`
As filed with the Securities and Exchange Commission on August 26, 1996
Registration No. 33-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
ARC CAPITAL
(Exact name of registrant as specified in its charter)
California 2067 Commerce Drive 33-0256103
(State or other jurisdiction of Medford, Oregon 97504 (I.R.S. Employer
incorporation or organization) (541) 776-7700 Identification No.)
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Alan R. Steel
2067 Commerce Drive
Medford, Oregon 97504
Tel. (541) 776-7700
Fax. (541) 779-6838
(Name, address, including zip code, and telephone number, including area
code of agent for service)
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With a copy to:
Yvonne E. Chester, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
Tel. (310) 553-4441
Fax. (310) 201-4746
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Approximate date of commencement of proposed
sale to public: As soon as practicable after this
Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed maximum Proposed maximum Amount of
Title of each class of Amount to be offering price aggregate offering registration
securities to be registered registered per unit (1) price (1) fee
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<S> <C> <C> <C> <C>
Class A Common Stock, no par value 6,128,538 $1.75 $10,724,942 $3,698.26
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<FN>
(1) Estimated solely for the purchase of calculating the registration fee and
based, pursuant to Rule 457(c) on the average of the high and low sale
prices of Registrant's Class A Common Stock as reported on the NASDAQ Stock
Market on August 21, 1996.
</FN>
</TABLE>
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its
effective date until the Registrant shall file a further amendment which
specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
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<PAGE>
ARC CAPITAL
Cross Reference Sheet
Pursuant to Item 501(b) of Regulation S-K, showing the location in the
Prospectus of the answers to the items in Part I of Form S-3.
Form S-3 Item Number and Caption Prospectus Caption
1. Front of the Registration Statement Facing Page; Outside Front
and OutsideFront Cover Page of Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front Cover Page and
ofProspectus Back Cover Page
3. Summary Information, Risk Factors and Risk Factors
Ratio ofEarnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page; Price
Range of Class A Common Stock,
Class A Warrants and Class B
Warrants
6. Dilution Dilution
7. Selling Security Holders Selling Securityholders
8. Plan of Distribution Outside Front Cover Page; Plan
of Distribution
9. Description of Securities to be Registered Outside Front Cover Page;
Description of Securities
10.Interest of Named Experts and Counsel Not Applicable
11.Material Changes Not Applicable
12.Incorporation of Certain Information Incorporation of Certain
by Reference Documents by Reference
13.Disclosure of Commission Position on Not Applicable
Indemnification for Securities Act
Liabilities
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED AUGUST 26, 1996
PROSPECTUS
ARC CAPITAL
6,128,538 Shares of Class A Common Stock
This Prospectus relates to the offer by certain securityholders named
herein (the "Selling Securityholders") for sale to the public from time to time
of (i) 3,752,000 shares of Class A Common Stock (the "Common Stock") of ARC
Capital ("ARC" or the "Company") issuable upon conversion of notes issued in
private placements (the "Notes") and in connection with an acquisition, (ii)
2,015,000 shares of Common Stock issuable upon exercise of Common Stock Purchase
Warrants ("Warrants") issued in connection with private placements of Common
Stock and convertible debt and in connection with an acquisition, and (iii)
361,538 shares of Common Stock issuable upon the exercise of certain stock
options granted to directors of, and consultants to, the Company. Unless
otherwise indicated herein, references herein to the "Company" means ARC Capital
and its subsidiaries.
The following table summarizes the terms of the Warrants (also see
"Description of Securities"):
<TABLE>
<CAPTION>
Class Exercise Price Per Share Expiration Date
<S> <C> <C>
F $ 1.875 April 12, 1998
G 2.00 February 28, 1999
H 2.125 April 17, 2001
I 2.25 July 23, 2001
Laidlaw 2.25 April 1, 1997
</TABLE>
With respect to the Common Stock issuable upon conversion of Notes,
1,152,000, 1,600,000 and 1,000,000 shares are issuable at $1.875, $2.125
(subject to change if certain events occur) and $2.25 per share, respectively.
The Note related to the 1,152,000 shares is due on April 13, 1997, and may be
prepaid at any time prior to maturity. The Note related to the 1,600,000 shares
is due on April 16, 2001 and may be prepaid: (1) without conversion privileges
before April 1997 at 120% of par; (2) with conversion privileges at any time
after April 1997, assuming that the market price of the Common Stock reaches
$4.00 per share; or (3) with conversion privileges any time concurrent with or
after an initial public offering of stock of the Company's SRC VISION, Inc.
and/or Pulsarr Holding b.v. subsidiary/ies ("Subsidiary") provided, however,
that if the market price of the Common Stock during the 30 days immediately
prior to prepayment is less than $3.00, there will be a prepayment penalty of
10% of the principal amount of the Note to be prepaid. The Note related to
1,000,000 shares is due on July 23, 1999, and may be prepaid at any time prior
to maturity.
361,538 shares of Common Stock are issuable upon the exercise of stock
options at prices ranging from $1.00 to $2.375 per share. Such options expire
between 2001 and 2005.
The Common Stock is traded on the Nasdaq Stock Market under the symbol
"ARCCA." As of August 21, 1996, the last sale price for the Common Stock as
reported on the Nasdaq Stock Market was $1.6875.
<PAGE>
This offering is not being underwritten. The Selling Securityholders have
advised the Company that they may sell, directly or through brokers, all or a
portion of the shares of Common Stock owned by each of them in negotiated
transactions or in transactions on the Nasdaq Stock Market or otherwise at
prices and terms prevailing at the time of sale. It is anticipated that usual
and customary brokerage fees will be paid by the Selling Securityholders. In
connection with such sales, the Selling Securityholders and any participating
broker or dealer may be deemed to be "underwriters" of the Shares within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
The Company has informed the Selling Securityholders that the
anti-manipulation provisions of Rules 10b-6 and 10b-7 under the Securities
Exchange Act of 1934 (the "Exchange Act") may apply to their sales of the Shares
The Company also has advised the Selling Securityholders of the requirements for
delivery of this Prospectus in connection with any sale of the Shares.
See "Risk Factors" beginning on page 7 of this Prospectus for a
discussion of certain material risks associated with an investment in the Shares
offered hereby.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================== -------------------- ----------------------
Price to Proceeds to Selling
Public (1) Securityholders (2)
==================================== ===================== =====================
<S> <C> <C>
Per Share of Common Stock....... $ 1.6875 $ 10,341,908
==================================== ===================== =====================
<FN>
(1) Based on the last reported sale price of the Common Stock on the Nasdaq
Stock Market on August 21, 1996.
(2) All proceeds from the sale of the Shares
offered hereby will be received by the Selling Securityholders.
The amount shown is without deduction for brokerage fees which may be
paid by the Selling Securityholders and for offering expenses, estimated
at $25,000, payable by the Company pursuant to its agreements and
understandings with the Selling Securityholders. See "Use of Proceeds."
</FN>
</TABLE>
The date of this Prospectus is August 26, 1996
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy or information statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements, and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N. W., Washington, D.C. 20549, as well as at the following
regional offices: 7 World Trade Center, New York, New York 10048, and
Northwestern Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials also can be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N. W.,
Washington, D.C. 20549, at prescribed rates. The Securities are traded on the
Nasdaq Market (small-cap) and the Company's reports, proxy or information
statements, and other information filed with Nasdaq may be inspected at Nasdaq's
offices at 1735 K Street, N. W., Washington, D.C., 20006.
Additional information regarding the Company and the Shares and Warrants
offered hereby is contained in the Registration Statement on Form S-3 of which
this Prospectus is a part (including all exhibits and amendments thereto, the
"Registration Statement"), filed with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). For further information pertaining to
the Company, the Common Stock and the Common Stock Purchase Warrants, reference
is made to the Registration Statement and the exhibits thereto, which may be
inspected and copied at the Commission's public reference facilities at
Judiciary Plaza, 450 Fifth Street, N. W., Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have been previously filed by the Company
(Commission File No. 0-20097) with the Commission under the Exchange Act are
incorporated in this Prospectus by reference: (a) the Company's Annual Report on
Form 10-K for the year ended December 31, 1995; (b) the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 31 and June 30, 1996; and (c)
the Company's Current Reports on Form 8-K or Form 8-K-A filed on January 26,
1996 (Date of Report: January 18, 1996), February 16, 1996 (Date of Report:
February 15, 1996), March 6, 1996 (Date of Report: March 1, 1996), May 13, 1996
(Date of Report: March 1, 1996), and July 30, 1996 (Date of Report: July 24,
1996).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of this offering shall be deemed to be incorporated by
reference into this Prospectus and to be a part of this Prospectus from the date
of filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in any other subsequently filed document which also is, or
is deemed to be, incorporated by reference herein) modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
On request, the Company will provide, without charge, to each person to whom
this Prospectus is delivered a copy of any or all of the documents incorporated
by reference (other than exhibits to such documents that are not specifically
incorporated by reference in such documents). Requests for such copies should be
directed to ARC Capital, 2067 Commerce Drive, Medford, Oregon 97504, Attention
Alan R. Steel, or by telephone at (541) 776-7700.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto incorporated by
reference herein. An investment in the Securities offered hereby involves
certain materials risks. Prospective investors should carefully consider the
factors discussed under "Risk Factors." Unless otherwise indicated, the
information contained in the Prospectus assumes that outstanding warrants other
than the Warrants, and options outstanding under the Company's stock option
plans are not exercised.
The Offering
Class A Common Stock offered hereby.......... 6,128,538 shares
Class A Common Stock outstanding
before offering............................ 10,764,190 shares (3)
Class A Common Stock outstanding
after offerings and conversion and
exercise of underlying securities (1)...... 16,892,728 shares(3)
Class B Common Stock outstanding
before and after offering(2)............... 118,501 shares
Use of Proceeds.............................. All of the proceeds from the
sale of the Securities offered
hereby will be received by the
Selling Securityholders. The
Company will not receive any
of the proceeds from this
offering but will bear
estimated expenses of
approximately $25,000.
Risk Factors................................. The securities offered hereby
involve a high degree of risk.
See "Risk Factors."
NASDAQ Symbols............................... Class A Common Stock - ARCCA
Class A Warrants - ARCCW
Class B Warrants - ACCRZ
UPO Units - ARCCU
(1) Assumes that the Notes are converted and the Class F, Class G, Class H,
Class I and Laidlaw warrants, and options to purchase 361,538 shares are
exercised. See "Risk Factors - Need for Additional Financing."
(2) The Class A Common Stock and the Class B Common Stock are substantially
identical except that the Class B Common Stock has limited
transferability.
(3) Based on 10,764,190 shares of Class A Common Stock outstanding as of
July 31, 1996.
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus and incorporated
herein by reference, the following risk factors should be considered carefully
in evaluating the Company and its business before purchasing the Shares offered
by this Prospectus. An investment in the Shares offered hereby is speculative in
nature and involves a high degree of risk.
History of Losses; Negative Cash Flow
Prior to 1995, the Company had a history of losses and negative operating
cash flow. The Company believes it may operate at a negative cash flow in the
future due to (i) the need to fund certain development projects, such as the
Advanced Vision Processor ("AVP"), (ii) cash required to enter new market areas,
(iii) interest costs associated with recent financings, (iv) cash required for
repayment of debt, and (v) possible cash needed to fully integrate Pulsarr's and
Ventek's operations. Until the Company is able to consistently generate
sustained positive cash flow from operations, the Company must rely on debt or
equity financing.
Although the Company achieved profitability in 1995, there can be no
assurance as to the Company's profitability on a quarterly or annual basis in
the future. Furthermore, the non-recurring expenses in early 1996 will result in
a significant loss for the 1996 year.
