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As Filed With the Securities and Exchange Commission on January 21, 1997
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
HARISTON CORPORATION
(Exact Name of Issuer as Specified in its Charter)
CANADA 33-0645339
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1500 WEST GEORGIA STREET, SUITE 1555
VANCOUVER, B.C. V6G 2Z6, CANADA
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(Address of Principal Executive Offices)
1996 HARISTON CORPORATION
STOCK OPTION PLAN NO. 2
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(Full Title of the Plan)
L. JAMES PORTER
1500 WEST GEORGIA STREET, SUITE 1555
VANCOUVER, B.C. V6G 2Z6, CANADA
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(Name and Address of Agent for Service)
(604) 685-8514
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(Telephone Number)
COPY TO:
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Scott Santagata, Esq.
Rutan & Tucker
611 Anton Boulevard, Suite 1400
Costa Mesa, California 92626
Approximate date of proposed commencement of sales: As soon as practicable after
the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be Registered Registered Share (1) Price (1) Registration Fee
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Common Stock, no par value 2,000,000 Shares $0.38 $760,000 $262.07
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(1) Estimated solely for purposes of calculating the fee and computed in
accordance with Rules 457(c) and 457(h) as of January 15, 1997.
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PROSPECTUS
2,000,000 SHARES
HARISTON CORPORATION
COMMON STOCK
(NO PAR VALUE)
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The securities covered by this Prospectus consist of 2,000,000 shares
of Common Stock, no par value (the "Common Stock") of Hariston Corporation, a
Canadian corporation (the "Company") issuable to optionees upon exercise of
options (the "Options") which have been or may be granted under the 1996
Hariston Corporation Stock Option Plan No. 2 (the "Plan").
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PURCHASE OF THE SECURITIES OFFERED HEREBY SHOULD ONLY BE MADE AFTER
CONSIDERATION OF CERTAIN ASPECTS OF THE COMPANY'S BUSINESS AND FINANCIAL
CHARACTERISTICS. SEE "RISK FACTORS," COMMENCING ON PAGE 6.
The prices for the shares covered by this Prospectus which are or may
be subject to outstanding Options are and will be as specified in the various
Stock Option Agreements governing the issuance of such shares.
This Prospectus does not cover resales of shares acquired hereunder.
Officers or directors of the Company may not publicly resell shares acquired
hereunder without compliance with Rule 144 promulgated under the Securities Act
of 1933, as amended (the "Act") or registration under the Act.
AN OFFICER OR DIRECTOR OF THE COMPANY WHO SELLS SHARES OF THE COMMON
STOCK OF THE COMPANY WITHIN SIX MONTHS BEFORE OR AFTER THE PURCHASE OF SHARES OR
THE GRANTING OF OPTIONS UNDER THE PLAN MAY BE OBLIGATED UNDER SECTION 16(b) OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND THE
RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") PROMULGATED THEREUNDER, TO PAY TO THE COMPANY ALL OR A PORTION OF
ANY AMOUNT OF THE SALES PRICE RECEIVED FOR THE SHARES SOLD IN EXCESS OF THE
PRICE PAID FOR THE SHARES PURCHASED. OFFICERS AND DIRECTORS OF THE COMPANY ARE
ADVISED TO CONSULT THEIR INDIVIDUAL COUNSEL IN THIS REGARD PRIOR TO THE PURCHASE
OR SALE OF ANY SUCH SHARES OR THE ACCEPTANCE OF AN OPTION TO ACQUIRE SHARES
UNDER THE PLAN.
No person has been authorized to give any information or to make any
representations, other than those contained in this Prospectus and in any
exhibit to the Registration Statement of which this Prospectus is a part (the
"Registration Statement") in connection with the offer made hereby, and if given
or made, such information or representations must not be relied upon as having
been authorized by the Company. This prospectus does not constitute an offer in
any jurisdiction in which such offer may not lawfully be made.
Statements made in this Prospectus, unless the context indicates
otherwise, are made as of the date of this Prospectus. Neither delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the Company since
the date hereof.
The date of this Prospectus is __________, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act, and in accordance therewith files reports and other information
with the Commission. Certain information concerning the Company is disclosed in
proxy statements and annual reports distributed to shareholders of the Company
and filed with the Commission. Such proxy statements, reports and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549
and at certain of its regional offices, located at 7 World Trade Center, Suite
1300, New York, New York 10048; 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661; and 5670 Wilshire Boulevard, 11th Floor, Los Angeles, California
90036. Copies of all such material may be obtained from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. In addition, copies of such reports, proxy statements and
other information concerning the Company may be inspected at the offices of the
National Association of Securities Dealers.
