notes payable was $1,629,899 and $1,358,117, respectively. These
amounts have been included as part of accrued interest in the
accompanying balance sheets.
Maturities of long-term debt for the years subsequent to March 31,
1996, are as follows:
1997 $ 57,267
1998 63,186
1999 69,716
2000 76,920
2001 2,609,070
Thereafter 4,370,010
---------
$7,246,169
==========
NOTE 6 - INCOME TAXES:
A reconciliation of tax expense computed at California statutory
rates is as follows:
For The Year Ended March 31,
--------------------------------
1996 1995 1994
---- ---- ----
Pre-tax book income (loss) $(1,441,677) $ 210,917 $ 1,109,945
=========== =========== ===========
Statutory California tax
at 1.5% for 1996 and 1995,
respectively, and 2.5%
for 1994 800 3,164 27,749
Other (24,622) 24,697 4,884
----------- ----------- -----------
Total provision for taxes
(benefit) (23,822) $ 27,861 $ 32,633
=========== =========== ===========
For tax years beginning on or after January 1, 1994, the California
statutory rate changed from 2.5% to 1.5%.
-12-
Page 41 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
NOTE 7 - 401(K) PROFIT SHARING PLAN:
The Company has a defined contribution Profit Sharing 401(k) Savings
Plan which covers substantially all of its employees. The plan became
effective on January 1, 1992. Under the terms of the plan, employees
can elect to defer up to 20% of their wages, subject to certain IRS
limitations, by making voluntary contributions to the plan.
Additionally, the Company can, at its discretion, match 100% of the
voluntary contributions not to exceed $250. The Company has received
determination letters from the IRS indicating that the above plan is
qualified within the terms of the applicable provisions of ERISA.
For the years ended March 31, 1996, 1995, and 1994, the Company
contributed $11,006, $5,291, and $16,979, respectively, to the plan
on behalf of its employees.
NOTE 8 -MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
At March 31, 1996, approximately 41% of the trade accounts receivable
were represented by one customer. During the year ended March 31,
1996, approximately 37% of the net sales were represented by two
customers. At March 31, 1995, approximately 64% of the trade accounts
receivable were represented by two customers. During the year ended
March 31, 1995, approximately 21% of the net sales were represented
by one customer.
To reduce credit risk, the Company performs ongoing credit
evaluations of its customers financial conditions, but does not
generally require collateral.
The Company purchases substantially all of its inventory through a
foreign trading company. The trading company negotiates purchases
with various foreign manufacturing companies and remits payment to
these companies. The amount due to the trading company as of March
31, 1996 and 1995 was $1,217,982 and $964,000, respectively, and is
included in accounts payable. A major shareholder of the foreign
trading company is also the contractor of services (NOTE 5).
The Company maintains cash balances with two banks. The amounts on
deposit at one financial institution at March 31, 1996 and 1995,
exceeded the $100,000 federally insured limit. The Company is exposed
to credit loss for the amount in excess of the federally insured
limit in the event of nonperformance by the related financial
-13-
Page 42 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
institution. However, management does not anticipate nonperformance
by these financial institutions.
NOTE 9 - LOWER OF COST OR MARKET ADJUSTMENT:
Adjustments of $989,000 and $100,000 were made in the fiscal years
ended March 31, 1995 and 1994, respectively, to reflect inventory at
the lower of cost or market, as determined by management's estimates
of value below the Company's cost.
NOTE 10 - NOTES PAYABLE:
At March 31, 1995, the Company has unsecured notes payable bearing no
interest, totaling $350,000 to the former owners of a company
acquired in May 1994, due in May 1995. The note holders are currently
employed with the Company. In May 1995, the Company paid $75,000 of
the notes and amended the notes to bear interest at the annual rate
of 7.5% with the unpaid balance of $275,000 due in full in May 1996.
In April 1996, the Company paid off the remaining balance to the note
holders without any interest. Since the Company and the note holder
have mutually agreed to waive the interest portion of the note
payable, interest in these notes have been imputed at a rate of 7.5%
per annum, with a corresponding reduction in the value of goodwill
(NOTE 1).
NOTE 11 - CONTINGENCIES:
The Company is involved in certain legal proceedings which arise in
the ordinary course of its business. While any litigation contains an
element of uncertainty, management believes that the outcome of such
proceedings will not have a material adverse effect on the Company's
results of operations.
NOTE 12 - RESEARCH AND DEVELOPMENT EXPENSES:
Research and development expenses for the years ended March 31, 1996,
1995, and 1994 was approximately $76,572, $60,477, and $44,909,
respectively.
NOTE 13 - SUBSEQUENT EVENTS:
In June, 1996, the Company initiated preliminary discussions with
North American Energy of Delaware, Inc. ("North American Energy"), a
publicly-held company, regarding the possibility of a potential
merger with the Company. On September 13, 1996, North American Energy
filed a Plan of Reorganization with the United States Bankruptcy
-14-
Page 43 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED MARCH 31, 1996, 1995 AND 1994
Court whereby North American Energy would merge into a new
corporation, ORA Electronics, Inc. ("ORA"), a Delaware corporation.
Concurrent with this proposed transaction, the Company would also
merge its assets and liabilities into ORA and ORA would become the
surviving corporation of such a merger. The contemplated transaction
is structured as a tax-free exchange of stock and is scheduled
to be completed in December 1996, subject to approval by the United
States Bankruptcy Court and the existing creditors of North American
Energy. When the proposed transaction has been consummated, ORA would
become a public company subject to the reporting requirements of the
Securities Exchange Act of 1934.
-15-
Page 44 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIODS ENDED
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
Page 45 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
BALANCE SHEET
September 30,
1996 March 31,
(Unaudited) 1996
----------- ----------
ASSETS
Current assets:
Cash and cash equivalents (Note 1) $ 987,336 $ 357,995
Trade accounts receivable, less
allowances for sales returns and
doubtful accounts (Note 1) 2,869,689 3,333,820
Inventories (Note 1) 6,289,950 5,812,730
Loan receivable, officer (Note 3) 474,836 243,982
Prepaid expenses (Note 2) 350,876 448,115
------------ ------------
Total current assets 10,972,687 10,196,642
Property and equipment, less accumulated
depreciation (Note 4) 6,466,953 6,569,698
Other assets (Note 1) 341,093 362,603
------------ ------------
Total assets $ 17,780,733 $ 17,128,943
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
(Note 6) $ 29,338 $ 57,267
Note payable to bank (Note 5) 4,500,000 4,000,000
Accounts payable 3,300,264 1,838,641
Accrued interest (Note 6) 1,783,631 1,674,960
Other accrued expenses 1,859,543 815,956
Note payable (Note 7) 0 275,000
------------ ------------
Total current liabilities 11,472,776 8,661,824
Long-term debt (Note 6) 7,186,602 7,188,902
------------ ------------
Total liabilities 18,659,378 15,850,726
------------ ------------
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock $10 par value; authorized
25,000 shares; issued and outstanding
1,000 shares 10,000 10,000
Retained earnings (deficit) (888,645) 1,268,217
------------ ------------
Total stockholders' equity (878,645) 1,278,217
------------ ------------
Total liabilities and
stockholders' equity $ 17,780,733 $ 17,128,943
============ ============
See Accompanying notes to financial statements
-2-
Page 46 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED SEPTEMBER 30,
(Unaudited)
1996 1995
------------ ------------
Net sales $ 8,200,208 $ 11,504,592
Cost of goods sold 6,189,650 8,083,543
------------ ------------
Gross profit 2,010,558 3,421,049
------------ ------------
Operating expenses:
Selling and shipping expenses 1,528,435 1,760,984
General and administrative expenses 2,164,075 2,225,258
------------ ------------
Total operating expenses 3,692,510 3,986,242
------------ ------------
Operating income (loss) (1,681,952) (565,193)
Interest expense 474,910 288,547
------------ ------------
Net income (loss) (2,156,862) (853,740)
Retained earnings, beginning of period 1,268,217 2,686,072
------------ ------------
Retained earnings (deficit), end of period ($ 888,645) $ 1,832,332
============ ============
See Accompanying notes to financial statements
-3-
Page 47 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30,
(Unaudited)
1996 1995
---------- ----------
Cash flows from operating activities:
Net income (loss) ($2,156,862) ($ 853,740)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating
activities:
Depreciation and amortization 179,772 161,674
Provision for losses and sales returns 789,723 1,195,606
Changes in assets and liabilities:
Accounts receivable 2,487,142 (2,351,485)
Inventories (477,220) 1,749,167
Loan receivable, officer (230,854) (409,892)
Prepaid expenses 97,239 85,102
Accounts payable (1,361,123) (437,602)
Accrued interest 28,665 (40,119)
Other accrued expenses 1,123,613 624,264
----------- -----------
Net cash provided by (used in)
operating activities 480,095 (277,025)
----------- -----------
Cash flows from investing activities:
Capital expenditures (45,524) (54,652)
----------- -----------
Cash flows from financing activities:
Repayment of note payable (275,000) (75,000)
Repayment of trust deed payable (30,230) (25,314)
Net borrowings under line of credit 500,000 0
----------- -----------
Net cash provided (used in)
by financing activities 194,770 (100,314)
----------- -----------
Net increase (decrease) in cash
and cash equivalents 629,341 (431,991)
Cash and cash equivalents at beginning of period 357,995 657,803
----------- -----------
Cash and cash equivalents at end of period $ 987,336 $ 225,812
=========== ===========
Supplemental disclosure of cash flow information
Interest paid $ 474,910 $ 288,547
=========== ===========
Income taxes paid $ 0 $ 0
=========== ===========
See Accompanying notes to financial statements
-4-
Page 48 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
- --------
Alliance Research Corporation (the "Company") is a wholesale distributor of
electronic parts and accessories with customers throughout the United
States. In addition, the Company undertakes research in connection with the
development of its own products with customers throughout the United
States. The Company is organized into divisions comprised of cellular
telephone antennas and accessories, computer cables and inter-connect
accessories, stereo and video installation accessories and consumer
electronic original and replacement parts and accessories.
Cash Equivalents
- ----------------
Cash equivalents include short-term investments with original maturities of
90 days or less.
Allowance for Sales Returns and Doubtful Accounts
- -------------------------------------------------
The Company reduces gross sales by the amount of discounts and returns to
determine net sales. The Company estimates a reserve for returns based on
historical experience and the amount of gross sales. The reserve is
adjusted periodically to reflect the Company's actual return experience.
The Company provides allowances for doubtful accounts receivable when it
determines that such amounts are uncollectible. Actual bad debt and sales
return experience has been in line with management's expectations. The
allowances are as follows at the following dates:
September 30 March 31
1996 1996
------------ --------
Doubtful accounts $ 400,000 $ 570,111
Sales returns 1,514,471 1,614,607
---------- ----------
$1,914,471 $2,184,718
========== ==========
Inventories
- -----------
Inventories are stated at the lower of cost (determined on a weighted
average cost basis) or market. Market value is based upon net realizable
value. Appropriate consideration is given to deterioration, obsolescence,
and other factors in evaluating net realizable value.
Revenues
- --------
Revenues are recognized upon shipment of product to customers.
-5-
Page 49 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Goodwill
- --------
Goodwill consists of the excess of consideration paid over the fair value
of net assets acquired and is amortized on a straight-line basis against
income over 40 years. Goodwill of $299,843 and $299,188 at September 30,
1996 and March 31, 1996 is included in other assets with accumulated
amortization of $17,935 and $13,805 at September 30, 1996 and March 31,
1996.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affects certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Concentration of Credit Risk
- ----------------------------
The Company maintains cash balances with two banks. The amounts on deposit
at one financial institution exceeds the $100,000 federally insured limit.
Advertising
- -----------
Advertising costs are charged to operations when incurred.
NOTE 2 - ELECTION OF S CORPORATION STATUS:
The Company, with the consent of its shareholders, has elected S
corporation status effective April 1, 1987 for both federal and state
income tax purposes. In lieu of federal corporate income taxes, the
shareholders of an S corporation are taxed on their proportionate share of
the Company's taxable income. For state purposes, S corporations are taxed
at a rate of 1 1/2% of taxable income. A provision for state income taxes
is reflected in the accompanying statement of income and retained earnings.
In connection with the S corporation election, the Company also elected to
retain its fiscal year end of March 31. According to Internal Revenue
Service regulations, to compensate the government for the tax deferral
obtained through the use of a taxable year end other than the required
taxable year end of December 31, the Company is obligated to make an annual
"required payment" on May 15. This payment is considered a deposit and is
refundable when there is no longer a tax deferral resulting from the use of
-6-
Page 50 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
a fiscal year end other than December 31. The amounts deposited as
"required payment" for the year ended March 31, 1996 is $219,927, and is
reflected as part of prepaid expenses in the accompanying balance sheet.
NOTE 3 - LOAN RECEIVABLE, OFFICER:
This loan bears interest at a rate of 5.05% and it is expected to be repaid
during the fiscal year ending March 31, 1997.
NOTE 4 - PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Major renewals and improvements
are capitalized while maintenance and repairs are expensed as incurred.
Interest and taxes have been capitalized in connection with the
construction of building improvements. The capitalized interest and taxes
are included in the cost of the building and are being depreciated over the
building's estimated useful life. Property and equipment are depreciated on
the straight-line and accelerated methods over the estimated useful lives
of the property as follows:
Useful Life September 30, March 31,
Assets In Years 1996 1996
- ------ ------------ ------------- ---------
Land $2,900,000 $2,900,000
Building and improvements 31.5 - 39 4,161,669 4,161,669
Machinery and equipment 5 - 7 779,212 744,061
Computer equipment 5 665,699 645,327
Furniture and fixtures 5 - 7 491,534 491,534
---------- ----------
8,998,114 8,942,591
Less accumulated depreciation 2,531,161 2,372,893
---------- ----------
Net property and equipment $6,466,953 $6,569,698
========== ==========
NOTE 5 - NOTE PAYABLE BANK:
The Company has a line of credit available in the amount of $4,500,000. The
line of credit is secured by all inventory, equipment and accounts
receivable of the Company and is personally guaranteed by the Company's
officers/shareholders. Borrowings on the line of credit incur interest at
the bank's prime rate of 8.25%.
-7-
Page 51 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Under the line of credit facility, the Company is required to maintain
various covenants. These covenants include meeting certain tangible net
worth and debt to equity ratios and restrict the amount of capital
expenditure, additional indebtedness and the payment of dividends.
The Company is negotiating with lending institutions for a total financing
plan which would include retiring the line of credit.
NOTE 6 - LONG-TERM DEBT:
September 30, March 31,
1996 1996
------------- ---------
Long-term debt consists of the following:
Trust deed payable, secured by certain
real estate, payable in monthly installments
of $43,418 including interest at 9.875% per
annum, due February 2019 $4,691,740 $4,721,969
Note payable to contractor of services,
unsecured, payable interest only accruing
at a rate of 7% due February 2001,
subordinated to the bank line of credit 1,374,200 1,374,200
Note payable to former contractor of services,
unsecured, payable interest only accruing at
a rate of 7% per annum due February 2001,
subordinated to the bank line of credit 500,000 500,000
Note payable to contractor of services,
unsecured, payable interest only accruing
at a rate of 7% per annum due June 2000,
subordinated to the bank line of credit 650,000 650,000
---------- ----------
7,215,940 7,246,169
Less: current portion 29,338 57,267
---------- ----------
$7,186,602 $7,188,902
========== ==========
Accrued interest on the subordinated notes payable are reported as accrued
interest in the financial statements.
-8-
Page 52 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Maturities of long-term debt for the years subsequent to March 31, 1996 are
as follows:
1997 57,267
1998 63,186
1999 69,716
2000 76,920
2001 2,609,070
Thereafter 4,370,010
---------
$7,246,169
==========
NOTE 7 - NOTES PAYABLE:
Notes payable bearing no interest are to the former owners of a Company
acquired in May 1994. In April 1996, the Company paid off the remaining
balance to the note holders without any interest. Since the Company and the
note holder have mutually agreed to waive the interest portion of the note
payable, interest in these notes have been imputed at a rate of 7.5% per
annum, with a corresponding reduction in the value of goodwill (NOTE 1).
NOTE 8 - 401(k) PROFIT SHARING PLAN:
The Company has a defined contribution Profit Sharing 401(k) Savings Plan
which covers substantially all of its employees. The Plan became effective
on January 1, 1992. Under the terms of the Plan, employees can elect to
defer up to 20% of their wages, subject to certain IRS limitations, by
making voluntary contributions to the Plan. Additionally, the Company can,
at its discretion, match 100% of the voluntary employee contributions not
to exceed $250. The Company has received determination letters from the IRS
indicating that the above Plan is qualified within the terms of the
applicable provisions of ERISA.
NOTE 9 - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
At September 30, 1996, approximately 66.3% of the trade accounts receivable
were represented by three customers and at March 31, 1996 approximately
41.0% of the trade accounts receivable were represented by one customer.
For the six months ended September 30, 1996, two customers accounted for
approximately 53.8% of the Company's net sales and for the fiscal year
ended March 31, 1996, two customers accounted for approximately 37.0% of
the Company's net sales.
To reduce credit risk, the Company performs ongoing credit evaluations of
its customers financial conditions but does not generally require
collateral.
-9-
Page 53 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The Company purchases substantially all of its inventory through a foreign
trading company. The trading company negotiates purchases with various
foreign manufacturing companies and remits payment to these companies.
NOTE 10 - CONTINGENCIES:
The Company is involved in legal proceedings which arise in the ordinary
course of its business. While any litigation contains an element of
uncertainty, management believes that the outcome of such proceedings will
not have a material adverse effect on the Company's results of operations.
NOTE 11 - RESEARCH AND DEVELOPMENT EXPENSES:
Research and development expenditures are expensed as incurred and are
included in general and administrative expenses.
The total research and development costs for new products for the six
months ended September 30, 1996 and 1995 were approximately $330,000 and
$325,000 respectively, including $45,000 and $40,000 of purchased materials
that do not have alternative future uses.
NOTE 12 - SUBSEQUENT EVENT:
In June 1996, the Company initiated preliminary discussions with North
American Energy of Delaware, Inc. ("North American Energy"), a
publicly-held company, regarding the possibility of a potential merger with
the Company. On September 13, 1996, North American Energy filed a Plan of
Reorganization with the United States Bankruptcy Court whereby North
American Energy would merge into a new corporation, ORA Electronics, Inc.
("ORA"), a Delaware corporation. Concurrent with this proposed transaction,
the Company would also merge its assets and liabilities into ORA and ORA
would become the surviving corporation of such a merger. The contemplated
transaction is structured as a tax-free exchange of stock and is scheduled
to be completed in December 1996, subject to approval by the United States
Bankruptcy Court and the existing creditors of North American Energy. When
the proposed transaction has been consummated, ORA would become a public
company subject to the reporting requirements of the Securities Exchange
Act of 1934.
-10-
Page 54 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
PRO FORMA FINANCIAL STATEMENTS
FOR THE SIX MONTH PERIOD ENDED
SEPTEMBER 30, 1996
Page 55 of 198
<PAGE>
<TABLE>
ALLIANCE RESEARCH CORPORATION
PRO FORMA BALANCE SHEET -- SEPTEMBER 30, 1996
<CAPTION>
Historical Pro Forma Pro Forma
(Unaudited) Adjustments (Unaudited)
----------- ----------- -----------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents (Note 1) $ 987,336 $ 0 $ 987,336
Trade accounts receivable, less allowances
for sales returns and doubtful accounts of
$1,914,471 (Note 1) 2,869,689 0 2,869,689
Inventories (Note 1) 6,289,950 0 6,289,950
Loan receivable, officer (Note 3) 474,836 0 474,836
Prepaid expenses (Note 2) 350,876 0 350,876
------------ ------------ ------------
Total current assets 10,972,687 0 10,972,687
Property and equipment, less accumulated
depreciation (Note 4) 6,466,953 0 6,466,953
Other assets (Note 1) 341,093 0 341,093
------------ ------------ ------------
Total assets $ 17,780,733 $ 0 $ 17,780,733
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 6) $ 29,338 $ 0 $ 29,338
Note payable to bank (Note 5) 4,500,000 0 4,500,000
Accounts payable (Note 15) 3,300,264 (1,500,000) 1,800,264
Accrued interest (Notes 6 and 14) 1,783,631 (1,776,831) 6,800
Other accrued expenses 1,859,543 0 1,859,543
Note payable (Note 7) 0 0 0
------------ ------------ ------------
Total current liabilities 11,472,776 (3,276,831) 8,195,945
Long-term debt (Note 6) 7,186,602 (2,524,200) 4,662,402
------------ ------------ ------------
Total liabilities 18,659,378 (5,801,031) 12,858,347
------------ ------------ ------------
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock $.001 par value; authorized
30,000,000 shares; issued and outstanding
6,684,200 shares (Note 13) 10,000 (3,318) 6,682
Preferred stock $.001 par value; authorized
5,000,000 issued and outstanding 0 shares 0 0 0
Paid in capital in excess of par (Notes 13,
14 and 15) 0 5,804,349 5,804,349
Retained earnings (deficit) (888,645) 0 (888,645)
------------ ------------
Total stockholders' equity (878,645) 5,801,031 4,922,386
------------ ------------ ------------
Total liabilities and stockholders' equity $ 17,780,733 $ 0 $ 17,780,733
============ ============ ============
</TABLE>
See Accompanying notes to financial statements
-2-
Page 56 of 198
<PAGE>
<TABLE>
ALLIANCE RESEARCH CORPORATION
PRO FORMA STATEMENT OF LOSS AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996 AND THE YEAR ENDED MARCH 31, 1996
<CAPTION>
Historical Pro Forma
Six Months Ended Six Months Ended Historical
September 30, 1996 Pro Forma September 30, 1996 Year Ended
(Unaudited) Adjustments (Unaudited) March 31, 1996
<S> <C> <C> <C> <C>
Net sales $ 8,200,208 $ 0 $ 8,200,208 $ 24,110,436
Cost of goods sold 6,189,650 0 6,189,650 15,354,206
----------- ----------- -----------
Gross profit 2,010,558 0 2,010,558 8,756,230
----------- ----------- -----------
Operating expenses:
Selling and shipping expenses 1,528,435 0 1,528,435 3,997,970
General and administrative expenses 2,164,075 0 2,164,075 5,202,191
----------- ----------- -----------
Total operating expenses 3,692,510 0 3,692,510 9,200,161
----------- ----------- -----------
Operating income (loss) (1,681,952) 0 (1,681,952) (443,931)
Interest expense 474,910 0 474,910 997,746
----------- ----------- -----------
Income (loss) before income taxes (2,156,862) 0 (2,156,862) (1,441,677)
Provision for tax benefit 0 0 0 (23,822)
----------- ----------- -----------
Net loss (2,156,862) 0 (2,156,862) (1,417,855)
Retained earnings, beginning of period 1,268,217 0 1,268,217 2,686,072
----------- ----------- -----------
Retained earnings (deficit), end of period ($ 888,645) $ 0 ($ 888,645) $ 1,268,217
=========== =========== ===========
Pro forma per share information:
Net loss ($ 2,156,862) $ 0 ($ 2,156,862) ($ 1,417,855)
Net income (loss) per share $ (2,156.86) $ 2,156.54 ($ 0.32) ($ 1,417.86)
Number of shares outstanding 1,000 6,683,200 6,684,200 1,000
(Notes 13, 14 and 15)
</TABLE>
See Accompanying notes to financial statements
-3-
Page 57 of 198
<PAGE>
<TABLE>
ALLIANCE RESEARCH CORPORATION
PRO FORMA STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
<CAPTION>
Historical Pro Forma Pro Forma
(Unaudited) Adjustments (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ($2,156,862) $ 0 ($2,156,862)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 179,772 0 179,772
Provision for losses and sales returns 789,723 0 789,723
Changes in assets and liabilities:
Accounts receivable 2,487,142 0 2,487,142
Inventories (477,220) 0 (477,220)
Loan receivable, officer (230,854) 0 (230,854)
Prepaid expenses 97,239 0 97,239
Accounts payable (1,361,123) 0 (1,361,123)
Accrued interest 28,665 0 28,665
Other accrued expenses 1,123,613 0 1,123,613
----------- ----------- -----------
Net cash provided by (used in)
operating activities 480,095 0 480,095
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures (45,524) 0 (45,524)
Cash flows from financing activities:
Repayment of note payable (275,000) 0 (275,000)
Repayment of trust deed payable (30,230) 0 (30,230)
Net borrowings under line of credit 500,000 0 500,000
----------- ----------- -----------
Net cash provided (used in)
by financing activities 194,770 0 194,770
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 629,341 0 629,341
Cash and cash equivalents at beginning of period 357,995 0 357,995
----------- ----------- -----------
Cash and cash equivalents at
end of period $ 987,336 $ 0 $ 987,336
=========== =========== ===========
Supplemental disclosure of cash flow information
Interest paid $ 474,910 $ 0 $ 474,910
=========== =========== ===========
Income taxes paid $ 0 $ 0 $ 0
=========== =========== ===========
</TABLE>
See Accompanying notes to financial statements
-4-
Page 58 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
- --------
Alliance Research Corporation (the "Company") is a wholesale distributor of
electronic parts and accessories with customers throughout the United
States. In addition, the Company undertakes research in connection with the
development of its own products with customers throughout the United
States. The Company is organized into divisions comprised of cellular
telephone antennas and accessories, computer cables and inter-connect
accessories, stereo and video installation accessories and consumer
electronic original and replacement parts and accessories.
Cash Equivalents
- ----------------
Cash equivalents include short-term investments with original maturities of
90 days or less.
Allowance for Sales Returns and Doubtful Accounts
- -------------------------------------------------
The Company reduces gross sales by the amount of discounts and returns to
determine net sales. The Company estimates a reserve for returns based on
historical experience and the amount of gross sales. The reserve is
adjusted periodically to reflect the Company's actual return experience.
The Company provides allowances for doubtful accounts receivable when it
determines that such amounts are uncollectible. Actual bad debt and sales
return experience has been in line with management's expectations. The
allowances are as follows at the following dates:
September 30, March 31,
1996 1996
------------- ---------
Doubtful accounts $ 400,000 $ 570,111
Sales returns 1,514,471 1,614,607
---------- ----------
$1,914,471 $2,184,718
========== ==========
Inventories
- -----------
Inventories are stated at the lower of cost (determined on a weighted
average cost basis) or market. Market value is based upon net realizable
value. Appropriate consideration is given to deterioration, obsolescence,
and other factors in evaluating net realizable value.
Revenues
- --------
Revenues are recognized upon shipment of product to customers.
-5-
Page 59 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
Goodwill
- --------
Goodwill consists of the excess of consideration paid over the fair value
of net assets acquired and is amortized on a straight-line basis against
income over 40 years. Goodwill of $299,843 and $299,188 at September 30,
1996 and March 31, 1996 is included in other assets with accumulated
amortization of $17,935 and $13,805 at September 30, 1996 and March 31,
1996.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affects certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Concentration of Credit Risk
- ----------------------------
The Company maintains cash balances with two banks. The amounts on deposit
at one financial institution exceeds the $100,000 federally insured limit.
Advertising
- -----------
Advertising costs are charged to operations when incurred.
NOTE 2 - ELECTION OF S CORPORATION STATUS:
The Company, with the consent of its shareholders, has elected S
corporation status effective April 1, 1987 for both federal and state
income tax purposes. In lieu of federal corporate income taxes, the
shareholders of an S corporation are taxed on their proportionate share of
the Company's taxable income. For state purposes, S corporations are taxed
at a rate of 1 1/2% of taxable income. A provision for state income taxes
is reflected in the accompanying statement of income and retained earnings.
In connection with the S corporation election, the Company also elected to
retain its fiscal year end of March 31. According to Internal Revenue
Service regulations, to compensate the government for the tax deferral
obtained through the use of a taxable year end other than the required
taxable year end of December 31, the Company is obligated to make an annual
"required payment" on May 15. This payment is considered a deposit and is
refundable when there is no longer a tax deferral resulting from the use of
a fiscal year end other than December 31. The amounts deposited as
"required payment" for the year ended March 31, 1996 is $219,927, and is
reflected as part of prepaid expenses in the accompanying balance sheet.
-6-
Page 60 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
Upon completion of the merger with North American Energy of Delaware, Inc.
the company's S corporation status will automatically terminate.
NOTE 3 - LOAN RECEIVABLE, OFFICER:
This loan bears interest at a rate of 5.05% and it is expected to be repaid
during the fiscal year ending March 31, 1997.
NOTE 4 - PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Major renewals and improvements
are capitalized while maintenance and repairs are expensed as incurred.
Interest and taxes have been capitalized in connection with the
construction of building improvements. The capitalized interest and taxes
are included in the cost of the building and are being depreciated over the
building's estimated useful life. Property and equipment are depreciated on
the straight-line and accelerated methods over the estimated useful lives
of the property as follows:
Useful Life September 30, March 31,
Assets In Years 1996 1996
- ------ ------------ ------------- ----------
Land $2,900,000 $2,900,000
Building and improvements 31.5 - 39 4,161,669 4,161,669
Machinery and equipment 5 - 7 779,212 744,061
Computer equipment 5 665,699 645,327
Furniture and fixtures 5 - 7 491,534 491,534
---------- ----------
8,998,114 8,942,591
Less accumulated depreciation 2,531,161 2,372,893
---------- ----------
Net property and equipment $6,466,953 $6,569,698
========== ==========
NOTE 5 - NOTE PAYABLE BANK:
The Company has a line of credit available in the amount of $4,500,000. The
line of credit is secured by all inventory, equipment and accounts
receivable of the Company and is personally guaranteed by the Company's
officers/shareholders. Borrowings on the line of credit incur interest at
the bank's prime rate of 8.25%.
