<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 20, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DIGICON INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 76-0343152
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
RICHARD W. MCNAIRY
3701 KIRBY DRIVE, SUITE 112 3701 KIRBY DRIVE, SUITE 112
HOUSTON, TEXAS 77098 HOUSTON, TEXAS 77098
(713) 526-5611 (713) 526-5611
(Address, including zip code, and telephone (Name, address, including zip code, and
number, telephone number,
including area code, of registrant's principal including area code, of agent for service)
executive offices)
</TABLE>
With copies to:
T. WILLIAM PORTER
PORTER & HEDGES, L.L.P.
700 LOUISIANA, 35TH FLOOR
HOUSTON, TEXAS 77002
(713) 226-0600
Approximate date of commencement of proposed sale to the public: From time
to time 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/
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF TO BE PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share...... 7,023,701 shs. $10.37 $72,835,779 $5,338
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</TABLE>
(1) Based upon the number of common shares of Veritas Energy Services Inc.
("Veritas Common Shares") outstanding on July 16, 1996 (8,779,626)
multiplied by 0.80, the exchange ratio in the combination of Veritas Energy
Services Inc. and the Registrant (the "Transaction").
(2) Pursuant to Rule 457(f), the registration fee was computed on the basis of
the market value of the 8,779,626 Veritas Common Shares to be received by
the Registrant in connection with the Transaction, computed in accordance
with Rule 457(c) on the basis of the average of the high and low price per
share of the Veritas Common Shares reported on the Toronto Stock Exchange on
August 13, 1996 (US$10.37 (C$14.25 multiplied by the applicable exchange
rate of 0.7275)).
(3) Pursuant to Rule 457(b), the registration fee has been reduced by $19,778.33
paid on May 24, 1996 upon the filing under the Securities Exchange Act of
1934, as amended, of preliminary copies of the Registrant's proxy materials
relating to the Transaction.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
PROSPECTUS
7,023,701 SHARES
VERITAS DGC INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
Each of the 7,023,701 shares of common stock, par value $0.01 per share
(the "Newco Common Stock"), of Veritas DGC Inc., a Delaware corporation
("Newco"), offered hereby is issuable upon exchange or redemption of an
exchangeable share (an "Exchangeable Share") of Veritas Energy Services Inc., an
Alberta corporation ("Newco Sub"). The Exchangeable Shares were issued by Newco
Sub in exchange for Newco Sub Common Shares in connection with the combination
of Newco and Newco Sub. As a result of the combination, Newco has changed its
name to "Veritas DGC Inc.," from its former name "Digicon Inc." Shares of Newco
Common Stock are being offered on a continuous basis pursuant to Rule 415 under
the Securities Act of 1933, as amended (the "Securities Act"), for such period
as the Registration Statement to which this Prospectus relates remains
effective.
Newco and Newco Sub are offering shares of Newco Common Stock to holders of
Exchangeable Shares pursuant to the terms of the Exchangeable Shares, which
obligate Newco and Newco Sub to effect such exchanges when, as and if
Exchangeable Shares are presented by the holders thereof for exchange. Upon such
exchange, holders of Exchangeable Shares will be entitled to receive for each
Exchangeable Share one share of Newco Common Stock, plus an additional amount
equivalent to the full amount of all declared and unpaid dividends on such
Exchangeable Share (see "Plan of Distribution"). All expenses of registration
incurred in connection with this offering are being paid by Newco. The Newco
Common Stock commenced trading on the New York Stock Exchange (the "NYSE") under
the symbol "DGC" and on the Toronto Stock Exchange under the symbol "VER" on the
date of this Prospectus. Prior thereto, the Newco Common Stock traded on the
American Stock Exchange ("AMEX") under the symbol "DGC," and on August 19, 1996,
the closing price of the Newco Common Stock on AMEX was $13 5/8 per share.
---------------------
SEE "RISK FACTORS" BEGINNING AT PAGE 2 HEREOF FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH ANY
INVESTMENT IN THE NEWCO COMMON STOCK OFFERED HEREBY.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS AUGUST , 1996.
<PAGE> 3
AVAILABLE INFORMATION
Newco is subject to the information 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"), which can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549; and at the regional offices
of the Commission at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New York,
New York 10048. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549 at prescribed rates or on the Internet at
http://www.sec.gov. Such reports, proxy statements and other information
concerning Newco also may be inspected at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
Newco has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act with respect to the shares of
Newco Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission. For further information with respect to
Newco and the Newco Common Stock, reference is made to such Registration
Statement and to the exhibits and schedules thereto. Statements contained in
this Prospectus as to the contents of any contract or any other document
referred to are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified by such reference. A
copy of the Registration Statement may be obtained at the public reference
facilities maintained by the Commission as provided in the preceding paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by Newco with the Commission
pursuant to the Exchange Act (File No. 1-7427), are incorporated in this
Prospectus by reference and shall be deemed to be a part hereof:
(a) Digicon Inc.'s Annual Report on Form 10-K for the year ended July 31,
1995, as amended by Form 10-K/A dated June 17, 1996, Form 10-K/A-2
dated July 19, 1996 and Form 10-K/A-3 dated August 20, 1996.
(b) Digicon Inc.'s Quarterly Reports on Form 10-Q for the quarters ended
October 31, 1995, January 31, 1996 and April 30, 1996.
(c) Digicon Inc.'s Current Reports on Form 8-K dated March 19, 1996 and May
17, 1996.
(d) The description of the Newco Common Stock contained in Newco's
Registration Statement on Form 8-A dated August 14, 1996.
(e) Definitive Joint Management Information Circular and Proxy Statement of
Newco and Newco Sub filed with the Commission on July 22, 1996.
All documents filed by Newco pursuant to Section 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 made hereby shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of the filing
of such documents. Any statement contained in this Prospectus, in a supplement
to this Prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed supplement to this Prospectus or in any document that also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
<PAGE> 4
Newco hereby undertakes to provide without charge to each person, including
any beneficial owner, to whom a copy of this Prospectus has been delivered, on
the written or oral request of any such person, a copy of any or all of the
documents referred to above which have been or may be incorporated in this
Prospectus by reference, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents). Written
or telephone requests for such copies should be directed to Newco at its
principal executive offices located at 3701 Kirby Drive, Suite 112, Houston,
Texas 77098, Attention: Secretary (telephone number: (713) 526-5611).
RISK FACTORS
Investors should consider carefully the following factors, in addition to
the other information contained in this Prospectus, before exchanging their
Exchangeable Shares for the shares of Newco Common Stock offered hereby.
TAXABILITY OF THE EXCHANGE
Based on the tax laws as of the date of this Prospectus, the exchange of
Exchangeable Shares for shares of Newco Common Stock is generally a taxable
event in Canada and the United States. A holder's tax consequences can vary
depending on a number of factors, including the residency of the holder, the
method of the exchange (redemption or exchange) and the length of time that the
Exchangeable Shares were held prior to exchange (see "Income Tax
Considerations").
DIFFERENCES IN CANADA AND U.S. TRADING MARKETS
The Toronto Stock Exchange (the "TSE") has approved the listing of the
Exchangeable Shares and the Newco Common Stock is listed on the NYSE and the
TSE. There is no current intention to list the Exchangeable Shares or Newco
Common Stock on any other stock exchange in Canada or the United States. As a
result of the foregoing, the price at which the Exchangeable Shares will trade
will be based upon the market for such shares on the TSE and the price at which
the shares of Newco Common Stock will trade will be based upon the market for
such shares on the NYSE and TSE. Although Newco believes that the market price
of the Exchangeable Shares on the TSE and the market price of the Newco Common
Stock on the NYSE and TSE will reflect essentially equivalent values, there can
be no assurances that the market price of the Newco Common Stock will be
identical, or even similar, to the market price of the Exchangeable Shares.
FOREIGN PROPERTY
So long as they are listed on a prescribed stock exchange in Canada (which
currently includes the TSE) and Newco Sub maintains a substantial presence in
Canada, the Exchangeable Shares will not be foreign property under the Income
Tax Act (Canada) (the "Canadian Tax Act") for trusts governed by registered
pension plans, registered retirement savings plans, registered retirement income
funds and deferred profit sharing plans or for certain other tax-exempt persons.
Newco Common Stock will, however, be foreign property for such plans or persons.
THE COMPANY
Newco provides seismic data acquisition and processing services to the
petroleum industry in selected markets worldwide. The Company was incorporated
in Texas in 1965, was reincorporated in Delaware in 1969 and adopted its present
corporate name on August , 1996. Newco's executive offices are located at 3701
Kirby Drive, Houston, Texas 77098, and its telephone number is (713) 526-5611.
USE OF PROCEEDS
Because the shares of Newco Common Stock will be issued on exchange or
redemption of the Exchangeable Shares, Newco will receive no net cash proceeds
on such issuance.
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<PAGE> 5
DESCRIPTION OF NEWCO CAPITAL STOCK
As of the date of this Prospectus, the Newco Restated Certificate of
Incorporation ("Newco Certificate") authorizes 40,000,000 Ordinary Shares and
1,000,000 shares of preferred stock, par value $0.01 per share ("Newco Preferred
Stock"). The Ordinary Shares consist of a series of one share of special voting
stock, par value $0.01 per share (the "Special Voting Stock"), all other shares
being designated as Common Stock.
NEWCO COMMON STOCK
Shares of Newco Common Stock have a par value of $0.01 per share. The
holders of Newco Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Cumulative voting for
the election of directors is not authorized by the Newco Certificate. The
holders of Newco Common Stock are entitled to receive such dividends as may be
declared by the Newco board of directors out of funds legally available therefor
and will be entitled upon any liquidation, dissolution or winding-up of Newco to
receive rateably the net assets of Newco available for distribution. No
pre-emptive rights, conversion rights, redemption rights or sinking fund
provisions are applicable to the Newco Common Stock.
NEWCO SPECIAL VOTING STOCK
A single share of Newco Special Voting Stock is authorized as a series of
Ordinary Shares for issuance and a single share, par value $.01 per share (the
"Voting Share"), is outstanding. Except as otherwise required by law or the
Newco Certificate, the Voting Share possesses a number of votes equal to the
number of outstanding Exchangeable Shares from time to time not owned by Newco
or any entity controlled by Newco for the election of directors and on all other
matters submitted to a vote of stockholders of Newco. The holders of Newco
Common Stock and the holder of the Voting Share will vote together as a single
class on all matters. The holder of the Voting Share will not be entitled to
receive any assets of Newco available for distribution to its stockholders. The
holder of the Voting Share will not be entitled to receive dividends. Pursuant
to the Combination Agreement dated as of May 10, 1996, by and between Newco and
Newco Sub (the "Combination Agreement"), the Voting Share was issued to the
trustee appointed under the Voting and Exchange Trust Agreement dated as of
August , 1996, among Newco, Newco Sub and The R-M Trust Company (the "Voting
and Exchange Trust Agreement"). At such time as the Voting Share has no votes
attached to it because there are no Exchangeable Shares outstanding not owned by
Newco or an entity controlled by Newco, and there are no shares of stock, debt,
options or other agreements of Newco Sub that could give rise to the issuance of
any Exchangeable Shares to any person (other than Newco or any entity controlled
by Newco), the Voting Share will be canceled.