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TABLE OF CONTENTS
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Page
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THE COMPANY...................................................................... 4
RISK FACTORS..................................................................... 6
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................. 12
DESCRIPTION OF THE PLAN.......................................................... 13
History and Duration......................................................... 13
Purpose...................................................................... 13
Eligibility.................................................................. 13
Administration............................................................... 13
Shares Subject to Options.................................................... 13
Adjustment Provisions........................................................ 14
Effect of Certain Corporate Transactions..................................... 14
Types of Options............................................................. 14
Option Price................................................................. 14
Limitations.................................................................. 15
Exercise of Options.......................................................... 15
Nontransferability of Options................................................ 15
Restrictions on Resale....................................................... 15
Termination of Options....................................................... 15
Amendment of Plan............................................................ 17
Privileges of Stock Ownership................................................ 17
Tax Withholding.............................................................. 17
Federal Income Tax Consequences.............................................. 17
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THE COMPANY
GENERAL
Hariston Corporation ("Hariston" or the "Company") is a Canadian holding
company which has historically made investments in a wide variety of start-up or
early-stage businesses. Within the last eighteen months, management commenced
efforts to sell certain of its assets and subsequently invested the proceeds in
a business or businesses that might offer the potential to increase long-term
share value.
In July 1995, the Company sold Metanetix Corporation and related technology
to Consolidated Western and Pacific Corporation ("Consolidated"), its partner in
the development of a metals recovery project in Butte, Montana, for a purchase
price of up to $9 million, with payments dependent upon the Butte project's
future profitability. Consolidated subsequently informed the Company that it did
not want to acquire the related technology license, thereby reducing the maximum
purchase price to approximately $7 million.
In August 1995, the Company sold its ownership interests in approximately 40
Canadian oil and natural gas properties to a private third party for $2.4
million cash and the assumption of $979,000 of debt. During this period, the
Company also sold a portion of its investment in Madison Partners Limited, as
market conditions would allow.
Concurrently with these divestitures, the Company's Board of Directors
adopted a strategy to position the Company, through one or more select
acquisitions, as a publisher and distributor of educational multimedia software.
In August 1995, Hariston, through a wholly-owned subsidiary, acquired certain
assets and liabilities of a CD-ROM catalog retailer doing business under the
name "Educorp." Located in San Diego, this subsidiary has since been renamed
Educorp Direct ("Direct"), with a strategic focus on the direct marketing and
distribution of educational CD-ROM software. The businesses previously operated
under the name "Educorp" which were acquired in August 1995 may be deemed a
predecessor of the Company.
In January 1996, Hariston, through a wholly-owned subsidiary, completed the
purchase of certain assets and liabilities of a book and multimedia software
publisher known as HighText Publications, Inc. Also located in San Diego, and
since renamed HighText Interactive, Inc. ("HighText"), this subsidiary is
focused on the development and publishing of adult-learning interactive
multimedia software.
Direct and HighText are operated as the sole operating subsidiaries of
Educorp Multimedia, Inc. ("Educorp"), Hariston's multimedia software subsidiary.
Educorp is positioned as a developer, publisher, and distributor of interactive
multimedia software with an emphasis on adult-learning titles.
Hariston's other major remaining asset is its investment in Polish Life
Improvement, S.A. ("PLI"), an early stage home improvement retailer, co-founded
by the Company in 1992. Following several partial sales from the Company's
initial stock ownership position in PLI, Hariston now retains an approximately
26% ownership interest in PLI. PLI operates four home-improvement stores under
the name NOMI. PLI generated unaudited total revenues of approximately $33
million in 1995, an increase of 120% over the prior year. These included
revenues from PLI's supermarket operations, which were sold in 1996.
Hariston's strategy is to seek to increase Company value through the
independent development and growth of Educorp, and to continue to explore
possibilities for maximizing value from its investment in PLI. As a 100% owned
subsidiary, Educorp is currently the Company's primary focus.
The principal offices of the Company are located at 1500 West Georgia
Street, Suite 1555, Vancouver, British Columbia V6G 2Z6, Canada, telephone (604)
685-8514.
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A description of the Company's business is set forth in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1995 (the "Company
Form 10-K"), as amended, which description is incorporated herein by this
reference.
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RISK FACTORS
The Securities offered hereby are highly speculative in nature and involve a
high degree of risk. Prospective investors should carefully consider, along with
the other information contained in this Prospectus, the following factors and
risks in evaluating an investment in the Company.