Need for Additional Financing
The Company is seeking additional financing; however there can be no
assurance the Company will be able to obtain any additional financing on terms
satisfactory to the Company, if at all. The recent increases in (i) outstanding
shares of the Company's Class A Common Stock due to private placements, (ii) the
April 1995 and April 1996 private placements of convertible debt, (iii) a
substantial loss in the first half of 1996, (iv) debt incurred for the
acquisition of Ventek, and (v) the number of securities issuable upon exercise
of warrants and convertible debt may limit the Company's ability to negotiate
additional debt or equity financing.
Uncertain Ability to Manage Growth and Integrate Acquired Businesses
As part of its business strategy, the Company intends to pursue rapid
growth. In March and July 1996, the Company acquired Pulsarr and Ventek,
respectively, which had sales in 1995 of approximately $11.4 million and $4.4
million, respectively, and would have added approximately 80% to the Company's
1995 sales on a pro forma basis. This growth strategy will require the
integration of new entities, such as Pulsarr and Ventek, the establishment of
distribution relationships in foreign countries, expanded customer service and
support, increased personnel throughout the Company and the continued
implementation and improvement of the Company's operational, financial and
management information systems. There is no assurance that the Company will be
able to attract qualified personnel or to accomplish other measures necessary
for its successful integration of Pulsarr, Ventek or other acquired entities for
internal growth, or that the Company can successfully manage expanded
operations. As the Company expands, it may from time to time experience
constraints that will adversely affect its ability to satisfy customer demand in
a timely fashion. Failure to manage growth effectively could adversely affect
the Company's financial condition and results of operations.
Rapid Technological Changes; Product Development
The markets for the Company's machine vision products are characterized
by rapidly changing technology, evolving industry standards and frequent new
product introductions and enhancements. For example, the Company believes that
the 1995 introduction by Key Technology, Inc. of its new line of vision sorting
equipment adversely affected bookings in late 1995 and 1996. Sales of products
such as those offered by the Company depend in part on the continuing
development and deployment of emerging technology and new services and
applications based on such technology. The Company's success will depend to a
significant extent upon its ability to enhance its existing products and develop
new products that gain market acceptance. There can be no assurance that the
Company will be successful in selecting, developing and manufacturing new
products or enhancing its existing products on a timely or cost-effective basis
or that products or technologies developed by others will not render the
Company's products noncompetitive or obsolete. Moreover, the Company may
encounter technical problems in connection with its product development that
could result in the delayed introduction of new products or product
enhancements. Failure to develop or introduce on a timely basis new products or
product enhancements that achieve market acceptance would materially and
adversely affect the Company's business, operating results and financial
condition.
Market Acceptance of New Products
The Company's future operating results will depend upon its ability to
successfully introduce and market, on a timely and cost-effective basis, new
products and enhancements to existing products. There can be no assurance that
new products or enhancements, if developed and manufactured, will achieve market
acceptance. The Company is currently in the initial prototype stage of
development on its AVP, a high speed software and digital signal processing
technology designed to significantly improve system performance. There can be no
assurance that a market for AVP systems will develop (i.e. that a need for AVP
systems will exist, that AVP will be favored over other products on the market,
etc.) or, if a market does develop, that the Company will be able, financially
or operationally, to market and support AVP systems successfully.
Dependence on Certain Markets and Expansion Into New Markets
The future success and growth of the Company is dependent upon continuing
sales in domestic and international food processing markets as well as
successful penetration of other existing and potential markets. A substantial
portion of the Company's historical sales has been in the potato and vegetable
processing markets. Reductions in capital equipment expenditures by such
processors due to commodity surpluses, product price fluctuations, changing
consumer preferences or other factors could have an adverse effect on the
Company's results of operations. The Company also intends to expand the
marketing of its processing systems in additional food markets such as meat and
granular food products, as well as nonfood markets such as plastics, wood
products and tobacco, and to expand its sales activities in foreign markets. In
the case of Ventek, the wood veneer market served is narrow, and saturation of
the market and the potential inability to identify and develop new markets could
adversely affect Ventek's growth rate. There can be no assurance that the
Company can successfully penetrate additional food, nonfood, and wood veneer
markets or expand further in foreign markets.
Lengthy Sales Cycle
The sales cycle in the marketing and sale of the Company's machine vision
systems, especially in new markets or in a new application, is lengthy and can
be as long as three years. Even in existing markets, due to the $100,000 to
$450,000 price range for each system, the purchase of a machine vision system
can constitute a substantial capital investment for a customer (which may need
more than one machine for its particular proposed application) requiring lengthy
consideration and evaluation. In particular, a potential customer must develop a
high degree of assurance that the product will meet its needs, successfully
interface with the customer's own manufacturing, production or processing
system, and have minimal warranty, safety and service problems. Accordingly, the
time lag from initiation of marketing efforts to final sales can be lengthy.
Competition
The markets for the Company's products are highly competitive. A major
competitor of the Company has recently made a new product introduction which has
increased the competition that the Company faces. Some of the Company's
competitors may have substantially greater financial, technical, marketing and
other resources than the Company. Important competitive factors in the Company's
markets include price, performance, reliability, customer support and service.
Although the Company believes that it currently competes effectively with
respect to these factors, there can be no assurance that the Company will be
able to continue to compete effectively in the future.
Dependence upon Certain Suppliers
Certain key components and subassemblies used in the Company's products are
currently obtained from sole sources or a limited group of suppliers, and the
Company has only one long-term supply agreement to ensure an uninterrupted
supply of certain components. Although the Company seeks to reduce dependence on
sole or limited source suppliers, the inability to obtain sufficient sole or
limited source components as required, or to develop alternative sources if and
as required, could result in delays or reductions in product shipments which
could materially and adversely affect the Company's results of operations and
damage customer relationships. The purchase of certain of the components used in
the Company's products requires an 8 to 12 week lead time for delivery. An
unanticipated shortage of such components could delay the Company's ability to
timely manufacture units, damage customer relations, and have a material adverse
effect on the Company. In addition, a significant increase in the price of one
or more of these components or subassemblies could adversely affect the
Company's results of operations.
Dependence upon Significant Customers and Distribution Channel
The Company sold equipment to two unaffiliated customers each totaling 20%
of sales in 1995. Sales to a third unaffiliated customer totaled 15% of sales in
1994. Ventek's sales have been to a relatively small number of multi-location
plywood manufacturers. The Company usually receives orders of one to several
machine vision systems, but occasionally receives larger orders. While the
Company strives to create long-term relationships with its customers and
distributors, there can be no assurance that they will continue ordering
additional systems from the Company. The Company may continue to be dependent on
a small number of customers and distributors, the loss of which would adversely
affect the Company's business.
Risk of International Sales
Due to its export sales (from the U.S. in the case of SRC and Ventek, or
from the Netherlands in the case of Pulsarr), the Company is subject to the
risks of conducting business internationally, including unexpected changes in
regulatory requirements; fluctuations in the value of the U. S. dollar or Dutch
guilder, which could increase the sales prices in local currencies of the
Company's products in international markets; delays in obtaining export
licenses, tariffs and other barriers and restrictions; and the burdens of
complying with a variety of international laws. In addition, the laws of certain
foreign countries may not protect the Company's intellectual property rights to
the same extent as do the laws of the United States or the Netherlands.
Fluctuations in Quarterly Operating Results; Seasonality
The Company has experienced and may in the future experience significant
fluctuations in revenues and operating results from quarter to quarter as a
result of a number of factors, many of which are outside the control of the
Company. These factors include the timing of significant orders and shipments,
product mix, delays in shipment, capital spending patterns of customers,
competition and pricing, new product introductions by the Company or its
competitors, the timing of research and development expenditures, expansion of
marketing and support operations, changes in material costs, production or
quality problems, currency fluctuations, disruptions in sources of supply,
regulatory changes and general economic conditions. These factors are difficult
to forecast, and these or other factors could have a material adverse effect on
the Company's business and operating results. Moreover, due to the relatively
fixed nature of many of the Company's costs, including personnel and facilities
costs, the Company would not be able to reduce costs in any quarter to
compensate for any unexpected shortfall in net sales, and such a shortfall would
have a proportionately greater impact on the Company's results of operations for
that quarter. For example, a significant portion of the Company's quarterly net
sales depends upon sales of a relatively small number of high-priced systems.
Thus, changes in the number of such high-priced systems shipped in any given
quarter can produce substantial fluctuations in net sales, gross profits, and
net income from quarter to quarter. In addition, in the event the Company's
machine vision systems' average selling price increases, of which there can be
no assurance, the addition or cancellation of sales may exacerbate quarterly
fluctuations in revenues and operating results.
The Company's operating results may also be affected by certain seasonal
trends. The Company typically experiences lower sales and order levels in the
first quarter when compared with the preceding fourth quarter due primarily to
the seasonality of certain harvested food items. The Company expects these
seasonal patterns to continue, though their impact on revenues will decline as
the Company continues to expand its presence in nonagricultural and other
markets which are less seasonal.
Risks Associated with Possible Acquisitions
The Company may pursue strategic acquisitions or joint ventures in addition
to the acquisitions of Pulsarr and Ventek as part of its growth strategy. While
the Company has no commitments or binding agreements with respect to any further
acquisition, the Company anticipates that one or more potential opportunities
may become available in the future. Acquisitions and joint ventures would
require investment of operational and financial resources and could require
integration of dissimilar operations, assimilation of new employees, diversion
of management resources, increases in administrative costs and additional costs
associated with debt or equity financing. There can be no assurance that any
acquisition or joint venture by the Company will not have an adverse effect on
the Company's results of operations or will not result in dilution to existing
shareholders. If additional attractive opportunities become available, the
Company may decide to pursue them actively. There can be no assurance that the
Company will complete any future acquisitions or joint ventures or that such a
future transaction will not materially and adversely affect the Company.
Dependence upon Key Personnel
The Company's success depends to a significant extent upon the continuing
contributions of its key management, technical, sales and marketing and other
key personnel. Except for William J. Young, the Company's President and Chief
Executive Officer, Alan R. Steel, the Company's Chief Financial Officer, Dr.
James Ewan, SRC's President and Chief Executive Officer, Jan C. Scholt,
Pulsarr's Managing Director, and the four former stockholders of Ventek, the
Company does not have long-term employment agreements or other arrangements with
such individuals which would encourage them to remain with the Company. The
Company's future success also depends upon its ability to attract and retain
additional skilled personnel. Competition for such employees is intense. The
loss of any current key employees or the inability to attract and retain
additional key personnel could have a material adverse effect on the Company's
business and operating results. There can be no assurance that the Company will
be able to retain its existing personnel or attract such additional skilled
employees in the future.
Intellectual Property
The Company's competitive position may be affected by its ability to
protect its proprietary technology. Although the Company has a number of United
States and foreign patents, there can be no assurance that any such patents will
provide meaningful protection for its product innovations. The Company may
experience additional intellectual property risks in international markets where
it may lack patent protection.
Product Liability and Other Legal Claims
From time to time, the Company may be involved in litigation arising out of
the normal course of its business, including product liability and other legal
claims. While the Company has a general liability insurance policy which
includes product liability coverage up to an aggregate amount of $10 million,
there can be no assurance that the Company will be able to maintain product
liability insurance on acceptable terms or that its insurance will provide
adequate coverage against potential claims in the future. There can be no
assurance that third parties will not assert infringement claims against the
Company, that any such assertion of infringement will not result in litigation
or that the Company would prevail in such litigation. Furthermore, litigation,
regardless of its outcome, could result in substantial cost to and diversion of
effort by the Company. Any infringement claims or litigation against the Company
could materially and adversely affect the Company's business, operating results
and financial condition. If a substantial product liability or other legal claim
against the Company were sustained that was not covered by insurance, there
could be an adverse effect on the Company's financial condition and
marketability of the affected products.