NEWCO PREFERRED STOCK
Shares of Newco Preferred Stock have a par value of $0.01 per share. One
million shares of Newco Preferred Stock are presently authorized. The Newco
board of directors is authorized to provide for the issuance of shares of
preferred stock in one or more series, and to establish from time to time the
number of shares to be included in each such series, to fix the designations,
powers, preferences and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. No series of such stock has
been designated.
Although the Newco board of directors has no present intention of doing so,
it could issue a series of Newco Preferred Stock that could, depending on the
terms of such series, provide for a liquidation preference over the Newco Common
Stock or impede the completion of a merger, tender offer or other takeover
attempt. The Newco board of directors, in so acting, could issue Newco Preferred
Stock having terms that could discourage an acquisition attempt through which an
acquiror may be otherwise able to change the composition of the board of
directors, including a tender or exchange offer or other transaction that some,
or a majority, of Newco's stockholders might otherwise believe to be in their
best interests.
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PLAN OF DISTRIBUTION
EXCHANGEABLE SHARES
Pursuant to the terms of a plan of arrangement (the "Plan of Arrangement")
under section 182 of the Business Corporations Act (Alberta) (the "ABCA"), Newco
Sub underwent a reorganization of capital whereby, among other things, it issued
.80 of an Exchangeable Share for each existing Newco Sub Common Share (other
than Newco Sub Common Shares held by holders who properly exercised their rights
of dissent and are ultimately entitled to be paid fair value for their shares)
(the "Arrangement") at the effective time (the "Effective Time") of the
combination of Newco Sub and Newco (the "Combination").
Newco Common Stock may be issued to holders of Exchangeable Shares as
follows: (i) holders of Exchangeable Shares may require at any time that such
shares be exchanged for an equivalent number of shares of Newco Common Stock
plus an additional amount equivalent to all declared and unpaid dividends on
such Exchangeable Shares (see "-- Procedures for Issuance of Newco Common
Stock -- Election by Holders to Exchange Exchangeable Shares"); (ii) Newco Sub
may redeem such Exchangeable Shares by exchanging therefor an equal number of
shares of Newco Common Stock (see "-- Procedures for Issuance of Newco Common
Stock -- Redemption of Exchangeable Shares"); and (iii) upon liquidation of
Newco Sub and Newco, holders of Exchangeable Shares may be required to, or may
elect to, exchange such Exchangeable Shares for shares of Newco Common Stock
(see "-- Procedures for Issuance of Newco Common Stock -- Liquidation of Newco
Sub" and "-- Liquidation of Newco").
PROCEDURES FOR ISSUANCE OF NEWCO COMMON STOCK
Election by Holders to Exchange Exchangeable Shares. Holders of the
Exchangeable Shares are entitled at any time to retract (i.e., require Newco Sub
to redeem) any or all such Exchangeable Shares owned by them and to receive an
equivalent number of shares of Newco Common Stock, plus an additional amount
equivalent to all declared and unpaid dividends on such Exchangeable Shares.
Holders of the Exchangeable Shares may effect such retraction by presenting a
certificate or certificates to Newco Sub or its transfer agent representing the
number of Exchangeable Shares the holder desires to retract, together with a
duly executed statement (the "Retraction Request") specifying the number of
Exchangeable Shares the holder wishes to retract and the date upon which the
holder desires to receive the Newco Common Stock, which must be between five and
ten business days after the request is received by Newco Sub (the "Retraction
Date"), and such other documents as may be required to effect the retraction of
the Exchangeable Shares.
Upon receipt of the Exchangeable Shares, the Retraction Request and other
required documentation from the holder thereof, Newco Sub must immediately
notify Newco of such Retraction Request. Newco will thereafter have two business
days in which to advise Newco Sub as to whether Newco shall exercise its
overriding right (the "Retraction Call Right") to purchase all of the
Exchangeable Shares submitted by the holder thereof by the delivery of an
equivalent number of shares of Newco Common Stock plus an additional amount
equivalent to the full amount of all declared and unpaid dividends on the
Exchangeable Shares to the transfer agent for delivery to such holder on the
Retraction Date. If Newco does not advise Newco Sub within such two business day
period, Newco Sub will notify the holder as soon as possible thereafter that
Newco will not exercise the Retraction Call Right. A holder may revoke his or
her Retraction Request at any time prior to the close of business on the
business day preceding the Retraction Date, in which case the holder's
Exchangeable Shares will neither be purchased by Newco nor redeemed by Newco
Sub. If the holder does not revoke his or her Retraction Request, on the
Retraction Date the Exchangeable Shares that the holder has requested Newco Sub
to redeem will be acquired by Newco (assuming Newco exercises its Retraction
Call right) or redeemed by Newco Sub, as the case may be, in each case for one
share of Newco Common Stock for each Exchangeable Share plus an additional
amount equivalent to the full amount of all declared and unpaid dividends on the
Exchangeable Shares.
Redemption of Exchangeable Shares. Subject to applicable law and the
Redemption Call Right of Newco described below, on August , 2014 (the 18th
anniversary of the effective date (the "Effective Date") of the Arrangement) or
(i) such later date as specified by the Newco Sub Board of Directors (no later
than the 25th anniversary of the Effective Date) or (ii) such earlier date as
specified by the Newco Sub Board
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<PAGE> 7
of Directors, if at such date there are less than 250,000 Exchangeable Shares
outstanding (other than Exchangeable Shares held by Newco and entities
controlled by Newco and subject to necessary adjustments to such number of
shares to reflect permitted changes to Exchangeable Shares) (the "Automatic
Redemption Date"), Newco Sub will redeem all but not less than all of the then
outstanding Exchangeable Shares for one share of Newco Common Stock for each
Exchangeable Share, plus an amount equivalent to the full amount of all unpaid
dividends thereon. Newco Sub shall, at least 120 days prior to the Automatic
Redemption Date, provide the registered holders of the Exchangeable Shares with
written notice of the proposed redemption of the Exchangeable Shares.
Notwithstanding any proposed redemption of the Exchangeable Shares, Newco has an
overriding right to acquire on the Automatic Redemption Date all but not less
than all of the Exchangeable Shares then outstanding in exchange for one share
of Newco Common Stock for each Exchangeable Share, plus an additional amount
equivalent to the full amount of all declared and unpaid dividends on the
Exchangeable Shares.
Liquidation of Newco Sub. Upon the occurrence of a Newco Sub Insolvency
Event (as described below), holders of the Exchangeable Shares have preferential
rights to receive from Newco Sub one share of Newco Common Stock for each
Exchangeable Share they hold, plus an additional amount equivalent to the full
amount of any declared and unpaid dividends on each such Exchangeable Share (the
"Liquidation Amount"). In the event of a proposed Newco Sub Insolvency Event,
Newco has the right to purchase all of the outstanding Exchangeable Shares from
the holders thereof at the effective time of any such liquidation, dissolution,
or winding-up in exchange for the Liquidation Amount. A "Newco Sub Insolvency
Event" is an insolvency or bankruptcy proceeding instituted by or against Newco
Sub, including any such proceeding under the Companies' Creditors Arrangement
Act (Canada) and the Bankruptcy and Insolvency Act (Canada), the admission in
writing by Newco Sub of its inability to pay its debts generally as they become
due and the inability of Newco Sub, as a result of solvency requirements of
applicable law, to redeem any Exchangeable Shares tendered for retraction.
On or after the effective date of liquidation, dissolution or winding-up,
and subject to the exercise by Newco of its right (the "Liquidation Call Right")
to purchase the Exchangeable Shares in exchange for the Liquidation Amount, a
holder of Exchangeable Shares has two options. The holder may surrender
certificates representing such Exchangeable Shares, together with such other
documents as may be required, to Newco Sub's registered office or the office of
the transfer agent. Upon receipt of the certificates and other documents, Newco
Sub will deliver the Liquidation Amount to such holder at the address recorded
in the securities register or by holding the Liquidation Amount for pick up by
the holder at Newco Sub's registered office or the office of the transfer agent,
as specified by Newco Sub in a notice to such holder. The second alternative is
that the holder may exercise its exchange right by requiring Newco to purchase
the Exchangeable Shares in exchange for the Liquidation Amount and delivering to
The R-M Trust Company, as trustee, (i) the certificates, duly endorsed in blank,
(ii) a duly completed form of notice of exercise of such exchange right, which
is contained on the reverse of, or attached to, the Exchangeable Share
certificates and (iii) any other required documents.
Liquidation of Newco. Upon the occurrence of a Newco Liquidation Event (as
described below), in order for the holders of the Exchangeable Shares to
participate on a pro rata basis with the holders of Newco Common Stock, each
holder of Exchangeable Shares will automatically receive in exchange therefor an
equivalent number of shares of Newco Common Stock, plus an additional amount
equivalent to the full amount of any declared and unpaid dividends on such
Exchangeable Shares. A "Newco Liquidation Event" means (i) any determination by
Newco's board of directors to institute voluntary liquidation, dissolution, or
winding-up proceedings with respect to Newco or to effect any other distribution
of assets of Newco among its stockholders for the purpose of winding up its
affairs; or (ii) immediately upon the earlier of (A) receipt by Newco of notice
of, and (B) Newco becoming aware of any threatened or instituted claim, suit or
proceedings with respect to the involuntary liquidation, dissolution or
winding-up of Newco or to effect any other distribution of assets of Newco among
its stockholders for the purpose of winding up its affairs.
To effect the automatic exchange of Exchangeable Shares for shares of Newco
Common Stock, Newco will be deemed to have purchased each Exchangeable Share
outstanding immediately prior to the Newco Liquidation Event for the Liquidation
Amount applicable to such time. Upon a holder's request and surrender
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<PAGE> 8
of Exchangeable Share certificates, duly endorsed in blank and accompanied by
such instruments of transfer as Newco may reasonably require, Newco will deliver
to such holder, certificates representing an equivalent number of shares of
Newco Common Stock.
INCOME TAX CONSIDERATIONS
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Felesky Flynn, Canadian tax counsel for Newco Sub, the
following is a summary of the principal Canadian federal income tax
consideration generally applicable to Newco Sub shareholders who, for purposes
of the Canadian Tax Act, hold their Exchangeable Shares and shares of Newco
Common Stock as capital property and deal at arm's length with Newco Sub and
Newco. This summary does not apply to a holder with respect to whom Newco is a
foreign affiliate within the meaning of the Canadian Tax Act.
Certain recent amendments to the Canadian Tax Act (the "mark-to-market
rules") relating to financial institutions (including certain financial
institutions, registered securities dealers and corporations controlled by one
or more of the foregoing) will deem such financial institutions not to hold
their Exchangeable Shares and shares of Newco Common Stock as capital property
for purposes of the Canadian Tax Act. Shareholders that are financial
institutions should consult their own tax advisors to determine the tax
consequences to them of the application of the mark-to-market rules. In
addition, all shareholders should consult their own tax advisors as to whether,
as a matter of fact, they hold their Exchangeable Shares and will hold their
shares of Newco Common Stock as capital property for the purposes of the
Canadian Tax Act.