Risk of Inability to Satisfy Requirements for Additional Funds. The
Company's principal capital requirements include working capital to finance the
internal expansion of Educorp, and costs which may be incurred in connection
with the acquisition of businesses in the future. Historically, the Company has
also required capital to finance operating losses. With the subsequent
acquisition of HighText, and the need to finance product development and general
corporate expenses until both Direct and HighText earn a sufficient profit, the
Company will have to raise additional equity and/or debt capital in 1997. To the
extent excess cash is generated from operations, the Company intends to reinvest
it in the growth and development of its multimedia software publishing and
distribution operations. There is no assurance that cash flows from operations
will be sufficient to meet operating requirements or, if required, that
additional debt or equity financing will be available at all, or will be
available on terms acceptable to the Company. Any additional equity financings
may be dilutive to shareholders, and debt financing, if available, may involve
restrictive covenants. Adequate funds for the Company's operations may not be
available when needed or on terms acceptable to the Company. The Company's
inability to obtain additional financing when needed would have a material
adverse effect on the Company.
Risk from Accumulated Deficit, Tangible Net Worth and Operating Losses. As
of December 31, 1995, the Company had an accumulated deficit of approximately
$25,626,000 and negative tangible net worth of approximately $406,000. For the
year ended December 31, 1995, the Company had an operating loss of approximately
$1.8 million. There can be no assurance that the Company's continuing operations
will result in net income.
Risk from Competitors of Educorp. The software industry is intensely
competitive. Educorp competes primarily against other companies that publish or
distribute multimedia CD-ROM software in the education, entertainment, and
reference categories. Educorp has competition in several areas. As a distributor
of third party titles, Educorp competes with other direct marketing companies
such as Micro Warehouse, Tiger Direct, Multiple Zones, and Creative Computers.
On the retail level, Educorp competes with large computer retailers such as Comp
USA, Computer City, Best Buy, and Micro Center; software vendors such as
Egghead; and mass merchants such as Toys R Us, Walmart, Price/Costco and Sears.
As a software developer and publisher, Educorp competes indirectly against
developers and publishers that sell multimedia titles outside of Educorp's
subject focus, and directly against software developers and publishers that
offer multimedia product for the adult consumer, higher education, and corporate
management and training markets. Examples of established competitors include
Softkey, Cliff Studyware, Princeton Review, and Export Software. Products in the
market compete primarily on the basis of subjective factors such as
entertainment value and objective factors such as price, graphics and sound
quality. Large diversified entertainment, cable and telecommunications
companies, in addition to large software companies such as Microsoft
Corporation, are increasing their focus on the interactive entertainment and
education software market, which will result in even greater competition for
Educorp. Many of these companies have substantially greater financial, marketing
and technical resources than Educorp. As competition increases, significant
price competition and reduced profit margins may result. In response to
increased competition for shelf space, Educorp may need to increase marketing
expenditures. In addition, competition from new technologies (such as new
hardware platforms) may reduce demand in markets in which Educorp has
traditionally competed. Manufacturers and developers of cartridge-based video
games, such as Nintendo and Sega and their licensees, also are indirect
competitors of Educorp. Prolonged price competition or reduced demand as a
result of competing technologies would have a material adverse effect on
Educorp's business, financial condition and operating results. There can be no
assurance that Educorp will be able to compete successfully against
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current or future competitors or that competitive pressures faced by Educorp
will not materially and adversely affect its business, operating results or
financial condition.
Risk from Uncertainty of Market Acceptance. Consumer preferences for
adult-learning, education and entertainment software products are continually
changing and are extremely difficult to predict. Few such products achieve
sustained market acceptance. There can be no assurance that new products
distributed or introduced by Educorp will achieve any significant degree of
market acceptance or that any such acceptance, if achieved, will be sustained
for a sufficient period of time to permit Educorp to recover its development and
marketing costs. There can be no assurance that HighText's products will be
accepted by the adult-learning market to the extent necessary for such products
to be profitable or even for HighText to recover its development and marketing
costs related to such products. In addition, Educorp believes that as ownership
of CD-ROM-based personal computers ("PC's") and other emerging platforms becomes
more widespread, and as Educorp diversifies its product offerings, it must
market its products to a broader market than it has in the past, thereby
increasing overall marketing expenditures without any assurance of profitability
justifying expansion into such broader markets. In seeking to appeal to a
broader market, Educorp will face significant new challenges, including intense
competition from larger companies with established market positions. Educorp
will also face the risk that it may lose existing customers who may dislike the
changes in Educorp's products and marketing approach. There can be no assurance
that Educorp will be able to compete successfully in this broader market.