-7-
Page 61 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
Under the line of credit facility, the Company is required to maintain
various covenants. These covenants include meeting certain tangible net
worth and debt to equity ratios and restrict the amount of capital
expenditure, additional indebtedness and the payment of dividends.
The Company is negotiating with lending institutions for a total financing
plan which would include retiring the line of credit.
NOTE 6 - LONG-TERM DEBT:
September 30, March 31,
1996 1996
------------- ---------
Long-term debt consists of the following:
Trust deed payable, secured by certain real
estate, payable in monthly installments of
$43,418 including interest at 9.875% per annum,
due February 2019 $4,691,740 $4,721,969
Note payable to contractor of services,
unsecured, payable interest only accruing at
a rate of 7% due February 2001, subordinated
to the bank line of credit 1,374,200 1,374,200
Note payable to former contractor of services,
unsecured, payable interest only accruing at
a rate of 7% per annum due February 2001,
subordinated to the bank line of credit 500,000 500,000
Note payable to contractor of services,
unsecured, payable interest only accruing at
a rate of 7% per annum due June 2000,
subordinated to the bank line of credit 650,000 650,000
---------- ----------
7,215,940 7,246,169
Less: current portion 29,338 57,267
---------- ----------
$7,186,602 $7,188,902
========== ==========
-8-
Page 62 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
Accrued interest on the subordinated notes payable are reported as accrued
interest in the financial statements.
Maturities of long-term debt for the years subsequent to March 31, 1996 are
as follows:
1997 57,267
1998 63,186
1999 69,716
2000 76,920
2001 2,609,070
Thereafter 4,370,010
-----------
$7,246,169
==========
NOTE 7 - NOTES PAYABLE:
Notes payable bearing no interest are to the former owners of a Company
acquired in May 1994. In April 1996, the Company paid off the remaining
balance to the note holders without any interest. Since the Company and the
note holder have mutually agreed to waive the interest portion of the note
payable, interest in these notes have been imputed at a rate of 7.5% per
annum, with a corresponding reduction in the value of goodwill (NOTE 1).
NOTE 8 - 401(k) PROFIT SHARING PLAN:
The Company has a defined contribution Profit Sharing 401(k) Savings Plan
which covers substantially all of its employees. The Plan became effective
on January 1, 1992. Under the terms of the Plan, employees can elect to
defer up to 20% of their wages, subject to certain IRS limitations, by
making voluntary contributions to the Plan. Additionally, the Company can,
at its discretion, match 100% of the voluntary employee contributions not
to exceed $250. The Company has received determination letters from the IRS
indicating that the above Plan is qualified within the terms of the
applicable provisions of ERISA.
NOTE 9 - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK:
At September 30, 1996, approximately 66.3% of the trade accounts receivable
were represented by three customers and at March 31, 1996 approximately
41.0% of the trade accounts receivable were represented by one customer.
For the six months ended September 30, 1996, two customers accounted for
approximately 53.8% of the Company's net sales and for the fiscal year
ended March 31, 1996, two customers accounted for approximately 37.0% of
the Company's net sales.
-9-
Page 63 of 198
<PAGE>
ALLIANCE RESEARCH CORPORATION
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
To reduce credit risk, the Company performs ongoing credit evaluations of
its customers financial conditions but does not generally require
collateral.
The Company purchases substantially all of its inventory through a foreign
trading company. The trading company negotiates purchases with various
foreign manufacturing companies and remits payment to these companies.
NOTE 10 - CONTINGENCIES:
The Company is involved in legal proceedings which arise in the ordinary
course of its business. While any litigation contains an element of
uncertainty, based upon the opinion of the Company's counsel, management
believes that the outcome of such proceedings will not have a material
adverse effect on the Company's results of operations.
NOTE 11 - RESEARCH AND DEVELOPMENT EXPENSES:
Research and development expenditures are expensed as incurred and are
included in general and administrative expenses.
The total research and development costs for new products for the six
months ended September 30, 1996 and 1995 were approximately $330,000 and
$325,000 respectively, including $45,000 and $40,000 of purchased materials
that do not have alternative future uses.
NOTE 12 - SUBSEQUENT EVENT:
In June 1996, the Company initiated preliminary discussions with North
American Energy of Delaware, Inc. ("North American Energy"), a
publicly-held company, regarding the possibility of a potential merger with
the Company. On September 13, 1996, North American Energy filed a Plan of
Reorganization with the United States Bankruptcy Court whereby North
American Energy would merge into a new corporation, ORA Electronics, Inc.
("ORA"), a Delaware corporation. Concurrent with this proposed transaction,
the Company would also merge its assets and liabilities into ORA and ORA
would become the surviving corporation of such a merger. The contemplated
transaction is structured as a tax-free exchange of stock and is scheduled
to be completed in December 1996, subject to approval by the United States
Bankruptcy Court and the existing creditors of North American Energy. When
the proposed transaction has been consummated, ORA would become a public
company subject to the reporting requirements of the Securities Exchange
Act of 1934.
-10-
Page 64 of 198
<PAGE>
NOTE 13- PRO FORMA ADJUSTMENT - CAPITALIZATION SUBSEQUENT TO MERGER
The Stockholders' equity section of the pro forma Balance Sheet reflects
the capitalization structure agreed to in the Plan of Reorganization as if
the merger with North American Energy of Delaware, Inc. had been completed
on September 30, 1996. The issued and outstanding shares include 5,000,000
shares issued to the sole shareholder of Alliance Research Corporation and
approximately 350,000 shares issued to creditors and other parties in
interest of North American Energy, including an estimated 100,000 shares
used to round up certain odd lot holdings to the next highest round lot.
Also included are 160,556 shares issued to a financial consultant in
consideration for financial advisory services rendered to the Company with
respect to the merger transaction (Note 12).
NOTE 14 - PRO FORMA ADJUSTMENT - CONVERSION OF LONG-TERM DEBT
The pro forma Balance Sheet at September 30, 1996 reflects an agreement
between a Long-term debt holder and Alliance Research Corporation to
convert $2,524,200 of principal and $1,776,831 of accrued interest to
860,207 shares of common stock of the post merger company. Interest accrues
at the rate of $846.07 per day subsequent to September 30, 1996 requiring
additional shares to be issued to cover the period between September 30,
1996 and the date of the merger.
NOTE 15 - PRO FORMA ADJUSTMENT - CONVERSION OF TRADE CREDIT
The pro forma Balance Sheet at September 30, 1996 reflects an agreement
between a trade creditor and Alliance Research Corporation to convert
$1,500,000 of trade accounts payable to 300,000 shares of common stock of
the post merger company. Accounts payable and Stockholders' equity have
been adjusted accordingly.
-11-
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<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ---------------------------------------------------------------------------
2.2 Agreement and Plan of Merger between
ORA Electronics, Inc., a Delaware
corporation, and North American Energy
of Delaware, Inc., a Delaware orporation,
dated December 20, 1996 67
3.1 Restated Certificate of Incorporation
of Ora Electronics, Inc. 72
3.2 Bylaws of Ora Electronics, Inc. 78
4.1 Specimen Common Stock Certificate
of ORA Electronics, Inc. 109
4.2 Specimen Class A Warrant Certificate 112
4.3 Specimen Class B Warrant Certificate 117
4.4 Specimen Class C Warrant Certificate 122
4.5 Specimen Class D Warrant Certificate 127
4.6 Warrant Agreement between Ora Electronics,
Inc. and Continental Stock Transfer and
Trust Company, dated as of December 20, 1996 132
23.1 Independent Auditors' Consent of
Tanner, Mainstain & Hoffer 149
23.2 Independent Auditors' Consent of
Richard & Hedrick 150
99.1 Letter Agreement dated as of December 19,
1996 between ORA Electronics, Inc. and DLS
Financial Services, Inc. 151
99.2 Registration Rights Agreement between
Ora Electronics, Inc. and The Cooper
Family Living Trust, dated as of
December 20, 1996 180
27 Financial Data Schedule 198
Page 66 of 198
<PAGE>
EXHIBIT 2.2
-----------
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is
entered into as of December 20, 1996, between NORTH AMERICAN ENERGY OF
DELAWARE, INC., a Delaware corporation ("North American"), and ORA
ELECTRONICS, INC., a Delaware corporation ("ORA"). North American and ORA
are sometimes referred to herein as the "Constituent Corporations."
The authorized capital stock of North American consists of
15,000,000 shares of Common Stock, $0.01 par value. The authorized capital
stock of ORA consists of 30,000,000 shares of Common Stock, $.001 par
value, and 5,000,000 shares of Preferred Stock, $.001 par value.
The directors of the Constituent Corporations deem it advisable and
to the advantage of these corporations that North American merge into ORA upon
the terms and conditions contained herein.
NOW, THEREFORE, the parties hereby adopt the plan of merger
encompassed by this Merger Agreement and hereby agree that North American shall
merge into ORA as herein provided.
SECTION 1.
TERMS AND CONDITIONS
1.1 MERGER. Subject to compliance with all applicable laws and to
the terms and conditions of this Merger Agreement, North American shall be
merged with and into ORA, and ORA shall be the surviving corporation (the
"Surviving Corporation"), effective as of the date when this Merger Agreement is
filed with the Secretary of State of the State of Delaware (the "Effective
Date").
1.2 SUCCESSION. On the Effective Date, ORA shall succeed to all of
the rights, privileges, powers and property, including, without limitation, all
rights, privileges, franchises, patents, trademarks, licenses, registrations and
other assets of every kind and description, of North American, in the manner of
and as more fully set forth in Section 259(a) of the General Corporation Law of
the State of Delaware.
1.3 STOCK OF NORTH AMERICAN AND ORA. Upon the Effective Date, by
virtue of the merger and without any further action on the part of the
Constituent Corporations or their stockholders, each share of North American
Common Stock issued and outstanding immediately prior to the Effective Date
shall be changed and converted into and become (a) .01379 fully paid and
nonassessable shares of the Common Stock of ORA, (b) .02752 Class A Warrants,
(c) .03770 Class B Warrants, (d) .03261 Class C Warrants and (e) .04290 Class D
Warrants, rounded down to the nearest whole number. In addition, each North
American stockholder of record on August 19, 1996 (the "Record Date")
Page 1
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<PAGE>
(including beneficial owners of shares held by nominees), who surrenders
certificates to ORA representing all of the shares of North American Common
Stock held by such stockholder on such Record Date for conversion under
Section 1.4 shall be entitled to an additional number of shares of ORA
Common Stock and Class A, B, C and D Warrants to the extent necessary to
ensure that the total number of shares of ORA Common Stock and each of
Class A, B, C and D Warrants received by such qualifying North American
stockholder is equal to a multiple of 100. All shares of ORA Common Stock
and Class A Warrants, Class B Warrants, Class C Warrants and Class D
Warrants issued pursuant to the merger shall be rounded down to the nearest
whole number and no fractional shares will be issued, and no cash in lieu
of fractional shares will be paid, in connection therewith.
1.4 STOCK CERTIFICATES. On and after the Effective Date, all of the
outstanding certificates that prior to that time represented shares of the
Common Stock of North American shall be deemed for all purposes to evidence
ownership of and to represent the shares of ORA and Class A, B, C and D Warrants
into which the shares of North American represented by such certificates have
been converted as herein provided and shall be so registered on the books and
records of ORA or its transfer agents. The registered owner of any such
outstanding stock certificate shall, until such certificate shall have been
surrendered for transfer or conversion or otherwise accounted for to ORA or its
transfer agent, have and be entitled to exercise any voting and other rights
with respect to and to receive any dividend and other distributions upon the
shares of ORA evidenced by such outstanding certificate as provided above.
SECTION 2.
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and Bylaws of ORA as in effect immediately prior to the Effective
Date shall remain the Certificate of Incorporation and Bylaws of ORA after the
Effective Date.
2.2 DIRECTORS AND OFFICERS. The directors and officers of ORA
immediately prior to the Effective Date shall remain the directors and officers
of ORA after the Effective Date.
SECTION 3.
MISCELLANEOUS
3.1 FURTHER ASSURANCES. From time to time, and when required by ORA
or by its successors and assigns, there shall be executed and delivered on
behalf of North American such deeds and other instruments, and there shall be
taken or caused to be taken by it such further and other action, as shall be
appropriate and necessary in order to vest or perfect, or to conform of record
or otherwise, in ORA the title to and possession of all the property, interests,
Page 2
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<PAGE>
assets, rights, privileges, immunities, powers, franchises and authority of
North American and otherwise to carry out the purposes of this Merger Agreement,
and the officers and directors of ORA are fully authorized in the name and on
behalf of North American or otherwise to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
3.2 AMENDMENT. At any time before or after approval by the
shareholders of North American, this Merger Agreement may be amended in any
manner as may be determined in the judgment of the respective Boards of
Directors of ORA and North American to be necessary, desirable or expedient in
order to clarify the intention of the parties hereto or to effect or facilitate
the purpose and intent of this Merger Agreement.
3.3 ABANDONMENT. At any time before the Effective Date, this Merger
Agreement may be terminated and the merger may be abandoned by the Board of
Directors of ORA or North American, notwithstanding the approval of this Merger
Agreement by the shareholders of ORA or North American, or the consummation of
the merger may be deferred for a reasonable period if, in either case, in the
opinion of the Board of Directors of ORA or North American, such action would be
in the best interests of such corporation, including, without limitation, the
failure by the Constituent Corporations to obtain (i) any and all consents or
approvals from any governmental agency having jurisdiction and other third
parties that are required for the lawful consummation of the merger and (ii) the
approval by the requisite vote of the shareholders of ORA or North American in
accordance with California law.
3.4 GOVERNING LAW. This Merger Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware.
Page 3
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<PAGE>
IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by the Boards of Directors of North American and ORA, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
NORTH AMERICAN ENERGY OF DELAWARE, INC.
a Delaware corporation
By /s/ Raymond L. Burke
-----------------------------------
Raymond L. Burke,
President
ATTEST:
/s/ David Rosenberg
- ----------------------------
David Rosenberg,
Secretary
ORA ELECTRONICS, INC.,
a Delaware corporation
By /s/ Gershon N. Cooper
--------------------------------
Gershon N. Cooper,
President and Chairman of the Board
ATTEST:
/s/ Matthew F. Jodziewicz
- ----------------------------
Matthew F. Jodziewicz,
Secretary
Page 4
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<PAGE>
CERTIFICATE OF THE SECRETARY OF ORA ELECTRONICS, INC.,
A DELAWARE CORPORATION
I, Matthew F. Jodziewicz, the Secretary of ORA Electronics, Inc., a
Delaware corporation, hereby certify that the Agreement of Merger to which this
certificate is attached, after having been first duly signed on behalf of the
corporation by the President and Secretary under the corporate seal of said
corporation, was duly approved and adopted by written consent of the sole
shareholder of ORA Electronics, Inc., a Delaware corporation
WITNESS my hand and seal of said ORA Electronics, Inc., a Delaware
corporation this 20th day of December , 1996.
---- ------------
/s/ Matthew F. Jodziewicz
-------------------------
Matthew F. Jodziewicz
Secretary
Page 5
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<PAGE>
EXHIBIT 3.1
-----------
State of Delaware
Office of Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "ORA ELECTRONICS, INC.", FILED IN THIS OFFICE ON THE FOURTH
DAY OF DECEMBER, A.D. 1996, AT 4:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW
CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/s/ Edward J. Freel
[seal] ---------------------------------
Edward J. Freel, Secretary of State
Authentication: 8224046
Date: 12-05-96
Page 72 of 198
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
ORA ELECTRONICS, INC.
Ora Electronics, Inc., a corporation organized and
existing under the laws of the State of Delaware, hereby certifies as
follows:
1. The name of the corporation is Ora Electronics, Inc.
The date of filing of its original Certificate of Incorporation with
the Secretary of State was October 11, 1996.
2. The corporation has not received any payment for
any of its stock.
3. This Restated Certificate of Incorporation
restates and further amends the Certificate of Incorporation of
this corporation by eliminating Article VII.
4. The text of the Certificate of Incorporation as
amended heretofore is amended in its entirety to read as follows:
CERTIFICATE OF INCORPORATION
OF
ORA ELECTRONICS, INC.
ARTICLE I.
The name of the Corporation is ORA ELECTRONICS, INC.
ARTICLE II.
The address of the registered office of the Corporation in
the State of Delaware is 1209 Orange Street, Wilmington, in the County
of Newcastle. The name of its registered agent at that address is The
Corporation Trust Company.
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<PAGE>
ARTICLE III.
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware (the "GCL").
ARTICLE IV.
A. AUTHORIZED COMMON STOCK AND PREFERRED STOCK. The total
authorized number of shares of the Corporation shall be
35,000,000 shares, consisting of 30,000,000 shares
designated as Common Stock, $.001 par value, and 5,000,000
shares designated as Preferred Stock, $.001 par value.
B. POWERS OF BOARD OF DIRECTORS TO ESTABLISH AND DESIGNATE
SERIES OF PREFERRED STOCK. Shares of the Preferred Stock
may be issued from time to time in one or more series. The
Board of Directors of the Corporation is hereby expressly
authorized to establish and designate one or more series of
the Preferred Stock, to fix the number of shares
constituting each series, and to fix the designations and
the powers, preferences, qualifications, limitations,
restrictions and dividend, conversion, redemption,
distribution, liquidation, special voting and other rights
of the shares of each series and the variations of the
relative powers, rights, preferences, qualifications,
limitations and restrictions as between series, and to
increase and to decrease (but not below the number of shares
of such series then outstanding) the number of shares
constituting each such series. Such determinations may be
fixed by a resolution or resolutions adopted by the Board of
Directors.
ARTICLE V.
The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. The
number of directors which shall constitute the Board of Directors
shall be as specified in the Bylaws of the Corporation.
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<PAGE>
ARTICLE VI.
Elections of directors at an annual or special meeting of
stockholders shall be by written ballot unless the Bylaws of the
Corporation shall otherwise provide.
ARTICLE VII.
Special meetings of the stockholders of the Corporation
for any purpose or purposes may be called as provided in the Bylaws of
the Corporation.
ARTICLE VIII.
No director of the Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for any
breach of fiduciary duty by such a director as a director.
Notwithstanding the foregoing sentence, a director shall be liable to
the extent provided by applicable law (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant
to Section 174 of the GCL or (iv) for any transaction from which such
director derived an improper personal benefit. No amendment to or
repeal of this Article IX or adoption of any provision of this
Certificate of Incorporation inconsistent with this Article IX shall
apply to or have any effect on the liability or alleged liability of
any director of the Corporation for or with respect to any acts or
omissions of such director occurring prior to such amendment, repeal
or adoption. If the GCL is hereafter amended to authorize the further
elimination or limitation of the liability of a director, then the
liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the GCL, as so amended.
ARTICLE IX.
In furtherance and not in limitation of the powers con-
ferred by statute, the Board of Directors is expressly authorized to
adopt, repeal, alter, amend or rescind the Bylaws of the Corporation.
In addition, the Bylaws of the Corporation may be adopted, repealed,
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<PAGE>
altered, amended or rescinded by the affirmative vote of the holders
of not less than two-thirds of the outstanding stock of the
Corporation entitled to vote thereon.
ARTICLE X.
The provisions set forth in this Article XI, and in
Articles VII, VIII and X herein may not be repealed or amended in any
respect, unless such action is approved by the affirmative vote of the
holders of not less than two-thirds of the outstanding stock of the
Corporation entitled to vote thereon.
ARTICLE XI.
Subject to the foregoing, the Corporation reserves the
right to repeal, alter, amend or rescind any provision contained in
this Certificate of Incorporation, in the manner now or hereafter
prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
ARTICLE XII.
Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between
this corporation and its stockholders or any class of them, any court
of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers
appointed for this corporation under the provisions of ss.291 of Title
8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this
corporation under the provisions of ss.279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the
case may be, to be summoned in such manner as the said court directs.
If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class
of stockholders of this corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of this
corporation as a consequence of such compromise or arrangement, the
said compromise or arrangement and the said reorganization shall, if
sanctioned by the court to which the said application has been made,
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be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of this corporation, as the
case may be, and also on this corporation.
ARTICLE XIII.
The incorporator is Jon W. Newby, whose mailing address
is 333 South Hope Street, 48th Floor, Los Angeles, California
90071
5. This Restated Certificate of Incorporation was duly
adopted by the Board of Directors in accordance with Sections 241 and
245 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Internet Health, Inc. has caused
this Certificate to be signed by its Chief Financial Officer, John M.
Burris, this 4th day of December, 1996.
-----
/s/ John M. Burris
--------------------------
John M. Burris
Chief Financial Officer
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<PAGE>
EXHIBIT 3.2
-----------
BYLAWS
OF
ORA ELECTRONICS, INC.
ARTICLE 1.
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE. The principal office of the
corporation shall be 9410 Owensmouth Avenue, Chatsworth,
California, and may be changed from time to time by the
corporation's Board of Directors.
1.2 REGISTERED OFFICE. The registered office of the
corporation required by the Delaware General Corporation Law to
be maintained in the State of Delaware may, but need not, be
identical with the principal office, and the address of the
registered office may be changed from time to time by the board
of directors.
1.3 OTHER OFFICES. The board of directors may at any
time establish other offices at any place or places within or
outside the State of Delaware where the corporation is qualified
to do business.
ARTICLE 2.
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS. Meetings of stockholders shall
be held at any place, within or outside the State of Delaware,
designated by the board of directors. In the absence of any such
designation, stockholders' meetings shall be held at the
registered office of the corporation.
2.2 ANNUAL MEETING. The annual meeting of stock
holders shall be held each year on a date and at a time desig-
nated by the board of directors. At the meeting, directors shall
be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING. In addition to such special
meetings as are required by applicable law, a special meeting of
the stockholders may be called at any time only by the board of
directors, the chairman of the board, the chief executive
officer, the president or, upon the written request of a
stockholder or stockholders holding shares in aggregate entitled
-1-
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<PAGE>
to cast not less then 10% of the votes at the meeting, by the
secretary.
If a special meeting is called by any person or persons
other than the board of directors, the request shall be in writ-
ing, specifying the time of such meeting (which shall be not less
than thirty-five (35) nor more than sixty (60) days after the
receipt of the request) and the general nature of the business
proposed to be transacted, and shall be delivered personally or
sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the chief executive
officer, the president, any vice president or the secretary of
the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer
receiving the request shall cause notice to be promptly given to
the stockholders entitled to vote, in accordance with the
provisions of Sections 2.4 and 2.7, explaining that a meeting
will be held at the time requested by the person or persons
calling the meeting, and specifying such time. If the notice is
not given within twenty (20) days after the receipt of the
request, the person or persons requesting the meeting may give
the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting
the time when a meeting of stockholders called by action of the
board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS. Except as
otherwise required by applicable law and Section 2.3, all notices
of meetings of stockholders shall be in writing and shall be sent
or otherwise given in accordance with Section 2.7 of these Bylaws
not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such
meeting. The notice shall specify the place, date and hour of
the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called.
2.5 DIRECTOR NOMINATIONS. Only persons who are
nominated in accordance with the procedures set forth in this
Section 2.5 shall be eligible for election as directors. Nomina-
tions of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the
direction of the board of directors or by any stockholder of the
corporation entitled to vote for the election of directors at the
meeting who complies with the notice procedure set forth in this
Section 2.5. Such nominations, other than those made by or at
the direction of the board of directors, shall be made pursuant
to timely notice in writing to the secretary of the corporation.
To be timely, a stockholder notice shall be delivered to or
mailed and received at the principal executive office of the
corporation not less than sixty (60) days nor more than
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<PAGE>
ninety (90) days prior to the meeting; provided, however, that in
the event that less than sixty (60) days' notice or prior public
disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made. Such stock-
holder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as
a director, (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares
of the corporation that are beneficially owned by such person and
(iv) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required in such case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as
amended (including without limitation such person's written con-
sent to being named in the proxy statement as a nominee and to
serving as a director if elected); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the
corporation's books, of such stockholder and (ii) the class and
number of shares of the corporation that are beneficially owned
by such stockholder. At the request of the board of directors,
any person nominated by the board of directors for election as a
director shall furnish to the secretary of the corporation that
information required to be set forth in a stockholder's notice of
nomination pertaining to the nominee. No person shall be
eligible for election as a director of the corporation unless
nominated in accordance with the procedures set forth in this
Section 2.5. The chairman of the meeting shall, if the facts
warrant, determine that a nomination was not made in accordance
with the procedures prescribed by these Bylaws, and if he should
so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded.
2.6 BUSINESS INTRODUCED BY STOCKHOLDERS. With respect
to business introduced by a stockholder that is not specified in
the notice of annual meeting, the stockholder must have given
timely notice thereof in writing to the secretary of the
corporation for that business to be properly introduced at the
annual meeting. To be timely, the notice must be delivered to or
mailed and received by the secretary of the corporation in the
same manner and subject to the same time requirements in
accordance with the procedure set forth in Section 2.5. As to
each matter the stockholder proposes to bring before the meeting,
the stockholder's notice must set forth the following: (i) a
brief description of the business sought to be presented at the
meeting and the reasons for conducting such business at the
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<PAGE>
meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class, series and number of
shares of corporation stock that are beneficially owned by the
stockholder and (iv) any material interest of the stockholder in
such business.
2.7 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.
Except as otherwise required by applicable law, written notice of
any meeting of stockholders, if mailed, shall be given when
deposited in the United States mail, postage prepaid, directed to
the stockholder at his address as it appears on the records of
the corporation. An affidavit of the secretary or an assistant
secretary or of the transfer agent of the corporation that the
notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
2.8 QUORUM. The holders of a majority of the stock
issued and outstanding and entitled to vote at the meeting,
present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not
present or represented at any meeting of the stockholders, then
either (i) the chairman of the meeting or (ii) a majority of the
stockholders entitled to vote at the meeting, present in person
or represented by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such
adjourned meeting at which a quorum is present or represented,
any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.9 ADJOURNED MEETING; NOTICE. When a meeting is
adjourned to another time or place, unless these Bylaws or the
certificate of incorporation or applicable law otherwise
requires, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which
the adjournment is taken. At the adjourned meeting, the
corporation may transact any business that might have been
transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or, if after the adjournment, a new
record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
2.10 CONDUCT OF BUSINESS. The chairman of any meeting
of stockholders shall determine the order of business and the
procedure at the meeting, including such regulation of the manner
of voting and the conduct of business and discussion as seem to
the chairman to be in order.
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<PAGE>
2.11 VOTING. The stockholders entitled to vote at any
meeting of stockholders shall be determined in accordance with
the provisions of Section 2.13 of these Bylaws, subject to the
provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting
agreements).
Except as may be otherwise provided in the certificate
of incorporation, each stockholder entitled to vote shall be
entitled to one vote for each share of capital stock held by such
stockholder.
Directors shall be elected by plurality of the votes
cast by holders of shares entitled to vote thereon. All other
elections shall be determined and all questions decided by
majority vote of the number of shares entitled to vote and
represented at any meeting at which there is a quorum, except in
such cases as shall otherwise be required by statute, the
certificate of incorporation or these Bylaws.
2.12 WAIVER OF NOTICE. Whenever notice is required to
be given under any provision of the General Corporation Law of
Delaware or of the certificate of incorporation or these Bylaws,
a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except when
the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of stockholders need
be specified in any written waiver of notice unless so required
by the certificate of incorporation or these Bylaws.
2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.
Except as otherwise required by applicable law, in order that the
corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of
stock or for the purpose of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be
more than sixty (60) nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other
action.
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If the board of directors does not so fix a record
date:
(i) The record date for determining
stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(ii) The record date for determining
stockholders for any other purpose shall be at the close of
business on the day on which the board of directors adopts
the resolution relating thereto.
A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the board
of directors may fix a new record date for the adjourned meeting.
2.14 PROXIES. Each stockholder entitled to vote at a
meeting of stockholders may authorize another person or persons
to act for him by a written proxy, signed by the stockholder and
filed with the secretary of the corporation, but no such proxy
shall be voted or acted upon after three (3) years from its date,
unless the proxy provides for a longer period. A proxy shall be
deemed signed if the stockholder's name is placed on the proxy
(whether by manual signature, facsimile signature, typewriting,
telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney in fact. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by
the provisions of Section 212(c) of the General Corporation Law
of Delaware.
2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The
officer who is in charge of the stock ledger of the corporation
shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during the ordinary business
hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is
to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present. Such list
shall presumptively determine the identity of the stockholders
entitled to vote at the meeting and the number of shares held by
each of them.
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ARTICLE 3.
DIRECTORS
3.1 POWERS. Subject to the provisions of the General
Corporation Law of Delaware and any limitations in the certifi-
cate of incorporation or these Bylaws relating to action required
to be approved by the stockholders of the outstanding shares, the
business, property and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under
the direction of the board of directors.
3.2 NUMBER OF DIRECTORS. The authorized number of
directors shall be not less than five (5) nor more than nine (9).
The exact number within the range shall be fixed and may from
time to time be changed by a resolution adopted by the board of
directors. The minimum and maximum number of directors of the
corporation as stated above, may be changed only by an amendment
of this section of the bylaws.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS. Except as provided in Section 3.4 of these Bylaws,
directors shall be elected at each annual meeting of stockholders
to hold office until the expiration of the director's term, as
specified in the certificate of incorporation. Directors need
not be stockholders unless so required by the certificate of
incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director
elected to fill a vacancy, shall hold office until his successor
is elected and qualified or until his earlier resignation or
removal. Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES. Any director may
resign at any time upon written notice to the attention of the
secretary of the corporation. When one or more directors so
resigns and the resignation is effective at a future date, a
majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation
or resignations shall become effective, and each director so
chosen shall hold office as provided in this section in the
filling of other vacancies.
