As filed with the Securities and Exchange Commission on May 8, 1996
Registration No. 33-98400
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
(AMENDMENT NO. 4)
ADVANCED DEPOSITION TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 04-2865714
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
GLENN J. WALTERS, PRESIDENT
Advanced Deposition Technologies, Inc.
580 Myles Standish Boulevard
Taunton, Massachusetts 02780
(508) 823-0707
(Address of registrant's principal executive office and agent for service)
Copies to:
PAUL D. BROUDE, ESQUIRE
ANDREW D. MYERS, ESQUIRE
O'Connor, Broude & Aronson
950 Winter Street, Suite 2300
Waltham, Massachusetts 02154
(617) 890-6600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE 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, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box: [ X ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------- ----------------- ---------------------- ---------------------- ----------------------
Proposed
Title of Each Class Proposed Maximum Maximum Amount of
of Securities to Be Amount to be Offering Price Aggregate Registration
Registered Registered(1) per Share Offering Price Fee(1)
- ----------------------------- ----------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value...................... 2,600,000 $5.00
$13,000,000 $4,482.76
Class B Common Stock
Purchase Warrants ....... 1,250,000 $0.00 $0.00 $0.00
TOTAL........................ $5.00 $13,000,000 $4,482.76
- ----------------------------- ----------------- ---------------------- ---------------------- ----------------------
</TABLE>
(1) The Company has already paid the registration fee for the securities
included in this Registration Statement.
(2) Includes additional shares of Common Stock issuable upon exercise of
the Registrant's redeemable common stock purchase warrants (the "IPO
Warrants") sold in its initial public offering and warrants issued to
the representative underwriters of its initial public offering (the
"Representative's Warrants").
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
Subject to Completion: Dated May 8, 1996
PROSPECTUS
ADVANCED DEPOSITION TECHNOLOGIES, INC.
2,600,000 SHARES OF COMMON STOCK
1,250,000 CLASS B REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to (i) 1,150,000 shares of Common Stock, $.01
par value per share (the "Common Stock"), of Advanced Deposition Technologies,
Inc., a Delaware corporation (the "Company"), issuable upon the exercise of
redeemable common stock purchase warrants (the "IPO Warrants") issued in
connection with the Company's initial public offering completed on September 17,
1993 (the "IPO"), (ii) 200,000 shares of Common Stock issuable upon exercise of
warrants issued to the representative of the underwriters of the IPO (the
"Representative's Warrants"), (iii) 1,250,000 Class B Redeemable Common Stock
Purchase Warrants (the "Class B Warrants") and (iv) 1,250,000 shares of Common
Stock underlying the Class B Warrants. For a period of 30 days following the
effective date of this Prospectus (the "30-day Period"), each IPO Warrant will
entitle the holder to purchase one share of Common Stock at an exercise price of
$5.00 per share and receive one Class B Warrant for no additional consideration.
After the 30-Day Period through March 8, 1997, two IPO Warrants will entitle the
holder to purchase one share of Common Stock at an exercise price of $5.00 per
share. No Class B Warrants will be issued following the 30-Day Period, unless
such period is extended by the Board of Directors of the Company. The Common
Stock and Class B Warrants are sometimes referred to herein as the "Securities."
Each Class B Warrant will entitle the holder to purchase one share of
Common Stock at an exercise price of $5.00 per share through May __, 1998. The
Class B Warrants will only become exercisable if the Company increases its
authorized number of shares of Common Stock. The IPO Warrants and Class B
Warrants are redeemable by the Company at a redemption price of $.10 per warrant
at any time on 30 days' prior written notice, provided that the market price of
the Common Stock equals or exceeds $7.00 per share for 10 consecutive trading
days ending within 20 days prior to the notice of redemption. The IPO Warrants
and Class B Warrants are sometimes collectively referred to herein as the
"Warrants." The Representative's Warrants are exercisable to purchase Common
Stock and/or redeemable warrants at $6.43 per share and $.14 per warrant,
respectively. The redeemable warrants underlying the Representative's Warrants
are exercisable at a price of $8.65 per share. During the 30-Day Period, persons
who exercise the redeemable warrants underlying the Representative's Warrants
will receive one Class B Warrant. See "DESCRIPTION OF SECURITIES."
The Company will receive the exercise price upon the exercise, if any,
of the IPO Warrants and/or the Representative's Warrants.
The Company's Common Stock and IPO Warrants are traded on the NASDAQ
Small-Cap Market ("NASDAQ") under the symbols "ADTC" and "ADTCW," respectively.
On April 24, 1996, the closing bid and ask prices of the Company's Common Stock
on NASDAQ were $5 3/8 and $5 3/4 per share, respectively. The closing bid and
ask prices for the IPO Warrants on NASDAQ were $17/16 and $19/16, respectively.
No market exists for the Class B Warrants and no assurance can be given that a
market for such securities will develop or, if developed, be sustained.
An investment in the Common Stock and Warrants involves a high degree
of risk. See "Risk Factors" contained elsewhere in this Prospectus.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------
THE DATE OF THIS PROSPECTUS IS ___________, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copies thereof may be
obtained, at prescribed rates, at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained at prescribed
rates by writing to the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549.
The Company has filed a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Act"), covering the Common Stock
included in this Prospectus. This Prospectus does not contain all the
information set forth in or annexed to exhibits to the Registration Statement
filed by the Company with the Commission and reference is made to such
Registration Statement and the exhibits thereto for the complete text thereof.
For further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement, including the exhibits
filed as part thereof, copies of which may be obtained at prescribed rates upon
request to the Commission in Washington, D.C. Any statements contained herein
concerning the provisions of any documents are not necessarily complete, and, in
each instance, such statements are qualified in their entirety by reference to
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission.
INCORPORATION BY REFERENCE
The following documents, which have been filed by the Company with the
Commission under the Act and the Exchange Act, are incorporated by reference in
this Prospectus:
(1) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995, as amended and filed with the Commission
on April 29, 1996, file number 1-12230;
(2) The Company's Definitive Proxy Statement for its 1995 Annual
Meeting of Stockholders filed with the Commission on May 6,
1996 file number 1-12230;
(3) The Company's Amendment No. 2 to its Form SB-2 Registration
Statement filed with the Commission on September 3, 1993, file
number 33-66324-B; and
(4) Description of the Company's Common Stock in the Company's
Form 8-A/A Registration Statement, dated August 27, 1993, as
amended, file number 1-12230.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering described herein shall be deemed to be
incorporated by reference into this Prospectus from the respective dates those
documents are filed. If any statement in this Prospectus or any document
incorporated by reference in this Prospectus is modified or superseded by a
statement in this Prospectus, the earlier statement will be deemed, for the
purposes of this Prospectus, to have been modified or superseded by the
subsequent statement, and the earlier statement is incorporated by reference
only as modified or to the extent it is not superseded.
The Company will furnish its stockholders with annual reports containing
audited financial statements and such interim reports as it deems appropriate.
IN CONNECTION WITH THIS OFFERING, CERTAIN SELLING GROUP MEMBERS MAY ENGAGE
IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE OVER THE
COUNTER MARKET ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SEE "PLAN OF DISTRIBUTION."
3
THE COMPANY
OVERVIEW
Advanced Deposition Technologies, Inc. (the "Company") develops,
manufactures, markets and sells patented and proprietary metallized films for
energy management applications, primarily within the electronics and food
packaging industries. The Company produces metallized films by applying an
ultra-thin layer or layers of vaporized metal onto different types of polymer
films. From 1993 through 1995, the Company developed several new products based
on its proprietary method for metallizing film in high-resolutions patterns. The
Company markets and sells many of its new products to the food packaging
industry and actively pursues other applications for its patterned, metallized
films.
The primary source of the Company's revenues to date has been from sales to
the electronic capacitor market. During the years ended December 31, 1995, 1994
and 1993 the Company's sales to the food packaging market totalled approximately
$2,737,000 (28.7% revenues), $1,763,000 (27.9% of revenues) and $92,000 (1.6% of
revenues), respectively. While the Company expects that its sales to the
electronic capacitor market will continue to account for a significant part of
its business, the Company believes the market for its food packaging products
and other potential applications for its metallized films will generate much of
its anticipated future growth in revenues.
The Company began operations in 1985 as a supplier of metallized film to
the electronic capacitor industry. In 1989, the Company developed and introduced
its first metallized films for use in microwave food packaging applications. The
Company's metallized films for microwavable foods create heat fields within the
package, resulting in more uniformly cooked food than conventional microwave
food packaging. The Company generally sells metallized film packed in rolls to
converters, who incorporate the film into a final food package.
In 1994, the Company introduced a microwave browning and crisping bag (the
"ACCU-CRISP(R) Bag"), made witH a patented fuse susceptor metallized film. The
Company has sold the ACCU-CRISP(R) Bags through retail channels. The Company has
also developed, and manufactured on a limited basis for evaluation purposes,
authentication holograms, electronic article surveillance tags, electrostatic
discharge materials, microwave sterilization devices and solar protective films
using the Company's metallization process.
The Company's executive offices and manufacturing operations are located at
580 Myles Standish Industrial Park, Taunton, Massachusetts 02780. Its telephone
number is (508) 823-0707.
RISK FACTORS
The Securities offered hereby involves a high degree of risk, including
risks associated with the Company's recent history of losses; working capital
deficit; intense competition; expansion into new markets and need for additional
financing, among others. Purchasers should carefully consider the information
presented under "Risk Factors" beginning on page 6.
4
RISK FACTORS
The Securities offered hereby involves a high degree of risk. The
Securities should not be purchased by persons who cannot afford the loss of
their entire investment. Purchasers should carefully consider the information
presented below.
