Subscription Agreement

EXHIBIT 10.26


THIS SUBSCRIPTION AGREEMENT AND THE CONVERTIBLE SUBORDINATED NOTES SOLD HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 AS AMENDED (THE SECURITIES ACT"), BUT IS SOLD PURSUANT TO AN EXEMPTION FROM THE REQUIREMENTS OF SAID ACT. NEITHER SUCH NOTES NOR ANY INTEREST OF PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED OR DISPOSED OF IN THE UNITED STATES OR TO A "U.S. PERSON" AS DEFINED IN REGULATION S PROMULGATED UNDER SUCH ACT ("REGULATION S") EXCEPT IN COMPLIANCE WITH REGULATION S.


SUBSCRIPTION AGREEMENT


Mr. Alan Steel, CFO ARC Capital 2067 Commerce Drive Medford, Oregon 97504


Gentlemen:


THIS OFFSHORE SECURITIES SUBSCRIPTION AGREEMENT (this "Agreement") is executed in reliance upon the transactional exemption afforded by Regulation S ("Regulation S") as promulgated by the Securities and Exchange Commission ("SEC") under the Securities Act of 1933, as amended ("1933 Act").


THIS AGREEMENT has been executed by the undersigned in connection with the placement of Subordinated Convertible Notes pursuant to section 903 (c) (2) of Regulation S (hereinafter referred to as the "Notes") of ARC Capital, a corporation under the laws of the State of California, U.S.A., NASDAQ symbol "ARCCA" (hereinafter referred to as the "Seller" or the "Company"). The Notes being sold pursuant to this Agreement have not been registered under the 1933 Act and may not be offered to sold in the United States or to U.S. Persons, other than distributors (as such terms are defined in Regulation S), unless the Notes are registered under the 1933 Act, or an exemption from the registration requirement of the 1933 Act is available. The terms on which the Notes can be converted into Common Stock (such common stock underlying the Notes being referred to herein as "Shares") and the other terms of the Notes are set forth therein. The offer and sale of Notes and the Shares (collectively the "Securities"), are being made in reliance upon the provision of Regulation S ("Regulation S") under the United States Securities Act of 1933, as amended (the "Act").


The undersigned, Swiss American Securities Inc. as agent for Credit Suisse(herein referred to as Buyer or "Purchaser"), in order to induce the Company to enter into the transaction contemplated hereby and acknowledging that the Company will rely thereon, represents and warrants and agrees as follows:


1. Subject to the terms and conditions set forth in this Agreement, the undersigned hereby subscribes for $1,600,000 in principal amount of 6.75% Subordinated Convertible (Sales of Notes are made only in $100,000 increments).


Upon execution of this Subscription Agreement by the Company, Purchaser will wire transfer available funds in U.S. dollars payable to the Company via escrow account as follows:


The Notes shall be delivered to the Purchaser c/o Swiss American Securities, as escrow agent, on a delivery versus payment basis and funds shall be wired by Purchaser as follows:


Bank: United National Bank of Oregon
400 SW Sixth Avenue
ABA# 123 000 220
FBO: ARC Capital
Acct # 1260015896


2. Representation and Warranties: The Purchaser hereby acknowledges, represents and warrants to and agrees with the Company as follows:


(a) The Purchaser has been furnished ...