Warranty Exposure and Performance Specifications
The Company generally provides a one-year limited warranty on its products.
In addition, for certain custom-designed systems, the Company contracts to meet
certain performance specifications for a specific application. In the past, the
Company has incurred higher warranty expenses related to new products than it
typically incurs with established products. There can be no assurance that the
Company will not incur substantial warranty expenses in the future with respect
to new products, as well as established products, or with respect to its
obligations to meet performance specifications, which may have an adverse effect
on its results of operations and customer relationships.
USE OF PROCEEDS
Other than the exercise price of such of the Warrants and Options as may
be exercised, the Company will not receive any of the proceeds from the sale of
the Common Stock offered hereby. The Company will pay the costs of this
offering, which are estimated to be $25,000. Holders of the Warrants and Options
are not obligated to exercise their Warrants and Options, and there can be no
assurance that such holders will choose to exercise all or any of such Warrants
and Options. Additionally, the holders of the Notes are not obligated to convert
their Notes, and there can be no assurance that such holders will choose to
exercise all or any of such Notes. The gross proceeds to the Company in the
event that all of the Warrants and Options are exercised would be as follows:
<PAGE>
<TABLE>
<CAPTION>
Number of
Warrants or Exercise Price Proceeds to
or Options per Share Company
<S> <C> <C> <C>
Warrants:
Class F 300,000 $ 1.875 $ 562,500
Class G 240,000 2.00 480,000
Class H 340,000 2.125 722,500
Class I 1,000,000 2.25 2,250,000
Laidlaw 135,000 2.25 303,750
Options: 200,000 1.00 200,000
100,000 2.375 237,500
61,538 1.625 99,999
---------------
Total $ 4,856,249
===============
</TABLE>
The effect of the conversion of the Notes would be to reduce debt and
increase equity by approximately $7,810,000. While there will be no direct
proceeds to the Company from an assumed conversion of the Notes, the Company's
future cash flows would be enhanced by the cessation of Note-related interest
and principal payments.
The Company intends to apply the net proceeds it receives from exercise
of the Warrants and Options, to the extent any are exercised, to augment its
working capital and for general corporate purposes.
PRICE RANGE OF CLASS A COMMON STOCK,
CLASS A WARRANTS AND CLASS B WARRANTS
The Company's Class A Common Stock, Class A Warrants, and Class B
Warrants are quoted on the Nasdaq system under the symbols ARCCA, ARCCW and
ARCCZ, respectively. The high and low sales prices for the Class A Common Stock,
Class A Warrants and Class B Warrants as reported by The Nasdaq Stock Market for
the last two fiscal years and for 1996 are indicated below. Such prices are
inter-dealer prices without retail markups, markdowns, or commissions, and may
not necessarily represent actual transactions. There is no established public
trading market for the Company's Class B Common Stock.
<TABLE>
<CAPTION>
Class A Common
Stock Class A Class B
Warrants Warrants
Year Ended December 31, 1994 Low High Low High Low High
- ---------------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter (January-March) 3.88 6.25 2.50 4.56 0.88 2.00
Second Quarter (April-June) 1.94 4.38 0.94 3.38 0.75 1.81
Third Quarter (July-September) 1.25 2.63 0.75 1.31 0.25 0.69
Fourth Quarter (October-December) 0.69 1.56 0.25 0.50 0.13 0.25
Year Ended December 31, 1995
First Quarter (January-March) 0.69 1.13 0.25 0.41 0.09 0.13
Second Quarter (April-June) 0.88 1.38 0.31 0.56 0.09 0.31
Third Quarter (July-September) 1.06 3.63 0.31 1.88 0.16 0.63
Fourth Quarter (October-December) 1.88 3.25 0.91 1.75 0.22 0.59
Year Ended December 31, 1996
First Quarter (January-March) 2.50 1.50 1.09 0.66 0.41 0.31
Second Quarter (April-June) 2.56 1.31 1.56 0.63 0.47 0.25
Closing price on August 21, 1996 1.69 0.69 0.28
</TABLE>
On December 31, 1995, there were 102 and 30 record owners of the
Company's Class A and Class B Common Stock, respectively. The majority of
outstanding shares of Class A Common Stock are held of record by a nominee
holder on behalf of an unknown number of ultimate beneficial owners. The total
numbers of beneficial owners of the Company's common shares indicated in the
responses to the Company's November 1994 proxy solicitation by the nominees or
their designated agents was approximately 2,300.
The Company has not declared or paid any cash dividends upon its Common
Stock since its inception. The Company does not anticipate paying any cash
dividends in the foreseeable future. It is anticipated that earnings, if any,
which may be generated from operations will be used to finance the operations of
the Company.
DILUTION
As of June 30, 1996, the Company's Class A Common Stock had a net
tangible book value of $59,000, which represents the amount of the Company's
total tangible assets less liabilities, or $.01 per share, based on 10,882,691
outstanding shares, and assuming conversion of 118,500 shares of Class B Common
Stock. Giving effect to the conversion of $2,160,000 of 10.25% Notes, $3,400,000
of 6.75% Notes, and the $2,250,000 Notes, the pro forma net tangible book value
of the shares of Class A Common Stock would have been $.18, $.28 and $.19 per
share, respectively, representing an immediate dilution per share of $1.70,
$1.86, and $2.07, respectively, to individuals converting the 10.25% Notes,
6.75% Notes, and $2.250,000 Notes, respectively. Giving effect to the exercise
of the 300,000, 240,000, 340,000, 1,000,000 and 135,000 outstanding Class F, G,
H, I and Laidlaw Warrants, respectively, the pro forma net tangible book value
of the shares of Class A Common Stock would have been $.06, $.05, $.07, $.19 and
$.03 per share, respectively, representing an immediate dilution per share of
$1.83, $1.96, $2.07, $2.07 and $2.23 to individuals exercising Class F, G, H, I
and Laidlaw Warrants, respectively. Giving effect to the exercise of 361,538
Options to purchase shares of Class A Common Stock, the pro forma net tangible
book value of the shares of Class A Common Stock would have been $.05 per share,
representing an immediate dilution per share of $1.44. Dilution per share
represents the difference between the exercise price and the pro forma net
tangible book value after the conversion of the Notes or exercise of the
Warrants or Options, as applicable.
The following table illustrates per share dilution to be incurred by
individuals converting the Notes and exercising the Warrants and Options listed
herein, assuming all such Notes, Warrants and Options are converted or
exercised.
<TABLE>
<CAPTION>
10.25% 6.75% $2,250,000 Class F Class G Class H Class I Laidlaw
Notes Notes Notes Warrants Warrants Warrants Warrants Warrants Options
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Conversion or exercise price
per share of Class A Common
Stock $ 1.875 $ 2.125 $ 2.25 $ 1.875 $ 2.00 $ 2.125 $ 2.25 $ 2.25 $ 1.487
Net tangible book value
per share before conversion
of Notes or exercise of 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01
Warrants or Options
Proforma net tangible book
value after conversion or 0.18 0.28 0.19 0.06 0.05 0.07 0.19 0.03 0.05
exercise (1)
Increase per share attributable
to conversion or exercise 0.17 0.27 0.18 0.05 0.04 0.06 0.18 0.02 0.04
Dilution per share (2) 1.70 1.86 2.07 1.83 1.96 2.07 2.07 2.23 1.44
<FN>
(1) Assumes the entire conversion or exercise price is allocated to the Class
A Common Stock obtained upon conversion or exercise and that none of the
other types of Notes, Warrants or Options, as applicable, are converted
or exercised.
(2) Dilution per share represents the difference between the conversion or
exercise price and the pro forma net tangible book value after the
conversion or exercise of the Notes, Warrants, or Options as applicable.
</FN>
</TABLE>
SELLING SECURITYHOLDERS
All of the Securities offered hereby are being sold by the Selling
Securityholders.
<TABLE>
<CAPTION>
Ownership Ownership
Prior to Registration After Offering (1)
Type and Number
Type and Number of Securities Type and Number
Beneficial Owner of Securities Percent(6) Being Offered of Securities Percent(6)
<S> <C> <C> <C> <C> <C>
Ilverton International, Inc. 2,240,000 Shares
of Common Stock (1) 17.1% Same 0 0%
Rush & Co. 1,152,000 shares of
Common Stock (1) 9.6% Same 0 0%
Gerinda Management 240,000 shares of
Limited Common Stock (1) 2.2% Same 0 0%
The Dimitri Villard 13,500 Shares of
Revocable Living Trust (4) Common Stock(1) * Same 0 0%
Laidlaw Equities, Inc. (4) 121,500 Shares of
Common Stock(1) 1.2% Same 0 0%
Veneer Technology, Inc.(7) 2,000,000 shares
of Common Stock 13.8% Same 0 0%
Asif S. Ahmad (2)(3) 392,394 shares of 100,000 shares 292,394 shares
Common Stock (2) 3.5% of Common Stock of Common Stock 2.6%
Nagaraj P. Murthy (2)(3) 425,727 shares of 100,000 shares 325,727 shares
Common Stock (2) 3.8% of Common Stock of Common Stock 2.9%
James K. Rifenbergh (2)(3) 110,000 shares of 100,000 shares 10,000 shares of
Common Stock (2) * of Common Stock Common Stock *
Wall Street Consultants, 61,538 shares of
Inc.(5) Common Stock (2) * Same 0 0%
<FN>
* Less than 1%.
(1) Common Stock issuable upon conversion of Notes or exercise of Warrants.
(2) Includes Options to purchase 100,000 shares of Common Stock.
(3) Messrs. Ahmad, Murthy and Rifenbergh are directors of the Company.
(4) Laidlaw Equities ("Laidlaw") served as a financial advisor to the Company
in 1994. Dimitri Villard was associated with Laidlaw at that time.
(5) Wall Street Consultants, Inc., through its Wall Street Group, Inc. affiliate, serves as public relations
counsel to the Company.
(6) Percents are based on outstanding Common Stock as of July 31, 1996.
(7) Veneer Technology, Inc. is the former owner of the assets and business of Ventek.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The shares of Common Stock offered hereby may be offered and sold from
time to time by the Selling Securityholders listed above, or by pledgees,
donees, transferees or other successors in interest. The Selling Securityholders
will act independently of the Company in making decisions with respect to the
timing, market, or otherwise at prices related to the then current market price
or in negotiated transactions.
The shares of Common Stock covered by this Prospectus may be sold by the
Selling Securityholders in one or more transactions on the Nasdaq Stock Market,
or otherwise at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The shares of Common
Stock may be sold by one or more of the following ways: (a) a block trade in
which the broker or dealer so engaged will attempt to sell the shares of Common
Stock as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this prospectus;
and (c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers. Thus, the period of distribution of such shares of Common
Stock may occur over an extended period of time.
The Company will bear all costs and expenses of the registration of the
Shares under the Securities Act and certain state securities laws, other than
fees of counsel for the Selling Securityholders and any discounts or commissions
payable with respect to sales of such Shares.
In offering the securities, the Selling Securityholders and any
broker-dealers and any other participating broker-dealers who execute sales for
the selling Securityholders may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales, and any profits
realized by the Selling Securityholders and the compensation of such
broker-dealer may be deemed to be underwriting discounts and commissions. In
addition, any shares covered by this Prospectus which qualify for sale pursuant
to Rule 144 may be sold under Rule 144 rather than pursuant to this Prospectus.
The Company has advised the Selling Securityholders that during such time
as they may be engaged in a distribution of Securities included herein they are
required to comply with Rules 10b-6 and 10b-7 under the Exchange Act (as those
Rules are described in more detail below) and, in connection therewith that they
may not engage in any stabilization activity, except as permitted under the
Exchange Act, are required to furnish each broker-dealer through which Common
Stock included herein may be offered copies of this Prospectus, and may not bid
for or purchase any securities of the Company or attempt to induce any person to
purchase any securities except as permitted under the Exchange Act.