RECENT HISTORY OF LOSSES; WORKING CAPITAL DEFICIT; AUDITORS' REPORT CONTAINS
EXPLANATORY PARAGRAPH
The Company reported net income of approximately $6,000 for the year ended
December 31, 1995 and net losses of approximately $1,809,000 for the year ended
December 31, 1994. As of December 31, 1995, the Company had a working capital
deficiency of approximately $1,381,000 and an accumulated deficit of
approximately $2,088,000. The report of the Company's independent accountants
upon the Company's financial statements incorporated herein by reference
contains an explanatory paragraph, which states that the Company has working
capital deficiency, primarily due to the classification of certain obligations
to a bank, described below, as short term. These conditions raise substantial
doubt as to the Company's ability to continue as a going concern. The Company
must refinance its existing bank obligation, as well as an obligation to
Printpack in order to continue operating in its current form. In addition, in
order to operate profitably in the future, the Company must successfully market
its new products to new industries, sell these products to existing and new
customers, increase gross margins through higher volumes and manufacturing
efficiencies, and control its operating expenses. There can be no assurance that
the Company will operate on a profitable basis in the future.
NEED FOR ADDITIONAL FINANCING
Based on the Company's operating plan, the Company anticipates that it will
require additional financing to meet its on-going obligations and current plans
for expansion. No assurance can be given that the Company will be successful in
obtaining such financing on favorable terms, or at all. The Company currently
has line of credit and term loan facilities with a bank, pursuant to which it
has pledged substantially all of its assets. The Company's line of credit
facility expired on December 31, 1995. The bank has agreed to allow the Company
until June 30, 1996 to find alternative financing arrangements. However, no
assurance can be given that a refinancing will be completed on a timely basis on
commercially reasonable terms, or at all. If the Company's current bank requires
the Company to repay its loans before replacement financing is obtained, it
would have a material adverse effect on the Company's ability to continue its
operations as presently conducted. See "Use of Proceeds," "Plan of Distribution"
and "Description of Securities"
5
COMPETITION
The food packaging industry is highly competitive and subject to changes in
the types of food products requiring packaging and food preparation. The Company
will depend on its abilities to provide high quality, cost-effective metallized
film for the food packaging industry, to establish continuing relationships with
microwave and non-microwave food packaging companies, and to respond to the
changing needs of the marketplace in order to compete successfully in this
industry. The Company competes with numerous providers of food packaging and
food packaging supplies, many of which have a longer history of operations and
substantially greater financial, marketing, technical and other resources than
the Company, all of which may give them numerous competitive advantages. No
assurance can be given that current and future competitors will not develop new
or enhanced technologies or products perceived to be superior to those sold or
developed by the Company. No assurance can be given that the Company can
successfully compete or operate profitably in such a competitive environment.
The electronic capacitor market in which the Company competes is also
highly competitive. The Company competes with competitors in this market which
have substantially greater financial, marketing, technical and other resources
than the Company. No assurance can be given that current and future competitors
will not develop new or enhanced technologies perceived to be superior to those
sold or developed by the Company. In recent years, there has been increasing
price competition in this market, resulting in reduced margins. No assurance can
be given that the Company will continue to compete successfully in this market.
RISK OF EXPANSION INTO NEW MARKETS; RELIANCE ON DISTRIBUTION PARTNERS
The Company recently developed products for, and began to focus much of its
marketing efforts on, the microwave food packaging and other industries. The
Company has only recently begun to generate revenues from these markets, and no
assurances can be given that such revenues will continue or will economically
justify the Company's development and marketing efforts in these areas. In
addition, the Company's initial expansion into certain new markets may be
dependent on relationships with potential marketing and distribution partners,
and on new partners' success in these markets with products supplied by the
Company. The Company's expansion plans into new markets will subject the Company
to all of the risks incident to the expansion of a small business, particularly
the possible adverse impact associated with the integration of new lines of
products into the Company's existing operations and the potential diversion of
management time and attention from the Company's traditional line of business.
In addition, no assurance can be given that new products can be effectively
marketed and sold by the Company on a profitable basis. Companies that establish
new product lines directed toward new markets frequently encounter unforeseen
expenses, difficulties, complications and delays.
6
DEPENDENCE ON MAJOR CUSTOMERS
Two customers accounted for approximately 34% and 11%, respectively, of the
Company's revenues in the year ended December 31, 1995. Substantially all of the
Company's sales of food packaging material, not including sales of ACCU-CRISP(R)
Bags which are ordinarily made through retail channels, were made to Printpack
Enterprises, Inc. ("Printpack") the customer that accounted for 34% of the
Company's revenues in 1995. The Company has entered into a letter agreement with
Printpack that involves, among other things, terminating a purchase agreement
and lease agreement between the parties. The Company cannot currently predict
the effect the termination of these agreements will have on the Company. No
assurance can be given that the Company will continue to recognize revenue from
Printpack in the future. If the Company were to substantially reduce doing
business with any of its major customers, the Company's business and results of
operations could be materially and adversely effected.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company has been granted eight patents and has filed eight patent
applications with the U.S. Patent and Trademark Office. Most of the patent
applications pertain to products, such as the Company's ACCU-CRISP(R) Bags and
proposed security hologram products, made with vaporized metals deposited onto
substrates. In addition, the Company has pending patent applications in Europe
and Japan. The Company's patent and trade secret rights are of material
importance to the Company and its future prospects. No assurance can be given
that the patents will be held valid if subsequently challenged, that any
additional patents will be issued or that the scope of any patent protection
will exclude competitors. No assurance can be given that any patents will
provide competitive advantages for the Company's products. Even if a
competitor's products were to infringe patents owned by the Company, it would be
costly for the Company to enforce its rights in an infringement action and would
divert funds and management resources from the Company's operations.
Furthermore, no assurance can be given that the Company's products will not
infringe any patents of others. If valid patents are infringed upon by the
Company, the patent owners might be able to prevent the future use, sale and
manufacture of the Company's products. Also, the Company may be required to pay
damages for past infringement, or to pay license fees or royalties on future
sales of any infringing products, if a license could be obtained. To date, no
legal action has been initiated against the Company for infringement of any
patents.
The Company also relies on trade secrets that it seeks to protect, in part,
through confidentiality agreements with employees, consultants and other
parties. No assurance can be given that these agreements will not be breached,
that the Company will have adequate remedies for any breach, or that the
Company's trade secrets will not otherwise become known to or independently
developed by existing or potential competitors of the Company. As the Company
intends to enforce its patents, trademarks and copyrights and protect its trade
secrets, it may be involved from time to time in litigation to determine the
enforceability, scope and validity of these rights. Any such
7
litigation could result in substantial cost to the Company and diversion of
effort by the Company's management and technical personnel.
LIMITED PRODUCT LINES; TECHNOLOGICAL CHANGE
The Company's metallized films developed for the electronic capacitor and
food packaging markets are presently the Company's primary commercial products.
Although the Company is expanding its product line sold within these markets and
is currently developing additional applications for its products, no assurance
can be given that any proposed application or product can be successfully
developed, marketed or sold on a profitable basis.
The electronic capacitor and microwave food packaging markets in which the
Company operates are undergoing rapid technological change. No assurance can be
given that the development of new technology by others will not render the
Company's products obsolete or commercially unmarketable.
NO DIVIDENDS
The Company has not paid dividends on its Common Stock since its inception
and does not intend to pay any dividends to its stockholders in the foreseeable
future. The Company currently intends to reinvest earnings, if any, in the
development and expansion of its business. The Company's bank lender prohibits
payment of dividends without the bank's prior consent.
CONTROL BY CURRENT MANAGEMENT
Assuming no exercise of the IPO Warrants and the Representative's Warrant,
the current Directors and Executive Officers of the Company will own
approximately 30% of the outstanding Common Stock. As a result, the current
management will be able to exert substantial influence over the election of all
of the members of the Board of Directors and the outcome of any issues which may
be subject to a vote of the Company's stockholders.
POTENTIAL SALES PURSUANT TO RULE 144
The sale, or availability for sale, of substantial amounts of Common Stock
in the public market subsequent to this offering pursuant to Rule 144 under the
Act ("Rule 144") or otherwise could adversely affect the market price of the
Common Stock and could impair the Company's ability to raise additional capital
through the sale of its equity securities or debt financing. The availability of
Rule 144 to the holder of restricted securities of the Company would be
conditioned on, among other factors, the availability of certain public
information concerning the Company. Of the Company's 3,169,870 shares of Common
Stock issued and outstanding as of April 22, 1996 Prospectus, 1,522,818 shares
of Common Stock are "restricted securities" as that term is defined in Rule 144
promulgated under the Act and may, under certain circumstances, be sold
immediately
8
without registration pursuant to Rule 144. See "DESCRIPTION OF SECURITIES -
Shares Eligible for Future Sale."
ABSENCE OF ACTIVE PUBLIC MARKET; NO PUBLIC MARKET FOR CLASS B WARRANTS; POSSIBLE
VOLATILITY IN PRICE OF SECURITIES
The level of trading in the Company's Common Stock on NASDAQ has been
volatile and no assurance can be given that a sustained, active market will
develop. Accordingly, purchasers of the Common Stock may experience difficulty
selling or otherwise disposing of such Common Stock. In addition, there is no
established public market for the Class B Warrants and no assurance can be given
that a public market for such securities will ever develop or, if developed, be
sustained.