This summary is based on the current provisions of the Canadian Tax Act,
the regulations thereunder, the current provisions of the Canada-United States
Income Tax Convention, 1980, as amended (the "Tax Treaty"), and Canadian tax
counsel's understanding of the current administrative practices of Revenue
Canada, Customs, Excise and Taxation ("Revenue Canada"). This summary takes into
account the amendments to the Canadian Tax Act and regulations publicly
announced by the Minister of Finance prior to the date hereof (the "Proposed
Amendments") and assumes that all Proposed Amendments will be enacted in their
present form. However, no assurances can be given that the Proposed Amendments
will be enacted in the form proposed, or at all.
Except for the foregoing, this summary does not take into account or
anticipate any changes in law, whether by legislative or judicial decision or
action, nor does it take into account provincial, territorial or foreign income
tax legislation or considerations, which may differ from the Canadian federal
income tax considerations described herein.
WHILE THIS SUMMARY IS INTENDED TO ADDRESS ALL PRINCIPAL CANADIAN FEDERAL
INCOME TAX CONSIDERATIONS, IT IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO
BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR
NEWCO SUB SHAREHOLDER. THEREFORE, SUCH HOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THEIR PARTICULAR CIRCUMSTANCES. NO ADVANCE INCOME TAX
RULING HAS BEEN OBTAINED FROM REVENUE CANADA TO CONFIRM THE TAX CONSEQUENCES OF
ANY OF THE TRANSACTIONS DESCRIBED HEREIN.
For purposes of the Canadian Tax Act, all amounts relating to the
acquisition, holding or disposition of shares of Newco Common Stock, including
dividends, adjusted cost base and proceeds of disposition, must be converted
into Canadian dollars based on the prevailing United States dollar exchange rate
at the time such amounts arise.
SHAREHOLDERS RESIDENT IN CANADA.
The following portion of the summary is applicable to Newco Sub
shareholders who, for purposes of the Canadian Tax Act, are resident or deemed
to be resident in Canada.
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<PAGE> 9
Redemption or Exchange of Exchangeable Shares. The conversion of an
Exchangeable Share for a share of Newco Common Stock is a taxable transaction. A
conversion can occur as a redemption by Newco Sub or as an acquisition by Newco.
The Canadian federal income tax consequences of a redemption differ from those
of an acquisition. A holder exercising the right of retraction in respect of an
Exchangeable Share cannot control whether the share will be acquired by Newco
under the Retraction Call Right or redeemed by Newco Sub if the Retraction Call
Right is not exercised; however, a holder who exercises the right of retraction
will be notified if the Retraction Call Right will not be exercised by Newco and
the holder may cancel the Notice of Retraction and retain the Exchangeable
Share.
The following explains the tax treatment to a holder of an Exchangeable
Share on a redemption by Newco Sub and an acquisition by Newco.
(a) On a redemption (including a retraction) of an Exchangeable Share
by Newco Sub, a portion of the redemption proceeds may be deemed to be a
dividend received by the holder. The deemed dividend is calculated as the
amount, if any, by which the redemption proceeds exceeds the paid-up
capital at that time of the Exchangeable Share. The deemed dividend is
subject to the tax treatment accorded to dividends described below. Newco
Sub is required to calculate the deemed dividend and report the amount to
the holder of the Exchangeable Share. The holder of the Exchangeable Share
may also have a capital gain or loss as a result of the redemption. The
holder of the Exchangeable Share is considered to have disposed of the
Exchangeable Share for proceeds of disposition equal to the redemption
proceeds less the amount of the deemed dividend. In the case of a
shareholder that is a corporation, in some circumstances the amount of any
deemed dividend may be treated as proceeds of disposition, and not as a
dividend, for purposes of calculating a capital gain.
(b) On the acquisition of an Exchangeable Share by Newco, the holder
will in general realize a capital gain (or a capital loss) equal to the
amount by which the proceeds of disposition of the Exchangeable Share, less
any reasonable cost of disposition, exceed (or are less than) the adjusted
cost base to the holder of the Exchangeable Share. The acquisition of an
Exchangeable Share by Newco will not result in a deemed dividend to the
holder of the Exchangeable Share.
The redemption proceeds in the case of a redemption by Newco Sub and the
proceeds of disposition in the case of an acquisition by Newco will be the fair
market value of a share of Newco Common Stock at the time of the exchange plus
the amount of all declared but unpaid dividends on the Exchangeable Share
received by the holder as part of the exchange consideration.
The following example illustrates the different treatment for a redemption
by Newco Sub and an acquisition by Newco, assuming that the exchange
consideration is $18.00 (i.e., the fair market value of the Newco Common Stock
plus the amount of all declared but unpaid dividends on the Exchangeable Share),
the Exchangeable Shares have a paid-up capital at that time of $5.00 per share
and the adjusted cost base to the holder of the Exchangeable Share is $10.00.
<TABLE>
<CAPTION>
ACQUISITION REDEMPTION
----------- ----------
<S> <C> <C>
Exchange Consideration........................................ $ 18.00 $18.00
Deemed Dividend(a)............................................ --(b) 13.00
------ ------
Proceeds of Disposition for capital gains purposes............ 18.00 5.00
Adjusted Cost Base............................................ 10.00 10.00
------ ------
Capital Gain (Loss)(a)........................................ $ 8.00 $(5.00)
====== ======
</TABLE>
- ---------------
(a) These line items (being the deemed dividend and the capital gain (or loss))
must be reported by the former holder of the Exchangeable Share.
(b) There is no deemed dividend in the case of an acquisition of the
Exchangeable Share by some person other than Newco Sub.
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<PAGE> 10
Three-quarters of any capital gain (the "taxable capital gain") will be
included in the shareholder's income for the year of disposition. Three-quarters
of any capital loss realized (the "allowable capital loss") may be deducted by
the holder against taxable capital gains for the year of disposition. Any excess
of allowable capital losses over taxable capital gains of the shareholder for
the year of disposition may generally be carried back up to three taxation years
or forward indefinitely and deducted against net taxable capital gains in those
other years.
A shareholder that is throughout the relevant taxation year a
"Canadian-controlled private corporation" (as defined in the Canadian Tax Act)
may be liable to pay an additional refundable tax of 6 2/3% on its "aggregate
investment income" for the year, which is defined to include taxable capital
gains (but not dividends or deemed dividends deductible in computing taxable
income).
If the holder of an Exchangeable Share is a corporation, the amount of any
capital loss arising from a disposition or deemed disposition of an Exchangeable
Share may be reduced by the amount of dividends received or deemed to have been
received by it on such share or on the Newco Sub Common Shares previously owned
by such holder, to the extent and under circumstances prescribed by the Canadian
Tax Act. Similar rules may apply where a corporation is a member of a
partnership or a beneficiary of a trust that owns Exchangeable Shares or where a
trust or partnership of which a corporation is a beneficiary or a member is a
member of a partnership or a beneficiary of a trust that owns Exchangeable
Shares.
The cost base of a share of Newco Common Stock received on the retraction,
redemption, or exchange of an Exchangeable Share will be equal to the fair
market value of the share of Newco Common Stock at the time of such event.
Dividends Paid on Exchangeable Shares. A shareholder who is an individual
will include dividends received or deemed to be received on the Exchangeable
Shares in computing the shareholder's income, and will be subject to the
gross-up and dividend tax credit rules normally applicable to taxable dividends
received from taxable Canadian corporations.
Subject to the special rules described below, in the case of a shareholder
that is a corporation, dividends received or deemed to be received on the
Exchangeable Shares will normally be deductible in computing its taxable income.
A shareholder that is a "private corporation" (as defined in the Canadian Tax
Act), or any other corporation resident in Canada and controlled or deemed to be
controlled by or for the benefit of an individual or a related group of
individuals, may be liable under Part IV of the Canadian Tax Act to pay a
refundable tax of 33 1/3% on dividends received or deemed to be received on the
Exchangeable Shares to the extent that such dividends are deductible in
computing the shareholder's taxable income.
Some special rules will apply to certain corporations that receive
dividends on the Exchangeable Shares.
(a) In the case of a shareholder that is a "specified financial
institution" under the Canadian Tax Act, a dividend received on its
Exchangeable Shares will be deductible in computing its taxable income only
if either:
(i) the specified financial institution did not acquire the
Exchangeable Shares in the ordinary course of the business carried on by
such institution; or
(ii) at the time of the receipt of the dividend by the specified
financial institution, the Exchangeable Shares are listed on a
prescribed stock exchange in Canada (which currently includes the TSE)
and the specified financial institution, either alone or together with
persons with whom it does not deal at arm's length, does not receive (or
is not deemed to receive ) dividends in respect of more than 10% of the
issued and outstanding Exchangeable Shares.
(b) If Newco or any person with whom Newco does not deal at arm's
length is a "specified financial institution" under the Canadian Tax Act
when a dividend is paid on an Exchangeable Share, then dividends received
or deemed to be received by a shareholder that is a corporation may not be
deductible in computing taxable income but, instead, may be fully included
in taxable income under Part I of the Canadian Tax Act. Newco has informed
Canadian tax counsel that it is of the view that neither it nor any
8
<PAGE> 11
person with whom it does not deal at arm's length is a specified financial
institution at the current time, but there can be no assurances that this
status will not change prior to when any dividends are received or deemed
to be received by a corporate shareholder.
The Exchangeable Shares will be "taxable preferred shares" and "short-term
preferred shares" for purposes of the Canadian Tax Act. Accordingly, Newco Sub
will be subject to a 66 2/3% tax under Part VI.1 of the Canadian Tax Act on
dividends, other than excluded dividends, paid or deemed to be paid on the
Exchangeable Shares. Dividends received or deemed to be received on the
Exchangeable Shares will not be subject to the 10% tax under Part IV.1 of the
Canadian Tax Act applicable to certain corporations.
Dividends on Newco Common Stock. Dividends paid on Newco Common Stock will
be included in the recipient's income for the purposes of the Canadian Tax Act.
Such dividends received by an individual shareholder will not be subject to the
gross-up and dividend tax credit rules in the Canadian Tax Act. A corporation
which is a shareholder will include such dividends in computing its taxable
income. United States non-resident withholding tax on such dividends will be
eligible for foreign tax credit or deduction treatment where applicable under
the Canadian Tax Act.
Disposition of Newco Common Stock. A disposition or deemed disposition of a
share of Newco Common Stock by a holder will generally result in a capital gain
(or capital loss) equal to the amount by which the proceeds of disposition, net
of any reasonable costs of disposition, exceed (or are less than) the adjusted
cost base to the holder of the share.
ELIGIBILITY FOR INVESTMENT
Foreign Property. Provided the Exchangeable Shares are listed on a
prescribed stock exchange in Canada (which currently includes the TSE) and Newco
Sub maintains a substantial presence in Canada, the Exchangeable Shares will not
be foreign property under the Canadian Tax Act for trusts governed by registered
pension plans, registered retirement savings plans, registered retirement income
funds and deferred profit sharing plans or for certain other tax-exempt persons.
Newco Sub will be considered to have a substantial presence in Canada if it
satisfies certain asset tests or its head office is in Canada and Newco Sub, or
a corporation controlled by it with a head office in Canada, employs more than
five employees full time in the active conduct of a business, other than an
investment business, carried on by it directly or through a partnership of which
it is a majority interest partner. Newco Sub has informed Canadian tax counsel
that it currently satisfies this substantial presence test and expects that it
will continue to satisfy the test.
The Voting Rights and Exchange Rights are foreign property under the
Canadian Tax Act. Newco Sub is of the view that the fair market value of these
rights is nominal. Newco Common Stock will be foreign property under the
Canadian Tax Act.