Risk from Dependence on Vendors. Educorp either purchases or licenses a
material proportion of its products, or certain rights to products, from
vendors. The termination or interruption of Educorp's relationships with these
vendors, or modification of the terms or discontinuance of the license
agreements with Educorp, could adversely affect Educorp's operating income and
cash flow. Educorp's success is, in part, dependent upon the ability of its
vendors to develop and market products that meet the changing requirements of
the marketplace. Similarly, even if certain of Educorp's vendors introduce new
products that are popular, there can be no assurance that Educorp will be able
to obtain authorizations to offer such products.
Risk of Diminished Ability to Compete Resulting from Changing Methods of
Distribution. The manner in which personal computers and related software and
products are distributed and sold is changing, and new methods of distribution
and sale, such as on-line shopping services and catalogs published on CD-ROM,
may emerge. Hardware and software vendors have sold, and may intensify their
efforts to sell, their products directly to end users. From time to time,
certain vendors have instituted programs for the direct sale of large order
quantities of software to certain major corporate accounts. These types of
programs may continue to be developed and used by various vendors. Vendors also
may attempt to increase the volume of software products distributed
electronically to end users' personal computers. Any of these competitive
programs, if successful, could have a material adverse effect on Educorp's
business and financial results.
Risk from Rising Postage, Shipping and Paper Costs. Postage and shipping are
significant expenses in the operation of Educorp's business. Educorp ships its
products to customers by overnight delivery and ground delivery services and
generally mails its catalogs through the U.S. Postal Service. As is customary in
the direct response marketing industry, Educorp generally passes on only a
portion of the costs of overnight delivery and parcel shipments directly to
customers as separate shipping and handling charges. Any increases in postal or
shipping rates in the future could therefore have an adverse effect on Educorp's
operating results. The cost of paper is also a significant expense of Educorp in
printing its catalogs. The cost of paper has increased significantly over the
last several years. Educorp may not be able to pass through a significant
portion of these increased postage and paper costs to its customers through
increased prices, thereby having a material adverse effect on Educorp's business
and financial results.
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Risk of Delays in Introduction of New Products. Educorp's success depends on
its ability to identify, develop and make timely introductions of successful new
products or enhancements of existing products to replace declining revenues from
older products. The effective lives of the products that Educorp distributes
have tended to become shorter due to the introduction of new hardware platforms,
technologies and competitive products, the increase in competition for retail
shelf space among software products and other factors. As a result, Educorp's
ability to introduce and distribute new products on a timely basis has become
increasingly important, as revenues from new products are essential to replace
declining revenues from older products. As its products have become more complex
and costly to develop and market, it has become more difficult to bring products
to market profitably. It is highly likely that Educorp will experience delays in
developing and introducing at least some future new products. There can be no
assurance that such delays will not have a material adverse effect on Educorp's
business and operating results.
Risk from Increasing Complexities and Technical Sophistication of Newly
Developed Products. Because of increasing competition in the adult-learning
interactive software market and as a result of increasingly sophisticated
products, HighText must develop titles incorporating high-quality graphics,
animation, images, video and audio. Such increasing competition and
sophistication has necessitated the allocation of increased financial and human
resources to new product development, packaging, preparation of user
instructional materials and marketing. Due to competitive pressures, however,
HighText's ability to increase product prices is limited. Greater product
development, identification and marketing expenditures also result in greater
financial risk to HighText if the product is not successful.
Risk from Business Interruption. Educorp believes that its success to date
has been, and future results of operations will be, dependent in large part upon
its ability to provide prompt and efficient service to its customers. As a
result, any disruption of the Educorp's day-to-day operations could have a
material adverse effect upon Educorp and any failure of Educorp's management
information systems, distribution center or telephone system could impair its
ability to receive and process customer orders and ship products on a timely
basis.
Risk from Seasonality and Substantial Fluctuations in Revenue. Educorp's
business is seasonal, with the highest level of net sales and earnings typically
occurring during the months from August to January of each year, and
substantially lower levels in other months. Educorp's quarterly operating
results may fluctuate throughout the year as a result of a variety of additional
factors, including delays in market acceptance, changes in platform standards,
the timing of new product introductions by Educorp or its competitors, the
timing of orders for Educorp's products and increases in product returns.