The stock market has from time to time experienced significant price and
volume fluctuations that may be unrelated to the operating performance of any
particular company. In addition, the market prices of the securities of many
publicly traded emerging companies, including the Company, have in the past
been, and can in the future be expected to be, especially volatile. Various
factors and events, including future announcements of technological innovations
or new products by the Company or its competitors, developments or disputes
concerning, among other things, patents or proprietary rights, publicity
regarding actual or potential results relating to products under development by
the Company or its competitors, and economic and other external factors, as well
as period-to-period fluctuations in the Company's financial results, may have a
significant impact on the market price of the securities and the Company's
business.
SUBSTANTIAL OPTIONS, WARRANTS AND SHARES RESERVED
Under the Company's 1993 Stock Option Plan (the "1993 Plan"), the Company
may issue options to purchase 300,000 shares of Common Stock to employees,
officers, directors and consultants, of which options to purchase 234,500 shares
of Common Stock were outstanding on March 25, 1996 at a weighted average
exercise price of $2.10 per share. The 1993 Plan allows the Board of Directors
to grant options with an exercise price that is less than, but reasonably
related to, the fair market value of the Common Stock on the date of the grant
without stockholder approval. Other options to purchase 60,922 shares of Common
Stock remained outstanding as of March 25, 1996 at a weighted average exercise
price of approximately $2.19 per share. In addition, the Company has reserved
50,000 shares of Common Stock for issuance upon exercise of stock options that
may be granted under its 1994 Formula Stock Option Plan (the "Formula Plan"), of
which options to purchase 6,000 shares of Common Stock at a weighted average
exercise price of $3.15 per share are outstanding as of March 25, 1996. Under
the Formula Plan, any non-employee who becomes a member of the Company's Board
of Directors receives an option to purchase 1,500 shares of Common Stock, which
vests annually in thirds beginning on the date of the grant subject to the
individual continuing to serve on the Board of Directors. In addition, each
non-employee who has served on the Board of Directors for at least one full year
receives an option to purchase 1,000 shares of Common Stock to vest one year
from the date of the grant. The exercise price of all options
9
granted under the Formula Plan is equal to the fair market value of the Common
Stock on the date of the grant. The 1993 Plan and Formula Plan are sometimes
referred to herein as the "Plans."
The IPO Warrants and Class B Warrants will be exercisable to purchase
shares of Common Stock until March 8, 1997 and May __, 1998, respectively, and
the Representative's Warrants grant the holders thereof the right to purchase up
to 100,000 shares of Common Stock and up to 100,000 redeemable warrants through
September 9, 1998. See "DESCRIPTION OF SECURITIES."
The existence of the IPO Warrants, Class B Warrants and the
Representative's Warrant and the Options may prove to be a hindrance to future
financing by the Company. In addition, the exercise of any such options or
warrants may further dilute the net tangible book value of the Common Stock.
Further, the holders of such options and warrants may exercise them at a time
when the Company would otherwise be able to obtain additional equity capital on
terms more favorable to the Company.
UNCERTAIN TERMS OF CLASS B WARRANTS
The Class B Warrants are exercisable only if holders of two-thirds of the
Company's outstanding shares of Common Stock approve an amendment (the
"Amendment") to the Company's Certificate of Incorporation to increase the
Company's number of authorized shares of Common Stock. The Company's
stockholders will vote on the Amendment at the Company's 1995 Annual Meeting of
Stockholders (the "Annual Meeting"), currently scheduled to be held on May 31,
1996. If the Amendment is not approved by holders of two-thirds of the
outstanding shares of the Company's Common Stock at the Annual Meeting or
otherwise, the Class B Warrants will not become exercisable and would therefore
not have any value.
POSSIBLE ABEYANCE OF MARKET MAKING ACTIVITIES
In connection with any solicitation by the Representative, unless granted
an exemption by the Securities and Exchange Commission (the "Commission") from
its Rule 10b-6, promulgated under the Exchange Act, the Representative and any
other soliciting broker-dealer will be prohibited from engaging in any market
making activities with respect to the Company's securities for the period
commencing either two or nine business days (depending on the market price of
the Common Stock) prior to any solicitation of the exercise of the Warrants
until the later of (i) the termination of such solicitation activity or (ii) the
termination (by waiver or otherwise) of any right which the Representative or
any other soliciting broker-dealer may have to receive a fee for the exercise of
Warrants following such solicitation. As a result, the Representative or any
other soliciting broker-dealer may be unable to provide a market for the
Company's securities, should they desire to do so, during certain periods while
the Warrants are exercisable. Such solicitations and reduction in the number of
market makers could adversely affect the market price of the securities.
10
NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES UNDERLYING THE WARRANTS;
REQUIREMENT TO MAINTAIN CURRENT PROSPECTUS; POSSIBLE REDEMPTION OF WARRANTS
Purchasers of the Warrants will have the right to exercise them to purchase
shares of Common Stock only if a current prospectus relating to such shares is
then in effect and only if the shares are qualified for sale under the
securities laws of the state or states in which the purchaser resides. The
Company has undertaken and intends to maintain a current prospectus which will
permit the purchase and sale of the Common Stock underlying the Warrants, but
there can be no assurance that the Company will be able to do so. The Company
will not call the Warrants for redemption at any time a current prospectus is
not effective. The Company intends to seek to qualify the shares of Common Stock
underlying the Warrants for sale in those states in which the Warrants were
originally offered. The Warrants may be deprived of any value if a current
prospectus covering the shares issuable upon the exercise thereof is not filed
and kept effective or if such underlying shares are not, or cannot be,
registered in the applicable states. The IPO Warrants may be subject to
redemption at $.10 per IPO Warrant on 30 days' prior written notice, provided
that the market price of the Common Stock equals or exceeds $7.00 per share (the
"Call Price") for 10 consecutive trading days ending within 20 days prior to the
notice of redemption. The Class B Warrants may be subject to redemption at $.10
per Warrant on 30 days prior written notice, provided that the average market
price equals or exceeds $7.00 per share during the 10 consecutive trading days
ending within 20 days prior to the notice of redemption. The Company's Board of
Directors has the discretion to reduce the exercise price and the Call Price of
the Warrants. In the event the Company exercises the right to redeem the
Warrants, such Warrants will be exercisable until the close of business on the
date fixed for redemption in such notice. If any Warrant called for redemption
is not exercised by such time it will cease to be exercisable and the holder
will be entitled only to the redemption price. See "DESCRIPTION OF SECURITIES."
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS
The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 1,000,000 shares of preferred stock, $.01 par value per
share. The preferred stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of Directors,
without further action by stockholders, and may include voting rights (including
the right to vote as a series on particular matters), preferences as to
dividends and liquidation, conversion and redemption rights and sinking fund
provisions. No preferred stock is currently outstanding, and the Company has no
present plans for the issuance thereof. However, the issuance of any such
preferred stock could adversely affect the rights of holders of Common Stock
and, therefore, could reduce the value of the Common Stock. See "DESCRIPTION OF
SECURITIES."
The Bylaws of the Company provide for a Board of Directors divided into
three classes serving for staggered three-year terms.
The ability of the Board of Directors to issue preferred stock and the
classification of the Board into three classes with staggered three-year terms
could discourage, delay or prevent a takeover of the Company.
11
In addition, the Company, as a Delaware corporation, is subject to the
General Corporation Law of the State of Delaware, including Section 203, an
anti-takeover law enacted in 1988. In general, the law restricts the ability of
a public Delaware corporation to engage in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder. As a result of
the application of Section 203 and certain provisions in the Company's
Certificate of Incorporation and Bylaws, as amended, potential acquirors of the
Company may find it more difficult or be discouraged from attempting to acquire
the Company, thereby possibly depriving holders of the Company's securities of
certain opportunities to sell or otherwise dispose of such securities at
above-market prices pursuant to such transactions.
12
USE OF PROCEEDS
The Company will receive the exercise price of the IPO Warrants and
Representative's Warrants upon the exercise, if any, of such securities. For a
period of 30 days following the effectiveness of this Prospectus (the "30-Day
Period"), each IPO Warrant and each redeemable warrant ("Redeemable Warrant")
underlying the Representative's Warrant will be exercisable at $5.00 and $8.65,
respectively, to purchase one share of Common Stock and one Class B Warrant.
Following the 30-day Period, two IPO Warrants and two Redeemable Warrants will
entitle the holder to purchase one share of Common Stock at the respective
exercise prices listed in the preceding sentence. During the 30-Day Period, the
aggregate exercise price of the IPO Warrants and the Representative's Warrants
(including the aggregate exercise price of the Redeemable Warrants) will be
$5,750,000 and $1,522,000, respectively. If all of the IPO Warrants and
Redeemable Warrants are exercised during the 30-Day Period, the Company would
issue 1,250,000 Class B Warrants, which would have an aggregate exercise price
of $6,250,000. Following the 30-Day Period, the aggregate exercise price of the
IPO Warrants and Representative's Warrants (including the aggregate exercise
price of the Redeemable Warrants) will be $2,875,000 and $1,089,500,
respectively.