Rule 10b-6 under the Exchange Act prohibits, with certain exceptions,
participants in a distribution from bidding for or purchasing, for an account in
which the participant has a beneficial interest, any of the securities that are
the subject of the distribution. Rule 10b-7 governs bids and purchases made in
order to stabilize the price of a security in connection with a distribution of
the security.
DESCRIPTION OF SECURITIES
The authorized capital of ARC consists of 60,000,000 shares of Class A
Common Stock, no par value, 3,000,000 shares of Class B Common Stock, no par
value, and 5,000,000 shares of preferred stock, no par value (the "Preferred
Stock"). At July 31, 1996, there were 10,764,190 shares and 118,501 shares of
the Class A and Class B, respectively, and no shares of Preferred Stock
outstanding.
Common Stock
General Provisions of Class A and Class B Common Stock
The Class A and Class B Common Stock (the "Common Stock") are
substantially identical on a share-for-share basis. The holders of Common Stock
vote as a single class on all matters to come before stockholders for a vote and
may cumulate their votes in the election of directors upon giving notice as
required by law. Each share of Class B Common Stock is automatically converted
into one share of Class A Common Stock upon its sale or transfer, or the death
of the holder.
All of the Common Stock is entitled to share equally in dividends from
sources available therefor when, as and if declared by the Board of Directors,
and upon liquidation or dissolution of ARC, whether voluntary or involuntary,
and to share equally in the assets of ARC available for distribution to
stockholders. Stockholders have no preemptive rights. All outstanding shares are
fully paid, nonassessable and legally issued. The Board of Directors is
authorized to issue additional shares of Common Stock within the limits
authorized by ARC's charter and without stockholder action.
Reference is made to ARC's Restated Articles of Incorporation, and
Amended and Restated By-Laws, as well as to the applicable statutes of the State
of California, for more detailed description of the rights and liabilities of
stockholders.
Preferred Stock
Shares of Preferred Stock may be issued from time to time in one or more
series; and the ARC Board of Directors, without further stockholder approval, is
authorized to fix the dividend rights and terms, conversion rights, voting
rights (whole, limited or none), redemption rights and terms, liquidation
preferences, sinking funds and any other rights, preferences, privileges and
restrictions applicable to each such series of Preferred Stock. The purpose of
authorizing the ARC Board of Directors to determine such rights and preferences
is to eliminate delays associated with a stockholder vote on specific issuances.
The issuance of the Preferred Stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could, among other
things, adversely affect the voting power of the holders of Common Stock and,
under certain circumstances, make it more difficult for a third party to gain
control of the Company; such issuance also could adversely affect the
distributions on and liquidation preferences of the Class A Common Stock by
creating more series of Preferred Stock with distribution or liquidation
preferences senior to the Class A Common Stock. In the event that shares of
Preferred Stock are issued as securities convertible into shares of Class A
Common Stock, the holders of Class A Common Stock may experience dilution.
Series A Preferred Stock.
Effective September 30, 1991, ARC issued 1,500,000 shares of Series A
Preferred Stock in settlement of advances from shareholders. As of December 31,
1993, such shareholders contributed all 1,500,000 shares of Series A Preferred
Stock to the capital of ARC in connection with ARC's 1994 restructure, and none
of the Series A Preferred Stock remains outstanding.
Class F, G, H and I Warrants
In connection with private placements of Class A Common Stock and
convertible notes in 1995 and 1996, and the acquisition of a company in 1996,
ARC issued the following warrants to purchase shares of Class A Common Stock:
<TABLE>
<CAPTION>
Number of Exercise Price Expiration
Class Warrants Per Share Date
<S> <C> <C> <C>
F 300,000 1.875 April 12, 1998
G 240,000 2.00 February 28, 1999
H 340,000 2.125 April 17, 2001
I 1,000,000 2.25 July 23, 2001
</TABLE>
The warrant exercise prices are subject to adjustment to protect holders
of the warrants against dilution in the event of a stock dividend, stock split,
combination or reclassification of Class A Common Stock.
Laidlaw Warrants
In connection with the rendering of financial consulting services in
1994, ARC issued to Laidlaw Warrants to purchase 135,000 shares of Class A
Common Stock at an exercise price of $2.25. The Laidlaw Warrants expire on April
1, 1997. The warrant exercise price is subject to adjustment to protect holders
of the warrants against dilution in the event of a stock dividend, stock split,
combination or reclassification of Class A Common Stock.
General Information as to Warrants
The Class F Warrants, Class G Warrants, Class H Warrants, Class I
Warrants and Laidlaw Warrants have been issued pursuant to warrant agreements.
Shares issued upon exercise of warrants and payment in accordance with the terms
of the warrants and warrant agreements will be fully paid and non-assessable.
The warrants do not confer upon the warrant holder any voting or other
rights of a stockholder of ARC. Upon notice to the warrantholders, ARC has the
right to unilaterally reduce the exercise price or extend the expiration date of
the warrants. Although this right is intended to benefit warrantholders, to the
extent that ARC exercises this right when the Warrants would otherwise be
exercisable at a price higher than the prevailing market price of the Class A
Common Stock, the likelihood of exercise, and the resultant increase in the
number of shares outstanding, may impede or make more costly a change of control
of ARC.
Schedule of Outstanding Stock, Warrants, Units and Potential Dilution
In addition to the Common Stock offered hereby, the Company has issued
securities which, upon conversion or exercise, will significantly increase the
number of shares of Class A Common Stock outstanding. The following table
summarizes, as of July 31, 1996, outstanding common stock, potential dilution to
the outstanding common stock upon exercise of warrants (including the Common
Stock being registered herein), UPO Units and convertible debt, and proforma
proceeds and debt reduction from the exercise of warrants and UPO Units or
conversion of debt.
<TABLE>
<CAPTION>
Proforma
Number or Principal Class A Common Proceeds
Amount Outstanding Conversion Stock After Conversion or Debt
Security at July 31, 1996 Factor Conversion Price Reduction
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock:
Class A 10,764,190 10,764,190
Class B 118,501 118,501
----------
Total currently outstanding 10,882,691
Warrants:
A 2,941,963 1.4 4,118,748 $ 2.84 $ 11,697,000
B 4,354,863 (A) 1.4 6,096,808 4.17 25,424,000
C 846,250 1.4 1,184,750 2.21 2,618,000
D 275,000 1 275,000 2.75 756,000
F 300,000 1 300,000 1.88 564,000
G 240,000 1 240,000 2.00 480,000
H 340,000 1 340,000 2.13 724,000
I 1,000,000 1 1,000,000 2.25 2,250,000
Gerinda 300,000 1 300,000 5.00 1,500,000
Laidlaw 135,000 1 135,000 2.25 304,000
----------
13,990,306
Unit Purchase Options: 188,400 6.30 1,187,000
Class A Common 376,800 1 376,800
A Warrants 376,800 1.4 527,520 2.84 1,498,000
B Warrants 565,400 1.4 791,280 4.17 3,300,000
----------
1,695,600
Convertible Debt:
10.25% Notes $ 2,160,000 1,152,000 1.88 2,160,000
6.75% Notes 3,400,000 1,600,000 2.13 3,400,000
6.75% Acquisition Note 2,250,000 1,000,000 2.25 2,250,000
6% Note 980,000 441,486 2.22 980,000
Acquisition Note 1,125,000 1,800,000 1,125,000
----------- ------------
5,993,486
Potentially outstanding shares and proforma proceeds
and reduction of debt 32,562,083 $ 62,217,000
========== ============
<FN>
(A) Includes 1,412,900 outstanding plus 2,941,963 assuming exercise of the Class A Warrants.
</FN>
</TABLE>
In addition, at July 31, 1996, ARC had outstanding options to purchase,
at prices ranging from $1.00 to $4.94 per share, 3,216,000 shares of Class A
Common Stock, 2,854,000 of which are under its stock option plans.
Transfer and Warrant Agent
The Transfer and Warrant Agent for ARC's Class A Common Stock, Class B
Common Stock, Class A Warrants, Class B Warrants, Class C Warrants and Class D
Warrants is American Stock Transfer & Trust Company, 40 Wall Street, New York,
New York 10005.
Reports to Stockholders
ARC intends to furnish to stockholders, after the close of each fiscal
year, an annual report relating to the operations of ARC and containing
financial statements audited and reported upon by its independent public
accountants. In addition, ARC may furnish to stockholders such other reports as
may be authorized, from time to time, by the Board of Directors.
LEGAL MATTERS
Troy & Gould Professional Corporation, Los Angeles, California, has
rendered an opinion to the effect that the securities offered hereby by the
Selling Securityholders, when sold or paid for, will be duly and validly issued,
fully paid and nonassessable.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1995
and 1994 and the related consolidated statements of operations, shareholders'
equity and cash flows for the years ended December 31, 1995 and December 31,
1994, the three months ended December 31, 1993, and the year ended September 30,
1993, have been incorporated by reference in the Prospectus in reliance upon the
reports of Price Waterhouse LLP and Coopers & Lybrand LLP, independent
accountants, given on the authority of those firms as experts in accounting and
auditing.
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any
information or make any representations, other than those contained in this
Prospectus, in connection with the offering hereby, and, if given or made, such
information and representations must not be relied upon as having been
authorized by the Company or the Selling Securityholders. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, any
securities to any person in any State or other jurisdiction in which such offer
or solicitation is unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company or the facts herein set
forth since the date hereof.
--------------------
TABLE OF CONTENTS
Page
Available Information..................... 5
Incorporation of Certain
Documents by Reference............... 5
Risk Factors.............................. 7
Use of Proceeds........................... 10
Price Range of Common Stock
and Dividend Policy.................. 11
Selected Consolidated Financial Data......
Selling Securityholders................... 13
Plan of Distribution...................... 13
Description of Securities................. 14
Legal Matters............................. 17
Experts................................... 17
==============================================================================
==============================================================================
6,128,538 Shares of Class A Common Stock
ARC CAPITAL
-----------------
PROSPECTUS
----------------
August 26, 1996
==============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth an itemized statement of all the amounts
of all expenses to be incurred in connection with the issuance and distribution
of the securities that are the subject of this Registration Statement. All
amounts shown, other than the Securities and Exchange Commission registration
fee, are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.......................... $ 3,698.26
Printing expenses............................................................ 2,000.00
Transfer Agent fees.......................................................... --
Legal fees and expenses...................................................... 10,000.00
Accounting fees and expenses................................................. 5,000.00
"Blue sky" fees and expenses................................................. 3,000.00
Miscellaneous expenses....................................................... 1,301.74
----------------
Total................................................................. $ 25,000.00
================
</TABLE>
Item 15. Indemnification of Directors and Officers
Under California law, a California corporation may eliminate or limit the
personal liability of a director to the corporation for monetary damages for
breach of the director's duty of care as a director, provided that the breach
does not involve certain enumerated actions, including, among other things,
intentional misconduct or knowing and culpable violation of the law, acts or
omissions which the director believes to be contrary to the best interests of
the corporation or its shareholders or which reflect an absence of good faith on
the director's part, the unlawful purchase or redemption of stock, payment of
unlawful dividends and receipt of improper personal benefits. The Company's
Board of Directors believes that such provisions have become commonplace among
major corporations and are beneficial in attracting and retaining qualified
directors, and the Company's Articles of Incorporation include such provisions.
The Company's Articles of Incorporation and Bylaws also impose a
mandatory obligation upon Company to indemnify any director or officer to the
fullest extent authorized or permitted by law (as now or hereinafter in effect),
including under circumstances in which indemnification would otherwise be at the
discretion of the Company. In addition, the Company has entered into indemnity
agreements with each of its directors and officers providing for the maximum
indemnification permitted or authorized by law.