Because a majority of the unit sales for a particular new product typically
occurs in the first several months after the product is introduced, Educorp's
revenues may increase in a quarter in which a major product introduction occurs
and may decline in subsequent quarters.
Risk from Dependence on Key Personnel. Educorp's success depends on the
continued service of its key product design, development, sales, marketing and
management personnel and its ability to continue to attract, motivate and retain
highly qualified employees and contractors. In order to introduce timely and
successful new products, Educorp must retain its key design, development and
purchasing personnel. Competition for skilled product buyers, designers, artists
and technical personnel is intense. The inability of Educorp to attract or
retain product buyers and key design and development personnel could have a
material and adverse effect on Educorp's business and operating results.
International Risks. Educorp believes that international sales may continue
to account for a material share of Educorp's total revenues in the future.
International sales are subject to inherent risks, including changes in export
controls, tariffs and other regulatory requirements and fluctuating exchange
rates. European and Asian distribution channels are more decentralized and hence
more difficult to enter efficiently. Effective competition in international
markets is also likely to require Educorp to translate and culturally adapt its
products and documentation. This will result in higher levels of specialized
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inventory and a greater risk of inventory obsolescence. Furthermore, the laws of
certain foreign countries may not protect Educorp's intellectual property rights
to the same extent as do the laws of the United States. The Company's interest
in PLI is also subject to the risks inherent in transacting business
internationally, such as export and monetary controls, political instability,
language and cultural barriers and fluctuating exchange rates.
Risk of Increased Government Regulation. Legislation has been proposed to
establish an independent agency to work with the video game industry to create a
system for providing parents and other purchasers of software with information
about graphic violence or sexually explicit material contained in such software.
The implementation of such a system may require software publishers to
communicate information regarding the content of their products (particularly
violent or sexually explicit material) to consumers through appropriate package
labeling, advertising and marketing presentations. Similar developments are also
taking place outside the United States. Educorp is unable to predict what
effect, if any, a rating system may have on Educorp's business and there can be
no assurance that such a rating system would not adversely affect Educorp's
results of operations.
Risk from Limited Protection of Proprietary Rights. Educorp regards its
software as proprietary and relies on a combination of patent, trade secret,
copyright and trademark laws, nondisclosure agreements, license agreements and
certain technical measures to protect its proprietary rights. There can be no
assurance that these efforts will be successful. Educorp is aware that
unauthorized copying occurs within the entertainment and education software
industry. It may be possible for third parties to copy Educorp's products or
otherwise obtain and use information that Educorp regards as proprietary.
Policing unauthorized use of Educorp's products is difficult and costly, and
software piracy and unauthorized copying can be expected to be a major
persistent problem. The laws of the United States provide only limited
protection of intellectual property rights, and the laws of certain other
countries in which Educorp's products are or may be distributed provide less
protection. As the number of entertainment and education software products
increases and the functionality of these products overlaps, Educorp believes
that software developers and publishers may increasingly become subject to
infringement claims. From time to time, Educorp may receive communications from
third parties asserting that features or content of certain of its products may
infringe upon intellectual property rights of such parties. There can be no
assurance that claims against Educorp will not result in costly litigation and
require Educorp to license the intellectual property of others. There can be no
assurance that such licenses will be available on reasonable terms, or at all.
Risk of Supply Interruption. Substantially all of Educorp's products are
stored on CD-ROM media. As is typical in the industry, Educorp out-sources the
CD-ROM manufacturing function to third parties. In the future, it is possible
that there may be periodic shortages of CD-ROM media and potentially late
deliveries of CD-ROM products from outside duplicating sources. Educorp's
dependence on third parties to perform the manufacturing function could result
in material problems if production were substantially delayed. Educorp produces
its diskette-based products by duplicating master software diskettes onto blank
diskettes acquired in quantity from a number of sources. Educorp occasionally
has difficulty in obtaining blank diskettes of appropriate quality. In addition,
Educorp has occasionally incurred higher than normal production expenses as a
result of supplementing its internal production staff with outside contractors
to meet production deadlines.
Repatriation Risk. In order to access funds generated by PLI if and when
such excess funds are available, if ever, PLI must either declare and pay
dividends or the Company must sell shares of its PLI stock. PLI is not expected
to declare dividends in the foreseeable future. Although there is currently a
market for PLI's common stock on the Warsaw Stock Exchange, the Company's
ability to sell any of its holdings in PLI is limited. Even if the Company is
more easily able to sell some or all of its PLI common stock, there can be no
assurance that the Company will be able to repatriate the proceeds of such sale.