Qualified Investments. Provided they are listed on a prescribed stock
exchange in Canada (which currently includes the TSE), the Exchangeable Shares
will be a qualified investment under the Canadian Tax Act for trusts governed by
registered retirement savings plans, registered retirement income funds and
deferred profit sharing plans. Further, the Exchangeable Shares should be a
qualified investment even if they are not listed on a prescribed exchange, as
long as Newco Sub continues to be considered a public corporation under the
Canadian Tax Act. (In certain other circumstances, such shares may also be
qualified investments.) Newco Common Stock will be a qualified investment under
the Canadian Tax Act for such plans provided such shares remain listed on the
TSE (or are listed on certain other stock exchanges). The Voting Rights and
Exchange Rights will not be qualified investments under the Canadian Tax Act.
Newco Sub is of the view that the fair market value of these rights is nominal.
SHAREHOLDERS NOT RESIDENT IN CANADA
The following portion of the summary is applicable to Newco Sub
shareholders who, for purposes of the Canadian Tax Act, have not been and will
not be resident or deemed to be resident in Canada at any time while they have
held Exchangeable Shares or will hold shares of Newco Common Stock and to whom
such shares are not taxable Canadian property and, in the case of a non-resident
of Canada who carries on an
9
<PAGE> 12
insurance business in Canada and elsewhere, the shares are not effectively
connected with its Canadian insurance business.
Generally, the Exchangeable Shares and shares of Newco Common Stock will
not be taxable Canadian property provided that such shares are listed on a
prescribed stock exchange (which currently includes the TSE), the holder does
not use or hold, and is not deemed to use or hold, the Exchangeable Shares or
the shares of Newco Common Stock, as applicable, in connection with carrying on
a business in Canada and the holder, persons with whom such holder does not deal
at arm's length, or the holder and such persons, has not owned (or had under
option) 25% or more of the issued shares of any class or series of the capital
stock of Newco Sub or Newco at any time within five years preceding the date in
question. In the case of Newco, even if the holder exceeds the 25% threshold
with respect to shares of Newco Common Stock, the shares of Newco Common Stock
may not be taxable Canadian property; such holders should consult their own tax
advisors to determine whether their shares of Newco Common Stock constitute
taxable Canadian property. The Exchangeable Shares are listed on the TSE and
Newco has indicated that it intends to use its best efforts to cause Newco Sub
to maintain such listing.
A holder of Exchangeable Shares will not be subject to tax under the
Canadian Tax Act on the exchange of an Exchangeable Share for a share of Newco
Common Stock, except to the extent the exchange gives rise to a deemed dividend
(discussed above), or on the sale or other disposition of an Exchangeable Share
or a share of Newco Common Stock.
Any dividends paid on the Exchangeable Shares are subject to non-resident
withholding tax under the Canadian Tax Act at the rate of 25%, although such
rate may be reduced under the provisions of an applicable income tax treaty. For
example, under the Tax Treaty, the rate is generally reduced to 15% for
dividends paid to a person who is the beneficial owner and who is resident in
the United States for purposes of the Tax Treaty.
A holder whose Exchangeable Shares are redeemed (either under Newco Sub's
redemption right or pursuant to the holder's retraction rights) will be deemed
to receive a dividend as described above for residents of Canada, which deemed
dividend will be subject to withholding tax as described in the preceding
paragraph.
UNITED STATES FEDERAL TAX CONSIDERATIONS
The following summary of the principal United States federal income tax
considerations is generally applicable to a United States Holder (as defined
below) of Exchangeable Shares arising from and relating to the receipt and
ownership of Newco Common Stock, and represents the opinion of Porter & Hedges,
L.L.P., United States counsel to Newco.
As used herein, a United States Holder includes a holder of Exchangeable
Shares who is a citizen or individual resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States, or of any political subdivision thereof, or an estate or trust
the income of which is includible in its gross income for United States federal
income tax purposes without regard to its source, but excludes persons subject
to special provisions of United States federal income tax law, such as
tax-exempt organizations, financial institutions, insurance companies,
broker-dealers, persons having a "functional currency" other than the United
States dollar, holders who hold Exchangeable Shares as part of a straddle, wash
sale, hedging or conversion transaction (other than by virtue of their
participation in an exchange of Exchangeable Shares for Newco Common Stock as
contemplated herein) and holders who acquired their Exchangeable Shares through
the exercise of employee stock options or otherwise as compensation for
services. This summary is limited to United States Holders who hold Exchangeable
Shares as capital assets as defined in the United States Internal Revenue Code
of 1986, as amended (the "U.S. Code")
This summary is based on United States federal income tax law in effect as
of the date of this Prospectus. No statutory, judicial or administrative
authority exists which directly addresses certain of the United States federal
income tax consequences of the ownership of instruments comparable to the
Exchangeable Shares. Consequently, some aspects of the United States federal
income tax treatment of the exchange of Exchangeable Shares for shares of Newco
Common Stock are not certain. No advance income tax ruling has
10
<PAGE> 13
been sought or obtained from the United States Internal Revenue Service (the
"IRS") regarding the tax consequences of the transactions described herein.
This summary does not address aspects of United States taxation other than
United States federal income taxation under the U.S. Code, nor does it address
all aspects of United States federal income taxation that may be applicable to a
particular United States Holder in light of the United States Holder's
particular circumstances. In addition, this summary does not address the United
States state or local tax consequences or the foreign tax consequences of the
receipt and ownership of Newco Common Stock.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), Treasury Regulations, IRS rulings and pronouncements, and judicial
decisions in effect as of the date of this Prospectus, all of which are subject
to change at any time by legislative, judicial or administrative action. Any
such changes may be applied retroactively in a manner that could alter the
conclusions herein and adversely affect a United States Holder.
UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT
TO THE UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES AND THE FOREIGN
TAX CONSEQUENCES OF THE RECEIPT AND OWNERSHIP OF NEWCO COMMON STOCK PARTICULARLY
IN LIGHT OF POSSIBLE CHANGES IN THE TAX LAWS AFTER THE DATE OF THIS PROSPECTUS.
EXCHANGE OF EXCHANGEABLE SHARES.
A United States Holder that exercises such holder's right to exchange its
Exchangeable Shares for shares of Newco Common Stock will generally recognize
gain or loss on such exchange, subject to the discussion below. Such gain or
loss will be equal to the difference between the fair market value of the shares
of Newco Common Stock at the time of the exchange and the United States Holder's
tax basis in the Exchangeable Shares surrendered. The gain or loss will
generally be capital gain or loss, except that, with respect to any declared but
unpaid dividends on the Exchangeable Shares, ordinary income may be recognized.
Capital gain or loss will generally be long-term capital gain or loss if a
United States Holder's holding period for its Exchangeable Shares (together with
the pre-conversion Newco Sub Common Shares) is longer than one year at the time
of the exchange. A United States Holder will generally, subject to the
discussion below, have a tax basis in the shares of Newco Common Stock received
equal to the fair market value of such shares at the time of the exchange. The
holding period for such shares will generally, subject to the discussion below,
begin on the day after the exchange. The IRS could assert, however, that the
Exchangeable Shares and certain of the rights associated therewith constitute
"offsetting positions" for purposes of the straddle rules set forth in Section
1092 of the U.S. Code. In such case, the holding period of the Exchangeable
Shares would not increase while held by a United States Holder.
It is possible, however, that a United States Holder who holds Exchangeable
Shares not acquired in the Arrangement would not be permitted to recognize loss
on an exchange of such Exchangeable Shares for Newco Common Stock. In that case,
a United States Holder will have a tax basis in the shares of Newco Common Stock
received equal to the tax basis of the Exchangeable Shares exchanged therefor
and the United States Holder's holding period for the Newco Common Stock
received will include the United States Holder's holding period in the
Exchangeable Shares exchanged therefor.
Further, under certain limited circumstances, an exchange by a United
States Holder of Exchangeable Shares for shares of Newco Common Stock may, in
any event, be characterized as a tax-free exchange. First, an exchange of
Exchangeable Shares for shares of Newco Common Stock may be characterized as a
tax-free exchange if, at the time of such exchange, (i) at least 80 percent of
the then outstanding Exchangeable Shares are held by Newco and (ii) in such
exchange, Newco, rather than Newco Sub, acquires the Exchangeable Shares in
exchange for shares of Newco Common Stock pursuant to the exercise the of its
Call Rights. In addition, a United States Holder that receives shares of Newco
Common Stock from Newco upon exercise by Newco of the Redemption Call Right or
the Liquidation Call Right generally should be entitled to nonrecognition
treatment with respect to the exchange. In either case, the exchange would not
be tax-free unless certain other requirements are satisfied, which, in turn,
will depend on facts and circumstances existing
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<PAGE> 14
at the time of such exchange and cannot be accurately predicted as of the date
of this Prospectus. There is, however, no direct authority addressing the proper
treatment of the exchange of Exchangeable Shares for shares of Newco Common
Stock in any of the situations for United States federal income tax purposes.
Accordingly, there can be no assurance that the IRS would not challenge the
status of the exchange as tax free or that, if challenged, a court would not
agree with the IRS. If such exchange did qualify as a tax-free exchange, a
United States Holder's tax basis in the share of Newco Common Stock received
would be equal to such holder's tax basis in the Exchangeable Shares exchanged
therefor. The holding period of the shares of Newco Common Stock received by
such United States Holder should include both the holding period of the
Exchangeable Share exchanged thereof, which in turn, should include the holding
period of the Veritas Common Stock converted pursuant to the Combination
Agreement and the Plan of Arrangement, provided that such Veritas Common Stock
and Exchangeable Share were held as capital assets immediately prior to the
Arrangement and the subsequent exchange, if any.
For United States federal income tax purposes, gain realized on the
exchange of Exchangeable Shares for shares of Newco Common Stock generally will
be treated as United States source gain, except that, under the terms of the Tax
Treaty, such gain may be treated as sourced in Canada. Any Canadian tax imposed
on the exchange may be available as a credit against United States federal
income taxes, subject to applicable limitations. A United States Holder that is
ineligible for a foreign tax credit with respect to any Canadian tax paid may be
entitled to a deduction therefor in computing United States taxable income.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS.
For United States federal income tax purposes, Newco Sub generally will be
classified as a passive foreign investment company (a "PFIC") for any taxable
year ending prior to consummation of the Arrangement during which either (i) 75
percent or more of its gross income was passive income (as defined for United
States federal income tax purposes) or (ii) on average for such taxable year, 50
percent or more of its assets (by value) produced or were held for the
production of passive income. For purposes of applying the foregoing tests, the
assets and gross income of Newco Sub's significant subsidiaries will be
attributed to Newco Sub.
While there can be no assurance with respect to the classification of Newco
Sub as a PFIC, Veritas believes that it did not constitute a PFIC during its
taxable years ending prior to consummation of the Arrangement. Currently, Newco
Sub and Newco intend to endeavor to cause Newco Sub to avoid PFIC status in the
future, although there can be no assurance that they will be able to do so or
that their intent will not change. Moreover, in connection with the transactions
contemplated herein, no opinion will be rendered regarding Newco Sub's status as
a PFIC.