Unless otherwise provided in the certificate of
incorporation or these Bylaws, any vacancy in the board, whether
because of death, resignation, disqualification, an increase in
the number of directors or any other cause may be filled by a
majority of directors then in office, although less than a
quorum, or by a sole remaining director.
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If at any time, by reason of death or resignation or
other cause, the corporation should have no directors in office,
then any officer or any stockholder or an executor, administra-
tor, trustee or guardian of a stockholder, or other fiduciary
entrusted with like responsibility for the person or estate of a
stockholder, may for the purpose of electing directors call a
special meeting of stockholders in accordance with the provisions
of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an
election as provided in Section 211 of the General Corporation
Law of Delaware.
If, at the time of filling any vacancy, the directors
then in office constitute less than a majority of the whole board
(as constituted immediately prior to the filling of such
vacancy), then the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten (10) percent of
the total number of the shares at the time outstanding having the
right to vote for such director, summarily order an election to
be held to fill any such vacancies or newly created director
ships, or to replace the directors chosen by the directors then
in office as aforesaid, which election shall be governed by the
provisions of Section 211 of the General Corporation Law of
Delaware as far as possible.
3.5 PLACE OF MEETING; MEETINGS BY TELEPHONE. The
board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of
Delaware.
Unless otherwise restricted by the certificate of
incorporation or by these bylaws, members of the board of
directors, or any committee designated by the board of directors,
may participate in a meeting of the board of directors, or any
committee, by means of conference telephone or similar communica-
tions equipment by means of which all persons participating in
the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
3.6 REGULAR MEETINGS. Regular meetings of the board
of directors may be held without notice at such time and at such
place as shall from time to time be determined by the board.
3.7 SPECIAL MEETINGS; NOTICE. Special meetings of the
board of directors for any purpose or purposes may be called at
any time by the chairman of the board, the chief executive
officer, the president, any vice president, the secretary or any
two (2) directors.
Notice of the time and place of special meetings shall
be delivered personally or by telephone to each director or sent
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by first-class mail or telegram, charges prepaid, or facsimile
transmission, addressed to each director at that director's
address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail
at least three (3) days before the time of the holding of the
meeting. If the notice is delivered personally or by telephone,
telegram, or facsimile transmission, it shall be delivered
personally or by telephone, or to the telegraph company, or by
facsimile transmission, at least twenty-four (24) hours before
the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the
director or to a person at the office of the director if the
person giving the notice has reason to believe the notice will be
communicated promptly to the director. The notice need not
specify the purpose of the meeting or, if the meeting is to be
held at the principal executive office of the corporation, the
place of the meeting.
3.8 QUORUM. At all meetings of the board of
directors, a majority of the authorized number of directors shall
constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the board of directors,
except as may be otherwise specifically provided by statute or by
the certificate of incorporation. If a quorum is not present at
any meeting of the board of directors, then the directors present
may adjourn the meeting from time to time, without notice other
than an announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may
continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority
of the required quorum for that meeting.
3.9 WAIVER OF NOTICE. Whenever notice is required to
be given under any provision of the General Corporation Law of
Delaware or of the certificate of incorporation or these Bylaws,
a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be
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deemed equivalent to notice. Attendance of a person at a meeting
shall constitute a waiver of notice of such meetings except when
the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the
purpose of, any meeting of the directors, or members of a
committee of directors, need be specified in any written waiver
of notice unless so required by the certificate of incorporation
or these Bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A
MEETING. Unless otherwise restricted by the certificate of
incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting if all members
of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
3.11 FEES AND COMPENSATION OF DIRECTORS. Unless
otherwise restricted by the certificate of incorporation or these
Bylaws, the board of directors shall have the authority to fix
the compensation of a director.
3.12 APPROVAL OF LOANS TO OFFICERS. The corporation
may lend money to, or guarantee any obligation of, or otherwise
assist any officer or other employee of the corporation or of any
of its subsidiaries, including any officer or employee who is a
director of the corporation or of any of its subsidiaries,
whenever, in the judgment of the directors, such loan, guaranty
or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with
or without interest and may be unsecured, or secured in such
manner as the board of directors shall approve, including,
without limitation, a pledge of shares of stock of the
corporation. Nothing contained in this section shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of
the corporation at common law or under any statute.
3.13 REMOVAL OF DIRECTORS. Unless otherwise
restricted by statute, by the certificate of incorporation or by
these Bylaws, any director or the entire board of directors may
be removed with or without cause but only by the affirmative vote
of the holders of a majority of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the
election of directors.
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ARTICLE 4.
COMMITTEES
4.1 COMMITTEES OF DIRECTORS. The board of directors
may, by resolution passed by a majority of the whole board,
designate one or more committees, with each committee to consist
of one or more of the directors of the corporation. The number
of committee members may be increased or decreased from time to
time by resolution adopted by a majority of the entire board of
directors. Each committee member shall serve as such until the
earliest of (i) the expiration of his term as a director,
(ii) his resignation as a committee member or as a director or
(iii) his removal as a committee member or as a director. The
board may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member
at any meeting of the committee. In the absence or dis-
qualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of
the board of directors or in these Bylaws, shall have and may
exercise all the powers and authority of the board of directors
in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to
all papers that may require it; but no such committee shall have
the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as
provided in Section 151(a) of the General Corporation Law of
Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolu-
tion, any distribution of assets of the corporation or the con-
version into, or the exchange of such shares for, shares of any
other class or classes or any other series of the same or any
other class or classes of stock of the corporation or fix the
number of shares of any series of stock or authorize the increase
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or decrease of the shares of any series), (ii) adopt an agreement
of merger or consolidation under Sections 251 or 252 of the
General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially
all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation
of a dissolution or (v) amend these Bylaws; and, unless the board
resolution establishing the committee, these Bylaws or the
certificate of incorporation expressly so provides, no such
committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger pursuant to Section 253 of
the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES. Each committee shall keep
regular minutes of its meetings and report the same to the board
of directors when required to do so by the board of directors.
4.3 MEETINGS AND ACTIONS OF COMMITTEES. Meetings and
actions of committees shall be governed by, and held and taken in
accordance with Section 3.5 (place of meetings and meetings by
telephone), Section 3.6 (regular meeting), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver
of notice), and Section 3.10 (action without a meeting) of these
Bylaws, with such changes in the context of those provisions as
are necessary to substitute the committee and its members for the
board of directors and its members; provided, however, that the
time of regular meetings of committees may be determined either
by resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be called
by resolution of the board of directors and that notice of
special meetings of committees shall also be given to all
alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with
the provisions of these Bylaws.
ARTICLE 5.
OFFICERS
5.1 OFFICERS. The Corporation shall have a chairman
of the board, a chief executive officer or a president or both,
a secretary and a chief financial officer and treasurer. The
corporation may also have, at the discretion of the board of
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directors, a chief operating officer, one or more vice
presidents, one or more assistant secretaries, one or more
assistant treasurers and any other officers as may be appointed
in accordance with the provisions of Section 5.3 of these Bylaws.
Any number of offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS. The officers of the
corporation, except such officers as may be appointed in
accordance with the provisions of Section 5.3 or 5.5 of these
Bylaws, shall be appointed by the board of directors, subject to
the rights, if any, of an officer under any contract of
employment.
5.3 SUBORDINATE OFFICERS. The board of directors may
appoint, or empower the chief executive officer and/or the
president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall hold
office for such period, have such authority, and perform such
duties as are provided in these Bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICER. Any officer
may be removed, either with or without cause, by an affirmative
vote of the majority of the board of directors at any regular or
special meeting of the board, or, by any officer upon whom such
power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written
notice to the corporation. Any resignation shall take effect at
the date of the receipt of that notice or at any later time
specified in that notice; and unless otherwise specified in that
notice, the acceptance of the resignation shall not be necessary
to make it effective. Any resignation is without prejudice to
the rights, if any, of the corporation under any contract to
which the officer is a party.
5.5 VACANCIES IN OFFICES. Any vacancy occurring in
any office of the corporation shall be filled by the board of
directors.
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5.6 CHAIRMAN OF THE BOARD. The chairman of the board
shall, if present, preside at all meetings of the board of
directors and stockholders and exercise and perform such other
powers and duties as may be from time to time assigned to him by
the board of directors or prescribed by these Bylaws. If at any
time there is no chief executive officer or president, the
chairman of the board shall in addition have the powers and
duties prescribed in Section 5.7 or 5.8 of this Article 5, as
applicable.
5.7 CHIEF EXECUTIVE OFFICER. The chief executive
officer shall, subject to the control of the board of directors,
have general direction and strategic control of the business and
the officers of the corporation. In the absence of the chairman
of the board, the chief executive officer shall preside at all
meetings of the stockholders and at all meetings of the board of
directors. The chief executive officer shall exercise and
perform such other powers and duties as may from time to time be
assigned to him by the board of directors or these Bylaws.
5.8 PRESIDENT. The president shall have general
supervision and control of the sales and marketing and
administration of the corporation and shall have such other
powers and duties as may be prescribed by the board of directors
or these Bylaws, subject to the control of the board of
directors, the chairman of the board and the chief executive
officer.
5.9 CHIEF OPERATING OFFICER. The chief operating
officer, if any, shall have general supervision and control over
the operations of the corporation, subject to the control of the
board of directors, chairman of the board, chief executive
officer and president. The chief operating officer may sign and
execute, in the name of the corporation, any instrument
authorized by the board of directors, except when a signing
and/or execution thereof shall have been expressly delegated by
the board of directors or by these Bylaws to some other officer
or agent of the corporation. The chief operating officer shall
have all the general powers and duties of management usually
vested in the chief operating officer of a corporation, and shall
have such other powers and duties as may be prescribed from time
to time by the board of directors or these Bylaws.
5.10 VICE PRESIDENTS. In the absence or disability of
the chairman of the board, the chief executive officer, the
president and the chief operating officer, the vice presidents,
if any, in order of their rank as fixed by the board of directors
or, if not ranked, a vice president designated by the board of
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directors, shall perform all the duties of the president and when
so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents shall have
such other powers and perform such other duties as from time to
time may be prescribed for them respectively by the board of
directors, these Bylaws, the chairman of the board or the chief
executive officer.
5.11 SECRETARY. The secretary shall keep or cause to
be kept, at the principal executive office of the corporation or
such other place as the board of directors may direct, a book of
minutes of all meetings and actions of directors, committees of
directors and stockholders. The minutes shall show the time and
place of each meeting, the name of those present at directors'
meetings or committee meetings, the number of shares present or
represented at stockholders' meetings and the proceedings
thereof.
The secretary shall keep, or cause to be kept, at the
principal executive office of the corporation or at the office of
the corporation's transfer agent or registrar, as determined by
resolution of the board of directors, a share register, or a
duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares
and the number and date of cancellation of every certificate
surrendered for cancellation.
The secretary shall give, or cause to be given, notice
of all meetings of the stockholders and of the board of directors
required to be given by law or by these Bylaws. The secretary
shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by
these Bylaws.
5.12 CHIEF FINANCIAL OFFICER AND TREASURER. The chief
financial officer and treasurer shall be the principal accounting
officer of the corporation and shall keep and maintain, or cause
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to be kept and maintained, adequate and correct books and records
of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained
earnings and shares. The books of account shall at all
reasonable times be open to inspection by any director.
The chief financial officer and treasurer shall deposit
all moneys and other valuables in the name and to the credit of
the corporation with such depositories as may be designated by
the board of directors. The chief financial officer and
treasurer shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the chief
executive officer, the president and/or directors, whenever they
request it, an account of all his transactions as chief financial
officer and treasurer and of the financial condition of the
corporation, and shall have other powers and perform such other
duties as may be prescribed by the board of directors or by these
Bylaws.
5.13 AUTHORITY AND DUTIES OF OFFICERS. In addition to
the foregoing authority and duties, all officers of the corpo-
ration shall respectively have such authority and perform such
duties in the management of the business of the corporation as
may be designated from time to time by the board of directors.
ARTICLE 6.
RECORDS AND REPORTS
6.1 MAINTENANCE AND INSPECTION OF RECORDS. The cor-
poration shall, whether at its principal executive offices or at
such places as designated by the board of directors, keep a
record of its stockholders listing their names and addresses and
the number and class of shares held by each stockholder, a copy
of these Bylaws as amended to date, accounting books and other
records.
Any stockholder of record, in person or by attorney or
other agent, shall, upon written demand under oath stating the
purpose thereof, have the right during the usual hours of busi-
ness to inspect for any proper purpose the corporation's stock
ledger, a list of its stockholders and its other books and
records and to make copies or extracts therefrom. A proper
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purpose shall mean a purpose reasonably related to such person's
interest as a stockholder. In every instance where an attorney
or other agent is the person who seeks the right to inspection,
the demand under oath shall be accompanied by a power of attorney
or such other writing that authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath
shall be directed to the corporation at its registered office in
Delaware or at its principal place of business.
6.2 INSPECTION BY DIRECTORS. Any director shall have
the right to examine the corporation's stock ledger, a list of
its stockholders and its other books and records for a purpose
reasonably related to his position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to
determine whether a director is entitled to the inspection
sought. The Court may summarily order the corporation to permit
the director to inspect any and all books and records, the stock
ledger, and the stock list and to make copies or extract there
from. The Court may, in its discretion, prescribe any limita-
tions or conditions with reference to the inspection, or award
such other and further relief as the Court may deem just and
proper.
6.3 ANNUAL STATEMENT TO STOCKHOLDERS. The board of
directors shall present at each annual meeting and at any special
meeting of the stockholders when called for by vote of the stock
holders, a full and clear statement of the business and condition
of the corporation.
ARTICLE 7.
GENERAL MATTERS
7.1 CHECKS. From time to time, the board of directors
shall determine, by resolution, which person or persons may sign
or endorse all checks, drafts, other orders for payment of money,
notes or other evidences of indebtedness that are issued in the
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name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
7.2 EXECUTION OF CORPORATION CONTRACTS AND INSTRU-
MENTS. The board of directors, except as otherwise provided in
these Bylaws, may authorize any officer or officers, or agent or
agents, to enter into any contract or execute any instrument in
the name of and on behalf of the corporation; such authority may
be general or confined to specific instances. Unless so autho-
rized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or
engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
7.3 STOCK CERTIFICATES; PARTLY PAID SHARES. The
shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may
provide by resolution or resolutions that some or all of any or
all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares repre-
sented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolu-
tion by the board of directors, every holder of stock represented
by certificates and upon request every holder of uncertificated
shares shall be entitled to have a certificate signed by, or in
the name of the corporation by the chairman or vice-chairman of
the board of directors or the chief executive officer or
president, and by the chief financial officer and treasurer or an
assistant treasurer, or the secretary or an assistant secretary
of the corporation representing the number of shares registered
in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of
issue.
The corporation may issue the whole or any part of its
shares as partly paid and subject to call for the remainder of
the consideration to be paid therefor. Upon the face or back of
each stock certificate issued to represent any such partly paid
shares and upon the books and records of the corporation in the
case of uncertificated partly paid shares, the total amount of
the consideration to be paid therefor and the amount paid thereon
shall be stated. Upon the declaration of any dividend on fully
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paid shares, the corporation shall declare a dividend upon partly
paid shares of the same class, but only upon the basis of the
percentage of the consideration actually paid thereon.
7.4 SPECIAL DESIGNATION ON CERTIFICATES. If the
corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the
designations, the preferences and the relative, participating,
optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of
such preferences and/or rights shall be set forth in full or sum-
marized on the face or back of the certificate that the corpora-
tion shall issue to represent such class or series of stock; pro-
vided, however, that, except as otherwise provided in Section 202
of the General Corporation Law of Delaware, in lieu of the fore
going requirements, there may be set forth on the face or back of
the certificate that the corporation shall issue to represent
such class or series of stock, a statement that the corporation
will furnish without charge to each stockholder who so requests
the powers, the designations, the preferences and the relative,
participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights.
7.5 LOST CERTIFICATES. Except as provided in this
Section 7.5, no new certificates for shares shall be issued to
replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time.
The corporation may issue a new certificate of stock or uncer-
tificated shares in the place of any certificate theretofore
issued by it, alleged to have been lost, stolen or destroyed, and
the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim
that may be made against it on account of the alleged loss, theft
or destruction of any such certificate or the issuance of such
new certificate or uncertificated shares.
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<PAGE>
7.6 CONSTRUCTION; DEFINITIONS. Unless the context
requires otherwise, the general provisions, rules of construction
and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the
generality of this provision, the singular number includes the
plural, the plural number includes the singular and the term
"person" includes both a corporation and a natural person.
7.7 DIVIDENDS. The directors of the corporation, sub-
ject to any restrictions contained in (i) the General Corporation
Law of Delaware or (ii) the certificate of incorporation, may
declare and pay dividends upon the shares of its capital stock.
Dividends may be paid in cash, in property or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of
any of the funds of the corporation available for dividends a
reserve or reserves for any proper purpose and may abolish any
such reserve. Such purposes shall include but not be limited to
equalizing dividends, repairing or maintaining any property of
the corporation and meeting contingencies.
7.8 FISCAL YEAR. The fiscal year of the corporation
shall be fixed by resolution of the board of directors and may be
changed by the board of directors.
7.9 SEAL. The corporation may adopt a corporate seal,
which may be altered at its pleasure, and may use the same by
causing it or a facsimile thereof to be impressed or affixed or
in any other manner reproduced.
7.10 TRANSFER OF STOCK. Upon surrender to the corpo-
ration or the transfer agent of the corporation of a certificate
for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the
transaction in its books.
7.11 STOCK TRANSFER AGREEMENT. The corporation shall
have power to enter into and perform any agreement with any
number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders
in any manner not prohibited by the General Corporation Law of
Delaware.
7.12 REGISTERED STOCKHOLDERS. The corporation shall
be entitled to recognize the exclusive right of a person regis-
tered on its books as the owner of shares to receive dividends
and to vote as such owner, shall be entitled to hold liable for
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<PAGE>
calls and assessments the person registered on its books as the
owner of shares and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part
of another person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE 8.
AMENDMENTS
Bylaws of the corporation may be adopted, amended or
repealed by the requisite number of stockholders entitled to vote
as required by the certificate of incorporation; provided,
however, that the corporation may, in its certificate of incor-
poration, confer the power to adopt, amend or repeal Bylaws upon
the directors.
ARTICLE 9.
INDEMNIFICATION
9.1 INDEMNIFICATION -- THIRD PARTY PROCEEDINGS. The
corporation (i) shall indemnify any person who is or was a party
or is threatened to be made a party to any proceeding (other than
an action by or in the right of the corporation to procure a
judgment in its favor) by reason of the fact that such person is
or was a director or officer of the corporation, or any
subsidiary of the corporation (the "Indemnitee"), and (ii) may
indemnify a person who is or was a party or is threatened to be
made a party to any proceeding (other than an action by or in the
right of the corporation to procure a judgment in its favor) by
reason of the fact that such person is or was an employee or
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<PAGE>
other agent of the corporation (the "Indemnitee Agent"), and such
proceeding relates to any action or inaction on the part of
Indemnitee or Indemnitee Agent while an officer, director,
employee or agent, or by reason of the fact that Indemnitee or
Indemnitee Agent is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including, subject to Section 9.20,
attorneys' fees and disbursements and any expenses of
establishing a right to indemnification pursuant to this
Article 9 or under Delaware law), judgments, fines, settlements
(if such settlement is approved in advance by the corporation,
which approval shall not be unreasonably withheld) and other
amounts actually and reasonably incurred by Indemnitee or
Indemnitee Agent in connection with such proceeding if Indemnitee
or Indemnitee Agent acted in good faith and in a manner
Indemnitee or Indemnitee Agent reasonably believed to be in or
not opposed to the best interests of the corporation and, in the
case of a criminal proceeding, if Indemnitee or Indemnitee Agent
had no reasonable cause to believe Indemnitee's or Indemnitee
Agent's conduct was unlawful. The termination of any proceeding
by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent shall not, of itself, create a
presumption that Indemnitee or Indemnitee Agent did not act in
good faith and in a manner that Indemnitee or Indemnitee Agent
reasonably believed to be in or not opposed to the best interests
of the corporation, or, with respect to any criminal proceeding,
shall not create a presumption that Indemnitee or Indemnitee
Agent had reasonable cause to believe that Indemnitee's or
Indemnitee Agent's conduct was unlawful.
9.2 INDEMNIFICATION -- PROCEEDINGS BY OR IN THE RIGHT
OF THE CORPORATION. The corporation shall indemnify Indemnitee
and may indemnify Indemnitee Agent if Indemnitee, or Indemnitee
Agent, as the case may be, was or is a party or is threatened to
be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation or any subsidiary of
the corporation to procure a judgment in its favor by reason of
the fact that Indemnitee or Indemnitee Agent is or was a
director, officer, employee or other agent of the corporation, or
any subsidiary of the corporation, and such action relates to any
action or inaction on the part of Indemnitee or Indemnitee Agent
while an officer, director, employee or agent, or by reason of
the fact that Indemnitee or Indemnitee Agent is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including, subject
to Section 9.20, attorneys' fees and disbursements and any
expenses of establishing a right to indemnification pursuant to
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<PAGE>
this Article 9 or under Delaware law) and, to the fullest extent
permitted by law, amounts paid in settlement, in each case to the
extent actually and reasonably incurred by Indemnitee or
Indemnitee Agent in connection with the defense or settlement of
the action or suit if Indemnitee or Indemnitee Agent acted in
good faith and in a manner Indemnitee or Indemnitee Agent
believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made with
respect to any claim, issue or matter to which Indemnitee (or
Indemnitee Agent) shall have been adjudged to have been liable to
the corporation in the performance of Indemnitee's or Indemnitee
Agent's duty to the corporation, unless and only to the extent
that the Court of Chancery or the court in which such action or
suit is or was pending shall determine upon application that, in
view of all the circumstances of the case, Indemnitee (or
Indemnitee Agent) is fairly and reasonably entitled to indemnity
for expenses and then only to the extent that such court shall
determine is proper.
9.3 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any
indemnification under Section 9.1 or 9.2 (unless ordered by a
court) shall be made by the corporation unless a determination is
reasonably and promptly made (i) by the board of directors by a
majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (ii) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested directors so directs, by independent legal counsel
in a written opinion, or (iii) by the stockholders, that such
person acted in bad faith and in a manner that such person did
not believe to be in or not opposed to the best interests of the
corporation, or, with respect to any criminal proceeding, that
such person believed or had reasonable cause to believe that his
conduct was unlawful.
9.4 SUCCESSFUL DEFENSE ON MERITS. To the extent that
Indemnitee (or Indemnitee Agent) without limitation has been suc-
cessful on the merits in defense of any proceeding referred to in
Sections 9.1 or 9.2 above, or in defense of any claim, issue or
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<PAGE>
matter therein, the corporation shall indemnify Indemnitee (or
Indemnitee Agent) against expenses (including attorneys' fees and
disbursements) actually and reasonably incurred by Indemnitee (or
Indemnitee Agent) in connection therewith.
9.5 CERTAIN TERMS DEFINED. For purposes of this
Article 9, references to "other enterprises" shall include
employee benefit plans, references to "fines" shall include any
excise taxes assessed on Indemnitee or Indemnitee Agent with
respect to an employee benefit plan, and references to "proceed-
ing" shall include any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or investi-
gative. References to "corporation" include all constituent
corporations absorbed in a consolidation or merger as well as the
resulting or surviving corporation, so that any person who is or
was a director, officer, employee or other agent of such a con-
stituent corporation or who, being or having been such a direc-
tor, officer, employee or other agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article 9 with
respect to the resulting or surviving corporation as such person
would if he or she had served the resulting or surviving
corporation in the same capacity.
9.6 ADVANCEMENT OF EXPENSES. The corporation shall
advance all expenses incurred by Indemnitee and may advance all
or any expenses incurred by Indemnitee Agent in connection with
the investigation, defense, settlement (excluding amounts actu-
ally paid in settlement of any action, suit or proceeding) or
appeal of any civil or criminal action, suit or proceeding
referenced in Sections 9.1 or 9.2 hereof; provided, that Indem-
nitee or Indemnitee Agent undertakes to repay such amounts
advanced only if, and to the extent that, it shall be determined
ultimately that Indemnitee or Indemnitee Agent is not entitled to
be indemnified by the corporation as authorized hereby. The
advances to be made hereunder shall be paid by the corporation
(i) to Indemnitee within twenty (20) days following delivery of
a written request therefor by Indemnitee to the corporation; and
(ii) to Indemnitee Agent within twenty (20) days following the
later of a written request therefor by Indemnitee Agent to the
corporation and determination by the corporation to advance
expenses to Indemnitee Agent pursuant to the corporation's
discretionary authority hereunder.
9.7 NOTICE OF CLAIM. Indemnitee shall, as a condition
precedent to his or her right to be indemnified under this
Article 9, and Indemnitee Agent shall, as a condition precedent
to his or her ability to be indemnified under this Article 9,
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<PAGE>
give the corporation notice in writing as soon as practicable of
any claim made against Indemnitee or Indemnitee Agent, as the
case may be, for which indemnification will or could be sought
under this Article 9. Notice to the corporation shall be
directed to the secretary of the corporation at the principal
business office of the corporation (or such other address as the
corporation shall designate in writing to Indemnitee or Indemni-
tee Agent). In addition, Indemnitee or Indemnitee Agent shall
give the corporation such information and cooperation as it may
reasonably require and as shall be within Indemnitee's or
Indemnitee Agent's power.
9.8 ENFORCEMENT RIGHTS. Any indemnification provided
for in Sections 9.1 or 9.2 or 9.4 shall be made no later than
sixty (60) days after receipt of the written request of Indemni-
tee. If a claim or request under this Article 9 or under any
statute providing for indemnification is not paid by the cor-
poration, or on its behalf, within sixty (60) days after written
request for payment thereof has been received by the corporation,
Indemnitee may, but need not, at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim
or request, and subject to Section 9.20, Indemnitee shall also be
entitled to be paid for the expenses (including attorneys' fees
and disbursements) of bringing such action. It shall be a
defense to any such action (other than an action brought to
enforce a claim for expenses incurred in connection with any
action, suit or proceeding in advance of its final disposition)
that Indemnitee has not met the standards of conduct that make it
permissible under applicable law for the corporation to indemnify
Indemnitee for the amount claimed, but the burden of proving such
defense shall be on the corporation, and Indemnitee shall be
entitled to receive interim payments of expenses pursuant to
Section 9.6 unless and until such defense may be finally
adjudicated by court order or judgment for which no further right
of appeal exists. The parties hereto intend that if the
corporation contests Indemnitee's right to indemnification, the
question of Indemnitee's right to indemnification shall be a
decision for the court, and no presumption regarding whether the
applicable standard has been met will arise based on any
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<PAGE>
determination or lack of determination of such by the corporation
(including its board of directors or any subgroup thereof,
independent legal counsel or its stockholders). The board of
directors may, in its discretion, provide by resolution for
similar or identical enforcement rights for any Indemnitee Agent.
9.9 ASSUMPTION OF DEFENSE. In the event the corpora-
tion shall be obligated to pay the expenses of any proceeding
against an Indemnitee (or Indemnitee Agent), the corporation, if
appropriate, shall be entitled to assume the defense of such
proceeding with counsel approved by Indemnitee (or Indemnitee
Agent), which approval shall not be unreasonably withheld, upon
the delivery to Indemnitee (or Indemnitee Agent) of written
notice of its election so to do. After delivery of such notice,
approval of such counsel by Indemnitee (or Indemnitee Agent) and
the retention of such counsel by the corporation, the corporation
will not be liable to Indemnitee (or Indemnitee Agent) under this
Article 9 for any fees of counsel subsequently incurred by Indem-
nitee (or Indemnitee Agent) with respect to the same proceeding,
unless (i) the employment of counsel by Indemnitee (or Indemnitee
Agent) is authorized by the corporation, (ii) Indemnitee (or
Indemnitee Agent) shall have reasonably concluded that there may
be a conflict of interest of such counsel retained by the corpo-
ration between the corporation and Indemnitee (or Indemnitee
Agent) in the conduct of such defense, or (iii) the corporation
ceases or terminates the employment of such counsel with respect
to the defense of such proceeding, in any of which events then
the fees and expenses of Indemnitee's (or Indemnitee Agent's)
counsel shall be at the expense of the corporation. At all
times, Indemnitee (or Indemnitee Agent) shall have the right to
employ other counsel in any such proceeding at Indemnitee's (or
Indemnitee Agent's) expense.
9.10 APPROVAL OF EXPENSES. No expenses for which
indemnity shall be sought under this Article 9, other than those
in respect of judgments and verdicts actually rendered, shall be
incurred without the prior consent of the corporation, which
consent shall not be unreasonably withheld.
9.11 SUBROGATION. In the event of payment under this
Article 9, the corporation shall be subrogated to the extent of
such payment to all of the rights of recovery of the Indemnitee
(or Indemnitee Agent), who shall do all things that may be neces-
sary to secure such rights, including the execution of such docu-
ments necessary to enable the corporation effectively to bring
suit to enforce such rights.