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Risk of Rapid Industry Changes. The home improvement industry in Poland is
new. As this industry develops in Poland, it is undergoing accelerated change as
producers, manufacturers, distributors and retailers seek to lower costs and
increase services in an increasingly competitive environment of relatively
static over-all demand. More traditional distribution outlets may have more long
term customer loyalty, thus making extrapolation of current trends an
ineffective method of predicting future results. As investors and established
foreign retailers have come to recognize the retail opportunities in Poland, an
increasing number of foreign retailers have entered the market. PLI has
competition, particularly in Warsaw, from several more established, better
capitalized companies. As their home markets become increasingly competitive,
retailers from other countries have opened stores, or acquired an interest in
stores, in Poland. No assurance can be given that increasing competition in
PLI's markets will not adversely affect its financial performance and results of
operations in future periods.
Risk from Changing Economic Conditions. PLI's retail stores are subject to
regional and local economic conditions. There can be no assurance that future
regional or local economic downturns will not have a material adverse effect on
PLI's results of operations and financial condition.
Risk from Competitors of PLI. In its retail operations, PLI competes on the
basis of price, quality and assortment, store location and format, sales
promotions, advertising, availability of parking, hours of operation and store
appeal. To meet the challenges of a rapidly changing and highly competitive
retail environment, PLI must maintain operational flexibility and develop
effective strategies across many market segments. No assurance can be given that
PLI will maintain such flexibility and develop effective strategies.
Investment Risk Resulting from Volatility of Stock Price. The market price
of the Company's Common Stock has been highly volatile. Such volatility does not
necessarily relate to the Company's financial performance. In the future, the
market price of the Company's Common Stock may be significantly affected by
factors such as the announcement of new products or technological innovations by
the Company or its competitors, quarterly variations in the Company's results of
operations, market conditions in the entertainment and education software
industry, market conditions or political instability in Eastern Europe, general
conditions in the financial markets, conditions in the economy in general or
other factors that might affect discretionary spending by consumers. In
addition, the stock market has experienced and continues to experience extreme
price and volume fluctuations that have particularly affected the market price
for many entertainment and education software companies and that have often been
unrelated to the operating performance of these companies. These broad market
fluctuations, as well as general economic and political conditions, may
adversely affect the market price of the shares offered hereby.
Risk from Unprofitable Acquisitions. The Company, in the ordinary course of
its business, considers acquisitions of, and mergers and other strategic
transactions with, third parties on a regular basis, and it is likely that the
Company will engage in more such transactions in the future. Such transactions
often involve substantial risks, and there can be no assurance that any such
transactions that are consummated will prove to be beneficial.
Risk from Litigation. The Company is currently a defendant in one lawsuit
and has received a letter from the Environmental Protection Agency that its
former subsidiary (since amalgamated with the Company) may be a "potentially
responsible party" under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 ("CERCLA").
In September 1995, CAPOZZI, ET AL. V. HARISTON CORPORATION, ET AL., was
filed in the Superior Court of the Province of Quebec, District of Montreal
(Case No. CSM: 500-05-010184-958). The complaint alleges that the Company
(through the actions of persons allegedly acting on its behalf) made
misrepresentations which caused the plaintiffs to suffer a loss in connection
with the plaintiffs'
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transactions in the stock of the Company. The damages claimed in this matter are
approximately CDN $112,000. The litigation is in its preliminary stages, and the
ultimate outcome cannot be determined.
Until mid-1995, the Company's former subsidiary, Metanetix Corporation
("Metanetix") was engaged in the business of developing certain technology for
the removal of minerals and other inorganic compounds from water, soil and
sludge. In connection with these development efforts, Metanetix and affiliated
corporations operated a laboratory and plant in Butte, Montana, at the site of a
former copper mine which held large volumes of contaminated water. The Metanetix
operations involved, among other things, treating contaminated water extracted
from the mine, and returning the treated water to the mine shaft. This mine and
surrounding areas are part of a Superfund Area designated by the Environmental
Protection Agency ("EPA") under CERCLA. Under CERCLA, the EPA designates
"potentially responsible parties," including current and former owners of
property or property rights in the Superfund Area, and operators in connection
therewith, as parties who may be jointly and severally liable for clean-up costs
attributable to hazardous materials on and from their properties.