For purposes of applying the 50 percent asset test following the
Arrangement, Newco Sub's assets must be measured by their adjusted tax bases (as
calculated in order to compute earnings and profits for United States federal
income tax purposes) instead of by value, subject to certain adjustments. As a
result, it is possible that Newco Sub could be a PFIC for taxable years ending
after the Arrangement even though less than 50 percent of Newco Sub's assets
(measured by the fair market value of such assets) do not constitute passive
assets. After the Arrangement, Newco Sub will endeavor to notify United States
Holders of Exchangeable Shares if it believes that Newco Sub was a PFIC for that
taxable year.
If Newco Sub is a PFIC during a United States Holder's holding period for
such holder's Exchangeable Shares, and the United States Holder has not made an
election to treat Newco Sub as a qualified electing fund (a "QEF Election") with
respect to all taxable years included in the United States Holder's holding
period in which Newco Sub was a PFIC, then (i) the United States Holder would be
required to allocate income recognized upon receiving certain excess dividends
with respect to, and gain recognized upon the exchange of Exchangeable Shares
for shares of Newco Common Stock ratably over the United States Holder's holding
period for such Exchangeable Shares, (ii) the amount allocated to each year
other than (x) the year of the excess dividend payment or disposition of the
Exchangeable Shares or (y) any year prior to the beginning of the first taxable
year of Newco Sub for which it was a PFIC, would be subject to tax at the
highest rate applicable to individuals or corporations, as the case may be, for
the taxable year to which such income is
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<PAGE> 15
allocated, and an interest charge would be imposed upon the resulting tax
attributable to each such year, and (iii) gain recognized upon the disposition
of the Exchangeable Shares would be taxable as ordinary income.
If a United States Holder has made a QEF Election with respect to all
taxable years included in the United States Holder's holding period in which
Newco Sub was a PFIC, the United States Holder would recognize gain or loss on
the disposition of Exchangeable Shares without regard to the PFIC rules. United
States Holders should consult their tax advisors concerning the merits and
mechanics of making a QEF Election and other relevant considerations if Newco
Sub is a PFIC for any taxable year.
The foregoing summary of the possible application of the PFIC rules to
Newco Sub and the United States Holders of Exchangeable Shares is only a summary
of certain material aspects of those rules. Because the United States federal
income tax consequences to United States Holders under the PFIC provisions are
significant and complex, United States Holders are urged to discuss those
consequences with their tax advisors.
SHAREHOLDERS NOT RESIDENT IN OR CITIZENS OF THE UNITED STATES.
The following summary is applicable to a non-United States Holder who
acquires Newco Common Stock in exchange for Exchangeable Shares. As used herein,
a non-United States Holder is a holder of Exchangeable Shares or of Newco Common
Stock acquired in exchange for Exchangeable Shares for United States federal
income tax purposes, is a nonresident alien individual, a foreign corporation, a
foreign partnership or a foreign estate or trust, but excludes persons subject
to special provisions of United States federal income tax law, such as
tax-exempt organizations, financial institutions, insurance companies, broker-
dealers, holders who hold Exchangeable Shares as part of a straddle, wash sale,
hedging or conversion transaction (other than by virtue of their participation
in an exchange of Exchangeable Shares for Newco Common Stock as contemplated
herein) and holders who acquired their Exchangeable Shares through the exercise
of employee stock options or otherwise as compensation for services. A
non-United States Holder seeking benefits under an applicable tax treaty or an
exemption from United States withholding tax for "effectively connected" income,
as described below, may be required to comply with additional certification and
other requirements in order to establish the holder's entitlement to such
benefits or exemption. This summary is limited to non-United States Holders who
hold Exchangeable Shares as capital assets and who will hold Newco Common Stock
as a capital asset. Moreover, insofar as concerns ownership by a non-United
States Holder of Exchangeable Shares, this discussion is limited to the exchange
by such holder of Exchangeable Shares for Newco Common Stock and does not
otherwise address U.S. federal tax consequences of the ownership and disposition
of Exchangeable Shares.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States for at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three-year period ending in the current
calendar year (counting for such purposes all of the days present in the current
year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year). Resident aliens are
subject to tax as if they were U.S. citizens.
This discussion does not consider specific facts and circumstances that may
be relevant to a particular non-United States Holder's tax position, including
whether such non-United States Holder is a United States expatriate.
Dividends received by a Non-United States Holder with respect to Newco
Common Stock that are not effectively connected with the conduct by such holder
of a trade or business in the United States will generally be subject to United
States withholding tax at a rate of 30 percent, which rate may be reduced by an
applicable income tax treaty in effect between the United States and the
non-United States Holder's country of residence (currently 15 percent,
generally, on dividends paid to residents of Canada under the Tax Treaty).
Subject to the discussion below, a non-United States Holder generally will
not be subject to United States federal income tax on gain (if any) recognized
on the exchange of the Exchangeable Shares for Newco Common Stock or on the sale
or exchange of shares of Newco Common Stock, unless (i) such gain is
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<PAGE> 16
effectively connected with a trade or business of the non-United States Holder
in the United States, or, if a tax treaty applies, is attributable to a
permanent establishment maintained by the non-United States Holder in the United
States, or (ii) the non-United States Holder is an individual who holds the
Exchangeable Shares or the Newco Common Stock, as the case may be, as capital
assets and is present in the United States for 183 days or more in the taxable
year of disposition, and certain other conditions are satisfied.
Notwithstanding the general rule set forth in the preceding paragraph,
under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), gain
or loss recognized by a non-United States Holder on the exchange of Exchangeable
Shares for Newco Common Stock or on the sale or exchange of shares of Newco
Common Stock will be subject to regular United States federal income tax, as if
such gain or loss were effectively connected with a U.S. trade or business, if
(a) Newco is a "U.S. real property holding corporation" ("USRPHC") (as defined
below) and (b) such NonUnited States Holder is a "greater than 5 percent
shareholder" (as defined below) of Newco Sub or Newco, as the case may be.
Newco will be a USRPHC with respect to any greater than 5 percent
shareholder if at any time during the shorter of (x) the five-year period ending
on the date of the sale or exchange of Exchangeable Shares for Newco Common
Stock or the sale or exchange of Newco Common Stock (as the case may be) or (y)
the period during which such greater than 5 percent shareholder held such
Exchangeable Shares or Newco Common Stock (as the case may be) (such period the
"FIRPTA holding period"), the fair market value of Newco's interests in United
States real property equaled or exceeded 50 percent of the sum of the fair
market values of all of its interests in real property and all of its other
assets used or held for use in a trade or business (as defined in applicable
regulations). Newco believes that it is not presently a USRPHC. Moreover, Newco
considers it unlikely that it will become a USRPHC in the future unless its
interests in United States real property increase significantly as a result of
one or more acquisitions, but there can be no assurance that Newco will not in
any event become a USRPHC in the future.
The definition of a "greater than 5 percent shareholder" is complex and
subject to some uncertainty. In the case of a non-United States Holder who owns
only Newco Common Stock (actually and constructively), such non-United States
Holder will be a greater than 5 percent shareholder if such non-United States
Holder holds more than 5 percent of the total fair market value of the Newco
Common Stock outstanding (on a non-diluted basis). In the case of a non-United
States Holder who owns only Exchangeable Shares (actually and constructively,
other than Newco Common Stock constructively owned by reason of ownership of
Exchangeable Shares), such non-United States Holder will be a greater than 5
percent shareholder if either (a) such non-United States Holder holds more than
5 percent of the total fair market value of the Exchangeable Shares outstanding
and the Exchangeable Shares are treated as "regularly traded on an established
securities market" or (b) such non-United States Holder holds Exchangeable
Shares with a fair market value on the relevant date of determination greater
than 5 percent of the total fair market value of the Newco Common Stock
outstanding (on a non-diluted basis) on such date and the Exchangeable Shares
are not treated as "regularly traded on an established securities market." The
Exchangeable Shares will be traded on the TSE which should be considered an
"established securities market" for this purpose. The Exchangeable Shares will
be treated as regularly traded on that market if they are registered by Newco
under Section 12 of the Exchange Act or Newco makes certain filings with the
IRS, and certain other conditions are met. Notwithstanding the foregoing, the
Exchangeable Shares will not be considered regularly traded on the TSE during
any calendar quarter in which 100 or fewer persons own 50 percent or more of the
Exchangeable Shares. If a non-United States Holder which is a greater than 5
percent shareholder during a period in which Newco is a USRPHC subsequently
disposes of sufficient Exchangeable Shares or Newco Common Stock so that such
non-United States Holder is no longer a greater than 5 percent shareholder, such
non-United States Holder will still be subject to United States federal income
tax on subsequent dispositions until Newco has ceased to be a USRPHC for at
least five years. If at any time, Newco Common Stock were not regularly traded
on an established securities market, or the Exchangeable Shares were traded on
an established securities market located in the United States, different rules,
not described herein, may apply. Non-United States Holders who believe they may
be greater than 5 percent shareholders are particularly urged to consult their
own tax advisors to determine the possible application of FIRPTA to them.
14
<PAGE> 17
A non-United States Holder that is a greater than 5 percent shareholder may
be subject to withholding on the exchange of Exchangeable Shares for Newco
Common Stock if, at the time of the exchange, the Exchangeable Shares are not
treated as regularly traded on an established securities market. Upon the
exchange of Exchangeable Shares for Newco Common Stock, the transferee of the
Exchangeable Shares would be required to withhold ten percent of the amount
realized in the exchange unless, in general, the non-United States Holder
obtains from Newco and provides to the transferee a statement signed under
penalties of perjury to the effect that Newco is not a USRPHC and was not a
USRPHC at anytime during the FIRPTA holding period (described above). Any tax
withheld may be credited against the United States federal income tax owed by
the non-United States Holder for the year in which the exchange occurs.
The foregoing summary of the possible application of the FIRPTA rules to
non-United States Holders is only a summary of certain material aspects of these
rules. Because the United States federal income tax consequences to a non-United
States Holder under FIRPTA may be significant and are complex, non-United States
Holders are urged to discuss those consequences with their tax advisors.
Newco Common Stock (or a previously triggered obligation of Newco to
deliver Newco Common Stock along with unpaid dividends) will be deemed to be a
United States situs asset for purposes of United States federal estate tax law
and, therefore, Newco Common Stock (or a previously triggered obligation of
Newco to deliver Newco Common Stock along with unpaid dividends) held by an
individual non-United States Holder at the time of his or her death will
generally be subject to the United States federal estate tax, except as may
otherwise be provided by an applicable tax or estate tax treaty with the United
States.
The Tax Treaty provides that the United States federal estate tax paid by a
resident of Canada will generally be allowed as a deduction from the amount of
any Canadian tax otherwise payable by the individual for the year in which the
individual died on the total of (a) any income, profits or gains of the
individual arising in the United States in that year and (b) where the value at
the time of the individual's death of the individual's entire gross estate,
wherever situated, exceeds $1.2 million, any income, profits or gains of the
individual for that year from property situated in the United States at that
time. This summary does not purport to be a complete description of all of the
provisions of the Tax Treaty that may affect the taxation of Canadian residents.
Non-United States Holders should consult their tax advisors as to the tax
consequences to them of the Tax Treaty or another applicable tax or estate tax
treaty with the United States.