9.12 EXCEPTIONS. Notwithstanding any other provision
herein to the contrary, the corporation shall not be obligated
pursuant to this Article 9:
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<PAGE>
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or
advance expenses to Indemnitee with respect to proceedings or
claims initiated or brought voluntarily by Indemnitee and not by
way of defense, except with respect to proceedings brought to
establish or enforce a right to indemnification under this
Article 9 or any other statute or law or as otherwise required
under the Delaware General Corporation Law, but such indemnifica-
tion or advancement of expenses may be provided by the corpora-
tion in specific cases if the board of directors has approved the
initiation or bringing of such suit; or
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for
any expenses incurred by the Indemnitee with respect to any pro-
ceeding instituted by Indemnitee to enforce or interpret this
Article 9, if a court of competent jurisdiction determines that
such proceeding was not made in good faith or was frivolous; or
(c) INSURED CLAIMS. To indemnify Indemnitee for
expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penal
ties, and amounts paid in settlement) that have been paid
directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the
corporation; or
(d) CLAIMS UNDER SECTION 16(B). To indemnify Indem-
nitee for expenses and the payment of profits arising from the
purchase and sale by Indemnitee of securities in violation of
Section 16(b) of the Securities Exchange Act of 1934, as amended,
or any similar successor statute.
9.13 PARTIAL INDEMNIFICATION. If Indemnitee is
entitled under any provision of this Article 9 to indemnification
by the corporation for some or a portion of the expenses, judg-
ments, fines or penalties actually or reasonably incurred by the
Indemnitee in the investigation, defense, appeal or settlement of
any civil or criminal action, suit or proceeding, but not,
however, for the total amount thereof, the corporation shall
nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is
entitled.
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<PAGE>
9.14 COVERAGE. This Article 9 shall, with respect to
expenses incurred following adoption of this Article 9, to the
extent permitted by law, apply to acts or omissions of
(a) Indemnitee that occurred prior to the adoption of this
Article 9 if Indemnitee was a director or officer of the
corporation, or any predecessor corporation or constituent
corporation in a merger involving the corporation, or was serving
at the request of the corporation as a director or officer of
another corporation, partnership, joint venture, trust or other
enterprise, at the time such act or omission occurred; and
(b) Indemnitee Agent that occurred prior to the adoption of this
Article 9 if Indemnitee Agent was an employee or other agent of
the corporation, or any preclusion or constituent corporation to
a merger involving the corporation, or was serving at the request
of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise at the time such act or omission occurred. All rights
to indemnification under this Article 9 shall be deemed to be
provided by a contract between the corporation and the Indemnitee
in which the corporation hereby agrees to indemnify Indemnitee to
the fullest extent permitted by law, including those
circumstances in which indemnification would otherwise be
discretionary and notwithstanding that such indemnification is
not specifically authorized by these Bylaws or by statute. Any
repeal or modification of these Bylaws, the Delaware General
Corporation Law or any other applicable law shall not affect any
rights or obligations then existing under this Article 9. The
provisions of this Article 9 shall continue as to Indemnitee and
Indemnitee Agent for any action taken or not taken while serving
in an indemnified capacity even though the Indemnitee or Indem-
nitee Agent may have ceased to serve in such capacity at the time
of any action, suit or other covered proceeding. This Article 9
shall be binding upon the corporation and its successors and
assigns and shall inure to the benefit of Indemnitee and Indem-
nitee Agent and Indemnitee's and Indemnitee Agent's estate,
heirs, legal representatives and assigns.
9.15 NON-EXCLUSIVITY. Nothing herein shall be deemed
to diminish or otherwise restrict any rights to which Indemnitee
or Indemnitee Agent may be entitled under these Bylaws, any
agreement, any vote of stockholders or disinterested directors,
or under the laws of the State of Delaware. The corporation may
enter into indemnification agreements with its directors,
officers, employees or agents.
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<PAGE>
9.16 SEVERABILITY. Nothing in this Article 9 is
intended to require or shall be construed as requiring the corpo-
ration to do or fail to do any act in violation of applicable
law. If this Article 9 or any portion hereof shall be invali-
dated on any ground by any court of competent jurisdiction, then
the corporation shall nevertheless indemnify Indemnitee or Indem-
nitee Agent to the fullest extent permitted by any applicable
portion of this Article 9 that shall not have been invalidated.
9.17 ENFORCEABILITY ACKNOWLEDGMENT. In certain
instances, Federal law or applicable public policy may prohibit
the corporation from indemnifying its directors and officers
under this Article 9 or otherwise. The corporation, if appro-
priate, may undertake with the Securities and Exchange Commission
to submit the question of indemnification to a court in certain
circumstances for a determination of the corporation's right
under public policy to indemnify an Indemnitee or Indemnitee
Agent.
9.18 OFFICER AND DIRECTOR LIABILITY INSURANCE. The
corporation shall, from time to time, make the good faith deter-
mination whether or not it is practicable for the corporation to
obtain and maintain a policy or policies of insurance with repu-
table insurance companies providing the officers and directors of
the corporation with coverage for losses from wrongful acts, or
to ensure the corporation's performance of its indemnification
obligations under this Article 9. Among other considerations,
the corporation will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. Not-
withstanding the foregoing, the corporation shall have no obliga-
tion to obtain or maintain such insurance if the corporation
determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are dispropor-
tionate to the amount of coverage provided, if the coverage pro-
vided by such insurance is limited by exclusions so as to provide
an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a subsidiary or parent of the
corporation.
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<PAGE>
9.19 NOTICE TO INSURERS. If, at the time of the
receipt of a notice of a claim pursuant to Section 9.7 hereof,
the corporation has director and officer liability insurance in
effect, the corporation shall give prompt notice of the commence-
ment of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The corporation
shall thereafter take all necessary or desirable action to cause
such insurers to pay, on behalf of the Indemnitee, all amounts
payable as a result of such proceeding in accordance with the
terms of such policies.
9.20 ATTORNEYS' FEES. In the event that any action is
instituted by Indemnitee under this Article 9 to enforce or
interpret any of the terms hereof, Indemnitee shall be entitled
to be paid all court costs and expenses, including reasonable
attorneys' fees, incurred by Indemnitee with respect to such
action, unless as a part of such action, the court of competent
jurisdiction determines that the action was not instituted in
good faith or was frivolous. In the event of an action insti-
tuted by or in the name of the corporation under this Article 9,
or to enforce or interpret any of the terms of this Article 9,
Indemnitee shall be entitled to be paid all court costs and
expenses, including attorneys' fees, incurred by Indemnitee in
defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a
part of such action the court determines that Indemnitee's
defenses to such action were not made in good faith or were
frivolous. The board of directors may, in its discretion, pro-
vide by resolution for payment of such attorneys' fees to any
Indemnitee Agent.
9.21 NOTICE. All notices, requests, demands and other
communications under this Article 9 shall be in writing and shall
be deemed duly given (i) if delivered by hand and receipted for
by the addressee, on the date of such receipt, or (ii) if mailed
by domestic certified or registered mail with postage prepaid, on
the third business day after the date postmarked.
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<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
ORA ELECTRONICS, INC.
The undersigned person appointed in the Certificate of
Incorporation to act as the Incorporator of ORA ELECTRONICS,
INC., hereby adopts the foregoing bylaws, comprising nineteen
(19) pages, as the Bylaws of the corporation.
Executed as of October 11, 1996.
/s/ Jon W. Newby
--------------------------------
Jon W. Newby
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<PAGE>
EXHIBIT 4.1
-----------
[SPECIMEN]
Number Shares
OE [Logo] ORA
ELECTRONICS
Incorporated under the laws See reverse for certain definitions
of the State of Delaware CUSIP 671009 10 8
This Certifies that
is the record holder of
Fully paid and nonassessable shares of common stock, $.001 par value, of
ORA ELECTRONICS, INC.
transferable on the books of the Corporation by the holder hereof in
person or by duly authorized attorney upon surrender of this
certificate properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
/s/ Matthew F. Jodziewicz /s/ Gershon N. Cooper
SECRETARY PRESIDENT
[Corporate Seal]
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<PAGE>
The Corporation shall furnish without charge to each stockholder who
so requests a statement of the powers, designations, preferences and
relative, participating, optional or other special rights of each
class of stock of the Corporation or series thereof and the
qualifications, limitations or restrictions of such preferences and/or
rights. Such requests shall be made to the Corporation's Secretary at
the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written
out in full according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT -
TEN ENT - as tenants by the ____________ Custodian __________
entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not Act____________________
as tenants in common (State)
UNIF TRF MIN ACT - _________
Custodian (until age ____)
(Cust) _____________ under
Uniform Transfers
(Minor)
to Minors Act__________________
(State)
Additional abbreviations may also be used though not in the above
list.
FOR VALUE RECEIVED, _________________ hereby sell, assign and transfer unto
Please insert social security or other
identifying number of assignee
__________________________________
______________________________________________________________________
(Please print or typewrite name and address, including zip code, of assignee)
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
_______________________________________________________________ Shares
of the common stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint ____________________________
Page 110 of 198
<PAGE>
Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated _____________________
X___________________________
X___________________________
NOTICE: The signature(s) to this
assignment must
correspond with the
name(s) as written upon
the face of the certificate
in every particular,
without alteration or
enlargement or any
change whatever.
Signature(s) Guaranteed
By_________________________________ The signature(s) should be
guaranteed by an eligible guarantor institution (banks, stockbrokers,
savings and loan associations and credit unions with membership in an
approved signature guarantee medallion program), pursuant to S.E.C.
Rule 17Ad.15.
======================================================================
American Bank Note Company Nov. 27, 1996 fm
3504 Atlantic Avenue
Suite 12
Long Beach, CA 90807 047763bk
(310) 989-2333
(FAX) (310) 426-7450 Proof NEW
======================================================================
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<PAGE>
EXHIBIT 4.2
-----------
SPECIMEN
NUMBER WARRANTS
OWA
[LOGO] ORA
ELECTRONICS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
VOID AFTER JUNE 18, 1997
CLASS A COMMON STOCK PURCHASE WARRANT CERTIFICATE
CUSIP 671009 11 6
THIS CERTIFIES THAT, for value received,
or registered assigns, is the owner of the number of Class A Common Stock
Purchase Warrants (the "Warrants") set forth above. Each Warrant (subject
to adjustments as hereinafter referred to) entitles the owner hereof to
purchase during the period commencing on December 20, 1996 until 5:00 p.m.
Los Angeles Time on June 18, 1997, one fully paid and nonassessable share
of common stock, par value $.001 (the "Common Stock"), of ORA ELECTRONICS,
INC. (hereinafter called the "Company"), a Delaware corporation (such whole
shares of Common Stock being hereinafter referred to as the "Shares of
Common Stock"), upon payment of the Warrant Price (as hereinafter defined);
provided, that, under certain conditions set forth in that certain Warrant
Agreement (the "Warrant Agreement") dated as of December 20, 1996, by and
between the Corporation and Continental Stock Transfer & Trust Company, as
warrant agent (the "Warrant Agent"), the number of Shares of Common Stock
purchasable upon the exercise of this Warrant may be increased or reduced
and the Warrant Price may be adjusted accordingly. Subject to adjustment as
aforesaid, the initial Warrant Price per Warrant (the "Warrant Price")
shall be $5.00 per Warrant. As provided in the Warrant Agreement, the
Warrant Price and any and all applicable taxes due in connection with the
exercise of the Warrant are payable, upon the exercise of this Warrant, in
lawful money of the United States either in cash or by certified check or
bank draft to the order of the Company.
Upon the exercise of this Warrant, the form of election to
purchase on the reverse hereof must be properly completed and
executed, and this Warrant must be surrendered to the Warrant Agent.
In the event that this Warrant is exercised with respect to less than
all of such Shares of Common Stock, a new Warrant for the remaining
number of such Shares of Common Stock will be issued upon such
surrender.
Prior to the due presentment for registration of transfer of
this Warrant Certificate, the Company and the Warrant Agent may deem
Page 112 of 198
<PAGE>
and treat the registered holder of this Warrant Certificate (the
"Registered Holder") as the absolute owner hereof except as may be
provided in the Warrant Agreement. Prior to the due presentment by the
Registered Holder for registration of transfer of this Warrant
Certificate, the Company and the Warrant Agent may deem and treat the
Registered Holder as the absolute owner hereof and of each Warrant
represented hereby (notwithstanding any notation of ownership or other
writing herein made by anyone other than a duly authorized officer of
the Company or the Warrant Agent), for all purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the
contrary.
The Company shall not be required upon the exercise of this
Warrant to issue fractional shares of Common Stock; nor shall the
Company be required, in the case of adjustments to the number of
Warrants as provided for in the Warrant Agreement, to issue Warrants
for fractional shares of Common Stock. In each such case, the number
of shares or Warrants, respectively, shall be rounded to the nearest
whole number.
This Warrant is issued under, and the rights represented hereby
are subject to, the terms and provisions contained in the Warrant
Agreement, to all the terms and provisions of which the Registered
Holder, by acceptance hereof, assents. Reference is hereby made to the
Warrant Agreement for more complete statement of the rights and
limitations of rights of the Registered Holders hereof, the rights and
duties of the Warrant Agent and the rights and obligations of the
Company thereunder. Copies of such Warrant Agreement are on file at
the office of the Warrant Agent.
This Warrant is transferable at the office of the Warrant Agent
(or of its successor as Warrant Agent) by the Registered Holder in
person or by an attorney duly authorized in writing, but only in the
manner and subject to the limitations provided in the Warrant
Agreement and upon surrender of this Warrant and the payment of any
transfer taxes. Upon any such transfer, a new Warrant, or new Warrants
of different denominations, of like tenor and representing an equal
aggregate number of Warrants, will be issued to the transferee in
exchange for this Warrant which shall be canceled by the Warrant
Agent.
This Warrant may be exchanged, when surrendered at the office of
the Warrant Agent (or its successor as Warrant Agent) by the
Registered Holder in person or by an attorney duly authorized in
writing, in the manner and subject to the limitations provided in the
Warrant Agreement, for another Warrant, or other Warrants of different
denominations, of like tenor and representing an equal number of
Warrants; provided, that, in the event that a Warrant surrendered for
transfer bears a restrictive legend, the Warrant Agent may require the
transferee to deliver an opinion of counsel, reasonably satisfactory
to the Company, stating that such transfer may be made and indicating
whether the new Warrant certificates must also bear a restrictive
legend, and the Warrant Agent shall not cancel such certificate or
issue new Warrant certificates in exchange therefor until the Warrant
Agent has received such opinion, if requested.
Page 113 of 198
<PAGE>
If this Warrant shall be surrendered for exercise within any
period during which the transfer books for the Common Stock or other
securities purchasable upon the exercise of this Warrant are closed
for any purpose, the Company shall not be required to make delivery of
certificates for the securities purchasable upon such exercise until
the date of the reopening of such transfer books.
The Registered Holder shall not be entitled to any of the rights
of a stockholder of the Corporation prior to the exercise hereof.
This Warrant certificate shall not be valid unless countersigned
by the Warrant Agent.
This Warrant certificate shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be executed by the facsimile signature of its President, the facsimile
of its corporate seal to be affixed hereunto and attested by the
facsimile signature of its Secretary.
Dated:
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
as Warrant Agent
By:
AUTHORIZED OFFICER
[corporate seal]
ORA ELECTRONICS, INC.
By By
/s/ Matthew F. Jodziewicz /s/ Gershon N. Cooper
SECRETARY PRESIDENT
======================================================================
AMERICAN BANK NOTE COMPANY DEC 12, 1996 fm
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 047736fc-W
(310) 989-2333
(FAX) (310) 426-7450 500-19X /s/rn REV 1
=====================================================================
Page 114 of 198
<PAGE>
ELECTION TO PURCHASE
To be Executed by the Registered Holder In Order to Exercise Warrants
To: ORA Electronics, Inc.
c/o Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Warrant(s) for an to purchase
thereunder __________________ shares of Common Stock provided for
therein tenders herewith payment of the purchase price in full to the
order of the Corporation and requests that certificates for such
shares shall be issued in the name of
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print or typewrite)
and be delivered to
__________________________________________________________
at
___________________________________________________________________________
(Street address) (City) (State) (Zip Code)
and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be registered in the name of, and
delivered to, the undersigned at the address stated below.
Dated:______________________________ Signature:_________________________
Note: The above signature must
Name:________________________________ correspond with the name as written
(Please print or Typewrite) upon the face of this Warrant
or with the name of the assignee
Address:_______________________________ appearing in the assignment from
below in every particular without
_______________________________________ alteration or any change whatever.
(City) (State) (Zip Code)
*Signature Guaranteed:_______________
_________________________________
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
Page 115 of 198
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder In Order to Assign Warrants
For value received ____________________________________________
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________
_______________________________________________________________________________
(Please Print or Typewrite Name and Address Including Postal
Zip Code of Assignee)
_______________________________________________________________________________
_______________________________________________________________________________
Warrants represented by the within Warrant Certificate, together with
all right, title and interest therein, and do hereby irrevocably
constitute and appoint
_______________________________________________________________________________
to transfer said Warrant on the books of the within named Corporation,
with full power of substitution in the premises.
Dated:______________________________
Signature:____________________________
Note: The above signature
must correspond with the
name as written upon the
face of this Warrant in
every particular without
alteration or enlargement or
any change whatever.
*Signature Guaranteed:________________
*In case of assignment, or if the Common Stock issued upon exercise is
to be registered in the name of a person other than the holder, the
holder's signature must be guaranteed by an eligible guarantor
institution (Bank, Stockbrokers, Savings and Loan Association and
Credit Unions), with membership in an approved signature guarantee
medallion program pursuant to S.E.C. Rule 17Ad-15.
======================================================================
AMERICAN BANK NOTE COMPANY DEC 6, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 047736bk
(310) 989-2333
(FAX) (310) 426-7450 proof /s/ CC NEW
======================================================================
Page 116 of 198
<PAGE>
EXHIBIT 4.3
-----------
SPECIMEN
NUMBER WARRANTS
OWA
[LOGO] ORA
ELECTRONICS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
VOID AFTER JUNE 20, 1998
CLASS B COMMON STOCK PURCHASE WARRANT CERTIFICATE
CUSIP 671009 12 4
THIS CERTIFIES THAT, for value received,
or registered assigns, is the owner of the number of Class B Common Stock
Purchase Warrants (the "Warrants") set forth above. Each Warrant (subject
to adjustments as hereinafter referred to) entitles the owner hereof to
purchase during the period commencing on December 20, 1996 until 5:00 p.m.
Los Angeles Time on June 20, 1998, one fully paid and nonassessable share
of common stock, par value $.001 (the "Common Stock"), of ORA ELECTRONICS,
INC. (hereinafter called the "Company"), a Delaware corporation (such whole
shares of Common Stock being hereinafter referred to as the "Shares of
Common Stock"), upon payment of the Warrant Price (as hereinafter defined);
provided, that, under certain conditions set forth in that certain Warrant
Agreement (the "Warrant Agreement") dated as of December 20, 1996, by and
between the Corporation and Continental Stock Transfer & Trust Company, as
warrant agent (the "Warrant Agent"), the number of Shares of Common Stock
purchasable upon the exercise of this Warrant may be increased or reduced
and the Warrant Price may be adjusted accordingly. Subject to adjustment as
aforesaid, the initial Warrant Price per Warrant (the "Warrant Price")
shall be $10.00 per Warrant. As provided in the Warrant Agreement, the
Warrant Price and any and all applicable taxes due in connection with the
exercise of the Warrant are payable, upon the exercise of this Warrant, in
lawful money of the United States either in cash or by certified check or
bank draft to the order of the Company.
Upon the exercise of this Warrant, the form of election to
purchase on the reverse hereof must be properly completed and
executed, and this Warrant must be surrendered to the Warrant Agent.
In the event that this Warrant is exercised with respect to less than
all of such Shares of Common Stock, a new Warrant for the remaining
number of such Shares of Common Stock will be issued upon such
surrender.
Prior to the due presentment for registration of transfer of
this Warrant Certificate, the Company and the Warrant Agent may deem
Page 117 of 198
<PAGE>
and treat the registered holder of this Warrant Certificate (the
"Registered Holder") as the absolute owner hereof except as may be
provided in the Warrant Agreement. Prior to the due presentment by the
Registered Holder for registration of transfer of this Warrant
Certificate, the Company and the Warrant Agent may deem and treat the
Registered Holder as the absolute owner hereof and of each Warrant
represented hereby (notwithstanding any notation of ownership or other
writing herein made by anyone other than a duly authorized officer of
the Company or the Warrant Agent), for all purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the
contrary.
The Company shall not be required upon the exercise of this
Warrant to issue fractional shares of Common Stock; nor shall the
Company be required, in the case of adjustments to the number of
Warrants as provided for in the Warrant Agreement, to issue Warrants
for fractional shares of Common Stock. In each such case, the number
of shares or Warrants, respectively, shall be rounded to the nearest
whole number.
This Warrant is issued under, and the rights represented hereby
are subject to, the terms and provisions contained in the Warrant
Agreement, to all the terms and provisions of which the Registered
Holder, by acceptance hereof, assents. Reference is hereby made to the
Warrant Agreement for more complete statement of the rights and
limitations of rights of the Registered Holders hereof, the rights and
duties of the Warrant Agent and the rights and obligations of the
Company thereunder. Copies of such Warrant Agreement are on file at
the office of the Warrant Agent.
This Warrant is transferable at the office of the Warrant Agent
(or of its successor as Warrant Agent) by the Registered Holder in
person or by an attorney duly authorized in writing, but only in the
manner and subject to the limitations provided in the Warrant
Agreement and upon surrender of this Warrant and the payment of any
transfer taxes. Upon any such transfer, a new Warrant, or new Warrants
of different denominations, of like tenor and representing an equal
aggregate number of Warrants, will be issued to the transferee in
exchange for this Warrant which shall be canceled by the Warrant
Agent.
This Warrant may be exchanged, when surrendered at the office of
the Warrant Agent (or its successor as Warrant Agent) by the
Registered Holder in person or by an attorney duly authorized in
writing, in the manner and subject to the limitations provided in the
Warrant Agreement, for another Warrant, or other Warrants of different
denominations, of like tenor and representing an equal number of
Warrants; provided, that, in the event that a Warrant surrendered for
transfer bears a restrictive legend, the Warrant Agent may require the
transferee to deliver an opinion of counsel, reasonably satisfactory
to the Company, stating that such transfer may be made and indicating
whether the new Warrant certificates must also bear a restrictive
legend, and the Warrant Agent shall not cancel such certificate or
issue new Warrant certificates in exchange therefor until the Warrant
Agent has received such opinion, if requested.
Page 118 of 198
<PAGE>
If this Warrant shall be surrendered for exercise within any
period during which the transfer books for the Common Stock or other
securities purchasable upon the exercise of this Warrant are closed
for any purpose, the Company shall not be required to make delivery of
certificates for the securities purchasable upon such exercise until
the date of the reopening of such transfer books.
The Registered Holder shall not be entitled to any of the rights
of a stockholder of the Corporation prior to the exercise hereof.
This Warrant certificate shall not be valid unless countersigned
by the Warrant Agent.
This Warrant certificate shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be executed by the facsimile signature of its President, the facsimile
of its corporate seal to be affixed hereunto and attested by the
facsimile signature of its Secretary.
Dated:
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
as Warrant Agent
By:
AUTHORIZED OFFICER
[corporate seal]
ORA ELECTRONICS, INC.
By By
/s/ Matthew F. Jodziewicz /s/ Gershon N. Cooper
SECRETARY PRESIDENT
======================================================================
AMERICAN BANK NOTE COMPANY DEC 12, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 047736fc-WB
(310) 989-2333
(FAX) (310) 426-7450 500-19X Proof ___ REV 2
=====================================================================
Page 119 of 198
<PAGE>
ELECTION TO PURCHASE
To be Executed by the Registered Holder In Order to Exercise Warrants
To: ORA Electronics, Inc.
c/o Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Warrant(s) for an to purchase
thereunder __________________ shares of Common Stock provided for
therein tenders herewith payment of the purchase price in full to the
order of the Corporation and requests that certificates for such
shares shall be issued in the name of
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print or typewrite)
and be delivered to
__________________________________________________________
at
___________________________________________________________________________
(Street address) (City) (State) (Zip Code)
and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be registered in the name of, and
delivered to, the undersigned at the address stated below.
Dated:______________________________ Signature:_________________________
Note: The above signature must
Name:________________________________ correspond with the name as written
(Please print or Typewrite) upon the face of this Warrant
or with the name of the assignee
Address:_______________________________ appearing in the assignment from
below in every particular without
_______________________________________ alteration or any change whatever.
(City) (State) (Zip Code)
*Signature Guaranteed:_______________
_________________________________
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
Page 120 of 198
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder In Order to Assign Warrants
For value received ____________________________________________
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________
_______________________________________________________________________________
(Please Print or Typewrite Name and Address Including Postal
Zip Code of Assignee)
_______________________________________________________________________________
_______________________________________________________________________________
Warrants represented by the within Warrant Certificate, together with
all right, title and interest therein, and do hereby irrevocably
constitute and appoint
_______________________________________________________________________________
to transfer said Warrant on the books of the within named Corporation,
with full power of substitution in the premises.
Dated:______________________________
Signature:____________________________
Note: The above signature
must correspond with the
name as written upon the
face of this Warrant in
every particular without
alteration or enlargement or
any change whatever.
*Signature Guaranteed:________________
*In case of assignment, or if the Common Stock issued upon exercise is
to be registered in the name of a person other than the holder, the
holder's signature must be guaranteed by an eligible guarantor
institution (Bank, Stockbrokers, Savings and Loan Association and
Credit Unions), with membership in an approved signature guarantee
medallion program pursuant to S.E.C. Rule 17Ad-15.
======================================================================
AMERICAN BANK NOTE COMPANY DEC 6, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 047736bk
(310) 989-2333
(FAX) (310) 426-7450 proof /s/ CC NEW
======================================================================
Page 121 of 198
<PAGE>
EXHIBIT 4.4
-----------
SPECIMEN
NUMBER WARRANTS
OWA
[LOGO] ORA
ELECTRONICS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
VOID AFTER DECEMBER 20, 1999
CLASS C COMMON STOCK PURCHASE WARRANT CERTIFICATE
CUSIP 671009 13 2
THIS CERTIFIES THAT, for value received,
or registered assigns, is the owner of the number of Class C Common Stock
Purchase Warrants (the "Warrants") set forth above. Each Warrant (subject
to adjustments as hereinafter referred to) entitles the owner hereof to
purchase during the period commencing on December 20, 1996 until 5:00 p.m.
Los Angeles Time on December 20, 1999, one fully paid and nonassessable
share of common stock, par value $.001 (the "Common Stock"), of ORA
ELECTRONICS, INC. (hereinafter called the "Company"), a Delaware
corporation (such whole shares of Common Stock being hereinafter referred
to as the "Shares of Common Stock"), upon payment of the Warrant Price (as
hereinafter defined); provided, that, under certain conditions set forth in
that certain Warrant Agreement (the "Warrant Agreement") dated as of
December 20, 1996, by and between the Corporation and Continental Stock
Transfer & Trust Company, as warrant agent (the "Warrant Agent"), the
number of Shares of Common Stock purchasable upon the exercise of this
Warrant may be increased or reduced and the Warrant Price may be adjusted
accordingly. Subject to adjustment as aforesaid, the initial Warrant Price
per Warrant (the "Warrant Price") shall be $15.00 per Warrant. As provided
in the Warrant Agreement, the Warrant Price and any and all applicable
taxes due in connection with the exercise of the Warrant are payable, upon
the exercise of this Warrant, in lawful money of the United States either
in cash or by certified check or bank draft to the order of the Company.
Upon the exercise of this Warrant, the form of election to
purchase on the reverse hereof must be properly completed and
executed, and this Warrant must be surrendered to the Warrant Agent.
In the event that this Warrant is exercised with respect to less than
all of such Shares of Common Stock, a new Warrant for the remaining
number of such Shares of Common Stock will be issued upon such
surrender.
Prior to the due presentment for registration of transfer of
this Warrant Certificate, the Company and the Warrant Agent may deem
Page 122 of 198
<PAGE>
and treat the registered holder of this Warrant Certificate (the
"Registered Holder") as the absolute owner hereof except as may be
provided in the Warrant Agreement. Prior to the due presentment by the
Registered Holder for registration of transfer of this Warrant
Certificate, the Company and the Warrant Agent may deem and treat the
Registered Holder as the absolute owner hereof and of each Warrant
represented hereby (notwithstanding any notation of ownership or other
writing herein made by anyone other than a duly authorized officer of
the Company or the Warrant Agent), for all purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the
contrary.
The Company shall not be required upon the exercise of this
Warrant to issue fractional shares of Common Stock; nor shall the
Company be required, in the case of adjustments to the number of
Warrants as provided for in the Warrant Agreement, to issue Warrants
for fractional shares of Common Stock. In each such case, the number
of shares or Warrants, respectively, shall be rounded to the nearest
whole number.
This Warrant is issued under, and the rights represented hereby
are subject to, the terms and provisions contained in the Warrant
Agreement, to all the terms and provisions of which the Registered
Holder, by acceptance hereof, assents. Reference is hereby made to the
Warrant Agreement for more complete statement of the rights and
limitations of rights of the Registered Holders hereof, the rights and
duties of the Warrant Agent and the rights and obligations of the
Company thereunder. Copies of such Warrant Agreement are on file at
the office of the Warrant Agent.