Proceeds, if any, from any such exercises would be used for working capital
and general corporate purposes. The Company may a portion of such proceeds to
repay its bank indebtedness, which currently consists of a revolving line of
credit facility that bears interest at 8.5% per annum and has a outstanding
balance of approximately $1,500,000, and a term note that bears interest at 8.5%
per annum and has an outstanding balance of approximately $1,000,000. The
revolving line of credit and term note became due on December 31, 1995. The bank
has agreed to allow the Company until June 30, 1996 to refinance this
indebtedness. The Company used the proceeds from its bank indebtedness for
working capital purposes and facilities expansion. The Company may also use up
to $1,000,000 of the proceeds resulting from exercises of the Warrants, if any,
to pay Printpack under the terms of a settlement arrangement under which
Printpack would (i) relinquish its exclusive purchase rights for certain of the
Company's proprietary products, (ii) transfer to the Company title to a
high-speed vacuum metallizer, and (iii) return to the Company 297,610 shares of
the Company's Common Stock. Under the terms of the settlement arrangement, in
addition to the $1,000,000 payment to Printpack, the Company will grant
Printpack options to purchase 200,000 shares of Common Stock at $4.00 per share
and will release Printpack from any claims the Company may have under the terms
of a purchase agreement between the parties. The Company may pay, from time to
time, certain brokerage firms up to a 5% solicitation fee in connection with
solicitations of exercises of the IPO Warrants and Class B Warrants, which fee
would reduce the amount of proceeds received by the Company upon exercise of
such securities, if any. See "RISK FACTORS - Recent History of Losses; Working
Capital Deficit; Auditors' Report Contains Explanatory Paragraph; - Need for
Additional Financing; - Dependence on Major Customers" and "PLAN OF
DISTRIBUTION."
13
The Company has agreed to assume all of the costs and fees relating to the
registration of the shares of Common Stock covered by this Prospectus, except
for any discounts, concessions or commissions payable to underwriters or dealers
or agent brokerage fees incident to the offering of the shares of Common Stock
covered by this Prospectus and any fees or disbursements of counsel to the
selling securityholders. In addition to any such solicitation fee, the Company
estimates the expenses associated with this Offering will be approximately
$100,000.
14
PLAN OF DISTRIBUTION
The shares of Common Stock covered hereby will be issued by the Company
upon exercise of the IPO Warrants, the Class B Warrants and Representative's
Warrants. If all of the IPO Warrants and Redeemable Warrants areexercised during
the 30-Day Period, the Company will issue 1,250,000 Class B Warrants. The
holders of the Securities will act independently of the Company in making
decisions with respect to the timing of such exercises, if any.
The IPO Warrants were originally issued by the Company in connection with
its initial public offering completed on September 17, 1993. In September 1995,
the Board of Directors of the Company approved a modification of the terms of
the IPO Warrants such that (i) the exercise price was reduced from $7.00 per
share to $5.00 per share, and (ii) the expiration date was extended from March
8, 1996 to March 8, 1997. In addition, effective March 8, 1996, the Call Price
of the IPO Warrants was reduced from $9.00 per share to $7.00 per share.
The Representative's Warrants were originally issued to the representative
(the "Representative") of several underwriters of the IPO and are currently held
by certain officers or affiliates of the Representative. The Representative's
Warrants enable the holders to purchase an aggregate of 100,000 shares of Common
Stock at $6.43 per share and 100,000 Redeemable Warrants at $.14 per warrant.
The exercise price of the Redeemable Warrants is $8.65 per share.
The shares of Common Stock underlying the Warrants and Representative's
Warrants may be resold from time to time by the holders thereof, or by pledgees,
donees, transferees or other successors in interest. The shares of Common Stock
covered by this Prospectus may be resold in one or more transactions on NASDAQ,
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 resold by one or more of the following: (a) a block trade in which
the broker or dealer so engaged will attempt to sell the shares of Common Stock
or Warrants 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. The Company is paying all of the other expenses
of registering the securities offered hereby under the Act estimated to be
$100,000 for filing, legal, accounting and miscellaneous fees and expenses.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid in connection with resales of securities covered by this Prospectus. The
Company will not receive any proceeds from any sales of the Common Stock, but
will receive the proceeds generated upon exercise of any of the IPO Warrants
and/or the Representative's Warrants.
In offering the securities for resale, holders of the Warrants and the
Representative's Warrants and any broker-dealers who execute sales of Common
Stock issuable upon exercise of such securities may be deemed to be
"underwriters" within the meaning of the Act in connection with such sales, and
any profits realized, including the compensation of such broker-dealer, may be
deemed to be underwriting discounts and commissions.
15
This Offering will terminate on the date on which all shares offered hereby
have been issued by the Company.
16
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue up to 5,500,000 shares of Common Stock,
$.01 par value, of which 3,169,870 were issued and outstanding on April 23,
1996. The following summary description of the Common Stock is qualified in its
entirety by reference to the Company's Certificate of Incorporation, as amended.
As of April 22, 1996, the Company had 68 holders of record of its Common Stock.
The holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of Securityholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of Preferred Stock which may from time to time be outstanding, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor, and, upon the
liquidation, dissolution or winding up of the Company, are entitled to share
ratably in all assets remaining after payment of liabilities and payment of
accrued dividends and liquidation preference on the Preferred Stock, if any.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. The outstanding Common Stock is,
and the Common Stock to be outstanding upon completion of the Offering will be,
validly issued, fully paid, and nonassessable.
Officers and directors of the Company will own approximately 30% of the
outstanding Common Stock, exclusive of shares of Common Stock issuable upon
exercise of outstanding options or warrants. As a result they will be in a
position through their voting control to likely elect all of the members of the
Board of Directors and will continue to effectively control the Company.
IPO WARRANTS
The following is a brief summary of certain provisions of the IPO Warrants,
but such summary does not purport to be complete and is qualified in all
respects by reference to the actual text of the Warrant Agreement, as amended,
between the Company and American Securities Transfer, Incorporated (the
"Transfer and Warrant Agent").
EXERCISE PRICE AND TERMS
During the 30-Day Period, each IPO Warrant will entitle the registered
holder thereof to purchase one share of Common Stock at an exercise price of
$5.00, subject to adjustment in accordance with the anti-dilution and other
provisions referred to below, and receive one Class B Warrant for no additional
consideration. Following the 30-Day Period, two IPO Warrants will enable the
registered holder thereof to purchase one share of Common Stock at a price of
$5.00 per share, subject to adjustment in accordance with the anti-dilution and
other provisions referred to below.
The holder of any IPO Warrant may exercise such IPO Warrant by surrendering
the certificate representing the IPO Warrant to the Company's Transfer and
Warrant Agent, with the subscription on the reverse side of such certificate
properly completed and executed, together with payment of the
17
exercise price. The IPO Warrants may beexercised at any time in whole or in part
at the applicable exercise price until expiration of the IPO Warrants on March
8, 1997. No fractional shares will be issued upon the exercise of the IPO
Warrants.
REDEMPTION
The IPO Warrants are subject to redemption at $.10 per IPO Warrant on 30
days' prior written notice, provided that the market price of the Common Stock
equals or exceeds $7.00 per share (the "Call Price") for 10 consecutive trading
days ending within 20 days prior to the notice of redemption. For purposes of
the Warrant Agreement, "market price" is defined as the average of the closing
bid and ask prices on NASDAQ. In the event the Company exercises the right to
redeem the IPO Warrants, such IPO Warrants will be exercisable until the close
of business on the date fixed for redemption in such notice. If any IPO Warrant
called for redemption is not exercised by such time, it will cease to be
exercisable and the warrantholder will be entitled only to the redemption price.
ADJUSTMENTS
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the IPO Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications on or of the Common Stock. Additionally, an
adjustment would be made in the case of a reclassification or exchange of Common
Stock, consolidation or merger of the Company with or into another corporation
or sale of all or substantially all of the assets of the Company in order to
enable holders of Redeemable Warrants to acquire the kind and number of shares
of stock or other securities or property receivable in such event by a holder of
the number of shares that might otherwise have been purchased upon the exercise
of the IPO Warrant. No adjustments will be made unless such adjustment would
require an increase or decrease of at least $.10 or more in such exercise price.
No adjustment to the exercise price of the shares subject to the IPO Warrants
will be made for dividends (other than stock dividends), if any, paid on the
Common Stock or for securities issued pursuant to exercise of the IPO Warrants,
the Representative's Warrant, currently outstanding options or options which may
be granted under the Plan or shares issued in connection with the acquisition of
another business by the Company. In addition, the Company's Board of Directors
has the discretion to change the exercise price and Call Price of the IPO
Warrants.
TRANSFER, EXCHANGE AND EXERCISE
The IPO Warrants may be presented to the Transfer and Warrant Agent for
transfer, exchange or exercise at any time at or prior to the close of business
on March 8, 1997, at which time the IPO Warrants become wholly void and of no
value. If a market for the IPO Warrants is maintained and continues, the holder
may sell the IPO Warrants instead of exercising them. There can be no assurance,
however, that a market for the IPO Warrants will be maintained or will continue.
If the Company is unable to qualify for sale in particular states its Common
Stock underlying the IPO Warrants, holders of the IPO Warrants desiring to
exercise the IPO Warrants in those states will have no choice but to either sell
such IPO Warrants or let them expire. See "RISK FACTORS - Non- Registration in
Certain Jurisdictions of Shares Underlying the IPO Warrants; Requirement to
Maintain Current Prospectus; Possible Redemption of IPO Warrants."
18
WARRANTHOLDER NOT A STOCKHOLDER
The IPO Warrants do not confer upon holders any voting or other rights as
stockholders of the Company.
CLASS B WARRANTS
The following is a brief summary of certain provisions of the Class B
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Class B Warrant Agreement,
as amended, between the Company and American Securities Transfer, Incorporated
(the "Transfer and Warrant Agent"). The Class B Warrants will only be issued to
holders of the IPO Warrants and Redeemable Warrants who exercise such securities
during the 30-Day Period. No Class B Warrants are outstanding as of the date of
this Prospectus.
EXERCISE PRICE AND TERMS
If holders of two thirds of the Company's outstanding shares of Common
Stock approve an amendment (the "Amendment") to increase the Company's number of
authorized shares of Common Stock, then, upon effectiveness of the Amendment,
each Class B Warrant will entitle the registered holder thereof to purchase one
share of Common Stock at a price of $5.00 per share, subject to adjustment in
accordance with the anti-dilution and other provisions referred to below. No
assurance can be given that the Amendment will be approved by holders of
two-thirds of the Company's outstanding shares of Common Stock or that the
Amendment will become effective.