LEGAL OPINIONS
Certain legal matters in connection with the Newco Common Stock offered
hereby are being passed upon for Newco by Porter & Hedges, L.L.P. Certain
federal U.S. and Canadian tax consequences have been passed upon by Porter &
Hedges, L.L.P. and by Felesky Flynn, Calgary, Alberta, respectively, as set
forth under "Income Tax Considerations."
EXPERTS
The consolidated financial statements of Digicon Inc. incorporated in this
prospectus by reference from Digicon Inc.'s Annual Report on Form 10-K, for the
year ended July 31, 1995 as amended by Form 10-K/A, 10-K/A-2 and 10-K/A-3 dated
June 17, 1996, July 19, 1996 and August 20, 1996, respectively, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The consolidated financial statements of Veritas Energy Services Inc.,
incorporated by reference herein as of October 31, 1994 and 1995, and for each
of the three years ended October 31, 1993, 1994 and 1995, have been audited by
Price Waterhouse, Chartered Accountants, as set forth in their report thereon
incorporated by reference herein, and are incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
15
<PAGE> 18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses payable by Newco in connection with the offering of
the Common Stock to be registered and offered hereby are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee........................ $ 5,338
Printing expenses.......................................................... 3,500
Legal fees and expenses.................................................... 20,000
Accounting fees and expenses............................................... 20,000
Miscellaneous.............................................................. 1,162
--------
Total............................................................ $50,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation to indemnify any 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 he is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action.
In a suit brought to obtain a judgment in the corporation's favor, whether
by the corporation itself or derivatively by a stockholder, the corporation may
only indemnify for expenses, including attorney's fees, actually and reasonably
incurred in connection with the defense or settlement of the case, and the
corporation may not indemnify for amounts paid in satisfaction of a judgment or
in settlement of the claim. In any such action, no indemnification may be paid
in respect of any claim, issue or matter as to which such persons shall have
been adjudged liable to the corporation except as otherwise approved by the
Delaware Court of Chancery or the court in which the claim was brought. In any
other type of proceeding, the indemnification may extend to judgments, fines and
amounts paid in settlement, actually and reasonably incurred in connection with
such other proceeding, as well as to expenses (including attorneys' fees).
The statute does not permit indemnification unless the person seeking
indemnification has 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 criminal actions or proceedings, the person had no reasonable cause to
believe his conduct was unlawful. There are additional limitations applicable to
criminal actions and to actions brought by or in the name of the corporation.
The determination as to whether a person seeking indemnification has met the
required standard of conduct is to be made (i) by a majority vote of a quorum of
disinterested members of the board of directors, or (ii) by independent legal
counsel in a written opinion, if such a quorum does not exist or if the
disinterested directors so direct, or (iii) by the stockholders.
The certificate of incorporation and bylaws of Newco require Newco to
indemnify Newco's directors and officers to the fullest extent permitted under
Delaware law, and to implement provisions pursuant to contractual indemnity
agreements Newco has entered into with its directors and executive officers.
Newco's Certificate of Incorporation limits the personal liability of a director
to the corporation or its stockholders to damages for breach of the director's
fiduciary duty.
Newco has purchased insurance on behalf of its directors and officers
against certain liabilities that may be asserted against, or incurred by, such
persons in their capacities as directors or officers of the registrant, or
II-1
<PAGE> 19
that may arise out of their status as directors or officers of the registrant,
including liabilities under the federal and state securities laws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following is a list of all the exhibits and financial statement
schedules filed as part of the Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------------------------------------------------------------------------------------------
<S> <C>
3-A -- Restated Certificate of Incorporation (with Amendments) of Digicon
Inc. dated December 17, 1992. (Exhibit 3-A to Digicon's Annual Report
on Form 10-K for the year ended July 31, 1994 is incorporated herein
by reference).
3-B -- Certificate of Ownership and Merger of New Digicon Inc. and Digicon
Inc. (Exhibit 3-B to Digicon's Registration Statement No. 33-43873,
dated November 12, 1991 is incorporated herein by reference).
3-C -- By-laws of New Digicon Inc. dated June 24, 1991. (Exhibit 3-C to
Digicon's Registration Statement No. 33-43873, dated November 12,
1991 is incorporated herein by reference).
3-D -- Certificate of Amendment of Certificate of Incorporation of Digicon
Inc. dated February 6, 1992. (Exhibit 3-D to Digicon's Annual Report
on Form 10-K for the year ended July 31, 1994 is incorporated herein
by reference).
3-E -- Certificate of Amendment of Restated Certificate of Incorporation of
Digicon Inc. dated January 16, 1995.
3-F -- Form of Restated Certificate of Incorporation of Digicon Inc.
4-A -- Specimen Common Stock certificate.
5 -- Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities.
8-A -- Form of Opinion of Felesky Flynn regarding tax matters.
8-B -- Form of Opinion of Porter & Hedges, L.L.P. regarding tax matters.
23-A -- Consent of Deloitte & Touche LLP independent auditors.
23-B -- Consent of Price Waterhouse, Chartered Accountants.
23-C -- Consent of Porter & Hedges, L.L.P. (included in Exhibits 5 and 8-B).
23-D -- Consent of Felesky Flynn (included in Exhibit 8-A).
24 -- Power of Attorney. (included on the signature page hereto).
</TABLE>
ITEM 17. UNDERTAKINGS
(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(2) The undersigned registrant hereby undertakes to file, during any period
in which offers or sales are being made, a post-effective amendment to this
Registration Statement to include any (i) prospectus required
II-2
<PAGE> 20
by section 10(a)(3) of the Securities Act, (ii) material information with
respect to the plan of distribution not previously disclosed in the registration
statement, or (iii) material change to such information in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(3) The undersigned registrant hereby undertakes that for the purpose of
determining any liability under the Securities Act of 1933, each 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.
(4) The undersigned registrant hereby undertakes 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.
(5) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 21
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Stephen J. Ludlow and Richard W. McNairy, and
each of them, either of whom may act without joinder of the other, his true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all pre-and post-effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, and each of them, or the
substitute or substitutes of either of them, may lawfully do or cause to be done
by virtue hereof.
SIGNATURES
Pursuant to the requirements of the Securities Act, 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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on August 19, 1996.
DIGICON INC.
By: /s/ STEPHEN J. LUDLOW
----------------------------------
Stephen J. Ludlow, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the indicated capacities
and on the 19th day of August, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ----------------------------------------------
<S> <C>
/s/ DOUGLAS B. THOMPSON Director and Chairman of the Board
- ---------------------------------------------
Douglas B. Thompson
/s/ STEPHEN J. LUDLOW Director, President and Chief Executive
- --------------------------------------------- Officer
Stephen J. Ludlow
/s/ RICHARD W. McNAIRY Chief Financial Officer
- ---------------------------------------------
Richard W. McNairy
/s/ CHARLES H. ACKERMAN Principal Accounting Officer
- ---------------------------------------------
Charles H. Ackerman
- --------------------------------------------- Director
George F. Baker
Director
- ---------------------------------------------
James B. Clement
Director
- ---------------------------------------------
Clayton P. Cormier
/s/ STEVEN J. GILBERT Director
- ---------------------------------------------
Steven J. Gilbert
/s/ JACK C. THREET Director
- ---------------------------------------------
Jack C. Threet
</TABLE>
II-4
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ---------------------------------------------------------------------------------------------
<S> <C>
3-A -- Restated Certificate of Incorporation (with Amendments) of Digicon
Inc. dated December 17, 1992. (Exhibit 3-A to Digicon's Annual Report
on Form 10-K for the year ended July 31, 1994 is incorporated herein
by reference).
3-B -- Certificate of Ownership and Merger of New Digicon Inc. and Digicon
Inc. (Exhibit 3-B to Digicon's Registration Statement No. 33-43873,
dated November 12, 1991 is incorporated herein by reference).
3-C -- By-laws of New Digicon Inc. dated June 24, 1991. (Exhibit 3-C to
Digicon's Registration Statement No. 33-43873, dated November 12,
1991 is incorporated herein by reference).
3-D -- Certificate of Amendment of Certificate of Incorporation of Digicon
Inc. dated February 6, 1992. (Exhibit 3-D to Digicon's Annual Report
on Form 10-K for the year ended July 31, 1994 is incorporated herein
by reference).
3-E -- Certificate of Amendment of Restated Certificate of Incorporation of
Digicon Inc. dated January 16, 1995.
3-F -- Form of Restated Certificate of Incorporation of Digicon Inc.
4-A -- Specimen Common Stock certificate.
5 -- Opinion of Porter & Hedges, L.L.P. with respect to legality of
securities.
8-A -- Form of Opinion of Felesky Flynn regarding tax matters.
8-B -- Form of Opinion of Porter & Hedges, L.L.P. regarding tax matters.
23-A -- Consent of Deloitte & Touche LLP independent auditors.
23-B -- Consent of Price Waterhouse, Chartered Accountants.
23-C -- Consent of Porter & Hedges, L.L.P. (included in Exhibits 5 and 8-B).
23-D -- Consent of Felesky Flynn (included in Exhibit 8-A).
24 -- Power of Attorney. (included on the signature page hereto).
</TABLE>
<PAGE> 1
EXHIBIT 3-E
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
DIGICON INC.
Digicon Inc., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a regular meeting of the Board of Directors of Digicon,
Inc. held on October 14, 1994, resolutions were duly adopted setting forth a
proposed amendment to the Restated Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and directing that said
amendment be considered at the forthcoming annual meeting of stockholders of
said corporation. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that the board of directors hereby in all respects
approves and declares the advisability of amending the Company's
Restated Certificate of Incorporation (With Amendments) (the "Restated
Certificate") to amend Section 1 of Article IV thereof to be and read in
its entirety as follows:
ARTICLE IV, SECTION 1
The aggregate number of shares which the Corporation
will have authority to issue is 21,000,000, of which 20,000,000
will be shares of common stock, par value $.01 per share
("Common Stock"), and 1,000,000 will be shares of preferred
stock, par value $.01 per share ("Preferred Stock").
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the annual meeting of stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary
number of shares as required by statute were voted in favor of the amendment.
<PAGE> 2
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of said corporation shall not be reduced
under or by reason of said amendment.
(Signature Page Follows)
-2-
<PAGE> 3
IN WITNESS WHEREOF, said Digicon Inc. has caused this certificate to be
signed by Stephen J. Ludlow, its President, and Allan C. Pogach, its Secretary,
this 16th day of January, 1995.
DIGICON INC.
By: /s/ STEPHEN J. LUDLOW
------------------------------
Stephen J. Ludlow, President
ATTEST: /s/ ALLAN C. POGACH
----------------------------
Allan C. Pogach, Secretary
STATE OF TEXAS )
)
)
COUNTY OF HARRIS )
Sworn to this 16th day of January, 1995.
---------------------------------
Notary Public in and for the
State of Texas
My Commission Expires:
- --------------------------------- ---------------------------------
Printed Name of Notary Public
-3-
<PAGE> 1
EXHIBIT 3-F
RESTATED
CERTIFICATE OF INCORPORATION
(WITH AMENDMENTS)
OF
DIGICON INC.
Digicon Inc., a corporation organized and existing under the laws of
Delaware (the "Corporation"), hereby certifies as follows:
FIRST: The present name of the Corporation is Digicon Inc.
SECOND: This Restated Certificate of Incorporation (with Amendments)
was duly adopted in accordance with the provisions of Section 245 of the
General Corporation Law of the State of Delaware.