This Warrant is transferable at the office of the Warrant Agent
(or of its successor as Warrant Agent) by the Registered Holder in
person or by an attorney duly authorized in writing, but only in the
manner and subject to the limitations provided in the Warrant
Agreement and upon surrender of this Warrant and the payment of any
transfer taxes. Upon any such transfer, a new Warrant, or new Warrants
of different denominations, of like tenor and representing an equal
aggregate number of Warrants, will be issued to the transferee in
exchange for this Warrant which shall be canceled by the Warrant
Agent.
This Warrant may be exchanged, when surrendered at the office of
the Warrant Agent (or its successor as Warrant Agent) by the
Registered Holder in person or by an attorney duly authorized in
writing, in the manner and subject to the limitations provided in the
Warrant Agreement, for another Warrant, or other Warrants of different
denominations, of like tenor and representing an equal number of
Warrants; provided, that, in the event that a Warrant surrendered for
transfer bears a restrictive legend, the Warrant Agent may require the
transferee to deliver an opinion of counsel, reasonably satisfactory
to the Company, stating that such transfer may be made and indicating
whether the new Warrant certificates must also bear a restrictive
legend, and the Warrant Agent shall not cancel such certificate or
issue new Warrant certificates in exchange therefor until the Warrant
Agent has received such opinion, if requested.
Page 123 of 198
<PAGE>
If this Warrant shall be surrendered for exercise within any
period during which the transfer books for the Common Stock or other
securities purchasable upon the exercise of this Warrant are closed
for any purpose, the Company shall not be required to make delivery of
certificates for the securities purchasable upon such exercise until
the date of the reopening of such transfer books.
The Registered Holder shall not be entitled to any of the rights
of a stockholder of the Corporation prior to the exercise hereof.
This Warrant certificate shall not be valid unless countersigned
by the Warrant Agent.
This Warrant certificate shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be executed by the facsimile signature of its President, the facsimile
of its corporate seal to be affixed hereunto and attested by the
facsimile signature of its Secretary.
Dated:
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
as Warrant Agent
By:
AUTHORIZED OFFICER
[corporate seal]
ORA ELECTRONICS, INC.
By By
/s/ Matthew F. Jodziewicz /s/ Gershon N. Cooper
SECRETARY PRESIDENT
======================================================================
AMERICAN BANK NOTE COMPANY DEC 12, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 047736fc-WC
(310) 989-2333
(FAX) (310) 426-7450 500-19X Proof /s/ ec REV 2
=====================================================================
Page 124 of 198
<PAGE>
ELECTION TO PURCHASE
To be Executed by the Registered Holder In Order to Exercise Warrants
To: ORA Electronics, Inc.
c/o Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Warrant(s) for an to purchase
thereunder __________________ shares of Common Stock provided for
therein tenders herewith payment of the purchase price in full to the
order of the Corporation and requests that certificates for such
shares shall be issued in the name of
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print or typewrite)
and be delivered to
__________________________________________________________
at
___________________________________________________________________________
(Street address) (City) (State) (Zip Code)
and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be registered in the name of, and
delivered to, the undersigned at the address stated below.
Dated:______________________________ Signature:_________________________
Note: The above signature must
Name:________________________________ correspond with the name as written
(Please print or Typewrite) upon the face of this Warrant
or with the name of the assignee
Address:_______________________________ appearing in the assignment from
below in every particular without
_______________________________________ alteration or any change whatever.
(City) (State) (Zip Code)
*Signature Guaranteed:_______________
_________________________________
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
Page 125 of 198
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder In Order to Assign Warrants
For value received ____________________________________________
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________
_______________________________________________________________________________
(Please Print or Typewrite Name and Address Including Postal
Zip Code of Assignee)
_______________________________________________________________________________
_______________________________________________________________________________
Warrants represented by the within Warrant Certificate, together with
all right, title and interest therein, and do hereby irrevocably
constitute and appoint
_______________________________________________________________________________
to transfer said Warrant on the books of the within named Corporation,
with full power of substitution in the premises.
Dated:______________________________
Signature:____________________________
Note: The above signature
must correspond with the
name as written upon the
face of this Warrant in
every particular without
alteration or enlargement or
any change whatever.
*Signature Guaranteed:________________
*In case of assignment, or if the Common Stock issued upon exercise is
to be registered in the name of a person other than the holder, the
holder's signature must be guaranteed by an eligible guarantor
institution (Bank, Stockbrokers, Savings and Loan Association and
Credit Unions), with membership in an approved signature guarantee
medallion program pursuant to S.E.C. Rule 17Ad-15.
======================================================================
AMERICAN BANK NOTE COMPANY DEC 6, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 047736bk
(310) 989-2333
(FAX) (310) 426-7450 proof /s/ CC NEW
======================================================================
Page 126 of 198
<PAGE>
EXHIBIT 4.5
-----------
SPECIMEN
NUMBER WARRANTS
OWA
[LOGO] ORA
ELECTRONICS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
VOID AFTER DECEMBER 20, 2001
CLASS D COMMON STOCK PURCHASE WARRANT CERTIFICATE
CUSIP 671009 14 0
THIS CERTIFIES THAT, for value received,
or registered assigns, is the owner of the number of Class D Common Stock
Purchase Warrants (the "Warrants") set forth above. Each Warrant (subject
to adjustments as hereinafter referred to) entitles the owner hereof to
purchase during the period commencing on December 20, 1996 until 5:00 p.m.
Los Angeles Time on December 20, 2001, one fully paid and nonassessable
share of common stock, par value $.001 (the "Common Stock"), of ORA
ELECTRONICS, INC. (hereinafter called the "Company"), a Delaware
corporation (such whole shares of Common Stock being hereinafter referred
to as the "Shares of Common Stock"), upon payment of the Warrant Price (as
hereinafter defined); provided, that, under certain conditions set forth in
that certain Warrant Agreement (the "Warrant Agreement") dated as of
December 20, 1996, by and between the Corporation and Continental Stock
Transfer & Trust Company, as warrant agent (the "Warrant Agent"), the
number of Shares of Common Stock purchasable upon the exercise of this
Warrant may be increased or reduced and the Warrant Price may be adjusted
accordingly. Subject to adjustment as aforesaid, the initial Warrant Price
per Warrant (the "Warrant Price") shall be $20.00 per Warrant. As provided
in the Warrant Agreement, the Warrant Price and any and all applicable
taxes due in connection with the exercise of the Warrant are payable, upon
the exercise of this Warrant, in lawful money of the United States either
in cash or by certified check or bank draft to the order of the Company.
Upon the exercise of this Warrant, the form of election to
purchase on the reverse hereof must be properly completed and
executed, and this Warrant must be surrendered to the Warrant Agent.
In the event that this Warrant is exercised with respect to less than
all of such Shares of Common Stock, a new Warrant for the remaining
number of such Shares of Common Stock will be issued upon such
surrender.
Prior to the due presentment for registration of transfer of
this Warrant Certificate, the Company and the Warrant Agent may deem
Page 127 of 198
<PAGE>
and treat the registered holder of this Warrant Certificate (the
"Registered Holder") as the absolute owner hereof except as may be
provided in the Warrant Agreement. Prior to the due presentment by the
Registered Holder for registration of transfer of this Warrant
Certificate, the Company and the Warrant Agent may deem and treat the
Registered Holder as the absolute owner hereof and of each Warrant
represented hereby (notwithstanding any notation of ownership or other
writing herein made by anyone other than a duly authorized officer of
the Company or the Warrant Agent), for all purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the
contrary.
The Company shall not be required upon the exercise of this
Warrant to issue fractional shares of Common Stock; nor shall the
Company be required, in the case of adjustments to the number of
Warrants as provided for in the Warrant Agreement, to issue Warrants
for fractional shares of Common Stock. In each such case, the number
of shares or Warrants, respectively, shall be rounded to the nearest
whole number.
This Warrant is issued under, and the rights represented hereby
are subject to, the terms and provisions contained in the Warrant
Agreement, to all the terms and provisions of which the Registered
Holder, by acceptance hereof, assents. Reference is hereby made to the
Warrant Agreement for more complete statement of the rights and
limitations of rights of the Registered Holders hereof, the rights and
duties of the Warrant Agent and the rights and obligations of the
Company thereunder. Copies of such Warrant Agreement are on file at
the office of the Warrant Agent.
This Warrant is transferable at the office of the Warrant Agent
(or of its successor as Warrant Agent) by the Registered Holder in
person or by an attorney duly authorized in writing, but only in the
manner and subject to the limitations provided in the Warrant
Agreement and upon surrender of this Warrant and the payment of any
transfer taxes. Upon any such transfer, a new Warrant, or new Warrants
of different denominations, of like tenor and representing an equal
aggregate number of Warrants, will be issued to the transferee in
exchange for this Warrant which shall be canceled by the Warrant
Agent.
This Warrant may be exchanged, when surrendered at the office of
the Warrant Agent (or its successor as Warrant Agent) by the
Registered Holder in person or by an attorney duly authorized in
writing, in the manner and subject to the limitations provided in the
Warrant Agreement, for another Warrant, or other Warrants of different
denominations, of like tenor and representing an equal number of
Warrants; provided, that, in the event that a Warrant surrendered for
transfer bears a restrictive legend, the Warrant Agent may require the
transferee to deliver an opinion of counsel, reasonably satisfactory
to the Company, stating that such transfer may be made and indicating
whether the new Warrant certificates must also bear a restrictive
legend, and the Warrant Agent shall not cancel such certificate or
issue new Warrant certificates in exchange therefor until the Warrant
Agent has received such opinion, if requested.
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<PAGE>
If this Warrant shall be surrendered for exercise within any
period during which the transfer books for the Common Stock or other
securities purchasable upon the exercise of this Warrant are closed
for any purpose, the Company shall not be required to make delivery of
certificates for the securities purchasable upon such exercise until
the date of the reopening of such transfer books.
The Registered Holder shall not be entitled to any of the rights
of a stockholder of the Corporation prior to the exercise hereof.
This Warrant certificate shall not be valid unless countersigned
by the Warrant Agent.
This Warrant certificate shall be governed by and construed in
accordance with the internal laws of the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Certificate to
be executed by the facsimile signature of its President, the facsimile
of its corporate seal to be affixed hereunto and attested by the
facsimile signature of its Secretary.
Dated:
COUNTERSIGNED:
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
as Warrant Agent
By:
AUTHORIZED OFFICER
[corporate seal]
ORA ELECTRONICS, INC.
By By
/s/ Matthew F. Jodziewicz /s/ Gershon N. Cooper
SECRETARY PRESIDENT
======================================================================
AMERICAN BANK NOTE COMPANY DEC 12, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 047736fc-WD
(310) 989-2333
(FAX) (310) 426-7450 500-19X Proof /s/ ec REV 2
=====================================================================
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<PAGE>
ELECTION TO PURCHASE
To be Executed by the Registered Holder In Order to Exercise Warrants
To: ORA Electronics, Inc.
c/o Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
The undersigned hereby irrevocably elects to exercise the right
of purchase represented by the within Warrant(s) for an to purchase
thereunder __________________ shares of Common Stock provided for
therein tenders herewith payment of the purchase price in full to the
order of the Corporation and requests that certificates for such
shares shall be issued in the name of
Please insert social security
or other identifying number
______________________________________________________________________________
(Please print or typewrite)
and be delivered to
__________________________________________________________
at
___________________________________________________________________________
(Street address) (City) (State) (Zip Code)
and, if said number of shares shall not be all the shares purchasable
thereunder, that a new Warrant for the balance remaining of the shares
purchasable under the within Warrant be registered in the name of, and
delivered to, the undersigned at the address stated below.
Dated:______________________________ Signature:_________________________
Note: The above signature must
Name:________________________________ correspond with the name as written
(Please print or Typewrite) upon the face of this Warrant
or with the name of the assignee
Address:_______________________________ appearing in the assignment from
below in every particular without
_______________________________________ alteration or any change whatever.
(City) (State) (Zip Code)
*Signature Guaranteed:_______________
_________________________________
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
Page 130 of 198
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder In Order to Assign Warrants
For value received ____________________________________________
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
__________________________________________
_______________________________________________________________________________
(Please Print or Typewrite Name and Address Including Postal
Zip Code of Assignee)
_______________________________________________________________________________
_______________________________________________________________________________
Warrants represented by the within Warrant Certificate, together with
all right, title and interest therein, and do hereby irrevocably
constitute and appoint
_______________________________________________________________________________
to transfer said Warrant on the books of the within named Corporation,
with full power of substitution in the premises.
Dated:______________________________
Signature:____________________________
Note: The above signature
must correspond with the
name as written upon the
face of this Warrant in
every particular without
alteration or enlargement or
any change whatever.
*Signature Guaranteed:________________
*In case of assignment, or if the Common Stock issued upon exercise is
to be registered in the name of a person other than the holder, the
holder's signature must be guaranteed by an eligible guarantor
institution (Bank, Stockbrokers, Savings and Loan Association and
Credit Unions), with membership in an approved signature guarantee
medallion program pursuant to S.E.C. Rule 17Ad-15.
======================================================================
AMERICAN BANK NOTE COMPANY DEC 6, 1996 dw
3504 ATLANTIC AVENUE
SUITE 12
LONG BEACH, CA 90807 047736bk
(310) 989-2333
(FAX) (310) 426-7450 proof /s/ CC NEW
======================================================================
Page 131 of 198
<PAGE>
EXHIBIT 4.6
-----------
WARRANT AGREEMENT
THIS WARRANT AGREEMENT dated as of December 20, 1996 (the
"Warrant Agreement"), is by and between ORA Electronics, Inc., a
Delaware corporation (the "Company"), and Continental Stock Transfer &
Trust Company, as warrant agent (the "Warrant Agent").
WITNESSETH:
WHEREAS, the Company proposes to issue a certain number of
Class A, Class B, Class C and Class D warrants (collectively, the
"Warrants") pursuant to the terms of (a) that certain Plan of
Reorganization for North American Energy of Delaware, Inc. ("North
American"), as filed with the United States Bankruptcy Court, Southern
District of New York, on August 19, 1996 (the "Plan"), and (b) that
certain Agreement and Plan of Merger dated as of December 20, 1996, by
and between North American and the Company (the "Merger Agreement");
WHEREAS, each Warrant entitles the holder thereof to
purchase one share (collectively, the "Warrant Shares") of the
Company's Common Stock (the "Common Stock"), pursuant to the terms of
the Plan, the Merger Agreement and this Warrant Agreement;
WHEREAS, the Company and Warrant Agent agree that the
Company desires to set forth the terms upon which Warrant Agent will
act as transfer and exchange agent for the Warrants; and
WHEREAS, the Company and the Warrant Agent desire to set
forth in this Warrant Agreement, among other things, the form and
provisions of each class of Warrants as set forth in certificates
representing each class of Warrants (the "Warrant Certificates") and
the terms and conditions under which such Warrants may be issued,
transferred, exchanged, replaced, redeemed and surrendered in
connection with the exercise and redemption thereof;
NOW, THEREFORE, in consideration of the promises and of
the mutual agreements herein contained, the parties hereto agree as
follows:
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<PAGE>
ARTICLE 1
WARRANT CERTIFICATES
1.1 FORM OF WARRANT CERTIFICATES. The Warrant Certificates shall
be substantially in the form of Exhibits A, B, C and D attached hereto
and, in addition, may have such letters, numbers or other marks of
identification or designation and such legends, summaries or
endorsements stamped or printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this
Agreement or as, in any particular case, may be required, in the
opinion of counsel for the Company, to comply with any law or with any
rule or regulation of any regulatory authority or agency or to conform
with customary usage.
1.2 EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be executed, either manually or by facsimile
signature printed thereon, (i) on behalf of the Company by its
Chairman of the Board, Chief Executive Officer or President or any
Vice President, and by its Chief Financial Officer, Secretary or any
Assistant Secretary, and (ii) on behalf of the Warrant Agent, by a
duly authorized officer thereof.
ARTICLE 2
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
2.1 EXERCISE PRICES AND TERMS. Each Warrant Certificate, when
signed by (i) the Chairman, Chief Executive Officer or President or
any Vice President, and by the Chief Financial Officer or Treasurer or
any Assistant Treasurer, or Secretary or any Assistant Secretary, of
the Company and (ii) a duly authorized officer of the Warrant Agent,
shall entitle the registered holder thereof to purchase from the
Company one share of Common Stock for each Warrant evidenced thereby,
at the respective purchase prices set forth in Sections 2.1 (a), (b),
(c) and (d) hereof, or such adjusted number of shares at such adjusted
purchase price as may be established from time to time pursuant to the
provisions of Article 3 hereof, payable in full at the time of
exercise of the Warrant. Except as the context otherwise requires, the
term "Exercise Price" as used in this Warrant Agreement shall mean the
purchase price of one share of Common Stock upon the exercise of a
Warrant as the context requires, reflecting all appropriate
adjustments made in accordance with the provisions of Article 3
hereof. The term "Exercise Deadline" as used in this Warrant Agreement
shall mean the latest time and date on which each respective class of
Warrants may be exercised, as set forth below.
(a) The purchase rights represented by each Class A
Warrant are exercisable at the exercise price of five dollars
($5.00) per share (the "Class A Exercise Price") for the period
-2-
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<PAGE>
commencing on the date hereof and terminating at 5:00 p.m.,
Los Angeles time, on June 18, 1997 (the "Class A Exercise
Deadline");
(b) The purchase rights represented by each Class B
Warrant are exercisable at the exercise price of ten dollars
($10.00) per share (the "Class B Exercise Price") for the period
commencing on the date hereof and terminating at 5:00 p.m., Los
Angeles time, on June 20, 1998 (the "Class B Exercise Deadline";
(c) The purchase rights represented by each Class C
Warrant are exercisable at the exercise price of fifteen dollars
($15.00) per share (the "Class C Exercise Price") for the period
commencing on the date hereof and terminating at 5:00 p.m., Los
Angeles time, on December 20, 1999 (the "Class C Exercise
Deadline"); and
(d) The purchase rights represented by each Class D
Warrant are exercisable at the exercise price of twenty dollars
($20.00) per share (the "Class D Exercise Price") for the period
commencing on the date hereof and terminating at 5:00 p.m., Los
Angeles time, on December 20, 2001 (the "Class D Exercise
Deadline").
2.2 [RESERVED.]
2.3 PROCEDURE FOR EXERCISE OF WARRANTS. During the periods
specified in each of Sections 2.1(a), (b), (c) and (d) hereof, as
applicable, the Warrants may be exercised by surrendering the Warrant
Certificates representing such Warrants to the Warrant Agent, with the
election to purchase form set forth on the Warrant Certificate duly
completed and executed, accompanied by payment in full of the
applicable Exercise Price as provided in Sections 2.1(a), (b), (c) and
(d) in effect at the time of such exercise, together with such taxes
as are specified in Section 6.1 hereof, for each share of Common Stock
with respect to which such Warrants are being exercised. Such Exercise
Price and taxes shall be paid in full by certified check or money
order, payable in United States currency, to the Company. The date on
which Warrants are exercised in accordance with this Section 2.3 is
sometimes referred to herein as the Date of Exercise of such Warrants.
2.4 ISSUANCE OF WARRANT SHARES. As soon as practicable after the
Date of Exercise of any Warrants, the Warrant Agent shall remit the
proceeds of the Exercise Price to the Company and, upon the Company's
acknowledgment of such remittance, issue a certificate or certificates
for the number of shares of Common Stock, rounded to the nearest whole
number, to which such holder is entitled, registered in accordance
with the instructions set forth in the election to purchase. All
-3-
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<PAGE>
Warrant Shares shall be validly authorized and issued, fully paid and
nonassessable and free from all taxes, liens and charges created by
the Company in respect of the issue thereof, and shall be previously
unissued shares. Each person in whose name any such certificate for
Warrant Shares is issued shall for all purposes be deemed to have
become the holder of record of the Warrant Shares represented thereby
on the Date of Exercise of the Warrants resulting in the issuance of
such shares, regardless of the date of issuance or delivery of such
certificate for the Warrant Shares.
2.5 CERTIFICATES FOR UNEXERCISED WARRANTS. In the event that
less than all of the Warrants represented by a Warrant Certificate are
exercised, the Company shall execute and the Warrant Agent shall
execute and mail, by first-class mail, within 30 days of the Date of
Exercise, to the registered holder of such Warrant Certificate, or
such other person as shall be designated in the election to purchase,
a new Warrant Certificate representing the number of full Warrants of
the same class not yet exercised. In no event shall a fraction of a
Warrant be exercised, and the Warrant Agent shall distribute no
Warrant Certificates representing fractions of Warrants under this or
any other Section of this Agreement.
2.6 RESERVATION OF SHARES. The Company shall at all times
reserve and keep available for issuance upon the exercise of Warrants
a number of its authorized but unissued shares of Common Stock that
will be sufficient to permit the exercise in full of all outstanding
Warrants.
ARTICLE 3
ADJUSTMENTS, TERMINATION AND NOTICE PROVISIONS
3.1 ADJUSTMENT OF EXERCISE PRICE. Subject to the provisions of
this Article 3, the Exercise Price in effect from time to time shall
be subject to adjustment, as follows: in case the Company shall at any
time after the date hereof (a) declare a dividend on the outstanding
Common Stock payable in shares of its capital stock, (b) subdivide the
outstanding Common Stock, (c) combine the outstanding Common Stock
into a smaller number of shares, or (d) issue any shares of its
capital stock by reclassification of the Common Stock (including any
such reclassification in connection with a consolidation or merger in
which the Company is the continuing corporation), then, in each case,
the Exercise Price in effect, and the number of shares of Common Stock
issuable upon exercise of the Warrants outstanding, at the time of the
record date for such dividend or of the effective date of such
subdivision, combination or reclassification, shall be proportionately
adjusted so that the holders of the Warrants after such time shall be
-4-
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<PAGE>
entitled to receive the aggregate number and kind of shares which, if
such Warrants had been exercised immediately prior to such time, such
holders would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. Such adjustment shall be made successively whenever
any event listed above shall occur.
3.2 NO ADJUSTMENTS TO EXERCISE PRICE. No adjustment in the
Exercise Price shall be required if such adjustment is less than $.05;
provided, however, that, any adjustments which by reason of this
Article 3 are not required to be made, shall be carried forward and
taken into account in any subsequent adjustment. All calculations
under this Article 3 shall be made to the nearest cent or to the
nearest share, as the case may be.
3.3 DEFERRAL OF ADJUSTMENTS TO EXERCISE PRICE. In any case in
which this Article 3 shall require that an adjustment in the Exercise
Price be made effective as of a record date for a specified event, the
Warrant Agent may elect to defer, until the occurrence of such event,
issuing to the holders of the Warrants, if any holder has exercised a
Warrant after such record date, the shares of Common Stock, if any,
issuable upon such exercise over and above the shares of Common Stock,
if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment; provided, however, that the
Company shall deliver to such exercising holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such
adjustment.
3.4 [RESERVED.]
3.5 REORGANIZATIONS. In case of any capital reorganization,
other than in the cases referred to in Section 3.1 hereof, or the
consolidation or merger of the Company with or into another
corporation (other than a merger or consolidation in which the Company
is the continuing corporation and which does not result in any
reclassification of the outstanding shares of Common Stock or the
conversion of such outstanding shares of Common Stock into shares of
other stock or other securities or property), or in the case of any
sale, lease or conveyance to another corporation of the property and
assets of any nature of the Company as an entirety or substantially as
an entirety (such actions being hereinafter collectively referred to
as "Reorganizations"), the Warrants shall terminate and shall no
longer be exercisable upon the consummation of the Reorganization
unless the Company's Board of Directors elects in its sole discretion
to provide that the Warrants, or any class or classes thereof, shall
continue to be exercisable in accordance with their terms after said
consummation, in which case there shall thereafter be deliverable upon
exercise of any Warrant so continued (in lieu of the number of shares
of Common Stock theretofore deliverable) the number of shares of stock
-5-
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<PAGE>
or other securities or property to which a holder of the number of
shares of Common Stock which would otherwise have been deliverable
upon the exercise of such Warrant would have been entitled upon such
Reorganization if such Warrant had been exercised in full immediately
prior to such Reorganization. In case of any Reorganization with
respect to which the Board of Directors of the Company has elected to
provide for the continuance of the Warrants, or any class or classes
thereof as provided above, appropriate adjustment, as determined in
good faith by the Board of Directors of the Company, shall be made in
the application of the provisions herein set forth with respect to the
rights and interests of Warrant holders so that the provisions set
forth herein shall thereafter be applicable, as nearly as possible, in
relation to any shares or other property thereafter deliverable upon
exercise of Warrants. Any such adjustment shall be made by and set
forth in a notice to the holders of the Warrant Certificates and shall
for all purposes hereof conclusively be deemed to be an appropriate
adjustment. In the event of sale, lease or conveyance or other
transfer of all or substantially all of the assets of the Company as
part of a plan for liquidation of the Company with respect to which
the Board of Directors of the Company has elected to provide for the
continuance of the Warrants, or any class or classes thereof, as
provided above, all rights to exercise any Warrant so continued shall
terminate 30 days after the Company gives written notice to each
registered holder of a Warrant Certificate that such sale or
conveyance or other transfer has been consummated.
3.6 RECLASSIFICATIONS. In case of any reclassification or change
of the shares of Common Stock issuable upon exercise of the Warrants
(other than a change in par value or as a result of a subdivision or
combination, but including any change in the shares into two or more
classes or series of shares), or in case of any consolidation or
merger of another corporation into the Company in which the Company is
the continuing corporation and in which there is a reclassification or
change (including a change to the right to receive cash or other
property) of the shares of Common Stock (other than a change in par
value or as a result of a subdivision or combination, but including
any change in the shares into two or more classes or series of
shares), the holders of the Warrants shall have the right thereafter
to receive upon exercise of the Warrants solely the kind and amount of
shares of stock and other securities, property, cash, or any
combination thereof receivable upon such reclassification, change,
consolidation or merger by a holder of the number of shares of Common
Stock for which the Warrants might have been exercised immediately
prior to such reclassification, change, consolidation or merger.
Thereafter, appropriate provision shall be made for adjustments which
shall be as nearly equivalent as practicable to the adjustments in
Article 3. The provisions of this Section 3.6 shall similarly apply to
successive reclassification and changes of shares of Common Stock.
-6-
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<PAGE>
3.7 VERIFICATION OF COMPUTATIONS. Whenever the exercise price is
adjusted as provided in this Article 3, the Warrant Agent will
promptly obtain a certificate of the Company's Chief Financial Officer
setting forth the exercise price as so adjusted and a brief statement
of the facts accounting for such adjustment, and will make available a
brief summary thereof to the holders of the Warrant Certificates, at
their addresses listed on the register maintained for that purpose by
the Warrant Agent (which summary may be included in any notice of
adjustment required by Section 3.1 hereof).
3.8 NOTICE OF CERTAIN ACTIONS. In the event that the Company
proposes:
(a) to pay any dividend or make any distribution
relating to shares of Common Stock in shares of Common Stock or
make any other distribution (other than regularly scheduled cash
dividends which are not in a greater amount per share than the
most recent such cash dividend) to all holders of Common Stock;
or
(b) to issue any rights, warrants or other
securities to all holders of Common Stock entitling such holders
of Common Stock to purchase any additional shares of Common
Stock or any other rights, warrants or other securities; or
(c) to effect any consolidation, merger, sale,
lease, or conveyance of property, described in Section 3.5, or
any reclassification or change of outstanding shares of Common
Stock described in Section 3.6; or
(d) to effect any liquidation, dissolution or
winding-up of the Company; or
(e) to take any other action which would cause an
adjustment to the Exercise Price;
then, in each such case, the Company shall cause the Warrant Agent to
give notice of such proposed action to the holders of the Warrant
Certificates. Such notice shall specify the date on which the books of
the Warrant Agent shall close, or a record shall be taken, for
determining holders of Common Stock entitled to receive such stock
dividend or other distribution or such rights or warrants, or the date
on which such reclassification, change, consolidation, merger, sale,
lease, other disposition, liquidation, dissolution, winding up or
exchange or other action shall take place or commence, as the case may
be, and the date as of which it is expected that holders of record of
Common Stock shall be entitled to receive securities or other property
deliverable upon such action, if any such date has been fixed. If
-7-
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<PAGE>
applicable, such notice shall also state if the Warrants, or any class
or classes thereof, shall continue to be exercisable or shall
terminate upon the consummation of a Reorganization as provided in
Section 3.5. Such notice shall be mailed, in the case of any action
covered by Subsection 3.8(a) or 3.8(b) above, at least 15 days prior
to the record date for determining holders of the Common Stock for
purposes of receiving such payment or offer; in the case of any action
covered by Subsection 3.8(c) or 3.8(d) above, at least 15 days prior
to the earlier of the date upon which such action is to take place or
any record date to determine holders of Common Stock entitled to
receive such securities or other property; and in the case of any
action covered by Subsection 3.8(e) above, no more than 15 days after
such action. Notwithstanding anything to the contrary contained in
this Warrant Agreement, the failure of the Company to cause the
Warrant Agent to provide the notice(s) required by this Section 3.8
shall not serve to invalidate the action taken.
3.9 NOTICE OF ADJUSTMENTS. Whenever any adjustment is made
pursuant to this Article 3, the Company shall cause the Warrant Agent
to give written notice of such adjustment sent by registered mail,
postage prepaid, to the holders of Warrant Certificates within 15 days
thereafter, such notice to include in reasonable detail (i) the events
precipitating the adjustment, (ii) the computation of any adjustments,
and (iii) the Exercise Price, and the number of shares or the
securities or other property purchasable upon exercise of each Warrant
after giving effect to such adjustment.