The foregoing indemnification provisions are broad enough to encompass
certain liabilities of directors and officers under the Securities Act of 1933.
Item 16. Exhibits
The following exhibits, which are furnished with this Registration
Statement or incorporated by reference, are filed as part of this Registration
Statement:
Exhibit
No. Description of Exhibit
- -------------------------------------------------------------------------------
3.1 Restated Articles of Incorporation of the Company as amended to date (1)
3.2 Restated and Amended By-Laws of the Company (1)
4.1 Form of Class F Warrant Agreement
4.2 Form of Class G Warrant Agreement. (1)
4.3 Form of Class H Warrant Agreement. (2)
4.4 Form of Class I Warrant Agreement (4)
4.5 Form of Laidlaw Warrant Agreement.
4.6 Form of stock option agreement. (3)
5.1 Opinion of Troy & Gould Professional Corporation regarding the legality
of the securities registered hereunder. (5)
23.1 Consents of Price Waterhouse LLP and Coopers & Lybrand LLP (contained
in Part II). (5)
23.2 Consent of Troy & Gould Professional Corporation (contained in Exhibit
5). (5)
24.1 Power of Attorney (contained in Part II).
------------------------
(1) Filed with the SEC on April 14, 1996, as an exhibit to the Company's
Form 10-K for the year ended December 31, 1995.
(2) Filed with the SEC on May 14, 1996, as an exhibit to the Company's
Form 10-Q for the quarter ended March 31, 1996.
(3) Filed with the SEC as an exhibit to Form S-1 (File No. 33-45126).
(4) Filed with the SEC on July 30, 1996, as an exhibit to the Company's
Form 8-K dated July 24, 1996.
(5) To be filed by amendment.
Item 17. Undertakings
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made of the securities registered hereby, a
post-effective amendment to this registration statement.
(i)To include any prospectus required by section 10(a)
(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any
material change to such information in the
registration statement;
provided, however, that (i) and (ii) do not apply if the
registration statement is on Form S-3, and the information
required to be included in a post-effective amendment is
contained in periodic reports filed by the registrant pursuant
to section 13 or section 15(d) of the Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned Company hereby undertakes:
That for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the
payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the city of Medford, Oregon on August 23, 1996.
ARC CAPITAL
By: /s/ William J. Young
William J. Young
Chairman of the Board, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William J. Young and Alan R. Steel, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this registration statement and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ William J. Young Chairman of the Board of Directors,
William J. Young Chief Executive Officer and President August 23, 1996
/s/ Alan R. Steel Chief Financial Officer
Alan R. Steel Principal Financial and Accounting August 22, 1996
Officer
/s/ Asif S. Ahmad Director August 21, 1996
- --------------------------------------
Asif S. Ahmad
s/ Nagaraj P. Murthy Director August 26, 1996
- --------------------------------------
Nagaraj P. Murthy
/s/ Jack Nelson Director August 22, 1996
- --------------------------------------
Jack Nelson
/s/ James K. Rifenbergh Director August 15, 1996
- --------------------------------------
James K. Rifenbergh
/s/ Rodger A. Van Voorhis Director August 16, 1996
- --------------------------------------
Rodger A. Van Voorhis
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
4.1 Form of Class F Warrant Agreement
4.4 Form of Laidlaw Warrant Agreement
5.1 Opinion of Troy & Gould Professional
Corporation*
23.1 Consents of Price Waterhouse LLP and
Coopers & Lybrand LLP (contained in
Part II)*
23.2 Consent of Troy & Gould Professional
Corporation (contained in Exhibit 5.1)*
24.1 Power of Attorney (contained in Part II)
* To be filed by amendment.
1
THESE WARRANTS AND ANY SHARES OF CLASS A COMMON STOCK ISSUABLE UPON THEIR
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"). THESE WARRANTS ARE NOT TRANSFERABLE, AND ANY SHARES OF CLASS A
COMMON STOCK ISSUABLE UPON THEIR EXERCISE MAY NOT BE TRANSFERRED UNTIL (1) A
REGISTRATION STATEMENT UNDER THE ACT SHALL HAVE BECOME EFFECTIVE WITH RESPECT
THERETO, OR (2) RECEIPT BY THE ISSUER OF AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT
REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER AND THAT SUCH PROPOSED
TRANSFER IS NOT IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS.
CLASS F WARRANT
TO PURCHASE CLASS A COMMON STOCK
Warrant No. 1
This Warrant issued by Applied Laser Systems, a California corporation
(the "Company"), as of April 13, 1995, entitles Ilverton International, Ltd.
(the registered "Holder") to purchase 300,000 shares of the Company's Class A
Common Stock at an initial purchase price of $1.875 per share (the "Purchase
Price").
This Warrant is one in a series of Class F Warrants, which in the
aggregate entitles the Holders thereof to purchase up to 300,000 shares of Class
A Common Stock. The Class F Warrants were issued in connection with the issuance
of a convertible subordinated secured note (the "Note") dated April 13, 1995,
between the Company and Ilverton International, Ltd.
SECTION 1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the Class A Common Stock of the Company,
whether now or hereafter authorized.
(b) "Corporate Office" shall mean the office of the Company at which at
any particular time its principal business shall be administered, which office
is located at the date hereof at 2067 Commerce Drive, Medford, Oregon 97504,
Attention: President.
(c) "Exercise Date" shall mean the date on which the Company shall have
received both (a) the Warrant, with an exercise form acceptable to the Company
and duly executed by the Registered Holder thereof or his attorney duly
authorized in writing, and (b) payment in cash, or by official bank or certified
check made payable to the Company, of an amount in lawful money of the United
States of America equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean April 13, 1995.
(e) "Purchase Price" shall mean the purchase price to be paid per share
of Common Stock upon exercise of each Warrant in accordance with the terms
hereof, which price shall be either (i) $1.875 or, (ii) if the Company enters
into a definitive agreement to acquire one or more major business entities
before October 13, 1995, the Purchase Price shall become $2.25 on the date of
such definitive agreement, subject to adjustment from time to time pursuant to
the provisions of Section 7 hereof, and subject to the Company's right to reduce
the Purchase Price upon notice to all Registered Holders.
(f) "Registered Holders" shall mean the persons in whose names the
Warrants shall be registered on the books maintained by the Company.
(g) "Warrant Expiration Date" shall mean 5:00 P.M. (Oregon time) on
April 12, 1998; provided that if such date shall in the State of Oregon be a
holiday or a day on which banks are authorized to close, then 5:00 P.M. (Oregon
time) on the next following day which in the State of Oregon is not a holiday or
a day on which banks are authorized to close. Upon notice to all Registered
Holders the Company shall have the right to extend the Warrant Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Agreements.
(a) This Warrant initially entitles the Registered Holder to purchase
an aggregate of 300,000 shares of Common Stock upon the exercise thereof, in
accordance with the terms hereof, subject to modification and adjustment as
provided in Section 7.
(b) From time to time, up to the Warrant Expiration Date, the Company
shall execute and deliver Warrants in required whole number denominations to the
persons entitled thereto in connection with any exchange permitted under this
Warrant; provided that no Warrant shall be issued except (i) those initially
issued hereunder; (ii) those issued on or after the Initial Warrant Exercise
Date, upon the partial exercise of this Warrant, to evidence any unexercised
Warrants held by the exercising Registered Holder; (iii) those issued upon any
exchange pursuant to Section 5; (iv) those issued in replacement of lost,
stolen, destroyed or mutilated Warrants pursuant to Section 6; and (v) at the
option of the Company, in such form as may be approved by its Board of
Directors, to reflect (a) any adjustment or change in the Purchase Price or the
number of shares of Common Stock purchasable upon exercise of the Warrants made
pursuant to Section 7 hereof, and (b) other modifications approved by Registered
Holders.
SECTION 3. Form and Execution of Warrants; Exercise of Warrants.
(a) Warrants shall be executed on behalf of the Company by its Chairman
of the Board, President, any Vice President or Chief Financial Officer by manual
signatures. In case any officer of the Company who shall have signed any of the
Warrants shall cease to be such officer of the Company before the date of
issuance of the Warrants and issue and delivery thereof, such Warrants may
nevertheless be issued and delivered with the same force and effect as though
the person who signed such Warrants had not ceased to be such officer of the
Company. After execution by the Company, each Warrant shall then be delivered to
the Registered Holder.
(b) Each Warrant may be exercised by the Registered Holder thereof at
any time on or after the Initial Warrant Exercise Date, but not after the
Warrant Expiration Date, upon the terms and subject to the conditions set forth
herein. A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the Exercise Date and the person entitled to receive
the securities deliverable upon such exercise shall be treated for all purposes
as the holder upon exercise thereof as of the close of business on the Exercise
Date. As soon as practicable on or after the Exercise Date the Company shall
deposit the proceeds received from the exercise of a Warrant, and promptly after
clearance of checks received in payment of the Purchase Price pursuant to such
Warrants, cause to be issued and delivered by the Company's transfer agent, to
the person or persons entitled to receive the same, a certificate or
certificates for the securities deliverable upon such exercise (plus a Warrant
for any remaining unexercised Warrants of the Registered Holder).
SECTION 4. Reservation of Shares; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants and payment of the Purchase Price shall, at the time of
delivery, be duly and validly issued, fully paid, nonassessable and free from
all taxes, liens and charges with respect to the issue thereof (other than those
which the Company shall promptly pay or discharge).
(b) The Company will use reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" securities laws with respect
to the exercise of the Warrants; provided, however, that the Company shall not
be obligated to file any general consent to service of process or qualify as a
foreign corporation in any jurisdiction. With respect to any such securities
laws, however, Warrants may not be exercised by, or shares of Common Stock
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
the Warrants, or the issuance, or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
being exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Company the amount of transfer taxes or
charges incident thereto, if any.
SECTION 5. Exchange of Warrant.
(a) This Warrant may be exchanged for other Warrants representing an
equal aggregate number of Warrants of the same type. Warrants to be exchanged
shall be surrendered to the Company at its Corporate Office, and upon
satisfaction of the terms and provisions hereof, the Company shall execute,
issue and deliver in exchange therefor the Warrant or Warrants which the
Registered Holder making the exchange shall be entitled to receive.
(b) The Company shall keep at its office books in which it shall
register the Warrants in accordance with its regular practice.
(c) The Company may require payment by such holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
(d) All Warrants surrendered for exercise or for exchange in case of
mutilated Warrants shall be promptly canceled by the Company and thereafter
retained by the Company until the Warrant Expiration Date, or such other time as
the Company shall determine solely within its discretion.
SECTION 6. Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to them of the ownership of and loss, theft, destruction or
mutilation of any Warrant and (in case of loss, theft or destruction) of
indemnity satisfactory to them, and (in case of loss, theft or destruction) upon
surrender and cancellation thereof, the Company shall execute and deliver to the
Registered Holder in lieu thereof a new Warrant of like tenor representing an
equal aggregate number of Warrants. Applicants for a substitute Warrant shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe or require.
SECTION 7. Adjustment of Exercise Price and Number of Shares of Common Stock
or Warrants.
(a) Subject to Section (f) and the exceptions referred to in Section
7(e) below, in the event the Company shall, at any time or from time to time
after the date hereof, subdivide or combine the outstanding shares of Common
Stock into a greater or lesser number of shares (any such subdivision or
combination being herein called a "Change of Shares"), then, and thereafter upon
each further Change of Shares, the Purchase Price in effect immediately prior to
such Change of Shares shall be changed to a price (including any applicable
fraction of a cent) determined by multiplying the Purchase Price in effect
immediately prior thereto by a fraction, the numerator of which shall be the sum
of the number of shares of Common Stock outstanding immediately prior to such
subdivision or combination, and the denominator of which shall be the sum of the
number of shares of Common Stock outstanding immediately after such subdivision
or combination. Such adjustment shall be made successively whenever such
subdivision or combination is made.