THIRD: Pursuant to Sections 242 and 245 of the General Corporation Law
of the State of Delaware, this Restated Certificate of Incorporation (with
Amendments) restates and integrates and further amends the provisions of the
Certificate of Incorporation of the Corporation.
FOURTH: The text of the Restated Certificate of Incorporation (with
Amendments) as heretofore amended and supplemented is hereby restated and
further amended to read in its entirety as follows:
ARTICLE I
The name of the Corporation is Veritas DGC Inc.
ARTICLE II
The registered office of the Corporation in the State of Delaware is
located at 1209 Orange Street in the City of Wilmington, County of New Castle.
The name and address of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
The nature of the business and the objects and purposes to be
transacted, promoted or carried on by the Corporation are to engage in any
lawful act or activity for which corporations may be organized under the
General Corporation Law of Delaware.
ARTICLE IV
Section 1. The aggregate number of shares which the Corporation will
have authority to issue is 41,000,000, of which 40,000,000 will be common
shares, par value $.01 per share, ("Ordinary
1
<PAGE> 2
Shares") and 1,000,000 will be shares of preferred stock, par value $.01 per
share ("Preferred Stock").
Section 2. Preferred Stock. Shares of Preferred Stock may be issued
from time to time in one or more series, each of which is to have a distinctive
designation specified in the resolution or resolutions of the Board of
Directors providing for the issuance of such Preferred Stock from time to time.
Each series of Preferred Stock:
(a) may have such number of shares;
(b) may have such voting powers, full or limited;
(c) may be subject to redemption upon such terms and conditions;
(d) may be entitled to receive dividends (which may be cumulative
or noncumulative) payable in cash, property, rights or securities at such rate
or rates, on such conditions, from such date or dates, and at such times, and
payable in preference to, or in such relation to, the dividends payable on any
other class or series of stock;
(e) may have such rights and preferences upon the dissolution or
liquidation (whether voluntary or involuntary) of the Corporation;
(f) may be made convertible into or exchangeable for other
securities, or cash, or other property or rights at such price or prices or at
such rates of exchange, and with such adjustments;
(g) may be entitled to the benefit of a sinking fund to be applied
to the redemption of shares of such series upon such terms and in such amount
or amounts;
(h) may be subject to such restrictions as to issuance or as to the
powers, preferences or rights of any such other series; and
(i) may have such other preferences, privileges and relative rights;
as in such instance is stated in the resolution or resolutions of the Board of
Directors providing for the issuance of such Preferred Stock. Except where
otherwise set forth in such resolution or resolutions, the number of shares
comprising such series may be increased or decreased (but not below the number
of shares then outstanding from time to time) by like action of the Board of
Directors. Shares of any series of Preferred Stock, which have been redeemed
(whether through the operation of a sinking fund or otherwise) by the
Corporation, or which, if convertible or exchangeable, have been converted into
or exchanged for shares of stock of any other class, will have the status of
authorized but unissued shares of Preferred Stock and may be reissued as a part
of the series of which they were originally a part or may be reclassified and
reissued as part of a new series of Preferred Stock created by resolution or
resolutions of the Board of Directors or as part of any other series of
Preferred Stock, all subject to the conditions or restrictions on issuance set
forth in the
2
<PAGE> 3
resolution or resolutions adopted by the Board of Directors providing for the
issuance of any series of Preferred Stock and to any filing required by law.
Section 3. Ordinary Shares. Ordinary Shares may be issued from time to
time in one or more series. The designations, powers, preferences and relative,
participating, optional and other special rights, and the qualifications,
limitations and restrictions thereon, of the Ordinary Shares of each series
shall be such as are stated and expressed herein, and to the extent not stated
and expressed herein, shall be such as may be fixed by the Board of Directors
and stated and expressed in the resolution or resolutions providing for the
issuance of such Ordinary Shares from time to time; provided, however, that:
(a) except as otherwise provided by law or by the resolution or
resolutions of the Board of Directors providing for the issuance of any series
of Preferred Stock, Ordinary Shares will have the exclusive right to vote for
the election of directors and for all other purposes;
(b) all outstanding Ordinary Shares shall vote together as a single
class on all matters presented to stockholders, with each outstanding share of
each series of Ordinary Shares to have such number of votes as specified herein
or as set forth in the resolution or resolutions of the Board of Directors
authorizing such series; and
(c) no series of Ordinary Shares (except for such series as are
herein designated and except for any increase in the number of shares
constituting such a series) shall be designated by resolution of the Board of
Directors except upon the unanimous approval of all outstanding Ordinary Shares.
Section 4. Special Voting Stock Designated. A series of Ordinary
Shares, consisting of one such share, is hereby designated as "Special Voting
Stock." Each outstanding share of Special Voting Stock shall be entitled at any
relevant date to the number of votes determined in accordance with the "Plan of
Arrangement" (as that term is defined in that certain "Combination Agreement"
dated as of May 10, 1996, by and between Digicon Inc. and Veritas Energy
Services Inc. ("Veritas")) on all matters presented to the stockholders. No
dividend or distribution of assets shall be paid to the holders of Special
Voting Stock. The Special Voting Stock is not convertible into any other class
or series of the capital stock of the Corporation or into cash, property or
other rights, and may not be redeemed. Any shares of Special Voting Stock
purchased or otherwise acquired by the Corporation shall be deemed retired and
shall be canceled and may not thereafter be reissued or otherwise disposed of by
the Corporation. So long as any "Exchangeable Shares" (as that term is defined
in the Combination Agreement) shall be outstanding, the number of shares
comprising the Special Voting Stock shall not be increased or decreased and no
other term of the Special Voting Stock shall be amended, except upon the
unanimous approval of all outstanding Ordinary Shares.
Section 5. Common Stock Designated. All Ordinary Shares not otherwise
designated as to series herein or in a resolution of the Board of Directors
creating another series of Ordinary Shares, is designated as "Common Stock."
Such resulting number of shares may be decreased by resolution of the Board of
Directors and without stockholder action; provided, however, that no decrease
shall reduce the number of shares of Common Stock to a number less than the
number of
3
<PAGE> 4
shares then outstanding plus the number of shares reserved for issuance upon
the exercise of outstanding options, rights and/or warrants, the conversion of
any outstanding convertible securities and/or the exchange of any outstanding
exchangeable securities which are directly or indirectly exercisable for,
convertible into or exchangeable for Common Stock. Each outstanding share of
Common Stock shall be entitled to one vote on all matters presented to the
stockholders. Subject to the rights and preferences of any Preferred Stock
which may be designated and issued, the holders of Common Stock are entitled
(i) to receive such dividends as may be declared thereon from time to time by
the Board of Directors in its discretion, out of any assets of the Corporation
at the time legally available for the payment of dividends and (ii) in the
event of liquidation, dissolution or winding up of the affairs of the
Corporation, whether voluntary or involuntary, or in the event of its
insolvency, to receive any net assets of the Corporation remaining after the
holders of any other classes or series of the Corporation's capital stock which
by their respective terms are senior to the Common Stock as to dividends and
distributions of assets have been paid in full the amounts to which they
respectively are entitled or a sum sufficient for such payment in full has been
set aside.
Section 6. No holder of securities of the Corporation shall have any
preemptive right to acquire any shares or securities of any kind, whether now
or hereafter authorized, which may at any time be issued, sold or offered for
sale by the Corporation.
ARTICLE V
The existence of the Corporation is to be perpetual.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
(a) to authorize and cause to be executed mortgages and liens upon
the real and personal property of the Corporation;
(b) to set apart out of any of the funds of the Corporation
available for dividends a reserve or reserves for any proper purpose and to
abolish any such reserve in the manner in which it was created; and
(c) when and as authorized by the affirmative vote of the holders
of a majority of the stock issued and outstanding having voting power given at a
stockholders' meeting duly called upon such notice as is required by statute to
sell, lease or exchange all or substantially all of the property and assets of
the Corporation, including its goodwill and its corporate franchises, upon such
terms and conditions and for such consideration, which may consist in whole or
in part of money or property including securities of any other corporation or
corporations, as the Board of Directors shall deem expedient and for the best
interests of the Corporation.
4
<PAGE> 5
ARTICLE VII
Meetings of stockholders may be held within or without the State of
Delaware, at such date and time as is requested by the person or persons
calling the meeting, within the limits fixed by law. Special meetings of
stockholders of the Corporation for any purpose or purposes may only be called
by a majority of the entire Board of Directors, by the Chairman of the Board
or the President of the Corporation. Special meetings may not be called by any
other person or persons. The books of the Corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of
Directors or in the Bylaws of the Corporation. Elections of directors need not
be by written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE VIII
The Corporation reserves the right to amend, alter, change or repeal
any provisions contained in this Restated Certificate of Incorporation (with
Amendments), in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE IX
The number of directors of the Corporation shall be not less than three
nor more than ten, the exact number to be fixed by the Board of Directors as
provided in the Bylaws. Any vacancy created by an increase in the number of
directors in accordance with the Bylaws may only be filled by the Board of
Directors. A director of the Corporation may only be removed by a majority vote
of the stockholders entitled to elect such director.
ARTICLE X
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that the foregoing clause shall not
apply to any liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the Corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Delaware General Corporation Law. Any
repeal or modification of this paragraph by the stockholders of the Corporation
shall be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of
such repeal or modification.
5
<PAGE> 6
The Corporation shall indemnify its officers and directors to the
fullest extent permitted by the Delaware General Corporation Law as the same
may be in effect from time to time.
ARTICLE XI
The Corporation expressly elects not to be governed by Section 203 of
the Delaware General Corporation Law.
ARTICLE XII
Notwithstanding any other provisions herein to the contrary, so long as
any Exchangeable Shares are outstanding, the Corporation shall (i) fully comply
with all terms of the Exchangeable Shares and with all contractual obligations
of the Corporation associated with such Exchangeable Shares and (ii) not amend,
alter, change or repeal this Article XII except upon the unanimous approval of
all outstanding Ordinary Shares.
6
<PAGE> 1
EXHIBIT 4-A
<TABLE>
<S> <C> <C> <C>
INCORPORATED UNDER THE LAWS COMMON STOCK
OF THE STATE OF DELAWARE PAR VALUE $.01
- --------- [VERITAS DGC INC. LOGO] ---------
NUMBER SHARES
- --------- ---------
THIS CERTIFICATE IS TRANSFERABLE CUSIP 92343P 10 7
IN NEW YORK, N.Y. OR DALLAS, TX SEE REVERSE FOR CERTAIN DEFINITIONS
AND RESTRICTIONS ON TRANSFER
VERITAS DGC INC.
---------------------------------------------------------------------------------------------------
This Certifies that
SPECIMEN
is the owner of
---------------------------------------------------------------------------------------------------
FULLY-PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK OF
Veritas DGC Inc. transferable on the books of the Corporation by the holder hereof in person or by
duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate
and the shares represented hereby are issued and shall be subject to all the provisions of the
Certificate of Incorporation of the Corporation (copies of which are on file with each Transfer
Agent and Registrar), as now or hereafter amended, to all of which the holder hereof by acceptance
hereof assents. This Certificate is not valid unless countersigned and registered by a Transfer Agent
and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized
officers. [SEAL]
Dated:
/s/ STEPHEN J. LUDLOW COUNTERSIGNED AND REGISTERED
PRESIDENT CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
/s/ RENE VANDENBRAND By
SECRETARY AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 2
The Corporation will furnish without charge to each stockholder who
so requests the designations, preferences and relative, participating, optional
or other special rights of each class of stock or series thereof of the
Corporation, and the qualifications, limitations, or restrictions of such
preferences and/or rights. Such request may be made to the Corporation or any
Transfer Agent and Registrar.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not
as tenants in common
Additional abbreviations may also be used though not in the above list.