3.10 WARRANT CERTIFICATE AMENDMENTS. Regardless of any
adjustments pursuant to this Article 3, Warrant Certificates
theretofore or thereafter issued need not be amended or replaced but
certificates thereafter issued shall bear an appropriate legend or
other notice of any adjustments.
3.11 FRACTIONAL SHARES. Upon the exercise of any Warrant
following adjustments in accordance with this Article 3 to the
Exercise Price or number of shares of Common Stock purchasable under
each Warrant, the number of shares of Common Stock to be so purchased
shall be rounded to the nearest whole number. In no event shall
fractional shares or fractional Warrants be issued by the Company. If
more than one Warrant is exercised at one time by the same registered
holder, the number of full shares of Common Stock which shall be
deliverable shall be computed based on the number of whole shares
deliverable in exchange for the aggregate number of Warrants
exercised.
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<PAGE>
ARTICLE 4
OTHER PROVISIONS RELATING TO RIGHTS OF
HOLDERS OF WARRANT CERTIFICATES
4.1 RIGHTS OF WARRANT HOLDERS. No Warrant Certificate shall
entitle the registered holder thereof to any of the rights of a
shareholder of the Company, including, without limitation, the right
to vote, to receive dividends and other distributions, or to receive
any notice of, or to attend, meetings of shareholders or any other
proceedings of the Company.
4.2 LOST, STOLEN, MUTILATED OR DESTROYED WARRANT CERTIFICATES. If
any Warrant Certificate shall be mutilated, lost, stolen or destroyed,
the Company and Warrant Agent shall execute and Warrant Agent shall
deliver, in exchange and substitution for and upon cancellation of a
mutilated Warrant Certificate, or in lieu of or in substitution for a
lost, stolen or destroyed Warrant Certificate, a new Warrant Certificate
for the number of Warrants represented by the Warrant Certificate so
mutilated, lost, stolen or destroyed but only upon receipt of evidence
of such loss, theft or destruction of such Warrant Certificate, and of
the ownership thereof, and indemnity, if requested, all satisfactory to
the Company. Applicants for such substitute Warrant Certificates shall
also comply with such other reasonable regulations and pay such other
reasonable charges incidental thereto as the Company may prescribe. Any
such new Warrant Certificate shall constitute an original contractual
obligation of the Company, whether or not the allegedly lost, stolen,
mutilated or destroyed Warrant Certificate shall be at any time
enforceable by anyone.
ARTICLE 5
SPLIT UP, COMBINATION, EXCHANGE, TRANSFER
AND CANCELLATION OF WARRANT CERTIFICATES:
CONCERNING THE WARRANT AGENT
5.1 SPLIT UP, COMBINATION, EXCHANGE AND TRANSFER OF WARRANT
CERTIFICATES. Prior to the Exercise Deadline, Warrant Certificates,
subject to the provisions of Section 5.2, may be split up, combined or
exchanged for other Warrant Certificates representing a like aggregate
number of Warrants or may be transferred in whole or in part. Any
holder desiring to split up, combine or exchange a Warrant Certificate
or Warrant Certificates shall make such request in writing delivered
to the Company and the Warrant Agent, and shall surrender the Warrant
Certificate or Warrant Certificates to be so split up, combined or
exchanged to the Warrant Agent. Subject to any applicable laws, rules
or regulations restricting transferability, any restriction on
transferability that may appear on a Warrant Certificate in accordance
with the terms hereof, or any "stop-transfer" instructions the
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<PAGE>
Company may give to the Warrant Agent to implement any such
restrictions (which instructions the Company is expressly authorized
to give), transfer of outstanding Warrant Certificates may be effected
from time to time upon the books of the Warrant Agent, upon a
surrender of the Warrant Certificate to the Warrant Agent, with the
assignment form set forth in the Warrant Certificate duly executed.
Upon any such surrender for split up, combination, exchange or
transfer, the Warrant Agent shall execute and deliver to the person
entitled thereto a Warrant Certificate or Warrant Certificates, as the
case may be, as so requested. The Company may require the holder to
pay a sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any split up, combination, exchange or
transfer of Warrant Certificates prior to the issuance of any new
Warrant Certificate.
5.2 CANCELLATION OF WARRANT CERTIFICATES. Any Warrant
Certificate surrendered upon the exercise of Warrants or for split up,
combination, exchange or transfer, or purchased or otherwise acquired
by the Company, shall be canceled and shall not be reissued by the
Company; and, except as provided (i) in Section 2.5, in case of the
exercise of less than all of the Warrants evidenced by a Warrant
Certificate, or (ii) in Section 5.1, in case of a split up,
combination, exchange or transfer of the Warrants evidenced by a
Warrant Certificate, or (iii) as provided for in Section 4.2, no
Warrant Certificate shall be issued hereunder in lieu of such canceled
Warrant Certificate.
5.3 CONCERNING THE WARRANT AGENT.
(a) The Warrant Agent acts hereunder as agent and in
a ministerial capacity for the Company and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall
not, by issuing and delivering Warrant Certificates or by any other
act hereunder, be deemed to make representations as to the validity or
value or authorization of the Warrant Certificates or the Warrants
represented thereby or of any securities or other property delivered
upon exercise of any Warrant or whether any stock issued upon exercise
of any Warrant is fully paid and non-assessable.
(b) The Warrant Agent shall not at any time be under any
duty or responsibility to any holder of Warrant Certificates to make
or cause to be made any adjustment of the Exercise Price provided in
this Agreement, or to determine whether any fact exists which may
require any such adjustment, or with respect to the nature or extent
of any such adjustment, when made, or with respect to the method
employed in making the same. It shall not (i) be liable for any
recital or statement of fact contained herein or for any action taken,
suffered or omitted by it in reliance on any Warrant Certificate or
other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or
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<PAGE>
parties, (ii) be responsible for any failure on the part of the
Company to comply with any of its covenants and obligations contained
in this Warrant Agreement or in any Warrant Certificate, or (iii) be
liable for any act or omission in connection with this Warrant
Agreement except for its own gross negligence or willful misconduct.
(c) The Warrant Agent may at any time consult with
counsel satisfactory to it (who may be counsel for the Company) and
shall incur no liability or responsibility for any action reasonably
taken, suffered or omitted by it in good faith in accordance with the
opinion or advice of such counsel.
(d) Any notice, statement, instruction, request,
direction, order or demand of the Company shall be sufficiently
evidenced by an instrument signed by the Chairman of the Board of
Directors, Chief Executive Officer, President or any Vice President
(unless other evidence in respect thereof is herein specifically
prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice,
statement, instruction, request, direction, order or demand.
(e) The Company agrees to pay the Warrant Agent
reasonable compensation for its services hereunder and to reimburse it
for its reasonable expenses hereunder; the Company further agrees to
indemnify the Warrant Agent and hold it harmless against any and all
losses, expenses and liabilities, including judgments, costs and
counsel fees, for anything done or omitted by the Warrant Agent in the
execution of its duties and powers hereunder except losses, expenses
and liabilities arising as a result of the Warrant Agent's gross
negligence or willful misconduct.
(f) The Warrant Agent may resign its duties and be
discharged from all further duties and liabilities hereunder (except
liabilities arising as a result of the Warrant Agent's own gross
negligence or willful misconduct), after giving thirty (30) days'
prior written notice to the Company. At least fifteen (15) days prior
to the date such resignation is to become effective, the Warrant Agent
shall cause a copy of such notice of resignation to be mailed to the
registered holder of each Warrant Certificate at the Company's
expense. Upon such resignation the Company shall appoint in writing a
new warrant agent. If the Company shall fail to make such appointment
within a period of thirty (30) days after it has been notified in
writing of such resignation by the resigning Warrant Agent, then the
registered holder of any Warrant Certificate may apply to any court of
competent jurisdiction for the appointment of a new warrant agent.
Any new warrant agent, whether appointed by the Company or by such a
court, shall be a stock transfer company licensed by the Securities and
Exchange Commission. After acceptance in writing of such appointment
by the new warrant agent is received by the Company, such new warrant
agent shall be vested with the same powers, rights, duties and
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<PAGE>
responsibilities as if it had been originally named herein as the
warrant agent, without any further assurance, conveyance, act or deed;
but if for any reason it shall be necessary or expedient to execute
and deliver any further assurance, conveyance, act or deed, the same
shall be done at the expense of the Company and shall be legally and
validly executed and delivered by the resigning Warrant Agent. Not
later than the effective date of any such appointment, the Company
shall file notice thereof with the resigning Warrant Agent, and shall
forthwith cause a copy of such notice to be mailed to the registered
holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or
any new warrant agent may be converted or merged, any corporation
resulting from any consolidation to which the Warrant Agent or any new
warrant agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent or any new warrant agent
shall be a successor warrant agent under this Agreement without any
further act, provided that such corporation is eligible for
appointment as successor to the Warrant Agent under the provisions of
the preceding paragraph. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed
to the Company and to the registered holders of each Warrant
Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates,
and any of its or their officers or directors, may buy and hold or
sell Warrants or other securities of the Company and otherwise deal
with the Company in the same manner and to the same extent and with
like effect as though it were not Warrant Agent. Nothing herein
shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
(i) The Warrant Agent shall retain for a period of two
(2) years from the date of exercise any Warrant Certificate received
by it upon such
exercise.
ARTICLE 6
OTHER MATTERS
6.1 PAYMENT OF TAXES AND CHARGES. Any transfer taxes due in
connection with the issuance of Warrant Certificates or certificates
for shares of Common Stock in any name other than that of the
registered holder of the Warrant Certificate surrendered shall be paid
by such registered holder; and, in such case, the Warrant Agent shall
not be required to issue or deliver any Warrant Certificate or
-12-
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<PAGE>
certificate for shares of Common Stock until such taxes shall have
been paid or it has been established to the Company's satisfaction
that no tax is due.
6.2 ASSIGNMENT. All covenants and provisions of this Agreement by
or for the benefit of the Company, the Warrant Agent or the Warrant
holder shall bind and inure to the benefit of their respective
successors and assigns.
6.3 NOTICES. Any notice or demand required by this Warrant
Agreement to be given or made by the registered holder of any Warrant
Certificate to or on the Company or the Warrant Agent shall be
sufficiently given or made if sent by first-class or registered mail,
postage prepaid, addressed (until another address is given in writing
by the Company or the Warrant Agent to each registered holder of a
Warrant Certificate) as follows:
If to the Company: ORA Electronics, Inc.
9410 Owensmouth Ave.
Chatsworth, California 91311
Attention: Chief Financial Officer
If to the Warrant Agent: Continental Stock Transfer & Trust Company
2 Broadway
New York, New York 10004
Attention: Compliance Department
Any notice or demand required by this Warrant Agreement to be given or
made by the Company or the Warrant Agent to or on the registered
holder of any Warrant Certificate shall be sufficiently given or made,
whether or not such holder receives the notice, if sent by first-class
or registered mail, postage prepaid, addressed to such registered
holder at his last address as shown on the books of the Company or the
Warrant Agent; otherwise, such notice or demand shall be deemed given
when received by the party entitled thereto.
6.4 DEFECTS IN NOTICE. Failure to file any certificate or notice
or to mail any notice, or any defect in any certificate or notice
pursuant to this Warrant Agreement, shall not affect in any way the
rights of any registered holder of a Warrant Certificate or the
legality or validity of any adjustment made pursuant to Article 3
hereof, or any transaction giving rise to any such adjustment, or the
legality or validity of any action taken or to be taken by the Company
or the Warrant Agent.
6.5 GOVERNING LAW. The internal laws of the State of Delaware shall
govern this Warrant Agreement and the Warrant Certificates.
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<PAGE>
6.6 HEADINGS. The descriptive headings of the articles and
sections of this Warrant Agreement are inserted for convenience only
and shall not control or affect the meaning or construction of any
of the provisions hereof.
6.7 COUNTERPARTS. This Warrant Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to
be an original; but such counterparts shall together constitute but
one and the same instrument.
6.8 MODIFICATION OF WARRANT AGREEMENT. The Warrant Agent and the
Company may by supplemental agreement make any changes or corrections
in this Warrant Agreement (a) that they shall deem appropriate to cure
any ambiguity or to correct any defective or inconsistent provision or
manifest mistake or error herein contained, or (b) that they may deem
necessary or desirable and which shall not adversely affect the
interests of the holders of Warrant Certificates; provided, however,
that this Warrant Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in
writing of the registered holders of Warrant Certificates holding over
fifty percent (50%) of the Warrants then outstanding; provided,
further, that no change in the number or nature of the securities
purchasable upon the exercise of any Warrant, and no change that
increases the Exercise Price of any Warrant, other than such changes
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<PAGE>
as are specifically set forth in this Warrant Agreement as originally
executed, shall be made without the consent in writing of each
registered holder affected by such change.
IN WITNESS WHEREOF, this Warrant Agreement has been duly
executed by the parties hereto as of the day and year first above
written.
"COMPANY"
ORA ELECTRONICS, INC.
By /s/ Gershon N. Cooper
--------------------------------------
Gershon N. Cooper - President
--------------------------------------
[Printed Name and Title]
"WARRANT AGENT"
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY
By /s/ William Seegraber
--------------------------------------
William Seegraber, Vice President
--------------------------------------
[Printed Name and Title]
-15-
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<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise of the
Warrants represented by this Warrant Certificate and to purchase
shares of Common Stock issuable upon the exercise of said Warrants,
and requests that certificates for such shares be issued and delivered
as follows:
ISSUE AND DELIVER TO:
______________________________________________________________________
(NAME)
_______________________________________________________________________
(ADDRESS)
_______________________________________________________________________
(SOCIAL SECURITY OR OTHER TAX IDENTIFICATION NUMBER)
If the number of Warrants hereby exercised is less than all
the Warrants represented by this Warrant Certificate, the undersigned
requests that a new Warrant Certificate representing the number of
full Warrants not exercised be issued and delivered as set forth
below.
In full payment of the purchase price with respect to the
Warrants exercised and transfer taxes, if any, the undersigned hereby
tenders payment of $_______ by certified check or money order payable
to the order of the Company in United States currency.
Dated: _______________
__________________________ ______________________________________
(Insert Social Security or (Signature of registered holder)
other identifying number(s)
of holder(s))
_______________________________________
(Signature of registered holder, if co-owned)
NOTE: Signature must conform in all
respects to name of holder as
specified on the face of
the Warrant Certificate.
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<PAGE>
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto the Assignee named below all of the rights of the
undersigned represented by the within Warrant Certificate, with
respect to the number of warrants set
forth below:
Name of Assignee: _________________________________________
Address: _______________________________________________
No. of Warrants:______________
and does hereby irrevocably constitute and appoint _______________ to
make such transfer on the books of the Warrant Agent, as defined in
that certain Warrant Agreement dated as of December ___, 1996,
maintained for that purpose, with full power
of substitution in the premises.
Dated: _______________
___________________________ _______________________________________
(Insert Social Security or (Signature of Assignee)
other identifying number(s)
of holder(s))
________________________________________
(Signature of Assignee if co-owned)
NOTE: Signature must conform in all
respects to name of holder as
specified on the face of
the Warrant Certificate.
Signature(s) Guaranteed:
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Page 148 of 198
<PAGE>
EXHIBIT 23.1
------------
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Current Report on Form 8-K of ORA
Electronics, Inc. of our report dated November 6, 1996.
/s/ Tanner, Mainstain & Hoffer
TANNER, MAINSTAIN & HOFFER
An Accountancy Corporation
Los Angeles, California
December 4, 1996
Page 149 of 198
<PAGE>
EXHIBIT 23.2
------------
RICHARD & HEDRICK
Accountancy Corporation
Certified Public Accountants
INDEPENDENT AUDITORS CONSENT
We consent to the use in the current report on form 8-K of ORA
Electronics, Inc. of our report dated September 30, 1996.
/s/ Richard & Hedrick
Los Angeles, California
December 4, 1996
Page 150 of 198
<PAGE>
EXHIBIT 99.1
------------
ORA ELECTRONICS, INC.
9410 Owensmouth Avenue
Chatsworth, CA 91311
December 19, 1996
DLS Financial Services Inc.
519 Interstate 30
Suite 243
Rockwall, Texas 75087
Attn: Dr. Len S. Smith
Re: FINANCIAL ADVISORY SERVICES
Dear Len:
This letter sets forth the agreement between ORA Electronics,
Inc., a Delaware corporation and successor to Alliance Research Corporation
("ORA"), and DLS Financial Services Inc. ("DLS") with respect to ORA's
compensation of DLS for the financial advisory services rendered by DLS to
ORA with respect to ORA's merger with North American Energy of Delaware,
Inc. (the "North American Merger") and otherwise.
1. COMPENSATION. In consideration for the financial advisory services
discussed above, immediately prior to the effectiveness of the North
American Merger, ORA will issue to DLS 160,566 shares of its common stock,
$.001 par value (the "Shares"), and will grant to DLS four options
substantially in the forms of Exhibits A, B, C and D hereto (the "Options"
and, collectively with the Shares, the "Securities"). DLS acknowledges that
such issuance and grant satisfies in full ORA's obligations to compensate
DLS with respect to such services.
2. REPRESENTATIONS OF ORA. ORA hereby represents and warrants
to you as follows:
2.1 ORGANIZATION AND STANDING. ORA is a corporation duly
organized, validly existing and in good standing under
the laws of the state of Delaware, with all requisite
corporate power and authority to enter into this
agreement, to own and to lease its property and to carry
on its businesses as now conducted.
-1-
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<PAGE>
2.2 AUTHORIZATION. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated herein have been duly authorized by all
required corporate actions.
2.3 ENFORCEABILITY. This Agreement constitutes the legal,
valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except
as such enforcement is limited by bankruptcy, insolvency
and other similar laws affecting the enforcement of
creditors rights generally.
2.4 STATUS OF SHARES. The Shares when issued hereunder shall
be validly issued, fully paid and non-assessable.
3. DLS REPRESENTATIONS. DLS hereby represents and warrants to ORA
as follows:
3.1 INVESTMENT INTENT. DLS is acquiring the Securities
hereunder for investment and not with a view towards, or
for sale in connection with, any distribution thereof.
3.2 KNOWLEDGE AND EXPERIENCE. DLS has such knowledge and
experience in financial and business matters that it is
capable of evaluating the merits and risks of an
investment in the Securities. DLS is an "accredited
investor" as defined in Rule 501(a) promulgated by the
Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "Securities
Act").
3.3 RESTRICTED SECURITIES. DLS acknowledges that the
Securities constitute "restricted securities" as defined in
Rule 144 promulgated by the SEC under the Securities Act
and that the Securities may not be sold, transferred, offered
for sale, pledged, hypothecated or otherwise disposed of
without (a) registration under the Securities Act except in a
transaction which is exempt from such registration
requirements and (b) compliance with state and foreign
securities laws, in each case, to be extent applicable. DLS
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<PAGE>
acknowledges that the Securities will bear a legend with
respect to the foregoing restrictions.
4. REGISTRATION RIGHTS. DLS shall have registration rights with
respect to the Securities as set forth on Schedule 1 to this agreement.
5. NOTICE. All notices, requests and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed
given (a) upon receipt, if given by personal delivery, (b) upon
confirmation of delivery, if given by electronic facsimile, or (c) upon the
third business day following mailing, if deposited in the United States
mail, certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to ORA: ORA Electronics, Inc.
9410 Owensmouth Avenue
Chatsworth, CA 91311
Attn: Chief Financial Officer
Fax: (818) 718-8626
If to DLS: DLS Financial Services Inc.
519 Interstate 30
Suite 243
Rockwall, TX 75087
Attn: Dr. L. S. Smith
Fax: (214) 772-3093
Either party may change its or his address or fax number by providing
notice of such change to the other party in accordance herewith.
6. NO ASSIGNMENT. This agreement may not be assigned or otherwise
transferred by DLS without ORA's written consent.
7. MISCELLANEOUS. No purported waiver, alteration or modification of
any terms of this agreement will be valid unless made in writing and signed
by the parties hereto. The captions and headings used herein are for
convenience only, and not part of this agreement and will not be used in
construing the terms hereof. This agreement constitutes and embodies the
entire understanding of the agreement of the parties hereto relating to the
subject matter hereof, and there are no other agreements or understandings,
written or oral, in effect between the parties relating to the subject
matter hereof. No provision of this agreement shall be construed in favor
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<PAGE>
of or against either of the parties hereto by reason of the extent to which
either of the parties or its counsel participated in the drafting hereof.
If any provision of this agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, the remaining
provisions hereof shall in no way be affected and shall remain in full
force and affect. In case of any litigation or arbitration between the
parties hereto, the prevailing party shall be entitled to its attorneys'
reasonable fees and expenses. This agreement is made and entered into in
the State of California, and the internal laws of such state relating to
contracts made and performed in such state shall govern the validity and
interpretation hereof. The state and federal courts located in Los Angeles
County shall have exclusive jurisdiction over any disputes arising
hereunder. The parties have agreed to submit to the jurisdiction of these
courts.
If the foregoing correctly sets forth your understanding of our
agreement, please sign the enclosed copy of this letter and return it to
ORA whereupon this letter shall constitute a binding agreement between us
as of the date first set forth above.
Sincerely,
ORA ELECTRONICS, INC.
By: /s/ Gershon N. Cooper
-------------------------------------
Gershon N. Cooper,
Chief Executive Officer and President
The undersigned hereby accepts and agrees to the foregoing
agreement to be effective as of the date first written above.
DLS FINANCIAL SERVICES INC.
By: /s/ Dr. L. S. Smith
---------------------------------
Its: President
-----------------------------
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Page 154 of 198
<PAGE>
SCHEDULE 1
REGISTRATION RIGHTS
1. CERTAIN DEFINITIONS. The following terms have the following
respective meaning when used in this Schedule 1:
1.1 "HOLDER" means DLS Financial Services Inc.
1.2 "PERSON" means an individual, partnership, corporation
(including a business trust), joint stock company, trust, unincorporated
association, joint venture or other entity.
1.3 "REGISTRABLE SECURITIES" means the Shares and shares of
ORA's Common Stock issued or issuable to Holder upon exercise of the
Options (the "Option Shares"); provided, that Shares and Option Shares
shall cease to be Registrable Securities when (i) a registration statement
covering such Registrable Securities has been declared effective under the
Securities Act by the SEC and such Registrable Securities have been
disposed of pursuant to such effective registration statement or (ii) the
entire amount of Registrable Securities proposed to be sold in a single
sale are, or in the opinion of counsel satisfactory to Company and Holder,
each in its reasonable judgment, may be, distributed to the public without
restriction pursuant to Rule 144 (or any successor provisions that are in
effect) under the Securities Act.
1.4 "REGISTRATION EXPENSES" means all expenses incident to
ORA's performance of or compliance with Section 2, including without
limitation all registration, qualification, listing and filing fees
applicable to any sale of Registrable Securities (including without
limitation fees relating to registration or qualification under the "blue
sky" or securities laws of any jurisdiction designated by Holder),
duplicating and printing expenses, messenger and delivery expenses and
expenses associated with any communications with Holder required or
permitted hereunder, including without limitation the cost of mailing such
communications to Holder. "Registration Expenses" will also include the
fees and disbursements of counsel and independent accountants of ORA (but
not of any separate counsel retained by Holder) and any internal costs of
ORA not specifically referred to above.
-5-
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<PAGE>
2. REGISTRATION.
2.1 REGISTRATION AND NOTICE. If ORA proposes to file a
registration statement under the Securities Act with respect to an offering
by ORA for its own account of any class of its securities (other than a
registration statement on Form S-4 or S-8 or any successor or other forms
not available to register capital stock to sell to the public), ORA shall
give written notice of such proposed filing to the Holder at least 30 days
before the anticipated filing date, and such notice shall describe in
detail the proposed registration and distribution (including those
jurisdictions under which registration under the securities or blue sky
laws is intended) and offer the Holder the opportunity to register such
number of Registrable Securities as the Holder may request and shall use
its best efforts (within ten days of the notice provided for in the
preceding sentence) to cause the managing underwriter or underwriters of a
proposed underwritten offering (the "Company Underwriter") to permit the
Holder to participate in the registration and to include such Registrable
Securities in such offering on the same terms and conditions as the
securities of ORA included therein. Notwithstanding the foregoing, if the
Company Underwriter delivers a written opinion to the Holder that the total
amount or kind of securities which the Holder, ORA and any other persons or
entities are intending to register in such offering (the "Total
Securities") is sufficiently large so as to have a material adverse effect
on the distribution of the Total Securities, the amount or kind of
securities to be offered for the account of the Holder and such other
persons or entities (but not ORA) shall be reduced pro rata to the extent
necessary to reduce the Total Securities to the number recommended by the
Company Underwriter. The Holder shall sell Registrable Securities in such
registered offering solely in compliance with the terms and conditions
agreed to between the Company and the Company Underwriter. The Holder
agrees that it shall enter into any holdback or lock up agreements required
by the Company Underwriter, not to exceed 180 days following the filing of
the applicable registration of statement, with respect to the sale by him
of Shares and Option Shares to the extent that the directors and executive
officers of ORA are similarly required to enter into such lock up or
holdback agreement.
3. REGISTRATION PROCEDURES.
(a) ORA will use all reasonable efforts to effect the
registration and qualification of the Registrable Securities as
provided in Section 2 and in connection therewith, ORA shall:
-6-
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<PAGE>
(i) prepare and file and use all reasonable efforts to
cause to become effective a registration statement under the Securities
Act regarding the Registrable Securities to be offered;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities until such
time as ORA has effected its distribution of securities thereunder;
(iii) furnish to Holder and to any underwriter of such
Registrable Securities such number of confirmed copies of such registration
statement and of each such amendment and supplement thereto, such number of
copies of the prospectus included in such registration statement (including
each preliminary prospectus and any summary prospectus) or filed under Rule
424(b) under the Securities Act in accordance with Rule 430A thereunder, in
conformity with the requirement of the Securities Act, such documents
incorporated by reference in such registration statement or prospectus, and
such other documents, as Holder or any such underwriter may reasonably
request;
(iv) use all reasonable efforts to register or qualify all
Registrable Securities covered by such registration statement under such
"blue sky" or other securities law of such jurisdictions as Holder or any
underwriter of such Registrable Securities will reasonably request, and to
any and all other acts and things which may be necessary to enable Holder
or any underwriter to consummate the disposition in such jurisdictions of
the Registrable Securities covered by such registration statement, except
that ORA shall not for any such purpose be required to qualify generally to
do business as a foreign corporation in any jurisdiction wherein it is not
so qualified, or to subject itself to taxation in any such jurisdiction or
to consent to general service of process in any such jurisdiction; and
(v) promptly notify Holder at any time when a
prospectus relating to a registration pursuant to Section 2 is required to
be delivered under the Securities Act, of the occurrence of any event as a
result of which the prospectus included in such registration statement as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing, and at the request of Holder prepare and furnish to Holder a
reasonable number of copies of a supplement to or an amendment of such
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<PAGE>
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus will not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statement therein
not misleading in the light of the circumstances then existing.
ORA may require Holder to furnish ORA such information
regarding Holder and the distribution of such securities as ORA may from
time to time reasonably request in writing and as will be required by law
or by the SEC in connection with any registration.
(b) Holder will, upon receipt of any notice from ORA of
the occurrence of any event of the kind described in Section 3(a)(v)
hereof, discontinue disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until
Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3(a)(v) hereto. The period of time
during which ORA will be obligated to maintain the effectiveness of a
registration statement under Section 3(a)(ii) above shall be extended
by the number of days of any such discontinuance.
4. INDEMNIFICATION AND CONTRIBUTION. (a) In the event of any
registration of any Registrable Securities hereunder, ORA will enter into
customary indemnification arrangements to indemnify and hold harmless
Holder or any person who participates as an underwriter in the offering or
sale of such securities, each officer and director of each underwriter, and
each other person, if any, who "controls" Holder or any such underwriter
within the meaning of the Securities Act against any losses, claims,
damages, liabilities and expenses, joint or several, to which such person
may be subject under the Securities Act or otherwise insofar as such
losses, claims, damages, liabilities (or actions or proceedings in respect
thereof) or expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in any
registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus or final prospectus included
therein or filed under Rule 424(b) in accordance with Rule 430A under the
Securities Act, or any amendment or supplement thereto, or any document
incorporated by reference therein, or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and ORA will reimburse each
such person for any legal or any other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided, however, that ORA will not be
liable in any such case to the extent that any such loss, claim, damage,
-8-
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<PAGE>
liability (or action or proceeding in respect thereof) or expense arising
out of or is based upon any untrue statement or alleged untrue statement,
any such preliminary prospectus or final prospectus, amendment or
supplement in reliance upon and in conformity with written information
furnished to ORA by Holder or such underwriter for use in the preparation
thereof. Such indemnity will remain in full force and effect regardless of
any investigation made by or on behalf of Holder or any such underwriter
and will survive the transfer of such securities by Holder. ORA also will
agree to provide for contribution as will be reasonably requested by Holder
or any underwriters in circumstances where such indemnity is held
unenforceable.