Upon each adjustment of the Purchase Price pursuant to this Section 7,
the total number of shares of Common Stock purchasable upon the exercise of each
Warrant shall (subject to the provisions contained in Section 7(b) hereof) be
such number of shares of Common Stock purchasable at the Purchase Price
immediately prior to such adjustment multiplied by a fraction, the numerator of
which shall be the Purchase Price in effect immediately prior to such adjustment
and the denominator of which shall be the Purchase Price in effect immediately
after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each Warrant held of record prior to such adjustment of the number of Warrants
shall become that number of Warrants determined by multiplying the number one by
a fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment. Upon each adjustment
of the number of Warrants pursuant to this Section 7, the Company shall, as
promptly as practicable, cause to be distributed to the Registered Holder of a
Warrant on the date of such adjustment a Warrant evidencing, subject to Section
8 hereof, the number of additional Warrants to which such Holder shall be
entitled as a result of such adjustment or, at the option of the Company, cause
to be distributed to such Holder in substitution and replacement for the Warrant
held by him prior to the date of adjustment (and upon surrender thereof, if
required by the Company) a new Warrant evidencing the number of Warrants to
which such Holder shall be entitled after such adjustment.
(c) Irrespective of any adjustments or changes in the Purchase Price or
the number of shares of Common Stock purchasable upon exercise of the Warrants,
the Warrant or Warrants theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue a new Warrant pursuant to Section
7(b) hereof, continue to express the Purchase Price per share and the number of
shares purchasable thereunder as they were expressed in the Warrant when it was
originally issued.
(d) After each adjustment of the Purchase Price pursuant to this
Section 7, the Company will promptly prepare a certificate signed by the
President, and by the Chief Financial Officer, Controller, Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company
setting forth: (i) the Purchase Price as so adjusted, (ii) the number of shares
of Common Stock purchasable upon exercise of each Warrant after such adjustment,
and, if the Company shall have elected to adjust the number of Warrants, the
number of Warrants to which the Registered Holder of each Warrant shall then be
entitled, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly cause a brief summary thereof to be sent
by ordinary first class mail to each Registered Holder of Warrants at his last
address as it shall appear in the registry books of the Company. No failure to
mail such notice nor any defect therein or in the mailing thereof shall affect
the validity thereof except as to the Holder to whom the Company failed to mail
such notice, or except as to the holder whose notice was defective. The
affidavit of the Secretary or an Assistant Secretary of the Company that such
notice has been mailed shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
(e) For purposes of Section 7(a) and 7(b) hereof, the following
provisions shall also be applicable:
(A) The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or for the
account of the Company and the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be considered a Change of
Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least $.25 in such
price; provided that any adjustments which by reason of this clause (B) are not
required to be made shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which, together with any
adjustment(s) so carried forward, shall require an increase or decrease of at
least $.25 in the Purchase Price then in effect hereunder.
(f) Any determination as to whether an adjustment in the Purchase Price
in effect hereunder is required pursuant to Section 7, or as to the amount of
any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.
(g) If and whenever the Company shall declare any dividends or
distributions or grant to the holders of Common Stock, as such, rights or
warrants to subscribe for or to purchase, or any options for the purchase of,
Common Stock or securities convertible into or exchangeable for or carrying a
right, warrant or option to purchase Common Stock, the Company shall notify each
of the then Registered Holders of the Warrants of such event prior to its
occurrence to enable such Registered Holders to exercise their Warrants and
participate as holders of Common Stock in such event.
SECTION 8. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 7 hereof, the Company
shall nevertheless not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon any
exercise hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the current market value of such fractional share,
determined as follows:
(A) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the National Market System of NASDAQ ("NMS"), the current value
shall be the last reported sale price of the Common Stock on such exchange on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day or no closing sale price is quoted, the average of
the closing bid and asked prices for such day on such exchange or system; or
(B) If the Common Stock is listed in the over-the-counter
market (other than on NMS) or admitted to unlisted trading privileges, the
current value shall be the mean of the last reported bid and asked prices
reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(C) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
SECTION 9. Warrantholder Not Deemed Stockholder. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
Holder shall have exercised such Warrants and been issued shares of Common Stock
in accordance with the provisions hereof.
SECTION 10. Rights of Action. All rights of action with respect to this
Warrant are vested in the Registered Holder of the Warrants, and the Registered
Holder of a Warrant, without consent of the holder of any other Warrant, may, on
his own behalf and for his own benefit, enforce against the Company his right to
exercise his Warrants for the purchase of shares of Common Stock in the manner
provided in this Warrant.
SECTION 11. Agreement of Warrantholder. Every holder of a Warrant, by
his acceptance thereof, consents and agrees with the Company that the Company
may deem and treat the person in whose name the Warrant is registered as the
holder and as the absolute, true and lawful owner of the Warrants represented
thereby for all purposes, and the Company shall not be affected by any notice or
knowledge to the contrary, except as otherwise expressly provided in Section 6
hereof.
SECTION 12. Gender; Singular and Plural. When the context and
construction so require, all words used in the singular herein shall be deemed
to have been used in the plural and the masculine shall include the feminine and
neuter and vice versa.
SECTION 13. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without reference to
principles of conflict of laws.
SECTION 14. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid, as follows: if to the Registered Holder of a Warrant, at the address of
such holder as shown on the registry books maintained by the Company; if to the
Company, at 2067 Commerce Drive, Medford, Oregon 97504, Attention:
President.
SECTION 15. Binding Effect. This Warrant shall be binding upon and
inure to the benefit of the Company (and its respective successors and assigns)
and the holders from time to time of Warrants. Nothing in this Warrant is
intended or shall be construed to confer upon any other person any right, remedy
or claim, in equity or at law, or to impose upon any other person any duty,
liability or obligation.
SECTION 16. Termination. This Warrant shall terminate at the close of
business on the Warrant Expiration Date.
APPLIED LASER SYSTEMS
By:
Alan R. Steel
1
THESE WARRANTS AND ANY SHARES OF CLASS A COMMON STOCK ISSUABLE UPON THEIR
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"). THESE WARRANTS ARE ONLY ASSIGNABLE TO PRESENT OR PAST EMPLOYEES OF
LAIDLAW EQUITIES, INC., AND ANY SHARES OF CLASS A COMMON STOCK ISSUABLE UPON
THEIR EXERCISE MAY NOT BE TRANSFERRED UNTIL (1) A REGISTRATION STATEMENT UNDER
THE ACT SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO, OR (2) RECEIPT BY THE
ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER AND THAT SUCH PROPOSED TRANSFER IS NOT IN VIOLATION OF ANY
APPLICABLE STATE SECURITIES LAWS.
LAIDLAW EQUITIES, INC. WARRANT
TO PURCHASE CLASS A COMMON STOCK
Warrant No. ___
This Warrant issued by Applied Laser Systems, a California corporation
(the "Company"), as of May 5, 1995, entitles
___________________________________(the registered "Holder") to purchase
_________________ shares of the Company's Class A Common Stock at an initial
purchase price of $2.25 per share (the "Purchase Price").
This Warrant is one in a series of Laidlaw Equities, Inc. Warrants,
which in the aggregate entitles the Holders thereof to purchase up to
____________ shares of Class A Common Stock. The Laidlaw Equities, Inc. Warrants
were issued pursuant to a Financial Advisory Agreement dated June 22, 1994,
between the Company and Laidlaw Equities, Inc.
SECTION 1. Definitions. As used herein, the following terms shall have the
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the Class A Common Stock of the Company,
whether now or hereafter authorized.
(b) "Corporate Office" shall mean the office of the Company at which at
any particular time its principal business shall be administered, which office
is located at the date hereof at 2067 Commerce Drive, Medford, Oregon 97504,
Attention: President.
(c) "Exercise Date" shall mean the date on which the Company shall have
received both (a) the Warrant, with an exercise form acceptable to the Company
and duly executed by the Registered Holder thereof or his attorney duly
authorized in writing, and (b) payment in cash, or by official bank or certified
check made payable to the Company, of an amount in lawful money of the United
States of America equal to the applicable Purchase Price.
(d) "Initial Warrant Exercise Date" shall mean May 5, 1995.
(e) "Purchase Price" shall mean the purchase price to be paid per share
of Common Stock upon exercise of each Warrant in accordance with the terms
hereof, which price shall be $2.25, subject to adjustment from time to time
pursuant to the provisions of Section 7 hereof, and subject to the Company's
right to reduce the Purchase Price upon notice to all Registered Holders.
(f) "Registered Holders" shall mean the persons in whose names the
Warrants shall be registered on the books maintained by the Company.
(g) "Warrant Expiration Date" shall mean 5:00 P.M. (Oregon time) on
April 1, 1997; provided that if such date shall in the State of Oregon be a
holiday or a day on which banks are authorized to close, then 5:00 P.M. (Oregon
time) on the next following day which in the State of Oregon is not a holiday or
a day on which banks are authorized to close. Upon notice to all Registered
Holders the Company shall have the right to extend the Warrant Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Agreements.
(a) This Warrant initially entitles the Registered Holder to purchase
an aggregate of 135,000 shares of Common Stock upon the exercise thereof, in
accordance with the terms hereof, subject to modification and adjustment as
provided in Section 7.
(b) From time to time, up to the Warrant Expiration Date, the Company
shall execute and deliver Warrants in required whole number denominations to the
persons entitled thereto in connection with any exchange permitted under this
Warrant; provided that no Warrant shall be issued except (i) those initially
issued hereunder; (ii) those issued on or after the Initial Warrant Exercise
Date, upon the partial exercise of this Warrant, to evidence any unexercised
Warrants held by the exercising Registered Holder; (iii) those issued upon any
exchange pursuant to Section 5; (iv) those issued in replacement of lost,
stolen, destroyed or mutilated Warrants pursuant to Section 6; and (v) at the
option of the Company, in such form as may be approved by its Board of
Directors, to reflect (a) any adjustment or change in the Purchase Price or the
number of shares of Common Stock purchasable upon exercise of the Warrants made
pursuant to Section 7 hereof, and (b) other modifications approved by Registered
Holders.
SECTION 3. Form and Execution of Warrants; Exercise of Warrants.
(a) Warrants shall be executed on behalf of the Company by its Chairman
of the Board, President, any Vice President or Chief Financial Officer by manual
signatures. In case any officer of the Company who shall have signed any of the
Warrants shall cease to be such officer of the Company before the date of
issuance of the Warrants and issue and delivery thereof, such Warrants may
nevertheless be issued and delivered with the same force and effect as though
the person who signed such Warrants had not ceased to be such officer of the
Company. After execution by the Company, each Warrant shall then be delivered to
the Registered Holder.
(b) Each Warrant may be exercised by the Registered Holder thereof at
any time on or after the Initial Warrant Exercise Date, but not after the
Warrant Expiration Date, upon the terms and subject to the conditions set forth
herein. A Warrant shall be deemed to have been exercised immediately prior to
the close of business on the Exercise Date and the person entitled to receive
the securities deliverable upon such exercise shall be treated for all purposes
as the holder upon exercise thereof as of the close of business on the Exercise
Date. As soon as practicable on or after the Exercise Date the Company shall
deposit the proceeds received from the exercise of a Warrant, and promptly after
clearance of checks received in payment of the Purchase Price pursuant to such
Warrants, cause to be issued and delivered by the Company's transfer agent, to
the person or persons entitled to receive the same, a certificate or
certificates for the securities deliverable upon such exercise (plus a Warrant
for any remaining unexercised Warrants of the Registered Holder).
SECTION 4. Reservation of Shares; Payment of Taxes; etc.
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of the Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants and payment of the Purchase Price shall, at the time of
delivery, be duly and validly issued, fully paid, nonassessable and free from
all taxes, liens and charges with respect to the issue thereof (other than those
which the Company shall promptly pay or discharge).