UNIF GIFT MIN ACT -- ___________ Custodian _____________
(Cust) (Minor)
under Uniform Gifts to Minors
Act ___________
(State)
For Value Received, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
______________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________ Shares
of the stock represented by the within certificate, and do hereby irrevocably
constitute and appoint _______________________________________________ Attorney
to transfer the same on the books of the within named Corporation with full
power of substitution in the premises.
Dated ______________
NOTICE:
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
x
--------------------------------------
(SIGNATURE)
x
--------------------------------------
(SIGNATURE)
- --------------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO
S.E.C. RULE 17Ad-15.
- --------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 5
August 19, 1996
Digicon Inc.
3701 Kirby Drive, Suite 112
Houston, Texas 77098
Re: Digicon Inc. -- Registration Statement on Form S-3
Gentlemen:
We have acted as counsel to Digicon Inc., a Delaware corporation
("Company"), in connection with the preparation for filing with the Securities
and Exchange Commission of a Registration Statement on Form S-3 (the
"Registration Statement") under the Securities Act of 1933, as amended. The
Registration Statement relates to an aggregate of 7,023,701 shares (the
"Shares") of the Company's common stock, par value $.01 per share (the "Common
Stock"), issuable on exchange of the exchangeable shares of Veritas Energy
Services Inc., an Alberta corporation, as described in the Registration
Statement.
We have examined such corporate records, documents, instruments and
certificates of the Company and have reviewed such questions of law as we have
deemed necessary, relevant or appropriate to enable us to render the opinion
expressed herein. In such examination, we have assumed without independent
investigation the authenticity of all documents submitted to us as originals,
the genuineness of all signatures, the legal capacity of all natural
persons, and the conformity of any documents submitted to us as copies to their
respective originals. As to certain questions of fact material to this opinion,
we have relied without independent investigation upon statements or
certificates of public officials and officers of the Company.
Based upon such examination and review, we are of the opinion that the
Shares have been duly and validly authorized and will, upon issuance and
delivery as described in the Registration Statement, be validly issued, fully
paid and nonassessable outstanding shares of the Common Stock.
This Firm consents to the filing of this opinion as an exhibit to the
Registration Statement and further consents to all references to this Firm
in Registration Statement.
Very truly yours,
/s/ PORTER & HEDGES, L.L.P.
PORTER & HEDGES, L.L.P.
<PAGE> 1
EXHIBIT 8-A
[PROSPECTUS OPINION AND CONSENT]
(403) 260-3312
10587(10)
[August __, 1996]
Veritas Energy Services Inc.
300, 615-3 Avenue S.W.
Calgary, Alberta
T2P 0G6
Dear Sirs:
RE: CANADIAN INCOME TAX OPINION
PROSPECTUS (AUGUST __, 1996) AND FORM S-3
We are Canadian tax counsel to Veritas Energy Services Inc. ("Newco
Sub").
Newco Sub and Veritas DGC Inc. (formerly Digicon, Inc., hereinafter
referred to as "Newco") previously entered into an arrangement pursuant to
which holders of Newco Sub common shares (the "Newco Sub Common Shares")
received securities of Newco Sub (the "Exchangeable Shares") in exchange for
Newco Sub Common Shares at a ratio of 0.8 Exchangeable Shares for each Newco
Sub Common Share, Newco and Newco Sub will be offering shares of Newco Common
Stock (the "Newco Common Stock") to holders of Exchangeable Shares pursuant to
the terms of the Exchangeable Shares, which obligate Newco and Newco Sub to
effect such exchanges when, as, and if Exchangeable Shares are presented by the
holders thereof for exchange.
<PAGE> 2
-2-
We have been engaged to express an opinion on the Canadian federal
income tax implications that will arise on the exchange of the Exchangeable
Shares for the Newco Common Stock.
In forming our opinion, we have relied upon the Income Tax Act (Canada)
(the "Canadian Tax Act"), income tax regulations ("Regulations") enacted
thereunder, proposed amendments to the Canadian Tax Act and Regulations, and our
understanding of the current administrative practices of Revenue Canada,
Customs, Excise and Taxation ("Revenue Canada"). Our opinion takes into account
any amendments to the Canadian Tax Act and Regulations publicly announced prior
to the date hereof and assumes that all such proposed amendments will be enacted
in their present form, although no assurance can be given that such will be the
case. Our opinion does not take into account or anticipate any changes in law,
whether by legislative, administrative or judicial decision or action.
Our opinion is based on information provided in the Prospectus of Newco
dated August __, 1996 (the "Prospectus"). We assume that all transactions will
be implemented as described in the Prospectus.
In our opinion, the exchange by holders of an Exchangeable Share for
Newco Common Stock will not be a tax-deferred event for purposes of the
Canadian Tax Act. The liability for, and amount of Canadian income taxes
exigible on, the exchange will depend on a variety of circumstances, including
the residency of the holder and the method of the exchange. The particulars are
more fully set out in the Prospectus under "Income Tax Considerations -
Canadian Federal Income Tax Considerations".
We hereby consent to the use of our firm name in the Prospectus under
the subheading "Canadian Federal Income Tax Considerations" and the heading
"Legal Opinions".
Yours very truly,
FELESKY FLYNN
<PAGE> 1
EXHIBIT 8-B
[Form of Prospectus Opinion and Consent
to be Issued by Porter & Hedges, L.L.P.]
[August , 1996]
Veritas DGC Inc.
3701 Kirby Drive, Suite 112
Houston, Texas 77098
Re: United States Federal Income Tax Opinion
Prospectus (August , 1996) and Form S-3
Gentlemen:
We are United States federal tax counsel to Veritas DGC Inc.
("Newco").
Newco and Veritas Energy Services Inc. (hereinafter referred to as
"Newco Sub") previously entered into an arrangement pursuant to which holders
of Newco Sub common shares (the "Newco Sub Common Shares") received securities
of Newco Sub (the "Exchangeable Shares") in exchange for Newco Sub Common
Shares at a ratio of 0.8 Exchangeable Shares for each Newco Sub Common Share.
Newco and Newco Sub will be offering a new class of securities of Newco common
stock (the "Newco Common Stock") to holders of Exchangeable Shares pursuant to
the terms of the Exchangeable Shares, which obligate Newco and Newco Sub to
effect such exchanges when, as, and if Exchangeable Shares are presented by
the holders thereof for exchange.
We have been engaged to express an opinion on the United States federal
income tax consequences of the exchange of Exchangeable Shares for Newco Common
Stock by United States Holders, as defined in the Prospectus of Newco dated
August , 1996 (the "Prospectus").
Our opinion has been requested by Newco on behalf of itself, Newco Sub
and United States Holders (as defined in the Prospectus) who exchange
Exchangeable Shares for Newco Common Stock pursuant to the Prospectus. No other
individual or entity may rely upon this opinion without the express, prior
written consent of both Newco and the undersigned.
Our opinion is limited to United States federal income tax matters
discussed herein and in the Prospectus. The opinion does not deal with the
specific circumstances of any particular holder of Exchangeable Shares, nor
does it cover the application of state, local, foreign or other tax laws.
<PAGE> 2
Veritas DGC Inc.
August ___, 1996
Page -2-
Further, our opinion is based on information provided in the Prospectus and we
assume that all transactions will be implemented as described in the
Prospectus.
We note that the opinion of counsel has no binding effect or official
status of any kind with the Internal Revenue Service or the courts. If there
were ultimately an adverse determination as to any of the United States tax
issues discussed herein or in the Prospectus, United States Holders could
sustain different tax consequences than are described herein or in the
Prospectus. Further, our opinion is based upon the Internal Revenue Code of
1986, regulations promulgated or proposed thereunder and interpretations thereof
by the Internal Revenue Service and the courts, all as of the date of the
Prospectus. All of such rules could change with retroactive effect, and our
opinion could be adversely affected or rendered obsolete by any such change. We
have no duty, and do not intend, to update or modify this opinion for changes in
the applicable law, regulations or interpretations occurring after the date of
the Prospectus. Similarly, any change in the facts and assumptions stated above,
upon which this opinion is based, could modify our conclusions.
Subject to the foregoing and the discussion in the Prospectus, in our
opinion a United States Holder that exercises such holder's right to exchange
its Exchangeable Shares for shares of Newco Common Stock will generally
recognize gain or loss on such exchange for United States federal income tax
purposes.
We participated in the preparation of the discussion set forth in the
Prospectus under the heading "United States Tax Considerations," and, except
as otherwise provided therein, the legal conclusions with respect to United
States federal income tax matters set forth therein reflect our opinion and we
believe they are accurate and complete in all material respects.
We hereby consent to the use of our firm name in the Prospectus and to the
filing of this opinion as part of the Prospectus. This consent does not
constitute an admission that we are "experts" within the meaning of such term
as used in the United States Securities Act of 1933.
Yours very truly,
PORTER & HEDGES, L.L.P.
<PAGE> 1
EXHIBIT 23-A
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration Statement of
Digicon Inc. on Form S-3 of our reports dated October 12, 1995 (July 15, 1996
as to Note 10, 20 and 21) appearing in the Annual Report on Form 10-K of
Digicon Inc. for the year ended July 31, 1995, as amended by Form 10-K/A dated
June 17, 1996, Form 10-K/A-2 dated July 19, 1996 and Form 10-K/A-3 dated August
20, 1996 and to the reference to us under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
We consent to the incorporation by reference in this Registration Statement
of Digicon Inc. on Form S-3 of our report dated March 10, 1995 (which expresses
an unqualified opinion and includes an explanatory paragraph concerning the
ability of such entities to continue as a going concern) on the combined
financial statements of DG Seis Overseas Limited and MD Seis Geophysical Co.
Ltd. and Seismic Technology, Inc. as of December 31, 1994 and for the period
from April 1, 1994 (date of inception) to December 31, 1994 appearing in Form
10-K/A of Digicon Inc. dated June 17, 1996.
We also consent to the incorporation by reference in this Registration
Statement of Digicon Inc. on Form S-3 of our report dated August 16, 1996 on
the financial statements of P. T. Digicon Mega Pratama as of July 31, 1995 and
1994 and for each of the three years in the period ended July 31, 1995
appearing in Form 10-K/A-3 of Digicon Inc. dated August 20, 1996.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Houston, Texas
August 20, 1996
<PAGE> 1
EXHIBIT 23-B
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated December 11, 1995 which appears on page F-31 of the Definitive Joint
Management Information Circular and Proxy Statement of Digicon Inc. and Veritas
Energy Services Inc. dated July 19, 1996. We also Consent to the references to
us under the heading "Experts" in such prospectus.
/s/ PRICE WATERHOUSE
PRICE WATERHOUSE
Chartered Accountants
Calgary, Alberta
August 15, 1996