Pending the EPA's investigation of the mine and surrounding area, the
Company has received notification from the EPA indicating that the EPA believes
Metanetix to be a "potentially responsible party." The designation of a party as
a "potentially responsible party" under CERCLA does not necessarily mean that
party is liable under CERCLA, or that the EPA has decided to assert a CERCLA
claim against that party. Neither the EPA nor any other governmental agency has
made any formal claim that the Company is liable under CERCLA or any other
similar statute with respect to the Butte operations. No assurance can be given,
however, that such a claim will not be made in the future. If such a claim is
made and is successful, the costs (including defense costs), damages and fines
that may be imposed on the Company as a result could have a material adverse
effect on the Company.
Risk from Decision Not to Pay Dividends. The Company has not paid any cash
dividends upon its Common Stock since its inception and, by reason of its
present financial status and its contemplated financial requirements, does not
anticipate paying any cash dividends in the foreseeable future.
Risk from Possible Delisting of Securities from Nasdaq Stock Market. The
Company's Common Stock is listed on the Nasdaq SmallCap Market. For continued
inclusion on the Nasdaq SmallCap Market, the Company will have to maintain
specified levels of total assets and capital and surplus, as well as meeting
additional criteria concerning the minimum bid price of the Common Stock, the
number and value of shares in the public float, the number of active market
makers, and the number of holders of Common Stock.
If the Company is unable to satisfy Nasdaq's maintenance requirements, its
securities may be delisted from Nasdaq. In such event, trading, if any, in the
Common Stock may thereafter be conducted in the over-the-counter market in the
so-called "pink sheets" or the NASD's "Electronic Bulletin Board." Consequently,
the liquidity of the Company's securities could be impaired, not only in the
number of securities which could be bought and sold, but also through delays in
the timing of the transactions, reduction in security analysts' and the news
media's coverage of the Company, and lower prices for the Company's securities
than might otherwise be attained. Furthermore, the Company's Common Stock could
become subject to Rule 15g-9 under the Exchange Act, which imposes additional
sales practice requirements on broker-dealers, including requirements pertaining
to the suitability of the investment for the purchaser and the delivery of
specific disclosure materials and monthly statements. Consequently, this rule
may adversely affect the ability of broker-dealers to sell the Company's
securities and may adversely affect the ability of purchasers in this Offering
to sell any of the securities acquired hereby in the secondary market.
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<PAGE> 13
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended.
(b) The Company's Quarterly Report on Form 10-Q for the quarters ended March
31, June 30, and September 30, 1996.
(d) All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the filing of a post-effective
amendment hereto that indicates that all securities offered hereby have been
sold or which deregisters all securities then remaining unsold.
(e) The description of the Company's Common Stock contained in the Company's
Registration Statement on Form 20-FR previously filed under the Exchange Act on
November 1, 1985, together with any amendment or report filed pursuant to such
act amending or updating such description.
The Company shall provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any and all of the information that has been incorporated by reference herein,
as well as all documents required to be delivered to employees pursuant to Rule
428(b) under the Securities Act of 1933, as amended. Such requests should be
directed to: Chief Financial Officer, Hariston Corporation, 1500 West Georgia
Street, Suite 1555, Vancouver, B.C. V6G 2Z6, Canada, (604) 685-8514.
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<PAGE> 14
DESCRIPTION OF THE PLAN
The following description includes a summary of certain provisions of the
1996 Hariston Corporation Stock Option Plan No. 2 (the "Plan"). The Plan should
be read in full and the summary below is subject to, and qualified in its
entirety by, the full text of the Plan.
HISTORY AND DURATION
The Plan was approved by the Company's Board of Directors and became
effective on August 16, 1996 (the "Effective Date"). Options may be granted
pursuant to the Plan within a period of ten (10) years from the Effective Date
of the Plan.
PURPOSE
The purpose of the Plan is to promote the best interests of the Company and
its shareholders by providing certain officers, directors and employees of the
Company and its subsidiaries ("Eligible Participants") with an opportunity to
acquire a proprietary interest in the Company. The Plan is designated to promote
continuity of management and to increase personal interest in the welfare of the
Company by those employees who are primarily responsible for shaping and
carrying out the long-range plans of the Company and securing the Company's
continued growth and financial success.
ELIGIBILITY
Any Eligible Participant of the Company or its present and future
subsidiaries ("Subsidiaries"), shall be eligible to receive Options under the
Plan.
ADMINISTRATION
The Plan is administered by the Board of Directors or by a committee (the
"Committee") of the Company's Board of Directors (the "Board"). A Committee
appointed by the Board shall consist of not less than three directors, a
majority of whom shall be nonemployee directors within the meaning of Rule
16b-3. References to the Committee herein shall refer to the Board of Directors
if no such Committee has been appointed.