Subject to the effectiveness of the Amendment, as to which no assurance can
be given, the holder of any Class B Warrant may exercise such Class B Warrant by
surrendering the certificate representing the Class B Warrant to the Company's
Transfer and Warrant Agent, with the subscription on the reverse side of such
certificate properly completed and executed, together with payment of the
exercise price. The Class B Warrants may be exercised at any time following
effectiveness of the Amendment in whole or in part at the applicable exercise
price until expiration of the Class B Warrants on May __, 1998. No fractional
shares will be issued upon the exercise of the Class B Warrants.
REDEMPTION
The Class B Warrants are subject to redemption at $.10 per Class B Warrant
on 30 days' prior written notice, provided that the average market price of the
Common Stock equals or exceeds $7.00 per share (the "Call Price") during the 10
consecutive trading days ending within 20 days prior to the notice of
redemption. For purposes of the Warrant Agreement, "market price" is defined as
the average of the closing bid and ask prices on NASDAQ. In the event the
Company exercises the right to redeem the Class B Warrants, such Class B
Warrants will be exercisable until the close of business on the date fixed for
redemption in such notice. If any Class B Warrant called for redemption is not
exercised by such time, it will cease to be exercisable and the warrantholder
will be entitled only to the redemption price.
ADJUSTMENTS
19
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the Class B Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications on or of the Common Stock. Additionally, an
adjustment would be made in the case of a reclassification or exchange of Common
Stock, consolidation or merger of the Company with or into another corporation
or sale of all or substantially all of the assets of the Company in order to
enable holders of Redeemable Warrants to acquire the kind and number of shares
of stock or other securities or property receivable in such event by a holder of
the number of shares that might otherwise have been purchased upon the exercise
of the Class B Warrant. No adjustments will be made unless such adjustment would
require an increase or decrease of at least $.10 or more in such exercise price.
No adjustment to the exercise price of the shares subject to the Class B
Warrants will be made for dividends (other than stock dividends), if any, paid
on the Common Stock or for securities issued pursuant to exercise of the Class B
Warrants, the Representative's Warrant, currently outstanding options or options
which may be granted under the Plan or shares issued in connection with the
acquisition of another business by the Company. In addition, the Company's Board
of Directors has the discretion to change the exercise price and Call Price of
the Class B Warrants.
TRANSFER, EXCHANGE AND EXERCISE
The Class B Warrants may be presented to the Transfer and Warrant Agent for
transfer, exchange or, following and subject to effectiveness of the Amendment,
as to which no assurance can be given, exercise at any time at or prior to the
close of business on May __, 1998, at which time the Class B Warrants become
wholly void and of no value. No assurance can be given that holders of two
thirds of the Company's outstanding shares of Common Stock will vote to approve
the Amendment of authorized shares of Common Stock and such increase becomes
effective. If a market for the Class B develops, as to which there can be no
assurance, the holder may sell the Class B Warrants instead of exercising them.
There can be no assurance, however, that a market for the Class B Warrants will
develop or will continue. If the Company is unable to qualify for sale in
particular states its Common Stock underlying the Class B Warrants, holders of
the Class B Warrants desiring to exercise the IPO Warrants in those states will
have no choice but to either sell such Class B Warrants or let them expire. See
"RISK FACTORS - Uncertain Terms of Class B Warrants." "RISK FACTORS -
Non-Registration in Certain Jurisdictions of Shares Underlying the Warrants;
Requirement to Maintain Current Prospectus; Possible Redemption of Warrants."
WARRANTHOLDER NOT A STOCKHOLDER
The Class B Warrants do not confer upon holders any voting or other rights
as stockholders of the Company.
REPRESENTATIVE'S WARRANTS
In connection with the IPO, the Company issued to the Representative, for
nominal consideration, the Representative's Warrants to purchase up to 100,000
shares of Common Stock and/or 100,000 Redeemable Warrants. The Representative's
Warrants are exercisable at $6.43 per share of Common Stock and $.14 per
redeemable warrant through September 9, 1998. The Redeemable Warrants issuable
upon exercise of the Representative's Warrants are identical to the IPO
20
Warrants except that they are exercisable at $8.65 per share. The exercise price
of the Representative's Warrants contain provisions for adjustment of the
exercise price and the number and type of securities issuable upon the exercise
thereof upon the occurrence of certain events. The Representative's Warrants
grant to the holders thereof certain rights of registration of the securities
issuable upon the exercise thereof.
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, $.01 par value (the "Preferred Stock"). The Preferred Stock may be issued
in one or more series, the terms of which may be determined at the time of
issuance by the Board of Directors, without further action by Securityholders,
and may include voting rights (including the right to vote as a series on
particular matters), preferences as to dividends and liquidation, conversion,
redemption rights, and sinking fund provisions.
No shares of Preferred Stock will be outstanding as of the closing of the
Offering and the Company has no present plans for the issuance thereof. The
issuance of any such Preferred Stock could reduce the rights, including voting
rights, of the holders of Common Stock, and, therefore, reduce the value of the
Common Stock. In particular, specific rights granted to future holders of
Preferred Stock could be used to restrict the Company's ability to merge with or
sell its assets to a third party, thereby preserving control of the Company by
existing management.
TRANSFER AND WARRANT AGENT
The Company has appointed American Securities Transfer, Incorporated, Denver,
Colorado, as Transfer and Warrant Agent for its Common Stock and IPO Warrants.
SHARES ELIGIBLE FOR FUTURE SALE
As of April 22, 1996 the Company had 3,169,870 shares of Common Stock
outstanding. Of these shares, 1,647,052 were freely tradeable without further
registration under the Act. If all of the IPO Warrants, Representative's
Warrants and Redeemable Warrants were exercised during the 30-Day Period, the
Company would have 4,519,870 shares of Common Stock outstanding, of which
2,997,052 shares would be freely tradeable. In addition, there would be
1,250,000 outstanding Class B Warrants which, upon effectiveness of the
Amendment, would be exercisable into an additional 1,250,000 freely tradeable
shares of Common Stock. If all of the IPO Warrants, Representative's Warrants
and Redeemable Warrants were exercised after the 30-Day Period, the Company
would have 3,894,870 shares of Common Stock outstanding, of which 2,372,052
shares would be freely tradeable.
Of the shares of Common Stock outstanding on April 22, 1996, 1,522,818 were
"restricted securities" within the meaning of Rule 144 of the Securities Act and
are eligible for sale in the public market in reliance upon, and in accordance
with, the provisions of Rule 144. See "RISK FACTORS - Potential Sales Pursuant
to Rule 144."
21
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
"affiliate" of the Company as that term is defined under the Securities Act,
will be entitled to sell within any three-month period a number of shares
beneficially owned for at least two years that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock, or (ii)the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain requirements as to the
manner of sale, notice, and the availability of current public information about
the Company. However, a person who is not deemed to have been an affiliate of
the Company during the 90 days preceding a sale by such person, and who has
beneficially owned shares of Common Stock for at least three years, may sell
such shares without regard to the volume, manner of sale, or notice requirements
of Rule 144. The holders of 297,610 shares of Common Stock issued to Printpack
in September 1992 have certain registration rights with respect to such Common
Stock. See "RISK FACTORS - Potential Sales Pursuant to Rule 144."
Up to 100,000 shares of Common Stock and/or 100,000 redeemable warrants may
be purchased by the Representative through September 9, 1998. Any and all shares
of Common Stock and/or redeemable warrants purchased upon exercise of the
Representative's Warrants may be freely tradeable, provided that the Company
satisfies certain securities registration and qualification requirements in
accordance with the terms of the Representative's Warrants. In addition, under
the 1993 Plan, the Company may issue options to purchase up to 300,000 shares of
Common Stock to key employees, officers, directors and consultants, of which
options to purchase 234,500 shares of Common Stock were outstanding as of March
25, 1996. Under the Formula Plan, the Company may issue options to purchase up
to 50,000 shares of Common Stock, of which options to purchase 6,000 shares were
outstanding as of March 25, 1996. Options to purchase 60,922 shares of Common
Stock granted outside of 1993 Plan and Formula Plan were outstanding as of March
27, 1996.
The Company cannot predict the effect, if any, that sales of Common Stock
pursuant to Rule 144 or otherwise, or the availability of such shares for sale,
will have on the market price prevailing from time to time. Nevertheless, sales
by the current Securityholders of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices for the Common
Stock. In addition, the availability for sale of a substantial amount of Common
Stock acquired through the exercise of the Representative's Warrants and other
options or warrants could adversely affect prevailing market prices for the
Common Stock.
LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITIES UNDER DELAWARE LAW
In accordance with Delaware law, the Company's Certificate of Incorporation
eliminates in certain circumstances the liability of directors of the Company
for monetary damages for breach of their fiduciary duty as directors. This
provision does not eliminate the liability of a director (i) for a breach of the
director's duty of loyalty to the Company or its Securityholders, (ii) for acts
or omissions by the director not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for a willful or negligent
declaration of an unlawful dividend, stock purchase or redemption, or (iv) for
transactions from which the director derived an improper personal benefit.