(b) Holder, by virtue of exercising its registration rights
hereunder, will enter into customary indemnification arrangements to
indemnify and hold harmless (in the same manner and to the same extent as
set forth in paragraph (a) of this Section 4) ORA, each director and each
officer of ORA who will sign such registration statement, against any
losses, claims, damages, liabilities and expenses, joint or several, to
which such person may be subject under the Securities Act or otherwise
insofar as such losses, claims, damages, liabilities (or actions or
proceedings in respect thereof) or expenses arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus included therein or filed under Rule 424(b) in accordance with
Rule 430A under the Securities Act, or any amendment or supplement thereto,
or any document incorporated by reference therein, or (ii) any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
Holder will reimburse each such person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, liability, act or proceeding; PROVIDED, HOWEVER, that
Holder will be liable in any such case only to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof)
or expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in such registration
statement, any such preliminary prospectus or final prospectus, amendment
or supplement, in reliance upon and in conformity with written information
specifically furnished to ORA by Holder for use in the preparation thereof.
Such indemnity will remain in full force and effect regardless of any
investigation made by or on behalf of ORA and will survive the transfer of
such securities by Holder. Holder also will agree to provide for
contribution as will be reasonably requested by ORA in circumstances where
such indemnity is unenforceable.
-9-
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<PAGE>
EXHIBIT A
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES
LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT
TO THE PROVISIONS OF SUCH ACT OR SUCH LAWS OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is entered into as of
December 20, 1996 between DLS Financial Services Inc. ("Optionee"), and ORA
ELECTRONICS, INC., a Delaware corporation (the "Company"), with reference
to the following facts:
A. In consideration for Optionee providing certain financial
advisory services pursuant to that certain Letter Agreement re: Financial
Advisory Services dated as of December 19, 1996 between Optionee and the
Company, the Company desires to grant Optionee an option to purchase
certain shares of its common stock ("Common Stock") on the terms and
conditions contained herein.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing and the
mutual covenants and conditions contained herein, the parties agree as
follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee an option
(the "Option") to purchase, in whole or in part at any time or from time to
time, from the Company 14,772 shares of Common Stock (the "Shares") at an
exercise price of $5.00 per Share.
2. TERM OF OPTION. The Option shall expire at 5:00 p.m., Los Angeles
time, on June 18, 1997 (the "Expiration Date").
3. EXERCISE OF OPTION. The Option may be exercised, in whole or in
part at any time or from time to time, on or after the date hereof, by
giving written notice to the Company no less than five days before the
Exercise Date (as defined below). Such notice (the "Exercise Notice")
-1-
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<PAGE>
shall state: (a) the number of Shares with respect to which the Option is
being exercised; (b) the aggregate purchase price to be paid for such
Shares; (c) the number of Shares which shall remain subject to the Option
after the Exercise Date; and (d) the date on which certificates evidencing
the Shares to be acquired shall be delivered to Optionee (the "Exercise
Date"). On the Exercise Date, the Company shall deliver to Optionee a
certificate representing the Shares being purchased by Optionee, and
Optionee shall deliver to the Company payment for such Shares, which shall
be by wire transfer or certified or cashier's check.
4. EQUITABLE ADJUSTMENT. The number of shares and the purchase price
per Share set forth in Section 1 above shall be equitably adjusted as
necessary in the event of any stock split, reverse stock split,
recapitalization or other similar event involving the capital stock of the
Company.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
represents and warrants to Optionee that as of the date hereof and on the
Exercise Date:
5.1 ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite corporate power and authority to
enter into this Agreement, to own and to lease its property and to carry on
its business as now conducted.
5.2 AUTHORIZATION. The execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all required corporate action.
5.3 ENFORCEABILITY. This Agreement constitutes the legal, valid
and binding obligation of the Company and is enforceable against the
Company in accordance with its terms, except as such enforcement is limited
by bankruptcy, insolvency and other similar laws affecting the enforcement
of creditors' rights generally.
5.4 STATUS OF THE SHARES. The Shares when issued and paid for
by Optionee as provided herein shall be validly issued, fully paid and
non-assessable.
6. RESERVATION OF THE SHARES. The Company agrees to reserve at all
times during the term of the Option a sufficient number of shares of Common
Stock for the exercise of the Option.
7. REGULATORY COMPLIANCE. The issuance and sale of the Shares
pursuant to the exercise of the Option shall be subject to full compliance
-2-
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<PAGE>
with all applicable requirements of law and all certificates representing
the Shares shall bear any legend required by applicable securities laws.
The Company shall not be obligated to issue the Shares unless they have
been registered and qualified under applicable federal and state securities
laws or an exemption from such registration and qualification is available
and the Company, at its option, receives an opinion of Optionee's counsel
as to the availability of such exemption.
8. TRANSFERABILITY. This Agreement and the Option may not be
assigned, transferred or sold by Optionee.
9. FURTHER ASSURANCES. The Company and Optionee will, upon the
request of the other, execute and deliver such documents and take such
action reasonably necessary or desirable to more effectively complete and
evidence the sale and transfer of the Shares.
10. SURVIVAL OF REPRESENTATIONS. All representations and warranties
made herein and remedies for failure to perform any obligation required to
be performed shall survive the execution and delivery of this Agreement.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements, arrangements and
understandings with respect thereto. No representation, promise, inducement
or statement of intention has been made by any party hereto that is not
embodied herein and no party shall be bound by or liable for any alleged
representation, promise, inducement or statement not so set forth herein.
11.2 WAIVER. No failure on the part of either party hereto to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof or as a waiver of any other right, power
or remedy hereunder or the performance of any obligation of the other party
hereto; and no single or partial exercise by either party hereto of any
right, power or remedy hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy by
such party.
11.3 NOTICE. All notices, requests and other communications
required or permitted to be given hereunder shall be in writing and shall
be deemed given (a) upon receipt, if given by personal delivery, (b) upon
confirmation of delivery, if given by electronic facsimile, or (c) upon the
third business day following mailing, if deposited in the United States
Mail, certified mail, return receipt requested, postage prepaid, addressed
as follows:
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<PAGE>
If to the Company: ORA Electronics, Inc.
9410 Owensmouth Avenue
Chatsworth, California 91311
Attn: Chief Financial Officer
Fax: (818) 718-8626
If to Optionee: DLS Financial Services Inc.
519 Interstate 30
Suite 243
Rockwell, TX 75087
Attn: Dr. L. S. Smith
Fax: (214) 772-3093
Either party may change its or his address or fax number by providing
notice of such change to the other party in accordance herewith.
11.4 CONTROLLING LAW. This Agreement shall be interpreted and
enforced under the internal laws of the State of Delaware.
11.5 CONSTRUCTION. In construing this Agreement, none of the
parties hereto shall have any term or provision construed against such
party solely by reason of such party having drafted the same.
11.6 SEVERABILITY. If any sentence, paragraph, clause or
combination of the same in this Agreement is held by a court or arbitration
panel of competent jurisdiction to be unenforceable in any jurisdiction,
such sentence, paragraph, clause or combination shall be unenforceable in
the jurisdiction where it is invalid and the remainder of this Agreement
shall remain binding on the parties in such jurisdiction as if such
unenforceable provision had not been contained herein. The enforceability
of such sentence, paragraph, clause or combination of the same in this
Agreement shall be otherwise unaffected and shall remain enforceable in all
other jurisdictions.
11.7 MODIFICATION. This Agreement may be modified, amended,
superseded or canceled, and any part of the terms, covenants,
representations, warranties or conditions of the Agreement may be waived,
only by a written document executed by the party or parties to be bound by
any such modification, amendment, cancellation or waiver.
-4-
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<PAGE>
11.8 COUNTERPARTS. This Agreement may be signed simultaneously
in any number of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
11.9 EFFECT OF HEADINGS. The headings used in this Agreement
are included for convenience only and are not to be used in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
"Company"
ORA ELECTRONICS, INC.
By /s/ Gershon N. Cooper
------------------------------------
Its President
------------------------------
"Optionee"
DLS FINANCIAL SERVICES INC.
By /s/ L. S. Smith
-----------------------------------
Its President
------------------------------
-5-
Page 164 of 198
<PAGE>
EXHIBIT B
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES
LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT
TO THE PROVISIONS OF SUCH ACT OR SUCH LAWS OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is entered into as of
December 20, 1996 between DLS Financial Services Inc. ("Optionee"), and ORA
ELECTRONICS, INC., a Delaware corporation (the "Company"), with reference
to the following facts:
A. In consideration for Optionee providing certain financial
advisory services pursuant to that certain Letter Agreement re: Financial
Advisory Services dated as of December 19, 1996 between Optionee and the
Company, the Company desires to grant Optionee an option to purchase
certain shares of its common stock ("Common Stock") on the terms and
conditions contained herein.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing and the
mutual covenants and conditions contained herein, the parties agree as
follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee an option
(the "Option") to purchase, in whole or in part at any time or from time to
time, from the Company 20,208 shares of Common Stock (the "Shares") at an
exercise price of $10.00 per Share.
2. TERM OF OPTION. The Option shall expire at 5:00 p.m., Los Angeles
time, on June 20, 1998 (the "Expiration Date").
3. EXERCISE OF OPTION. The Option may be exercised, in whole or in
part at any time or from time to time, on or after the date hereof, by
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<PAGE>
giving written notice to the Company no less than five days before the
Exercise Date (as defined below). Such notice (the "Exercise Notice") shall
state: (a) the number of Shares with respect to which the Option is being
exercised; (b) the aggregate purchase price to be paid for such Shares; (c)
the number of Shares which shall remain subject to the Option after the
Exercise Date; and (d) the date on which certificates evidencing the Shares
to be acquired shall be delivered to Optionee (the "Exercise Date"). On the
Exercise Date, the Company shall deliver to Optionee a certificate
representing the Shares being purchased by Optionee, and Optionee shall
deliver to the Company payment for such Shares, which shall be by wire
transfer or certified or cashier's check.
4. EQUITABLE ADJUSTMENT. The number of shares and the purchase price
per Share set forth in Section 1 above shall be equitably adjusted as
necessary in the event of any stock split, reverse stock split,
recapitalization or other similar event involving the capital stock of the
Company.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
represents and warrants to Optionee that as of the date hereof and on the
Exercise Date:
5.1 ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite corporate power and authority to
enter into this Agreement, to own and to lease its property and to carry on
its business as now conducted.
5.2 AUTHORIZATION. The execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all required corporate action.
5.3 ENFORCEABILITY. This Agreement constitutes the legal, valid
and binding obligation of the Company and is enforceable against the
Company in accordance with its terms, except as such enforcement is limited
by bankruptcy, insolvency and other similar laws affecting the enforcement
of creditors' rights generally.
5.4 STATUS OF THE SHARES. The Shares when issued and paid for
by Optionee as provided herein shall be validly issued, fully paid and
non-assessable.
6. RESERVATION OF THE SHARES. The Company agrees to reserve at all
times during the term of the Option a sufficient number of shares of Common
Stock for the exercise of the Option.
-2-
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<PAGE>
7. REGULATORY COMPLIANCE. The issuance and sale of the Shares
pursuant to the exercise of the Option shall be subject to full compliance
with all applicable requirements of law and all certificates representing
the Shares shall bear any legend required by applicable securities laws.
The Company shall not be obligated to issue the Shares unless they have
been registered and qualified under applicable federal and state securities
laws or an exemption from such registration and qualification is available
and the Company, at its option, receives an opinion of Optionee's counsel
as to the availability of such exemption.
8. TRANSFERABILITY. This Agreement and the Option may not be
assigned, transferred or sold by Optionee.
9. FURTHER ASSURANCES. The Company and Optionee will, upon the
request of the other, execute and deliver such documents and take such
action reasonably necessary or desirable to more effectively complete and
evidence the sale and transfer of the Shares.
10. SURVIVAL OF REPRESENTATIONS. All representations and warranties
made herein and remedies for failure to perform any obligation required to
be performed shall survive the execution and delivery of this Agreement.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements, arrangements and
understandings with respect thereto. No representation, promise, inducement
or statement of intention has been made by any party hereto that is not
embodied herein and no party shall be bound by or liable for any alleged
representation, promise, inducement or statement not so set forth herein.
11.2 WAIVER. No failure on the part of either party hereto to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof or as a waiver of any other right, power
or remedy hereunder or the performance of any obligation of the other party
hereto; and no single or partial exercise by either party hereto of any
right, power or remedy hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy by
such party.
11.3 NOTICE. All notices, requests and other communications
required or permitted to be given hereunder shall be in writing and shall
be deemed given (a) upon receipt, if given by personal delivery, (b) upon
confirmation of delivery, if given by electronic facsimile, or (c) upon the
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<PAGE>
third business day following mailing, if deposited in the United States
Mail, certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Company: ORA Electronics, Inc.
9410 Owensmouth Avenue
Chatsworth, California 91311
Attn: Chief Financial Officer
Fax: (818) 718-8626
If to Optionee: DLS Financial Services Inc.
519 Interstate 30
Suite 243
Rockwell, TX 75087
Attn: Dr. L. S. Smith
Fax: (214) 772-3093
Either party may change its or his address or fax number by providing
notice of such change to the other party in accordance herewith.
11.4 CONTROLLING LAW. This Agreement shall be interpreted and
enforced under the internal laws of the State of Delaware.
11.5 CONSTRUCTION. In construing this Agreement, none of the
parties hereto shall have any term or provision construed against such
party solely by reason of such party having drafted the same.
11.6 SEVERABILITY. If any sentence, paragraph, clause or
combination of the same in this Agreement is held by a court or arbitration
panel of competent jurisdiction to be unenforceable in any jurisdiction,
such sentence, paragraph, clause or combination shall be unenforceable in
the jurisdiction where it is invalid and the remainder of this Agreement
shall remain binding on the parties in such jurisdiction as if such
unenforceable provision had not been contained herein. The enforceability
of such sentence, paragraph, clause or combination of the same in this
Agreement shall be otherwise unaffected and shall remain enforceable in all
other jurisdictions.
11.7 MODIFICATION. This Agreement may be modified, amended,
superseded or canceled, and any part of the terms, covenants,
-4-
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<PAGE>
representations, warranties or conditions of the Agreement may be waived,
only by a written document executed by the party or parties to be bound by
any such modification, amendment, cancellation or waiver.
11.8 COUNTERPARTS. This Agreement may be signed simultaneously
in any number of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
11.9 EFFECT OF HEADINGS. The headings used in this Agreement
are included for convenience only and are not to be used in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
"Company"
ORA ELECTRONICS, INC.
By /s/ Gershon N. Cooper
-------------------------------------
Its President
-------------------------------
"Optionee"
DLS FINANCIAL SERVICES INC.
By /s/ L. S. Smith
-----------------------------------
Its President
----------------------------
-5-
Page 169 of 198
<PAGE>
EXHIBIT C
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES
LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT
TO THE PROVISIONS OF SUCH ACT OR SUCH LAWS OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is entered into as of
December 20, 1996 between DLS Financial Services Inc. ("Optionee"), and ORA
ELECTRONICS, INC., a Delaware corporation (the "Company"), with reference
to the following facts:
A. In consideration for Optionee providing certain financial
advisory services pursuant to that certain Letter Agreement re: Financial
Advisory Services dated as of December 19, 1996 between Optionee and the
Company, the Company desires to grant Optionee an option to purchase
certain shares of its common stock ("Common Stock") on the terms and
conditions contained herein.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing and the
mutual covenants and conditions contained herein, the parties agree as
follows:
1. Grant of Option. The Company hereby grants to Optionee an option
(the "Option") to purchase, in whole or in part at any time or from time to
time, from the Company 17,478 shares of Common Stock (the "Shares") at an
exercise price of $15.00 per Share.
2. Term of Option. The Option shall expire at 5:00 p.m., Los Angeles
time, on December 20, 1999 (the "Expiration Date").
-1-
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<PAGE>
3. Exercise of Option. The Option may be exercised, in whole or in
part at any time or from time to time, on or after the date hereof, by
giving written notice to the Company no less than five days before the
Exercise Date (as defined below). Such notice (the "Exercise Notice") shall
state: (a) the number of Shares with respect to which the Option is being
exercised; (b) the aggregate purchase price to be paid for such Shares; (c)
the number of Shares which shall remain subject to the Option after the
Exercise Date; and (d) the date on which certificates evidencing the Shares
to be acquired shall be delivered to Optionee (the "Exercise Date"). On the
Exercise Date, the Company shall deliver to Optionee a certificate
representing the Shares being purchased by Optionee, and Optionee shall
deliver to the Company payment for such Shares, which shall be by wire
transfer or certified or cashier's check.
4. Equitable Adjustment. The number of shares and the purchase price
per Share set forth in Section 1 above shall be equitably adjusted as
necessary in the event of any stock split, reverse stock split,
recapitalization or other similar event involving the capital stock of the
Company.
5. Representations and Warranties by the Company. The Company represents
and warrants to Optionee that as of the date hereof and on the Exercise Date:
5.1 Organization and Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite corporate power and authority to
enter into this Agreement, to own and to lease its property and to carry on
its business as now conducted.
5.2 Authorization. The execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all required corporate action.
5.3 Enforceability. This Agreement constitutes the legal, valid
and binding obligation of the Company and is enforceable against the
Company in accordance with its terms, except as such enforcement is limited
by bankruptcy, insolvency and other similar laws affecting the enforcement
of creditors' rights generally.
5.4 Status of the Shares. The Shares when issued and paid for
by Optionee as provided herein shall be validly issued, fully paid and
non-assessable.
-2-
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<PAGE>
6. Reservation of the Shares. The Company agrees to reserve at all
times during the term of the Option a sufficient number of shares of Common
Stock for the exercise of the Option.
7. Regulatory Compliance. The issuance and sale of the Shares
pursuant to the exercise of the Option shall be subject to full compliance
with all applicable requirements of law and all certificates representing
the Shares shall bear any legend required by applicable securities laws.
The Company shall not be obligated to issue the Shares unless they have
been registered and qualified under applicable federal and state securities
laws or an exemption from such registration and qualification is available
and the Company, at its option, receives an opinion of Optionee's counsel
as to the availability of such exemption.
8. Transferability. This Agreement and the Option may not be
assigned, transferred or sold by Optionee.
9. Further Assurances. The Company and Optionee will, upon the
request of the other, execute and deliver such documents and take such
action reasonably necessary or desirable to more effectively complete and
evidence the sale and transfer of the Shares.
10. Survival of Representations. All representations and warranties
made herein and remedies for failure to perform any obligation required to
be performed shall survive the execution and delivery of this Agreement.
11. Miscellaneous.
11.1 Entire Agreement. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements, arrangements and
understandings with respect thereto. No representation, promise, inducement
or statement of intention has been made by any party hereto that is not
embodied herein and no party shall be bound by or liable for any alleged
representation, promise, inducement or statement not so set forth herein.
11.2 Waiver. No failure on the part of either party hereto to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof or as a waiver of any other right, power
or remedy hereunder or the performance of any obligation of the other party
hereto; and no single or partial exercise by either party hereto of any
right, power or remedy hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy by
such party.
-3-
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<PAGE>
11.3 Notice. All notices, requests and other communications
required or permitted to be given hereunder shall be in writing and shall
be deemed given (a) upon receipt, if given by personal delivery, (b) upon
confirmation of delivery, if given by electronic facsimile, or (c) upon the
third business day following mailing, if deposited in the United States
Mail, certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Company: ORA Electronics, Inc.
9410 Owensmouth Avenue
Chatsworth, California 91311
Attn: Chief Financial Officer
Fax: (818) 718-8626
If to Optionee: DLS Financial Services Inc.
519 Interstate 30
Suite 243
Rockwell, TX 75087
Attn: Dr. L. S. Smith
Fax: (214) 772-3093
Either party may change its or his address or fax number by providing
notice of such change to the other party in accordance herewith.
11.4 Controlling Law. This Agreement shall be interpreted and
enforced under the internal laws of the State of Delaware.
11.5 Construction. In construing this Agreement, none of the
parties hereto shall have any term or provision construed against such
party solely by reason of such party having drafted the same.
11.6 Severability. If any sentence, paragraph, clause or
combination of the same in this Agreement is held by a court or arbitration
panel of competent jurisdiction to be unenforceable in any jurisdiction,
such sentence, paragraph, clause or combination shall be unenforceable in
the jurisdiction where it is invalid and the remainder of this Agreement
shall remain binding on the parties in such jurisdiction as if such
unenforceable provision had not been contained herein. The enforceability
of such sentence, paragraph, clause or combination of the same in this
Agreement shall be otherwise unaffected and shall remain enforceable in all
other jurisdictions.
11.7 Modification. This Agreement may be modified, amended,
superseded or canceled, and any part of the terms, covenants,
representations, warranties or conditions of the Agreement may be waived,
only by a written document executed by the party or parties to be bound by
any such modification, amendment, cancellation or waiver.
-4-
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<PAGE>
11.8 Counterparts. This Agreement may be signed simultaneously
in any number of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
11.9 Effect of Headings. The headings used in this Agreement
are included for convenience only and are not to be used in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
"Company"
ORA ELECTRONICS, INC.
By /s/ Gershon N. Cooper
-------------------------------------
Its President
-------------------------------
"Optionee"
DLS FINANCIAL SERVICES INC.
By /s/ L. S. Smith
------------------------------------
Its President
------------------------------
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Page 174 of 198
<PAGE>
EXHIBIT D
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE APPLICABLE SECURITIES
LAWS OF ANY STATE AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED PURSUANT
TO THE PROVISIONS OF SUCH ACT OR SUCH LAWS OR IF AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is entered into as of
December 20, 1996 between DLS Financial Services Inc. ("Optionee"), and ORA
ELECTRONICS, INC., a Delaware corporation (the "Company"), with reference
to the following facts:
A. In consideration for Optionee providing certain financial
advisory services pursuant to that certain Letter Agreement re: Financial
Advisory Services dated as of December 19, 1996 between Optionee and the
Company, the Company desires to grant Optionee an option to purchase
certain shares of its common stock ("Common Stock") on the terms and
conditions contained herein.
NOW, THEREFORE, IN CONSIDERATION OF the foregoing and the
mutual covenants and conditions contained herein, the parties agree as
follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee an option
(the "Option") to purchase, in whole or in part at any time or from time to
time, from the Company 23,022 shares of Common Stock (the "Shares") at an
exercise price of $20.00 per Share.
2. TERM OF OPTION. The Option shall expire at 5:00 p.m., Los Angeles
time, on December 20, 2001 (the "Expiration Date").
3. EXERCISE OF OPTION. The Option may be exercised, in whole or in
part at any time or from time to time, on or after the date hereof, by
giving written notice to the Company no less than five days before the
Exercise Date (as defined below). Such notice (the "Exercise Notice") shall
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<PAGE>
state: (a) the number of Shares with respect to which the Option is being
exercised; (b) the aggregate purchase price to be paid for such Shares; (c)
the number of Shares which shall remain subject to the Option after the
Exercise Date; and (d) the date on which certificates evidencing the Shares
to be acquired shall be delivered to Optionee (the "Exercise Date"). On the
Exercise Date, the Company shall deliver to Optionee a certificate
representing the Shares being purchased by Optionee, and Optionee shall
deliver to the Company payment for such Shares, which shall be by wire
transfer or certified or cashier's check.
4. EQUITABLE ADJUSTMENT. The number of shares and the purchase price
per Share set forth in Section 1 above shall be equitably adjusted as
necessary in the event of any stock split, reverse stock split,
recapitalization or other similar event involving the capital stock of the
Company.
5. REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
represents and warrants to Optionee that as of the date hereof and on the
Exercise Date:
5.1 ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with all requisite corporate power and authority to
enter into this Agreement, to own and to lease its property and to carry on
its business as now conducted.
5.2 AUTHORIZATION. The execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all required corporate action.
5.3 ENFORCEABILITY. This Agreement constitutes the legal, valid
and binding obligation of the Company and is enforceable against the
Company in accordance with its terms, except as such enforcement is limited
by bankruptcy, insolvency and other similar laws affecting the enforcement
of creditors' rights generally.
5.4 STATUS OF THE SHARES. The Shares when issued and paid for
by Optionee as provided herein shall be validly issued, fully paid and
non-assessable.
6. RESERVATION OF THE SHARES. The Company agrees to reserve at all
times during the term of the Option a sufficient number of shares of Common
Stock for the exercise of the Option.
7. REGULATORY COMPLIANCE. The issuance and sale of the Shares
pursuant to the exercise of the Option shall be subject to full compliance
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with all applicable requirements of law and all certificates representing
the Shares shall bear any legend required by applicable securities laws.
The Company shall not be obligated to issue the Shares unless they have
been registered and qualified under applicable federal and state securities
laws or an exemption from such registration and qualification is available
and the Company, at its option, receives an opinion of Optionee's counsel
as to the availability of such exemption.
8. TRANSFERABILITY. This Agreement and the Option may not be
assigned, transferred or sold by Optionee.
9. FURTHER ASSURANCES. The Company and Optionee will, upon the
request of the other, execute and deliver such documents and take such
action reasonably necessary or desirable to more effectively complete and
evidence the sale and transfer of the Shares.
10. SURVIVAL OF REPRESENTATIONS. All representations and warranties
made herein and remedies for failure to perform any obligation required to
be performed shall survive the execution and delivery of this Agreement.
11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding of the parties with respect to the subject
matter hereof and supersedes all prior agreements, arrangements and
understandings with respect thereto. No representation, promise, inducement
or statement of intention has been made by any party hereto that is not
embodied herein and no party shall be bound by or liable for any alleged
representation, promise, inducement or statement not so set forth herein.
11.2 WAIVER. No failure on the part of either party hereto to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof or as a waiver of any other right, power
or remedy hereunder or the performance of any obligation of the other party
hereto; and no single or partial exercise by either party hereto of any
right, power or remedy hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy by
such party.
11.3 NOTICE. All notices, requests and other communications
required or permitted to be given hereunder shall be in writing and shall
be deemed given (a) upon receipt, if given by personal delivery, (b) upon
confirmation of delivery, if given by electronic facsimile, or (c) upon the
third business day following mailing, if deposited in the United States
Mail, certified mail, return receipt requested, postage prepaid, addressed
as follows:
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<PAGE>
If to the Company: ORA Electronics, Inc.
9410 Owensmouth Avenue
Chatsworth, California 91311
Attn: Chief Financial Officer
Fax: (818) 718-8626
If to Optionee: DLS Financial Services Inc.
519 Interstate 30
Suite 243
Rockwell, TX 75087
Attn: Dr. L. S. Smith
Fax: (214) 772-3093
Either party may change its or his address or fax number by providing
notice of such change to the other party in accordance herewith.
11.4 CONTROLLING LAW. This Agreement shall be interpreted and
enforced under the internal laws of the State of Delaware.
11.5 CONSTRUCTION. In construing this Agreement, none of the
parties hereto shall have any term or provision construed against such
party solely by reason of such party having drafted the same.
11.6 SEVERABILITY. If any sentence, paragraph, clause or
combination of the same in this Agreement is held by a court or arbitration
panel of competent jurisdiction to be unenforceable in any jurisdiction,
such sentence, paragraph, clause or combination shall be unenforceable in
the jurisdiction where it is invalid and the remainder of this Agreement
shall remain binding on the parties in such jurisdiction as if such
unenforceable provision had not been contained herein. The enforceability
of such sentence, paragraph, clause or combination of the same in this
Agreement shall be otherwise unaffected and shall remain enforceable in all
other jurisdictions.
11.7 MODIFICATION. This Agreement may be modified, amended,
superseded or canceled, and any part of the terms, covenants,
representations, warranties or conditions of the Agreement may be waived,
only by a written document executed by the party or parties to be bound by
any such modification, amendment, cancellation or waiver.
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<PAGE>
11.8 COUNTERPARTS. This Agreement may be signed simultaneously
in any number of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same document.
11.9 EFFECT OF HEADINGS. The headings used in this Agreement
are included for convenience only and are not to be used in construing or
interpreting this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
"Company"
ORA ELECTRONICS, INC.
By /s/ Gershon N. Cooper
------------------------------------
Its President
------------------------------
"Optionee"
DLS FINANCIAL SERVICES INC.
By /s/ L. S. Smith
-----------------------------------
Its President
----------------------------
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<PAGE>
EXHIBIT 99.2
------------
===========================================================================
REGISTRATION RIGHTS AGREEMENT
by and between
ORA ELECTRONICS, INC., AND
THE COOPER FAMILY LIVING TRUST
-------------------------------------
Dated as of December 20, 1996
-------------------------------------
===========================================================================
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<PAGE>
TABLE OF CONTENTS
PAGE
1. Definitions..........................................................1
2. Securities Subject to this Agreement.................................2
(a) Registrable Securities.........................................2
(b) Holders of Registrable Securities..............................2
3. Demand Registration..................................................3
(a) Request for Demand Registration................................3
(b) Effective Demand Registration..................................3
(c) Expenses.......................................................3
(d) Underwriting Procedures........................................4
(e) Selection of Underwriters......................................4
4. Piggy-Back Registration..............................................4
(a) Piggy-Back Rights..............................................4
(b) Expenses.......................................................5
5. Holdback Agreements..................................................5
(a) Restrictions on Public Sale by Designated Holders..............5
(b) Restrictions on Public Sale by the Company.....................5
6. Registration Procedures..............................................6
(a) Obligations of the Company.....................................6
(b) Seller Information.............................................9
(c) Notice to Discontinue..........................................9
7. Registration Expenses...............................................10
8. Indemnification; Contribution.......................................10
(a) Indemnification by the Company................................10
(b) Indemnification by Designated Holders.........................11
(c) Conduct of Indemnification Proceedings........................11
(d) Contribution..................................................12
9. Rule 144............................................................13
10. Miscellaneous.......................................................13
(a) Recapitalizations, Exchanges, etc.............................13
(b) No Inconsistent Agreements....................................13
(c) Remedies......................................................13
(d) Amendments and Waivers........................................13
(e) Notices.......................................................14
(f) Successors and Assigns........................................14
(g) Counterparts..................................................15
(h) Headings......................................................15
(i) Governing Law.................................................15
(j) Severability..................................................15
(k) Entire Agreement..............................................15
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<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated as of
December 20, 1996 (the "AGREEMENT"), is made by and between ORA
Electronics, Inc., a Delaware corporation (the "COMPANY"), and
Gershon N. Cooper and Ruth Cooper, as trustees of the Cooper
Living Trust, established under the Trust Agreement dated
April 19, 1990 (the "LIVING TRUST"). This Agreement is made in
connection with that certain Agreement and Plan of Merger, dated
as of the date hereof (the "MERGER AGREEMENT"), by and between
the Company and North American Energy of Delaware, Inc., a
Delaware corporation ("NORTH AMERICAN"). In order to induce the
Living Trust to approve the Merger Agreement, the Company has
agreed to provide registration rights with respect to the
Registrable Securities (as hereinafter defined) as set forth in
this Agreement.