(b) The Company will use reasonable efforts to obtain appropriate
approvals or registrations under state "blue sky" securities laws with respect
to the exercise of the Warrants; provided, however, that the Company shall not
be obligated to file any general consent to service of process or qualify as a
foreign corporation in any jurisdiction. With respect to any such securities
laws, however, Warrants may not be exercised by, or shares of Common Stock
issued to, any Registered Holder in any state in which such exercise would be
unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and
other governmental charges that may be imposed with respect to the issuance of
the Warrants, or the issuance, or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
being exercised, then no such delivery shall be made unless the person
requesting the same has paid to the Company the amount of transfer taxes or
charges incident thereto, if any.
SECTION 5. Exchange of Warrant.
(a) This Warrant may be exchanged for other Warrants representing an
equal aggregate number of Warrants of the same type. Warrants to be exchanged
shall be surrendered to the Company at its Corporate Office, and upon
satisfaction of the terms and provisions hereof, the Company shall execute,
issue and deliver in exchange therefor the Warrant or Warrants which the
Registered Holder making the exchange shall be entitled to receive.
(b) The Company shall keep at its office books in which it shall
register the Warrants in accordance with its regular practice.
(c) All Warrants presented for registration of transfer, or for
exchange or exercise shall be accompanied by a written instrument or instruments
of transfer and subscription, in form satisfactory to the Company, duly executed
by the Registered Holder or his attorney in fact duly authorized in writing.
(d) The Company may require payment by such holder of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith.
(e) All Warrants surrendered for exercise or for exchange in case of
mutilated Warrants shall be promptly canceled by the Company and thereafter
retained by the Company until the Warrant Expiration Date, or such other time as
the Company shall determine solely within its discretion.
(f) Prior to due presentment for registration of transfer thereof, the
Company may deem and treat the Registered Holder of any Warrant as the absolute
owner thereof and of each Warrant represented thereby (notwithstanding any
notations of ownership or writing thereon made by anyone other than a duly
authorized officer of the Company) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 6. Loss or Mutilation. Upon receipt by the Company of evidence
satisfactory to them of the ownership of and loss, theft, destruction or
mutilation of any Warrant and (in case of loss, theft or destruction) of
indemnity satisfactory to them, and (in case of loss, theft or destruction) upon
surrender and cancellation thereof, the Company shall execute and deliver to the
Registered Holder in lieu thereof a new Warrant of like tenor representing an
equal aggregate number of Warrants. Applicants for a substitute Warrant shall
comply with such other reasonable regulations and pay such other reasonable
charges as the Company may prescribe or require.
SECTION 7. Adjustment of Exercise Price and Number of Shares of Common Stock
or Warrants.
(a) Subject to the exceptions referred to in Section 7(e) below, in the
event the Company shall, at any time or from time to time after the date hereof,
subdivide or combine the outstanding shares of Common Stock into a greater or
lesser number of shares, issue any shares of Common Stock as a stock dividend to
the holders of Common Stock, or sell any Common Stock at a price thirty percent
(30%) below fair market value (as determined pursuant to Section 8(a) below)
(any such subdivision or combination, stock dividend or sale being herein called
a "Change of Shares"), then, and thereafter upon each further Change of Shares,
the Purchase Price in effect immediately prior to such Change of Shares shall be
changed (i) if pursuant to such a subdivision or combination or stock dividend
to a price (including any applicable fraction of a cent) determined by
multiplying the Purchase Price in effect immediately prior thereto by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to such subdivision or combination or
stock dividend, the denominator of which shall be the sum of the number of
shares of Common Stock outstanding immediately after such subdivision or
combination or stock dividend, and (ii) if pursuant to such a sale, to a price
(including any applicable fraction of a cent) determined by multiplying the
Purchase Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to such sale and the number of shares of Common Stock which
the consideration received in such sale would purchase at a price thirty percent
(30%) below fair market value (as determined pursuant to Section 8(a) below),
and the denominator of which shall be the sum of the number of shares of Common
Stock outstanding immediately after such sale. Such adjustment shall be made
successively whenever such a subdivision or combination, stock dividend or sale
is made.
Upon each adjustment of the Purchase Price pursuant to this Section 7,
the total number of shares of Common Stock purchasable upon the exercise of each
Warrant shall (subject to the provisions contained in Section 7(b) hereof) be
such number of shares of Common Stock purchasable at the Purchase Price
immediately prior to such adjustment multiplied by a fraction, the numerator of
which shall be the Purchase Price in effect immediately prior to such adjustment
and the denominator of which shall be the Purchase Price in effect immediately
after such adjustment.
(b) The Company may elect, upon any adjustment of the Purchase Price
hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each Warrant held of record prior to such adjustment of the number of Warrants
shall become that number of Warrants determined by multiplying the number one by
a fraction, the numerator of which shall be the Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Purchase Price in effect immediately after such adjustment. Upon each adjustment
of the number of Warrants pursuant to this Section 7, the Company shall, as
promptly as practicable, cause to be distributed to the Registered Holder of a
Warrant on the date of such adjustment a Warrant evidencing, subject to Section
8 hereof, the number of additional Warrants to which such Holder shall be
entitled as a result of such adjustment or, at the option of the Company, cause
to be distributed to such Holder in substitution and replacement for the Warrant
held by him prior to the date of adjustment (and upon surrender thereof, if
required by the Company) a new Warrant evidencing the number of Warrants to
which such Holder shall be entitled after such adjustment.
(c) Irrespective of any adjustments or changes in the Purchase Price or
the number of shares of Common Stock purchasable upon exercise of the Warrants,
the Warrant or Warrants theretofore and thereafter issued shall, unless the
Company shall exercise its option to issue a new Warrant pursuant to Section
7(b) hereof, continue to express the Purchase Price per share and the number of
shares purchasable thereunder as they were expressed in the Warrant when it was
originally issued.
(d) After each adjustment of the Purchase Price pursuant to this
Section 7, the Company will promptly prepare a certificate signed by the
President, and by the Chief Financial Officer, Controller, Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, of the Company
setting forth: (i) the Purchase Price as so adjusted, (ii) the number of shares
of Common Stock purchasable upon exercise of each Warrant after such adjustment,
and, if the Company shall have elected to adjust the number of Warrants, the
number of Warrants to which the Registered Holder of each Warrant shall then be
entitled, and (iii) a brief statement of the facts accounting for such
adjustment. The Company will promptly cause a brief summary thereof to be sent
by ordinary first class mail to each Registered Holder of Warrants at his last
address as it shall appear in the registry books of the Company. No failure to
mail such notice nor any defect therein or in the mailing thereof shall affect
the validity thereof except as to the Holder to whom the Company failed to mail
such notice, or except as to the holder whose notice was defective. The
affidavit of the Secretary or an Assistant Secretary of the Company that such
notice has been mailed shall, in the absence of fraud, be prima facie evidence
of the facts stated therein.
(e) For purposes of Section 7(a) and 7(b) hereof, the following
provisions shall also be applicable:
(A) The number of shares of Common Stock outstanding at any
given time shall include shares of Common Stock owned or held by or for the
account of the Company and the sale or issuance of such treasury shares or the
distribution of any such treasury shares shall not be considered a Change of
Shares for purposes of said sections.
(B) No adjustment of the Purchase Price shall be made unless
such adjustment would require an increase or decrease of at least $.25 in such
price; provided that any adjustments which by reason of this clause (B) are not
required to be made shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which, together with any
adjustment(s) so carried forward, shall require an increase or decrease of at
least $.25 in the Purchase Price then in effect hereunder.
(C) In case of (1) the sale by the Company for cash of any
rights, warrants or options to subscribe for or purchase Common Stock or any
securities convertible into or exchangeable for Common Stock without the payment
of any further consideration other than cash, if any (such convertible or
exchangeable securities being herein called "Convertible Securities"), or (2)
the issuance by the Company, without the receipt by the Company of any
consideration therefore, of any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities, in each case, if (and only if)
the consideration payable to the Company upon the exercise of such rights,
warrants or options shall consist of cash and the price per share for which
Common Stock is issuable upon the exercise of such rights, warrants or options
or upon the conversion or exchange of such Convertible Securities (determined by
dividing (x) the minimum aggregate consideration payable to the Company upon the
exercise of such rights, warrants or options, plus the consideration received by
the Company for the issuance or sale of such rights, warrants or options, plus,
in the case of such Convertible Securities, the minimum aggregate amount of
additional consideration, if any, other than such Convertible Securities,
payable upon the conversion or exchange thereof, by (y) the total maximum number
of shares of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible Securities
issuable upon the exercise of such rights, warrants or options) is less than the
price that is thirty percent (30%) below the fair market value of the Common
Stock (as determined pursuant to Section 8(a) below) on the date of the issuance
or sale of such rights, warrants or options, then the total maximum number of
shares of Common Stock issuable upon the exercise of such rights, warrants or
options or upon the conversion or exchange of such Convertible Securities (as of
the date of the issuance or sale of such rights, warrants or options) shall be
deemed to be outstanding shares of Common Stock for purposes of Section 7(a) and
7(b) hereof and shall be deemed to have been sold for cash in an amount equal to
such price per share.
(D) If the exercise or purchase price provided for in any
right, warrant or option referred to in Section 7(e)(C) above, or the rate at
which any Convertible Securities referred to in Section 7(e)(C) above are
convertible into or exchangeable for Common Stock, shall change at any time
(other than under or by reason of provisions designed to protect against
dilution), the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have obtained (1) had the adjustments
made upon the issuance or sale of such rights, warrants, options or Convertible
Securities been made upon the basis of the issuance of only the number of shares
of Common Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities, (2)had adjustments
been made on the basis of the Purchase Price as adjusted under clause (1) for
all transactions (which would have affected such adjusted Purchase Price) made
after the issuance or sale of such rights, warrants, options or Convertible
Securities, and (3) had any such rights, warrants, options or Convertible
Securities then still outstanding been originally issued or sold at the time of
such change. On the expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such Convertible
Securities, the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have obtained (i) had the adjustments
made upon the issuance or sale of such rights, warrants, options or Convertible
Securities been made upon the basis of the issuance of only the number of shares
of Common Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities and (ii) had
adjustments been made on the basis of the Purchase Price as adjusted under
clause (i) above for all transactions (which would have affected such adjusted
Purchase Price) made after the issuance or sale of such rights, warrants,
options or Convertible Securities.
(E) In case of the sale for cash of any shares of Common
Stock, any Convertible Securities, any rights, warrants or options to subscribe
for or purchase Common Stock or Convertible Securities, the consideration
received by the Company therefore shall be deemed to be the gross sales price
therefor without deducting therefrom any expense paid or incurred by the Company
or any underwriting discounts or commissions or concessions paid or allowed by
the Company in connection therewith.
(f) Notwithstanding anything else to the contrary, no adjustment to the
Purchase price of the Warrants or to the number of shares of Common Stock
purchasable upon the exercise of each Warrant will be made:
(A) upon the exercise of any of the options presently
outstanding under the Company's 1991 Stock Option Plan and the 1994 Stock Option
Plan (collectively, the "Plans") for officers, directors and certain other key
personnel of the Company; or
(B) upon the grant or exercise of any other options which may
hereafter be granted or exercised under the Plans or under any other employee
benefit plan of the Company; or
(C) upon the sale or exercise of the Warrants; or
(D) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights, warrants or options to subscribe for
or purchase Common Stock or Convertible Securities, whether or not such rights,
warrants or options were outstanding on the date of the original sale of the
Warrants or were thereafter issued or sold; or
(E) upon the issuance or sale of Common Stock upon conversion
or exchange of any Convertible Securities, whether or not any adjustment in the
Purchase Price was made or required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible Securities were
outstanding on the date of the original sale of the Warrants or were thereafter
issued or sold; or
(F) upon any amendment to or change in the terms of any
rights, warrants or options to subscribe for or purchase Common Stock or
Convertible Securities or in the terms of any Convertible Securities, including,
but not limited to, any extension of any expiration date of such right, warrant
or option, any change in any exercise or purchase price provided for in any such
right, warrant or option, any extension of any date through which any
Convertible Securities are convertible into or exchangeable for Common Stock or
any change in the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock (other than rights, warrants, options or
Convertible Securities issued or sold after the close of business on the date of
the original issuance of the Warrants).