In addition, the Company's Bylaws include provisions to indemnify its
officers and directors and other persons against expenses, judgments, fines and
amounts paid in settlement in connection
22
with threatened, pending or completed suits or proceedings against such persons
by reason of serving or having served as officers, directors or in other
capacities, except in relation to matters with respect to which such persons
shall be determined not to have acted in good faith, unlawfully or in the best
interests of the Company. With respect to matters as to which the Company's
officers and directors and others are determined to be liable for misconduct or
negligence in the performance of their duties, the Company's Bylaws provide for
indemnification only to the extent that the Company determines that such person
acted in good faith and in a manner not opposed to the best interests of the
Company.
However, insofar as indemnification for liabilities may be permitted to
directors, officers, or persons controlling the Company pursuant to Delaware
state law, as well as the foregoing charter and bylaw provisions, the Company
has been informed that in the opinion of the Commission, such indemnification as
it relates to federal securities laws is against public policy, and therefore,
unenforceable.
Further, insofar as limitation of liabilities may be so permitted pursuant
to Delaware state law, as well as the foregoing charter and bylaw provisions,
such limitation of liabilities does not apply to any liabilities arising under
federal securities laws.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock since its inception
and has no intention of paying any dividends to its Securityholders in the
foreseeable future. The Company intends to reinvest earnings, if any, in the
development and expansion of its business. Any declaration of dividends in the
future will be at the election of the Board of Directors and will depend upon
the earnings, capital requirements and financial position of the Company,
general economic conditions, requirements of any bank lending arrangements which
may then be in place and other pertinent factors. The Company's current bank
loan agreement prohibits the payment of any dividends without the bank's prior
written consent.
LEGAL OPINION
Certain legal matters relating to the Securities offered hereby will be
passed upon for the Company by O'Connor, Broude & Aronson, 950 Winter Street,
Waltham, Massachusetts 02154.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports. Reference is made to said report, which includes an
explanatory paragraph regarding the Company's ability to continue as a going
concern.
23
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH
THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUSNOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR
THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
Available Information ............................................2
Incorporation by Reference........................................2
The Company ......................................................4
Risk Factors .....................................................5
Use of Proceeds .................................................13
Plan of Distribution ............................................15
Description of Securities........................................17
Legal Opinion ...................................................23
Experts .........................................................23
2,600,000 SHARES OF COMMON STOCK
AND 1,250,000 CLASS B
COMMON STOCK PURCHASE WARRANTS
ADVANCED DEPOSITION
TECHNOLOGIES, INC.
COMMON STOCK AND CLASS B
COMMON STOCK PURCHASE WARRANTS
PROSPECTUS
____________, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company expects to incur the following costs and expenses in connection
with the registration of the shares of Common Stock covered by this Prospectus:
*Registration Fee ...................................... $ 2,500.00
*Legal Fees ............................................ $ 40,000.00
*Accounting Fees........................................ $ 2,500.00
*Miscellaneous.......................................... $ 55,000.00
-----------
*Total ................................................. $100,000.00
===========
- ------------------
*Estimate
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware General Corporation Law, Section 102(b)(7), enables a corporation
in its original certificate of incorporation or an amendment thereto validly
approved by Securityholders to eliminate or limit personal liability of members
of its Board of Directors for violations of a director's fiduciary duty of care.
However, the elimination or limitation shall not apply where there has been a
breach of the duty of loyalty, failure to act in good faith, engaging in
intentional misconduct or knowingly violating a law, paying a dividend or
approving a stock repurchase which was deemed illegal or obtaining an improper
personal benefit. The Company's Certificate of Incorporation includes the
following language:
"To the maximum extent permitted by Section 102(b)(7) of the General
Corporation Law of Delaware, a director of this Corporation shall not
be personally liable to the Corporation or its Securityholders for
monetary damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to
the Corporation or its Securityholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director
derived an improper personal benefit."
Delaware General Corporation Law, Section 145, permits a corporation
organized under Delaware law to indemnify directors and officers with respect to
any matter in which the director or officer acted in good faith and in a manner
he reasonably believed to be not opposed to the best
interests of the Company, and, with respect to any criminal action, in which he
had reasonable cause to believe his conduct was lawful. The Bylaws of the
Company include the following provision:
"Reference is made to Section 145 and any other relevant provisions of
the General Corporation Law of the State of Delaware. Particular
reference is made to the class of persons, hereinafter called
"Indemnitees," who may be indemnified by a Delaware corporation
pursuant to the provisions of such Section 145, namely, any person, or
the heirs, executors, or administrators of such person, who was or is
a party or is threatened to be made a party to any threatened, pending
or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, by reason of the fact that such
person is or was a director, officer, employee, or agent of such
corporation or is or was serving at the request of such corporation as
a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise. The
Corporation shall, and is hereby obligated to, indemnify the
Indemnitees, and each of them, in each and every situation where the
Corporation is obligated to make such indemnification pursuant to the
aforesaid statutory provisions. The Corporation shall indemnify the
Indemnitees, and each of them, in each and every situation where,
under the aforesaid statutory provisions, the Corporation is not
obligated, but is nevertheless permitted or empowered, to make such
indemnification, it being understood that, before making such
indemnification with respect to any situation covered under this
sentence, (i) the Corporation shall promptly make or cause to be made,
by any of the methods referred to in Subsection (d) of such Section
145, a determination as to whether each Indemnitee acted in good faith
and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, and, in the case of any
criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful, and (ii) that no such indemnification shall
be made unless it is determined that such Indemnitee acted in good
faith and ina manner he reasonably believed to be in, or not opposed
to, the best interests of the Corporation, and, in the case of any
criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful."
ITEM 16. EXHIBITS
(a) The following exhibits are filed herewith:
Exhibit
No. Title
4a Form of Warrant Agreement between the Company and American Securities
Transfer, Inc. (Includes description of Specimen Warrant Certificate)
5* Opinion Letter of O'Connor, Broude & Aronson as to legality
of shares being registered.
23 Consent of Arthur Andersen LLP.
*filed with the Commission on April 26, 1996.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) 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;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, 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 at that time 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 Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
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 OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS AMENDMENT NO. 3 TO
ITS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF TAUNTON, COMMONWEALTH OF
MASSACHUSETTS, ON THE 7TH DAY OF MAY, 1996.
ADVANCED DEPOSITION TECHNOLOGIES, INC.
By: /s/ Glenn J. Walters
------------------------------
Glenn J. Walters, President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date
/s/ Glenn J. Walters President and Director and May 7, 1996
- ----------------------- Chief Executive Officer
Glenn J. Walters
/s/ Gordon E. Walters Chairman of the Board of Directors May 7, 1996
- -----------------------
Gordon E. Walters
/s/ John M. Buckley Director May 7, 1996
- -----------------------
John M. Buckley
/s/ Charles R. Buffler Director May 7, 1996
- -----------------------
Charles R. Buffler
/s/ Robert M. Pozzo Director May 7, 1996
- -----------------------
Robert M. Pozzo
/s/ John J. Moroney Director May 7, 1996
- -----------------------
John J. Moroney
/s/ Mark Thomas Chief Financial Officer May 7, 1996
- ----------------------- (Principal Accounting and
Mark Thomas Financial Officer)
EXHIBIT 4a
WARRANT AGREEMENT
ADVANCED DEPOSITION TECHNOLOGIES, INC., a Delaware corporation
(Company), and AMERICAN SECURITIES TRANSFER, INC. (AST), 1825 Lawrence Street,
Suite 444, Denver, Colorado 80202, a Colorado corporation (Warrant Agent), agree
as follows:
1. Purpose. The Company proposes to publicly offer and issue up to
1,250,000 Class B Redeemable Common Stock Purchase Warrants (the
"Class B Warrants"), each permitting the purchase of one (1) share (a
"Share") of Common Stock, $.01 par value per share, of the Company
(the "Common Stock"), at a price of $5.00 per share, subject to
adjustment under certain circumstances described in this Agreement.
2. Class B Warrants. Each Class B Warrant will entitle the registered
holder of a Class B Warrant (a "Warrant Holder") to purchase from the
Company one Share at $5.00 per Share (the "Exercise Price"). A Warrant
Holder may exercise all or any number of Class B Warrants resulting in
the purchase of a whole number of Shares. One Class B Warrant will be
issued upon exercise of each Redeemable Common Stock Purchase Warrant
of the Company from May __, 1996 through June __, 1996.
3. Exercise Period. The Class B Warrants may be exercised at any time
during the period following the effectiveness of an amendment to the
Company's Certificate of Incorporation increases the Company's number
of authorized shares of Common Stock to no less than 10,000,000 shares
and ending at 3:00 p.m., Denver, Colorado time on May ___, 1998 (the
"Expiration Date"), except as may be changed by Section 12 of this
Agreement. After the Expiration Date, any unexercised Class B Warrants
will be void and all rights of Warrant Holders shall cease.