The parties hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, and
unless the context requires a different meaning, the following
terms have the meanings indicated:
"ACT" means the Securities Act of 1933, as
amended.
"APPROVED UNDERWRITER" has the meaning assigned
such term in Section 3(e).
"COMMON STOCK" means the Common Stock, par value
$.001 per share, of the Company and any class or series of common
stock of the Company authorized after the date of this Agreement,
or any other class of stock resulting from successive changes or
reclassification of such Common Stock.
"COMPANY UNDERWRITER" has the meaning assigned
such term in Section 4(a).
"DEMAND REGISTRATION" has the meaning assigned
such term in Section 3(a).
"DESIGNATED HOLDER" means the Living Trust and any
transferee to whom Registrable Securities have been transferred
other than a transferee to whom such securities have been
transferred pursuant to a registration statement under the Act or
Rule 144 under the Act.
"EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
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<PAGE>
"INSPECTOR" has the meaning assigned such term in
Section 6(a)(viii).
"NASD" has the meaning assigned such term in
Section 6(a)(xv).
"PERSON" shall mean any individual, firm,
corporation, partnership, trust, incorporated or unincorporated
association, limited liability company, joint venture, joint
stock company, government (or an agency or political subdivision
thereof) or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.
"REGISTRABLE SECURITIES" mean each of the
following: (a) any shares of Common Stock issued pursuant to the
Merger Agreement, and (b) any Common Stock issued or issuable
with respect to such shares of Common Stock by way of a stock
dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other
reorganization or otherwise and shares of Common Stock issuable
upon conversion, exercise or exchange thereof.
"REGISTRATION EXPENSES" has the meaning assigned
such term in Section 7.
"SEC" means the Securities and Exchange
Commission.
2. SECURITIES SUBJECT TO THIS AGREEMENT.
(a) REGISTRABLE SECURITIES. For the purposes of
this Agreement, Registrable Securities will cease to be
Registrable Securities when (i) a registration statement covering
such Registrable Securities has been declared effective under the
Act by the SEC and such Registrable Securities have been disposed
of pursuant to such effective registration statement or (ii) the
entire amount of Registrable Securities proposed to be sold in a
single sale are or, in the opinion of counsel satisfactory to the
Company and the holder of such Registrable Securities, each in
their reasonable judgment, may be distributed to the public
without restriction pursuant to Rule 144 (or any successor
provision then in effect) under the Act.
(b) HOLDERS OF REGISTRABLE SECURITIES. A Person
is deemed to be a holder of Registrable Securities whenever such
Person owns of record Registrable Securities, or holds an option
to purchase, or a security convertible into or exercisable or
exchangeable for, Registrable Securities whether or not such
acquisition or conversion has actually been effected and
disregarding any legal restrictions upon the exercise of such
rights. If the Company receives conflicting instructions,
notices or elections from two or more persons with respect to the
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<PAGE>
same Registrable Securities, the Company may act upon the basis
of the instructions, notice or election received from the
registered owner of such Registrable Securities. Registrable
Securities issuable upon exercise of an option or upon conversion
of another security shall be deemed outstanding for the purposes
of this Agreement.
3. DEMAND REGISTRATION.
(a) REQUEST FOR DEMAND REGISTRATION. At any time
after the date hereof, the Designated Holders holding 51% of the
Registrable Securities may make a written request for
registration of Registrable Securities under the Act, and under
the securities or blue sky laws of any jurisdiction designated by
such holder or holders (a "DEMAND REGISTRATION"); PROVIDED, that
the Company will not be required to effect more than three Demand
Registrations in the aggregate at the request of Designated
Holders pursuant to this Section 3. Each such request for a
Demand Registration shall specify the amount of the Registrable
Securities proposed to be sold, the intended method of
disposition thereof and the jurisdictions in which registration
is desired. Upon a request for a Demand Registration, the
Company shall promptly take such steps as are necessary or
appropriate to prepare for the registration of the Registrable
Securities to be registered. Within fifteen (15) days after the
receipt of such request, the Company shall give written notice
thereof to all Designated Holders holding Registrable Securities
and include in such registration all Registrable Securities held
by a Designated Holder with respect to which the Company has
received written requests for inclusion therein at least ten (10)
days prior to the filing of the registration statement. Each
such receipt will also specify the number of Registrable
Securities to be registered, the intended method of disposition
thereof and the jurisdictions in which registration is desired.
Unless Designated Holders holding the majority of the
Registerable Securities to be included in the Demand Registration
consent in writing, no other party, including the Company (but
not including any other Designated Holder), shall be permitted to
offer securities under any such Demand Registration.
(b) EFFECTIVE DEMAND REGISTRATION. A
registration shall not constitute a Demand Registration until it
has become effective and remains continuously effective for not
less than one hundred and twenty (120) days. The Company shall
use its best efforts to cause any such Demand Registration to
become effective not later than ninety (90) days after it
receives a request under Section 2(a) hereof.
(c) EXPENSES. In any registration initiated as
a Demand Registration, the Company shall pay all Registration
Expenses in connection therewith, whether or not such Demand
Registration becomes effective.
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<PAGE>
(d) UNDERWRITING PROCEDURES. If Designated
Holders holding a majority of the Registrable Securities to which
the Demand Registration relates so elect, the offering of such
Registrable Securities pursuant to such Demand Registration shall
be in the form of a firm commitment underwritten offering and the
managing underwriter or underwriters selected for such offering
shall be the Approved Underwriter selected in accordance with
Section 3(e). In such event, if the Approved Underwriter advises
the Company in writing that, in its opinion, the aggregate amount
of such Registrable Securities requested to be included in such
offering is sufficiently large to have a material adverse effect
on the success of such offering, the Company shall include in
such registration only the aggregate amount of Registrable
Securities that, in the opinion of the Approved Underwriter, may
be sold without any such material adverse effect and shall
reduce, pro rata based on the amounts included in the request for
Demand Registration, the amount of Registrable Securities to be
included by each Designated Holder in such registration. To the
extent Registrable Securities so requested to be registered are
excluded from the offering, then the Designated Holders of such
Registrable Securities shall have the right to one additional
Demand Registration under this Section 3 with respect to such
Registrable Securities.
(e) SELECTION OF UNDERWRITERS. If any Demand
Registration of Registrable Securities is in the form of an
underwritten offering, the Designated Holders holding a majority
of the Registrable Securities to which the Demand Registration
relates shall select and obtain an investment banking firm to act
as the managing underwriter of the offering (the "APPROVED
UNDERWRITER"); PROVIDED, that the Approved Underwriter shall, in
any case, be acceptable to the Company in its reasonable
judgment.
4. PIGGY-BACK REGISTRATION.
(a) PIGGY-BACK RIGHTS. If the Company proposes
to file a registration statement under the Act with respect to an
offering by the Company for its own account of any class of
security (other than a registration statement on Form S-4 or S-8
or any successor or other forms not available for registering
capital stock for sale to the public), then the Company shall
give written notice of such proposed filing to the Designated
Holders of Registrable Securities at least thirty (30) days
before the anticipated filing date, and such notice shall
describe in detail the proposed registration and distribution
(including those jurisdictions where registration under the
securities or blue sky laws is intended) and offer such
Designated Holders the opportunity to register the number of
Registrable Securities as each such holder may request. The
Company shall use its best efforts (within ten (10) days of the
notice provided for in the preceding sentence) to cause the
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<PAGE>
managing underwriter or underwriters of a proposed underwritten
offering (the "COMPANY UNDERWRITER") to permit the Designated
Holders of Registrable Securities who have requested to
participate in the registration and to include such Registrable
Securities in such offering on the same terms and conditions as
the securities of the Company included therein. Notwithstanding
the foregoing, if the Company Underwriter delivers a written
opinion to the Designated Holders of Registrable Securities that
the total amount or kind of securities which they, the Company
and any other persons or entities intend to include securities in
such offering (the "TOTAL SECURITIES") is sufficiently large so
as to have a material adverse effect on the distribution of the
Total Securities, then the amount or kind of securities to be
offered for the account of such Designated Holders and such other
persons or entities (but not the Company) shall be reduced pro
rata to the extent necessary to reduce the Total Securities to
the amount recommended by the Company Underwriter.
(b) EXPENSES. The Company shall bear all
Registration Expenses in connection with any registration
pursuant to this Section 4.
5. HOLDBACK AGREEMENTS.
(a) RESTRICTIONS ON PUBLIC SALE BY DESIGNATED
HOLDERS. In order to participate in a registration effected
hereby, to the extent not inconsistent with applicable law, each
Designated Holder of Registrable Securities agrees not to effect
any public sale or distribution of any Registrable Securities
being registered or of any securities convertible into or
exchangeable or exercisable for such Registrable Securities,
including a sale pursuant to Rule 144 under the Act, during the
ten (10) business days prior to, and during the 120 day period
beginning on, the effective date of such registration statement
(except as part of such registration), if and to the extent
requested by the Company in the case of a non-underwritten public
offering or if and to the extent requested by the Company
Underwriter in the case of an underwritten public offering.
(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY.
The Company agrees not to effect any public sale or distribution
of any of its securities, or any securities convertible into or
exchangeable or exercisable for such securities (except pursuant
to registrations on Form S-4 or S-8 or any successor or other
forms not available for registering capital stock for sale to the
public) during the ten (10) business days prior to, and during
the ninety (90) day period beginning on, the later of (i) the
effective date of any registration statement in which the
Designated Holders of Registrable Securities are participating
and (ii) commencement of a public distribution of the Registrable
Securities pursuant to such registration statement.
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6. REGISTRATION PROCEDURES.
(a) OBLIGATIONS OF THE COMPANY. Whenever
registration of Registrable Securities has been requested
pursuant to Section 3 or 4 of this Agreement, the Company shall
use its best efforts to effect the registration and sale of such
Registrable Securities in accordance with the intended method of
distribution thereof as quickly as practicable, and in connection
with any such request, the Company shall, as expeditiously as
possible:
(i) prepare and file with the SEC a
registration statement on any form for which the Company then
qualifies of which counsel for the Company shall deem appropriate
and which form shall be available for the sale of such
Registrable Securities in accordance with the intended method of
distribution thereof, and use its best efforts to cause such
registration statement to become effective; PROVIDED, HOWEVER,
that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company shall (A) provide
counsel selected by the Designated Holders holding a majority of
the Registrable Securities being registered in such registration
("HOLDERS' COUNSEL") and any other Inspector (as hereinafter
defined) with an adequate and appropriate opportunity to
participate in the preparation of such registration statement and
each prospectus included therein (and each amendment or
supplement thereto) to be filed with the SEC, which documents
shall be subject to the review of Holders' Counsel, and
(B) notify the Holders' Counsel and each seller of Registrable
Securities of any stop order issued or threatened by the SEC and
take all reasonable action required to prevent the entry of such
stop order or to remove it if entered;
(ii) prepare and file with the SEC such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to
keep such registration statement effective for a period of: (A)
in the case of a demand registration under Section 3, not less
than 120 days or such shorter period which will terminate when
all Registrable Securities covered by such registration statement
have been sold, and (B) in the case of a piggy-back registration
under Section 4, such period of time as necessary for the Company
to effect its distribution of securities thereunder. The Company
shall comply with the provisions of the Act with respect to the
disposition of all securities covered by such registration
statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such
registration statement;
(iii) as soon as reasonably possible, furnish
to each seller of Registrable Securities, prior to filing a
registration statement, copies of such registration statement as
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<PAGE>
is proposed to be filed, and thereafter such number of copies of
such registration statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the
prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as each
such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such seller;
(iv) use its best efforts to register or
qualify such Registrable Securities under such other securities
or blue sky laws of such jurisdictions as any seller of
Registrable Securities requests, and to continue such qualifi
cation in effect in such jurisdiction for as long as is
permissible pursuant to the laws of such jurisdiction, or for as
long as any such seller requests or until all of such Registrable
Securities are sold, whichever is shortest, and do any and all
other acts and things which may be reasonably necessary or
advisable to enable any such seller to consummate the disposition
in such jurisdictions of the Registrable Securities owned by such
seller; PROVIDED, HOWEVER, that the Company shall not be required
to (A) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this
Section 6(a)(iv), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any
such jurisdiction;
(v) notify each seller of Registrable
Securities at any time when a prospectus relating thereto is
required to be delivered under the Act, upon discovery that, or
upon the happening of any event as a result of which, the
prospectus included in such registration statement contains an
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the
circumstances under which they were made, and the Company shall
promptly prepare a supplement or amendment to such prospectus and
furnish to each seller a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, after delivery to the purchasers of such
Registrable Securities, such prospectus shall not contain an
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances
under which they were made;
(vi) enter into and perform customary
agreements (including an underwriting agreement in customary form
with the Approved Underwriter or Company Underwriter, if any,
selected as provided in Sections 3 or 4) and take such other
actions as are reasonably required in order to expedite or
facilitate the disposition of such Registrable Securities;
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<PAGE>
(vii) make available for inspection by any
seller of Registrable Securities, any managing underwriter
participating in any disposition pursuant to such registration
statement, Holders' Counsel and any attorney, accountant or other
agent retained by any such seller or any managing underwriter
(each, an "INSPECTOR" and collectively, the "INSPECTORS"), all
financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries (collectively, the
"RECORDS") as shall be reasonably necessary to enable them to
exercise their due diligence responsibility, and cause the
Company's and its subsidiaries' officers, directors and
employees, and the independent public accountants of the Company,
to supply all information reasonably requested by any such
Inspector in connection with such registration statement.
Records that the Company determines, in good faith, to be
confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless
(A) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in the registration statement,
(B) the release of such Records is ordered pursuant to a subpoena
or other order from a court of competent jurisdiction, or (C) the
information in such Records has been made generally available to
the public. Each seller of Registrable Securities agrees that it
shall, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give notice to the Company and
allow the Company, at the Company's expense, to undertake
appropriate action to prevent disclosure of the Records deemed
confidential;
(viii) if such sale is pursuant to an
underwritten offering, obtain a "cold comfort" letter from the
Company's independent public accountants in customary form and
covering such matters of the type customarily covered by "cold
comfort" letters as Holders' Counsel or the managing underwriter
reasonably request;
(ix) furnish, at the request of any seller of
Registrable Securities on the date such securities are delivered
to the underwriters for sale pursuant to such registration or, if
such securities are not being sold through underwriters, on the
date the registration statement with respect to such securities
becomes effective, an opinion, dated such date, of counsel
representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the seller making
such request, covering such legal matters with respect to the
registration in respect of which such opinion is being given as
such seller may reasonably request and are customarily included
in such opinions;
(x) otherwise use its best efforts to comply
with all applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably
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practicable but no later than fifteen (15) months after the
effective date of the registration statement, an earnings
statement covering a period of twelve (12) months beginning after
the effective date of the registration statement, in a manner
which satisfies the provisions of Section 11(a) of the Act;
(xi) cause all such Registrable Securities to
be listed on each securities exchange on which similar securities
issued by the Company are then listed, provided, that the
applicable listing requirements are satisfied;
(xii) keep each seller of Registrable
Securities advised in writing as to the initiation and progress
of any registration under Section 3 or 4 hereunder;
(xiii) provide officers' certificates and other
customary closing documents;
(xiv) cooperate with each seller of
Registrable Securities and each underwriter participating in the
disposition of such Registrable Securities and their respective
counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the
"NASD"); and
(xv) use best efforts to take all other steps
necessary to effect the registration of the Registrable
Securities contemplated hereby.
(b) SELLER INFORMATION. The Company may require
each seller of Registrable Securities as to which any
registration is being effected to furnish to the Company such
information regarding the distribution of such securities as the
Company may from time to time reasonably request in writing.
(c) NOTICE TO DISCONTINUE. Each Designated
Holder of Registrable Securities agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind
described in Section 6(a)(vi), such Designated Holder shall
forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable
Securities until such Designated Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by
Section 6(a)(vi) and, if so directed by the Company, such
Designated Holder shall deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in
such Designated Holder's possession, of the prospectus covering
such Registrable Securities which is current at the time of
receipt of such notice. If the Company shall give any such
notice, the Company shall extend the period during which such
registration statement shall be maintained effective pursuant to
this Agreement (including without limitation the period referred
-9-
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<PAGE>
to in Section 6(a)(ii)) by the number of days during the period
from and including the date of the giving of such notice pursuant
to Section 6(a)(vi) to and including the date when the Designated
Holder shall have received the copies of the supplemented or
amended prospectus contemplated by and meeting the requirements
of Section 6(a)(vi).
7. REGISTRATION EXPENSES.
The Company shall pay all expenses (other than
underwriting discounts and commissions) arising from or incident
to the performance of, or compliance with, this Agreement,
including without limitation, (i) SEC, stock exchange and NASD
registration and filing fees, (ii) all fees and expenses incurred
in complying with securities or blue sky laws (including
reasonable fees, charges and disbursements of counsel in
connection with blue sky qualifications of the Registrable
Securities), (iii) all printing, messenger and delivery expenses,
(iv) the fees, charges and disbursements of counsel to the
Company and of its independent public accountants and any other
accounting and legal fees, charges and expenses incurred by the
Company (including without limitation any expenses arising from
any special audits incident to or required by any registration or
qualification), and (v) any liability insurance or other premiums
for insurance obtained (which insurance the Company agrees to use
its best efforts to obtain upon the reasonable request of any
seller of Registrable Securities) and the reasonable fees,
charges and expenses of any special experts (provided that a
seller of Registrable Securities shall give notice to the
Company, as soon as practicable, of the retention of such special
experts) retained in connection with any Demand Registration or
piggy-back registration pursuant to the terms of this Agreement,
regardless of whether such registration statement is declared
effective. In connection with each registration hereunder, the
Company shall reimburse the Designated Holders of Registrable
Securities being registered in such registration for the
reasonable fees, charges and disbursements of not more than one
counsel chosen by the Designated Holders holding a majority of
Registrable Securities being registered in such registration.
All of the expenses described in this Section 7 are referred to
herein as "REGISTRATION EXPENSES."
8. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company
agrees to indemnify, to the full extent permitted by law, each
Designated Holder, its officers, directors, partners, employees,
advisors and agents and each Person who controls (within the
meaning of the Act or the Exchange Act) such Designated Holder
from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable costs of investigation)
arising out of or based upon any untrue, or alleged untrue,
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<PAGE>
statement of a material fact contained in any registration
statement, prospectus or preliminary prospectus or notification
or offering circular (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) or
arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except
insofar as the same are caused by or contained in any information
furnished in writing to the Company by such Designated Holder
expressly for use therein. The Company shall also indemnify any
underwriters of the Registrable Securities, their officers,
directors and employees and each Person who controls such
underwriters (within the meaning of the Act and the Exchange Act)
to the same extent as provided above with respect to the
indemnification of the Designated Holders of Registrable
Securities.
(b) INDEMNIFICATION BY DESIGNATED HOLDERS. In
connection with any registration statement in which a Designated
Holder is participating pursuant to Section 3 or 4 hereof, each
such Designated Holder shall furnish to the Company in writing
such information with respect to such Designated Holder as the
Company may reasonably request or as may be required by law for
use in connection with any such registration statement or
prospectus and each Designated Holder agrees to indemnify, to the
extent permitted by law, the Company, any underwriter retained by
the Company and their respective directors, officers, employees
and each Person who controls the Company or such underwriter
(within the meaning of the Act and the Exchange Act) to the same
extent as the foregoing indemnity from the Company to the
Designated Holders, but only with respect to any such information
furnished in writing by such Designated Holder.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any
Person entitled to indemnification hereunder (the "INDEMNIFIED
PARTY") agrees to give prompt written notice to the indemnifying
party (the "INDEMNIFYING PARTY") after the receipt by the
Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof
made in writing for which the Indemnified Party intends to claim
indemnification or contribution pursuant to this Agreement;
provided, that the failure so to notify the Indemnifying Party
shall not relieve the Indemnifying Party of any liability that it
may have to the Indemnified Party hereunder. If notice of
commencement of any such action is given to the Indemnifying
Party as above provided, the Indemnifying Party shall be entitled
to participate in and, to the extent it may wish, jointly with
any other Indemnifying Party similarly notified, to assume the
defense of such action at its own expense, with counsel chosen by
it and satisfactory to such Indemnified Party. The Indemnified
Party shall have the right to employ separate counsel in any such
action and participate in the defense thereof, but the fees and
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<PAGE>
expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the Indemnified Party unless
(i) the Indemnifying Party agrees to pay the same, (ii) the
Indemnifying Party fails to assume the defense of such action
with counsel satisfactory to the Indemnified Party in its
reasonable judgment, (iii) the named parties to any such action
(including any impleaded parties) have been advised by such
counsel that either (A) representation of such Indemnified Party
and the Indemnifying Party by the same counsel would be
inappropriate under applicable standards of professional conduct
or (B) there may be one or more legal defenses available to it
which are different from or additional to those available to the
Indemnifying Party. In either of such cases, the Indemnifying
Party shall not have the right to assume the defense of such
action on behalf of such Indemnified Party. No Indemnifying
Party shall be liable for any settlement entered into without its
written consent, which consent shall not be unreasonably
withheld.
(d) CONTRIBUTION. If the indemnification
provided for in this Section 8 from the Indemnifying Party is
unavailable to an Indemnified Party hereunder in respect of any
losses, claims, damages, liabilities or expenses referred to
therein, then the Indemnifying Party, in lieu of indemnifying
such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions which
resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations.
The relative faults of such Indemnifying Party and Indemnified
Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates
to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include, subject to the limitations set
forth in Sections 8(a), 8(b) and 8(c), any legal or other fees,
charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 8(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. No person guilty of fraudulent misrepresentation
-12-
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<PAGE>
(within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person.
9. RULE 144.
The Company covenants that it shall file any reports
required to be filed by it under the Exchange Act and the rules
and regulations adopted by the SEC thereunder; and that it shall
take such further action as each Designated Holder of Registrable
Securities may reasonably request (including providing any
information necessary to comply with Rules 144 and 144A under the
Act), all to the extent required from time to time to enable such
Designated Holder to sell Registrable Securities without
registration under the Act within the limitation of the
exemptions provided by (a) Rule 144 or Rule 144A under the Act,
as such rules may be amended from time to time, or (b) any
similar rules or regulations hereafter adopted by the SEC. The
Company shall, upon the request of any Designated Holder of
Registrable Securities, deliver to such Designated Holder a
written statement as to whether it has complied with such
requirements.
10. MISCELLANEOUS.
(a) RECAPITALIZATIONS, EXCHANGES, ETC. The
provisions of this Agreement shall apply, to the full extent set
forth herein with respect to the Common Stock, to any and all
shares of capital stock of the Company or any successor or assign
of the Company (whether by merger, consolidation, sale of assets
or otherwise) which may be issued in respect of, in exchange for
or in substitution of, the Common Stock and shall be
appropriately adjusted for any stock dividends, splits, reverse
splits, combinations, recapitalizations and the like occurring
after the date hereof.
(b) NO INCONSISTENT AGREEMENTS. The Company
shall not enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the Designated
Holders in this Agreement.
(c) REMEDIES. The Designated Holders, in
addition to being entitled to exercise all rights granted by law,
including recovery of damages, shall be entitled to specific
performance of their rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive in any
action for specific performance the defense that a remedy at law
would be adequate.
(d) AMENDMENTS AND WAIVERS. Except as otherwise
provided herein, the provisions of this Agreement may not be
-13-
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<PAGE>
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the
Company has obtained the prior written consent of the Designated
Holders holding at least a majority of the Registrable
Securities.
(e) NOTICES. All notices and other communi
cations provided for or permitted hereunder shall be made in
writing and shall be made by hand delivery, overnight courier or
telecopier:
(i) if to the Company:
ORA Electronics, Inc.
9410 Owensmouth Ave.
Chatsworth, CA 91311
Telecopier: (818) 718-8626
Attention: President
with a copy to:
Sheppard, Mullin, Richter & Hampton
48th Floor
333 South Hope Street,
Los Angeles, CA 90071
Telecopier: (213) 620-1398
Attention: Lawrence M. Braun, Esq.
(ii) if to the Living Trust:
Gershon N. Cooper and Ruth Cooper, Trustees
The Cooper Living Trust
c/o ORA Electronics, Inc.
9410 Owensmouth Ave.
Chatsworth, CA 91311
Telecopier: (818) 718-8626
(iii) if to any other Designated Holder, at
its address as it appears on the
transfer books of the Company
All such notices and communications shall be deemed to
have been duly given: when delivered by hand, if personally
delivered; when delivered by courier, if delivered by commercial
overnight courier service; and when receipt is acknowledged, if
telecopied.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall
inure to the benefit of and be binding upon the successors and
assigns of each of the parties; provided, that the registration
rights and the other obligations of the Company contained in this
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Page 195 of 198
<PAGE>
Agreement shall with respect to any Registrable Security be
automatically transferred from a Designated Holder to any
subsequent holder of Registrable Securities (including any
pledgee but excluding any person who acquires such securities in
a transaction with respect to which a Registration Statement
under the Act is effective at the time or pursuant to a sale
complying with Rule 144 under the Act). Notwithstanding any
transfer of such rights, all of the obligations of the Company
hereunder shall survive any such transfer and shall continue to
inure to the benefit of all transferees.
(g) COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are
for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
(i) GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the internal laws of
the State of California without regard to the principles of
conflicts of law of such State.
(j) SEVERABILITY. If any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability
of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, it being
intended that all of the rights and privileges of the Designated
Holders shall be enforceable to the fullest extent permitted by
law.
(k) ENTIRE AGREEMENT. This Agreement is intended
by the parties as a final expression of their agreement and
intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth
or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to
such subject matter.
-15-
Page 196 of 198
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this
Agreement to be executed and delivered by their respective
officers hereunto duly authorized on the date first above
written.
"COMPANY"
ORA Electronics, Inc.
By: /s/ John M. Burris
-----------------------------------
Title: CFO
---------------------------
"LIVING TRUST"
/s/ Gershon N. Cooper /s/ Ruth Cooper
-----------------------------------------
Gershon N. Cooper and Ruth Cooper, as
trustees of the Cooper Living Trust,
established under the Trust Agreement
dated April 19, 1990
-16-
Page 197 of 198
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR 6-MOS 6-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1995 MAR-31-1994 MAR-31-1997 MAR-31-1996
<PERIOD-END> MAR-31-1996 MAR-31-1995 MAR-31-1994 SEP-30-1996 SEP-30-1995
<CASH> 357,995 657,803 420,992 987,336 0
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 5,518,538 4,192,450 2,533,045 4,784,160 0
<ALLOWANCES> 2,184,718 1,042,000 489,000 1,914,471 0
<INVENTORY> 5,812,730 5,668,446 4,676,853 6,289,950 0
<CURRENT-ASSETS> 1,019,642 9,971,693 7,430,315 10,972,687 0
<PP&E> 8,942,591 8,678,808 8,438,057 8,998,114 0
<DEPRECIATION> 2,372,893 2,056,996 1,783,522 2,531,161 0
<TOTAL-ASSETS> 17,128,943 17,020,943 14,165,803 17,780,733 0
<CURRENT-LIABILITIES> 8,661,824 7,078,703 4,104,714 11,472,776 0
<BONDS> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 10,000 10,000 10,000 10,000 0
<OTHER-SE> 1,268,217 2,686,072 3,253,016 (888,645) 1,832,332
<TOTAL-LIABILITY-AND-EQUITY> 17,128,943 17,020,943 14,165,803 17,780,733 0
<SALES> 24,110,436 25,308,778 20,398,962 8,200,208 11,504,592
<TOTAL-REVENUES> 24,110,436 25,308,778 20,398,962 8,200,208 11,504,592
<CGS> 15,354,206 15,687,331 10,559,143 6,189,650 8,083,543
<TOTAL-COSTS> 9,200,161 8,568,786 7,951,216 3,692,510 3,986,242
<OTHER-EXPENSES> (58,783) (56,790) (3,989) 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 1,056,529 898,534 782,647 474,910 288,547
<INCOME-PRETAX> (1,441,677) 210,917 1,109,945 (2,156,862) (853,740)
<INCOME-TAX> (23,822) 27,861 32,633 0 0
<INCOME-CONTINUING> (1,417,855) 183,056 1,077,312 (2,156,862) (853,740)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> (1,417,855) 183,056 1,077,312 (2,156,862) (853,740)
<EPS-PRIMARY> (1,417.86) 183.06 1,077.31 (2,156.86) (853.74)
<EPS-DILUTED> (1,417.86) 183.06 1,077.31 (2,156.86) (853.74)
</TABLE>