(g) Any determination as to whether an adjustment in the Purchase Price
in effect hereunder is required pursuant to Section 7, or as to the amount of
any such adjustment, if required, shall be binding upon the holders of the
Warrants and the Company if made in good faith by the Board of Directors of the
Company.
(h) If and whenever the Company shall declare any dividends or
distributions or grant to the holders of Common Stock, as such, rights or
warrants to subscribe for or to purchase, or any options for the purchase of,
Common Stock or securities convertible into or exchangeable for or carrying a
right, warrant or option to purchase Common Stock, the Company shall notify each
of the then Registered Holders of the Warrants of such event prior to its
occurrence to enable such Registered Holders to exercise their Warrants and
participate as holders of Common Stock in such event.
SECTION 8. Fractional Warrants and Fractional Shares.
(a) If the number of shares of Common Stock purchasable upon the
exercise of each Warrant is adjusted pursuant to Section 7 hereof, the Company
shall nevertheless not be required to issue fractions of shares, upon exercise
of the Warrants or otherwise, or to distribute certificates that evidence
fractional shares. With respect to any fraction of a share called for upon any
exercise hereof, the Company shall pay to the Holder an amount in cash equal to
such fraction multiplied by the current market value of such fractional share,
determined as follows:
(A) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the National Market System of NASDAQ ("NMS"), the current value
shall be the last reported sale price of the Common Stock on such exchange on
the last business day prior to the date of exercise of this Warrant or if no
such sale is made on such day or no closing sale price is quoted, the average of
the closing bid and asked prices for such day on such exchange or system; or
(B) If the Common Stock is listed in the over-the-counter
market (other than on NMS) or admitted to unlisted trading privileges, the
current value shall be the mean of the last reported bid and asked prices
reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(C) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current value shall be an amount determined in such reasonable manner as may be
prescribed by the Board of Directors of the Company.
SECTION 9. Registration of Stock.
(a) "Piggy Back" Registration Rights. From the date of this Warrant,
for the next two times that the Company either shall become obligated to, or
shall otherwise elect to proceed with the preparation and filing with the
Securities and Exchange Commission (the "Commission") of a registration
statement under the Act in connection with the proposed offer and sale for cash
of any of its Common Stock by the Company or by any of its then existing
security holders, other than a registration statement on a form that does not
permit the inclusion of shares by its security holders, the Company shall give
written notice of such election or obligation to all holders of record of the
Warrants (or holders of record of the Common Stock issued upon exercise of the
Warrants). Upon the written request of a record holder of any Warrants or such
shares issued upon exercise of the Warrants given within 20 days after the
receipt of any such notice from the Company, the Company will, except as
otherwise hereinafter provided, cause all of the shares of Common Stock for
which the record holders have requested registration pursuant to this Section
9(a), to be included in such registration statement, all to the extent necessary
to permit the sale or other disposition by such prospective seller or sellers of
the Common Stock to be so registered; provided, however, that nothing herein
shall prevent the Company from, at any time, abandoning or delaying any
registration. If any registration pursuant to this Section 9(a) shall be
underwritten in whole or in part, the Company may require that the shares of
Common Stock requested for inclusion pursuant to this Section 9(a) be included
in the underwriting on the same terms and conditions as the securities otherwise
being sold through the underwriters. If in the good faith judgment of the
managing underwriter of such public offering (as evidenced by a letter in
writing from such managing underwriter to the record holders of the Warrants, or
Common Stock, who have elected to sell shares pursuant hereto) the inclusion of
all or any portion of the Common Stock originally covered by a request for
registration would reduce the number of shares that can be sold by the Company
in such underwritten offering, the total number of shares to offered for the
account of the holders of Warrants and for the account of all other persons
(other than the Company) participating in the registration shall be reduced pro
rata in proportion to the respective number of shares requested to be included
therein to the extent necessary to reduce the total number of shares proposed to
be registered to the number of shares recommended by such managing underwriter.
(b) Registration Procedures. Whenever the Company elects to, or becomes
obligated to effect a registration of shares of Common Stock under the Act, the
Company will:
(A) furnish to the security holders participating in such
registration, to brokers or dealers effecting transactions in the shares of
Common Stock on behalf of such holders and to the underwriters of the securities
being registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
holders, brokers or dealers and underwriters may reasonable request in order to
facilitate the public offering of such securities;
(B) use its reasonable best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such participating holders may reasonably
request, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified;
(C) promptly notify the security holders participating in such
registration of the time when such registration statement has become effective
or when a supplement to any prospectus included in such registration statement
has been filed;
(D) notify such holders promptly of any request by the
Commission for the amending or supplementing of such registration statement or
prospectus or for additional information;
(E) at the request of any such holder, furnish (i) at the
closing provided for in the underwriting agreement, an opinion, dated such date,
of the counsel representing the Company for the purposes of such registration,
addressed to the underwriters and to the holder or holders making such request,
covering such matters relating to the Company or its securities, as such
underwriters and holders may reasonably request, and (ii) on the effective date
of the registration statement and at the closing provided for in the
underwriting agreement, a letter dated each such date, from the independent
certified public accountants of the Company, addressed to the underwriters and
to the holder or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request in which letter such
accountants shall state (without limiting the generality of the foregoing) that
they are independent certified public accountants within the meaning of the Act
and that in the opinion of such accountants the financial statements and other
financial data of the Company included in the registration statement or any
amendment or supplement thereto comply in all material respects with the
applicable accounting requirements of the Act.
(c) Expenses.
(A) With respect to each inclusion of shares of the Common
Stock in a registration statement pursuant to this Section 9, any and all fees,
costs and expenses of or incidental to, or incurred in connection with such
registration, inclusion and public offering (as specified in paragraph (B)
below) shall be borne by the Company; provided, however, than any security
holders participating in such registration shall bear their pro rata share of
any underwriting discounts and commissions and transfer taxes.
(B) The fees, costs and expenses of or incidental to each such
registration to be borne by the Company as provided in paragraph (A) above shall
include, without limitation, all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel for the underwriter or underwriters
of such securities (if the Company and/or selling security holders are required
to bear such fees and disbursements), and all legal fees and disbursements and
other expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified.
(C) Nothing in this Agreement shall obligate the Company to
undergo an audit other than as required under rules of the Commission applicable
to the Company or to keep any registration statement filed pursuant to this
Agreement current and effective.
(D) With respect to the expenses to be borne by the Company in
the foregoing parts of Section 9(c), the Company's obligation shall be limited
to keeping the registration statement effective for a period of 90 days.
(d) Indemnification.
(A) The Company shall indemnify, hold harmless and defend each
holder of shares of Common Stock which are included in a registration statement
pursuant to the provisions of this Section 9 and any underwriter (as defined in
the Act) for such holder and each person, if any, who controls such holder or
such underwriter within the meaning of the Act, from and against, and will
reimburse such holder and each such underwriter and controlling person with
respect to, any and all loss, damage liability, cost and expense (as and when
incurred), including without limitation, the costs of investigation and defense
of any legal action, proceeding or investigation, to which such holder or any
such underwriter or controlling person may become subject under the Act, the
Securities Exchange Act of 1934, as amended, or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by or arise out of
any untrue statement or alleged untrue statement of any material fact contained
in such registration statement, any prospectus contained therein, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; provided, however, that
the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such holder, such underwriter
or such controlling person in writing specifically for use in the preparation
thereof.
(B) Each holder of shares of the Common Stock which are
included in a registration pursuant to the provision of this Section 9 will
indemnify and hold harmless the Company, any controlling person and any
underwriter from and against, and will reimburse the Company, any controlling
person and any underwriter with respect to, any and all loss, damage, liability,
cost or expense to which the Company or any controller person and/or any
underwriter may become subject under the Act, the Securities Exchange Act of
1934, as amended, or otherwise, insofar as such losses, damages, liabilities,
costs or expenses are caused by any untrue or alleged untrue statement of any
material fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in reliance upon
and in strict conformity with written information furnished by such holder
specifically for use in the preparation thereof, provided that, with respect to
each inclusion of shares of Common Stock in a registration pursuant to the
provisions of this Section 9, the total liability hereunder of any holder of
such Common Stock to the Company and any controlling persons shall in no event
exceed the net proceeds to such holder from its or his sale of Common Stock
pursuant to such registration.
(C) Promptly after receipt by an indemnified party of notice
of the commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of paragraph (A)
or (B) of this Section 9(d), promptly notify the indemnifying party of the
commencement thereof, but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than hereunder. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnified party similarly notified,
to assume the defense thereof; with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any action include
both the indemnifying party and the indemnified party and if there is a conflict
of interest which would prevent counsel for the indemnifying party from also
representing the indemnified party, or any of the indemnified parties have
available to them defenses or counterclaims not available to the indemnifying
party even though this does not result in a conflict of interest, the
indemnified party or parties shall have the right to select one separate counsel
to participate in the defense of such action on behalf of all such indemnified
party or parties at the expense of the indemnifying party. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of paragraph (A) or (B) of this Section 9(d)
for any legal or other expenses subsequently incurred by such indemnified party
in connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed counsel in
accordance with the proviso of the preceding sentence, (ii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after the
notice of the commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense of
the indemnifying party.
SECTION 10. Warrantholder Not Deemed Stockholder. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
Holder shall have exercised such Warrants and been issued shares of Common Stock
in accordance with the provisions hereof.
SECTION 11. Rights of Action. All rights of action with respect to this
Warrant are vested in the Registered Holder of the Warrants, and the Registered
Holder of a Warrant, without consent of the holder of any other Warrant, may, on
his own behalf and for his own benefit, enforce against the Company his right to
exercise his Warrants for the purchase of shares of Common Stock in the manner
provided in this Warrant.
SECTION 12. Agreement of Warrantholder. Every holder of a Warrant, by
his acceptance thereof, consents and agrees with the Company that the Company
may deem and treat the person in whose name the Warrant is registered as the
holder and as the absolute, true and lawful owner of the Warrants represented
thereby for all purposes, and the Company shall not be affected by any notice or
knowledge to the contrary, except as otherwise expressly provided in Section 6
hereof.
SECTION 13. Gender; Singular and Plural. When the context and
construction so require, all words used in the singular herein shall be deemed
to have been used in the plural and the masculine shall include the feminine and
neuter and vice versa.
SECTION 14. Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without reference to
principles of conflict of laws.
SECTION 15. Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid, as follows: if to the Registered Holder of a Warrant, at the address of
such holder as shown on the registry books maintained by the Company; if to the
Company, at 2067 Commerce Drive, Medford, Oregon 97504, Attention:
President.
SECTION 16. Binding Effect. This Warrant shall be binding upon and
inure to the benefit of the Company (and its respective successors and assigns)
and the holders from time to time of Warrants. Nothing in this Warrant is
intended or shall be construed to confer upon any other person any right, remedy
or claim, in equity or at law, or to impose upon any other person any duty,
liability or obligation.
SECTION 17. Termination. This Warrant shall terminate at the close of
business on the Warrant Expiration Date or such earlier date upon which all
Laidlaw Equities, Inc. Warrants have been exercised.
APPLIED LASER SYSTEMS
By:
William J. Young