4. Redemption of Class B Warrants
a. Redemption; Redemption Price. The Company may, at its option,
redeem the outstanding Class B Warrants, in whole or in part,
upon not less than 30 days' prior written notice (the "Notice of
Redemption"), at a price of $.10 per Class B Warrant (the
"Redemption Price"), provided that the average of the market
prices of the Common Stock equals or exceeds $7.00 per share
during the 10 consecutive trading days ending within 20 days
prior to the notice of redemption. If the Company shall determine
to redeem less than all of the Class B Warrants then outstanding,
then the Class B Warrant Agent shall determine the Class B
Warrants to be redeemed by such manner or method as it shall deem
fair and appropriate, whether by lot or otherwise. Market price
shall mean (i) the average of the closing bid and ask prices for
the Common Stock in the over-the-counter market as reported by
the National Association of Securities Dealers Automated
Quotation System, or (ii) the closing sale price on the primary
exchange on which the Common Stock is traded, if the Common Stock
is traded on a national securities exchange.
b. Notice of Redemption. The Company shall give notice to the
Warrant Agent of any redemption in sufficient time so that the
Warrant Agent shall give the Notice of Redemption to all Holders
of Class B Warrant Certificates to be redeemed at least 30 days
prior to the date established for such redemption (the
"Redemption Date"). Each Notice of Redemption shall: (a) specify
the Redemption Date and the Redemption Price; (b) state that
payment of the Redemption Price will be made by the Warrant Agent
upon presentation and surrender to the Warrant Agent at its
principal office, of the Class B Warrant Certificates
representing the Class B Warrants being redeemed; (c) state that
the rights to exercise the Class B Warrants shall terminate at
5:00 p.m. New York time, on the fifth business day preceding the
Redemption Date; and (d) if less than all of the Class B Warrants
then outstanding are being redeemed, specify the serial numbers
or portions of the Class B Warrants to be redeemed. The Company
shall also make prompt public announcement of such redemption at
the time of the Warrant Agent's mailing of the Notice of
Redemption.
c. Payment of Redemption Price. On or prior to the opening of
business on the Redemption Date, the Company will deposit with
the Warrant Agent cash, or an irrevocable letter of credit issued
by a national or state bank and in form reasonably satisfactory
to the Warrant Agent, sufficient in amount to purchase all of the
Class B Warrants stated in the Notice of Redemption to be
redeemed. Payment of the Redemption Price shall be made by the
Warrant Agent upon presentation and surrender of the Class B
Warrant Certificates representing such Class B Warrants to the
Warrant Agent at its principal office. If the Notice of
Redemption shall have been duly given and if the Company shall
have duly deposited with the Warrant Agent the cash or
irrevocable letter of credit required by this Section 4c, then
any Class B Warrants not exercised by 5:00 p.m., New York time,
on the Redemption Date shall no longer be deemed to be
outstanding, and all rights with respect to such Class B Warrants
shall from and after such time and date cease and terminate,
except only for the right of the Holders thereof to receive the
Redemption Price, without interest.
5. Certificates. The Class B Warrant Certificates shall be in registered
form only and shall be substantially in the form set forth in Exhibit
A attached to this Agreement. Class B Warrant Certificates shall be
signed by, or shall bear the facsimile signature of, the President or
a Vice President of the Company and the Treasurer of the Company and
shall bear a facsimile of the Company's corporate seal. If any person,
whose facsimile signature has been placed upon any Class B Warrant
Certificate as the signature of an officer of the Company, shall have
ceased to be such officer before such Class B Warrant Certificate is
countersigned, issued and delivered, such Class B Warrant Certificate
shall be countersigned, issued and delivered with the same effect as
if such person had not ceased to be such officer. Any Class B Warrant
-2-
Certificate may be signed by, or made to bear the facsimile signature
of, any person who at the actual date of the preparation of such Class
B Warrant Certificate shall be a proper officer of the Company to sign
such Class B Warrant Certificate even though such person was not such
an officer upon the date of this Agreement.
6. Countersigning. Class B Warrant Certificates shall be manually
countersigned by the Warrant Agent and shall not be valid for any
purpose unless so countersigned. The Warrant Agent hereby is
authorized to countersign and deliver to, or in accordance with the
instructions of, any Warrant Holder any Class B Warrant Certificate
which is properly issued.
7. Registration of Transfers and Exchanges. Subject to the provisions of
Section 5, the Warrant Agent shall from time to time register the
transfer of any outstanding Class B Warrant Certificate upon records
maintained by the Warrant Agent for such purpose upon surrender of
such Class B Warrant Certificate to the Warrant Agent for transfer,
accompanied by appropriate instruments of transfer in form
satisfactory to the Company and the Warrant Agent and duly executed by
the Warrant Holder or a duly authorized attorney. Upon any such
registration of transfer, a new Class B Warrant Certificate shall be
issued in the name of and to the transferee and the surrendered Class
B Warrant Certificate shall be cancelled.
8. Exercise of Class B Warrants.
a. Any one Class B Warrant or any multiple of one Class B Warrant
evidenced by any Class B Warrant Certificate may be exercised on
or before the Expiration Date except as provided in Section 4. A
Class B Warrant shall be exercised by the Warrant Holder by
surrendering to the Warrant Agent the Class B Warrant Certificate
evidencing such Class B Warrant with the exercise form on the
reverse of such Class B Warrant Certificate duly completed and
executed and delivering to the Warrant Agent, by good check or
bank draft payable to the order of the Company, the Exercise
Price for each Share to be purchased.
b. Upon receipt of a Class B Warrant Certificate with the exercise
form thereon duly executed together with payment in full of the
Exercise Price for the Shares for which Class B Warrants are then
being exercised, the Warrant Agent shall requisition from any
transfer agent for the Shares, and upon receipt shall make
delivery of, certificates evidencing the total number of whole
Shares for which Class B Warrants are then being exercised in
such names and denominations as are required for delivery to, or
in accordance with the instructions of, the Warrant Holder. Such
certificates for the Shares shall be deemed to be issued, and the
person to whom such Shares are issued of record shall be deemed
to have become a holder of record of such Shares, as of the date
of the surrender of such Class B Warrant Certificate and
-3-
payment of the Exercise Price, whichever shall last occur,
provided that if the books of the Company with respect to the
Shares shall be closed on such date, then the Shares shall be
deemed to be issued, and the person to whom such Shares are
issued of record shall be deemed to have become a record holder
of such Shares, as of the date on which such books shall next be
open (whether before, on or after the Expiration Date).
c. If less than all the Class B Warrants evidenced by a Class B
Warrant Certificate are exercised upon a single occasion, a new
Class B Warrant Certificate for the balance of the Class B
Warrants not so exercised shall be issued and delivered to, or in
accordance with, transfer instructions properly given by the
Warrant Holder until the Expiration Date.
d. All Class B Warrant Certificates surrendered upon exercise of
Class B Warrants shall be cancelled.
e. Upon the exercise, or conversion of any Class B Warrant, the
Warrant Agent shall either (a) promptly deposit the payment into
an escrow account established by mutual agreement of the Issuer
and the Warrant Agent at a federally insured commercial bank or
(b) send the check to the Issuer and await clearance of funds
before issuing a share certificates representing the exercised
Class B Warrants to be issued. All funds deposited in the escrow
account will be disbursed on a weekly basis to the issuer once
they have been determined by the Warrant Agent to be collected
funds. Once the funds are determined to be collected, the Warrant
Agent shall cause the share certificate(s) representing the
exercised Class B Warrants to be issued.
f. Expenses incurred by American Securities Transfer, Inc. while
acting in the capacity as Warrant Agent will be paid by the
Company. These expenses, including delivery of exercised share
certificate to the shareholder, will be billed to the Issuer and
shall be refunded to Warrant Agent within 30 days. A detailed
accounting statement relating to the number of shares exercised,
names of registered warrant holder and the net amount of
exercised funds remitted will be given to the Issuer with the
payment of each exercise amount.
g. At the time of exercise of the Class B Warrant(s), the transfer
fee is to be paid by the Warrant Holder.
9. Taxes. The Company will pay all taxes attributable to the initial
issuance of Shares upon exercise of Class B Warrants. The Company
shall not, however, be required to pay any tax which may be payable in
respect to any transfer involved in any issue of Class B Warrant
Certificates or in the issue of any certificates of Shares in the name
other than that of the Warrant Holder upon the exercise of any Class B
Warrant.
-4-
10. Mutilated or Missing Warrant Certificates. If any Class B Warrant
Certificate is mutilated, lost, stolen or destroyed, the Company and
the Warrant Agent may, on such terms as to indemnify or otherwise as
they may in their discretion impose (which shall, in the case of a
mutilated Class B Warrant Certificate, include the surrender thereof),
and upon receipt of evidence satisfactory to the Company and the
Warrant Agent of such mutilation, loss, theft or destruction, issue a
substitute Class B Warrant Certificate of like denomination and tenor
as the Class B Warrant Certificate so mutilated, lost, stolen or
destroyed. Applicants for substitute Class B Warrant Certificates
shall comply with such other reasonable regulations and pay any
reasonable charges as the Company or the Warrant Agent may prescribe.
11. Reservation of Shares. For the purpose of enabling the Company to
satisfy all obligation to issue Shares upon exercise of Class B
Warrants, the Company will at all times reserve and keep available
free from preemptive rights, out of the aggregate of its authorized
but unissued shares, the full number of Shares which may be issued
upon the exercise of Class B Warrants will upon issue be fully paid
and nonassessable by the Company.
12. Governmental Restrictions. If any Shares issuable upon the exercise of
Class B Warrants require registration or approval of any governmental
authority, the Company may endeavor to secure such registration or
approval; provided that in no event shall such Shares be issued,
unless and until such registration or approval shall have been
obtained. The Company shall have the authority to suspend the exercise
of any and all Class B Warrants for a period during which the Company
seeks to obtain such registration or approval. All Class B Warrants,
the exercise of which have been requested on or prior to the
Expiration Date, shall be exercisable upon the removal of such
suspension until the close of business on the business day immediately
following the expiration of such suspension. The Company shall not be
required to secure the registration or approval to issue shares
underlying the Class B Warrants.
13. Adjustments. If prior to the exercise of any Class B Warrants the
Company shall have effected one or more stock split-ups, stock
dividends or other increases or reductions of the number of shares of
its $.01 par value common stock outstanding without receiving
compensation therefore in money, services or property, the number of
shares of common stock subject to the Class B Warrant granted shall,
(i) if a net increase shall have been effected in the number of
outstanding shares of the Company's common stock, then the number of
shares underlying the Class B Warrants shall be proportionately
increased, and the cash consideration payable per share shall be
proportionately reduced, and, (ii) if a net reduction shall have been
effected in the number of outstanding shares of the Company's common
stock, then the number of shares underlying the Class B Warrants shall
be proportionately reduced and the cash consideration payable per
share be proportionately increased.
-5-
14. Notice to Warrant Holders. Upon any adjustment as described in Section
13, the Company within 20 days thereafter shall (i) cause to be filed
with the Warrant Agent a certificate signed by a Company officer
setting forth the details of such adjustment, the method of
calculation and the facts upon which such calculation is based, which
certificate shall be conclusive evidence of the correctness of the
matters set forth therein, and (ii) cause written notice of such
adjustments to be given to each Warrant Holder as of the record date
applicable to such adjustment. Also, if the Company proposes to enter
into any reorganization, reclassification, sale of substantially all
of its assets, consolidation, merger, dissolution, liquidation or
winding up, the Company shall give notice of such fact at least 20
days prior to such action to all Warrant Holders which notice shall
set forth such facts as indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Exercise Price and the kind and amount of the shares or other
securities and property deliverable upon exercise of the Class B
Warrants. Without limiting the obligation of the Company hereunder to
provide notice to each Warrant Holder, failure of the Company to give
notice shall not invalidate corporate action taken by the Company.
15. No Fractional Warrants or Shares. The Company shall not be required to
issue fractions of Class B Warrants upon the reissue of Class B
Warrants, any adjustments as described in Section 14 or otherwise; but
the Company in lieu of issuing any such fractional interest, shall
round up or down to the nearest full Class B Warrant. If the total
Class B Warrants surrendered by exercise would result in the issuance
of a fractional share, the Company shall not be required to issue a
fractional share but rather the aggregate number of shares issuable
will be rounded up or down to the nearest full share.
16. Rights of Warrant Holders. No Warrant Holder, as such, shall have any
rights of a shareholder of the Company, either at law or equity, and
the rights of the Warrant Holders, as such, are limited to those
rights expressly provided in this Agreement or in the Class B Warrant
Certificates. The Company and the Warrant Agent may treat the
registered Warrant Holder in respect of any Class B Warrant
Certificate as the absolute owner thereof for all purposes
notwithstanding any notice to the contrary.
17. Warrant Agreement. The Company hereby appoints the Warrant Agent to
act as the agent of the Company and the Warrant Agent hereby accepts
such appointment upon the following terms and conditions by all of
which the Company and every Warrant Holder, by acceptance of his Class
B Warrants, shall be bound:
a. Statements contained in this Agreement and in the Class B Warrant
Certificates shall be taken as statements of the Company. The
Warrant Agent assumes no responsibility for the correctness of
any of the same except such as describes the Warrant Agent or for
action taken or to be taken by the Warrant Agent.
-6-
b. The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the Company's covenants contained
in this Agreement or in the Class B Warrant Certificates.
c. The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the
Warrant Agent shall incur no liability or responsibility to the
Company or to any Warrant Holder in respect of any action taken,
suffered or omitted by it hereunder in good faith and in
accordance with the opinion or the advice of such counsel,
provided the Warrant Agent shall have exercised reasonable care
in the selection and continued employment of such counsel.
d. The Warrant Agent shall incur no liability or responsibility to
the Company or to any Warrant Holder for any action taken in
reliance upon any notice, resolution, waiver, consent, order,
certificate or other paper, document or instrument believed by it
to be genuine and to have been signed, sent or presented by the
proper party or parties.
e. The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in
the execution of this Agreement, to reimburse the Warrant Agent
for all expenses, taxes and governmental charges and all other
charges of any kind in nature incurred by the Warrant Agent in
the execution of this Agreement and approved in advance by the
Company and to indemnify the Warrant Agent and save it harmless
against any and all liabilities, including judgments, costs and
counsel fees, for this Agreement except as a result of the
Warrant Agent's negligence or bad faith.
f. The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more
Warrant Holders shall furnish the Warrant Agent with reasonable
security and indemnity for any costs and expenses which may be
incurred in connection with such action, suit or legal
proceeding, but this provision shall not effect the power of the
Warrant Agent to take such action as the Warrant Agent may
consider proper, whether with or without any such security or
indemnity. All rights of action under this Agreement or under any
of the Class B Warrants may be enforced by the Warrant Agent
without the possession of any of the Class B Warrant Certificates
or the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the
ratable benefit of the Warrant Holders as their respective rights
or interests may appear.
-7-
g. The Warrant Agent and any shareholder, director, officer or
employee of the Warrant Agent may buy, sell or deal in any of the
Class B Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company
may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the
Company or for any other legal entity.
18. Successor Warrant Agent. Any corporation into which the Warrant Agent
may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation
to which the Warrant Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Warrant Agent, shall
be the successor to the Warrant Agent hereunder without the execution
or filing of any paper or any further act of a party or the parties
hereto. In any such event or if the name of the Warrant Agent is
changed, the Warrant Agent or such successor may adopt the
countersignature of the original Warrant Agent and may countersign
such Class B Warrant Certificates either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant
Agent.
19. Change of Warrant Agent. The Warrant Agent may resign or be discharged
by the Company from its duties under this Agreement by the Warrant
Agent or the Company, as the case may be, giving notice in writing to
the other, and by giving a date when such resignation or discharge
shall take effect, which notice shall be sent at least 30 days prior
to the date so specified. If the Warrant Agent shall resign, be
discharged or shall otherwise become incapable of acting, the Company
shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after it has
been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by any Warrant Holder or
after discharging the Warrant Agent, then any Warrant Holder may apply
to the District Court for Denver County, Colorado, for the appointment
of a successor to the Warrant Agent. Pending appointment of a
successor to the Warrant Agent, either by the Company or by such
Court, the duties of the Warrant Agent shall be carried out by the
Company. Any successor Warrant Agent, whether appointed by the Company
or by such Court, shall be a bank or a trust company, in good
standing, organized under the laws of the State of Colorado or of the
United States of America, having its principal office in Denver,
Colorado and having at the time of its appointment as Warrant Agent, a
combined capital and surplus of at least four million dollars. After
appointment, the successor Warrant Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed and the
former Warrant Agent shall deliver and transfer to the successor
Warrant Agent any property at the time held by it thereunder, and
execute and deliver any further assurance, conveyance, act or deed
necessary for effecting the delivery or transfer. Failure to give any
notice provided
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for in this section, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal of the Warrant
Agent or the appointment of the successor Warrant Agent, as the case
may be.
20. Notices. Any notice or demand authorized by this Agreement to be given
or made by the Warrant Agent or by any Warrant Holder to or on the
Company shall be sufficiently given or made if sent by mail, first
class, certified or registered, postage prepaid, addressed (until
another address is filed in writing by the Company with the Warrant
Agent), as follows:
Advanced Deposition Technologies, Inc.
580 Myles Standish Boulevard
Taunton, MA 02780
Attention: President
Any notice or demand authorized by this Agreement to be given or made
by any Warrant Holder or by the Company to or on the Warrant Agent
shall be sufficiently given or made if sent by mail, first class,
certified or registered, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company), as
follows:
American Securities Transfer, Inc.
1825 Lawrence Street, #444
Denver, CO 80202
Any distribution, notice or demand required or authorized by this
Agreement to be given or made by the Company or the Warrant Agent to
or on the Warrant Holders shall be sufficiently given or made if sent
by mail, first class, certified or registered, postage prepaid,
addressed to the Warrant Holders at their last known addresses as they
shall appear on the registration books for the Class B Warrant
Certificates maintained by the Warrant Agent.
21. Supplements and Amendments. The Company and the Warrant Agent may from
time to time supplement or amend this Agreement without the approval
of any Warrant Holders in order to cure any ambiguity or to correct or
supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, or to make any other
provisions in regard to matters or questions arising hereunder which
the Company and the Warrant Agent may deem necessary or desirable.
22. Successors. All the covenants and provisions of this Agreement by or
for the benefit of the Company or the Warrant Agent shall bind and
inure to the benefit of their respective successors and assigns
hereunder.
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23. Termination. This Agreement shall terminate at the close of business
on the Expiration Date or such earlier date upon which all Class B
Warrants have been exercised; provided, however, that if exercise of
the Class B Warrants is suspended pursuant to Section 12 and such
suspension continues past the Expiration Date, this Agreement shall
terminate at the close of business on the business day immediately
following the expiration of such suspension. The provisions of Section
17 shall survive such termination.
24. Governing Law. This Agreement and each Class B Warrant Certificate
issued hereunder shall be deemed to be a contract made under the laws
of the Commonwealth of Massachusetts and for all purposes shall be
construed in accordance with the laws of said state.
25. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give any person or corporation other than the Company,
the Warrant Agent and the Warrant Holders any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Warrant
Agent and the Warrant Holders.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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26. Counterparts. This Agreement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be
deemed to be an original and all such counterparts shall together
constitute but one and the same instrument.
Date:_______________, ____
Advanced Deposition technologies, Inc.
a Delaware corporation
By:___________________________________
Glenn J. Walters, President
SEAL
ATTEST:
________________________________
Secretary
American Securities Transfer, Inc.
a Colorado corporation
By:___________________________________
Gregory D. Tubbs, Vice President
SEAL
ATTEST:
________________________________
Secretary
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EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated March 26, 1996
(except with respect to the matters discussed in Note 3, as to which the date is
April 12, 1996) included in Advanced Deposition Technologies, Inc.'s Form
10-KSB-A for the year ended December 31, 1995 and to all references to our Firm
included in this registration statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Boston, Massachusetts
May 3, 1996