In accordance with the provisions of the Plan, the Committee shall select
the Eligible Participants to whom Options shall be granted; shall determine the
number of shares to be subject to each Option, the time at which the Option is
to be granted, the type of Option, the option period, the option price
(including adjusting the option price for Options already granted) and the
manner in which Options become exercisable; and shall establish such other
provisions of the option agreements as the Committee may deem necessary or
desirable. The Committee is authorized to interpret the Plan and to adopt such
rules and regulations for administration of the Plan as it may deem advisable.
The address of the Committee is: Stock Option Committee, c/o Chief Financial
Officer, Hariston Corporation, 1500 West Georgia Street, Suite 1555, Vancouver,
B.C. V6G 2Z6, Canada and the telephone number is (604) 685-8514. Plan
participants may contact the Committee if they require any additional
information concerning the Plan or its administration.
SHARES SUBJECT TO OPTIONS
Options granted pursuant to the Plan shall be options to purchase the
Company's authorized but unissued common stock, no par value. The maximum
aggregate number of shares which may be delivered upon the exercise of all
Options is 2,000,000, subject to adjustment as described below.
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<PAGE> 15
ADJUSTMENT PROVISIONS
In the event of a capital adjustment resulting from a stock split, reverse
stock split, reorganization, amalgamation or merger, the number of shares of
Common Stock under option in outstanding option agreements shall be adjusted in
a manner consistent with such capital adjustment. The price of any shares under
option shall be adjusted so that there will be no change in the aggregate
purchase price payable upon exercise of any such Option. The determination of
the Committee as to any adjustment shall be final.
EFFECT OF CERTAIN CORPORATE TRANSACTIONS
Notwithstanding any other provision of the Plan, the Board of Directors may
at any time, by notice in writing to all optionees under the Plan in connection
with (i) any proposed sale of all or substantially all of the assets of the
Company, (ii) certain proposed corporate reorganizations of the Company, or
(iii) certain proposed offers to acquire or redeem outstanding securities of any
class of the Company (in each case, a "Proposed Transaction"), require each
optionee to elect either to, within such period as the Board of Directors shall
prescribe,
(a) subscribe and pay for a part or the whole of the shares then
remaining unsubscribed for under the Option (whether or not such Option
would otherwise then be exercisable), or to accept termination of the Option
or to elect to accept payment under subparagraph (b) or subparagraph (c),
below;
(b) accept payment in cash in an amount calculated pursuant to a stated
formula in respect of a part or the whole of the shares then remaining
unsubscribed for under the Option (whether or not such Option would
otherwise then be exercisable), or
(c) if the option price for a part or the whole of the shares exceeds
the market price of the shares on both the date notice is given and on the
date of completion of the Proposed Transaction, accept payment of a total of
$1 in respect of all rights to such shares.
TYPES OF OPTIONS
Certain of the Options issued pursuant to the Plan may constitute incentive
stock options within the meaning of Section 422 of the Internal Revenue Code
(the "Code") and successor provisions thereto ("Incentive Stock Options") and
the remainder of the Options issued under the Plan will constitute nonstatutory
stock options. Certain differences exist between Incentive Stock Options and
nonstatutory stock options which are discussed in more detail below, including
differences in income tax consequences to the option holder and to the Company.
See "Federal Income Tax Consequences," below.
OPTION PRICE
The option price per share of Common Stock shall be fixed by the Committee,
but shall be not less than (1) 85% of the fair market value of the Common Stock
on the date of grant for nonstatutory stock options, (2) 110% of the fair market
value of the Common Stock on the date of grant for Incentive Stock Options
issued to an Eligible Participant owning more than 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary
corporation, within the meaning of section 422(b)(6) of the Code, or (3) the
fair market value of the Common Stock at the date of grant for all other
Incentive Stock Options.
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<PAGE> 16
LIMITATIONS
Certain limitations exist on the number of Incentive Stock Options which may
be granted. The aggregate fair market value of the stock for which Incentive
Stock Options shall become exercisable in any calendar year shall not exceed
$100,000 (U.S.). This limitation applies to options granted both under the Plan
and under other incentive stock option plans of the Company, taken together, and
shall apply separately to each employee granted options. Further, this
limitation applies to each option only in the year in which it first becomes
exercisable.
The Committee may impose any other conditions it deems necessary to qualify
an option as an "Incentive Stock Option" within the meaning of Section 422A of
the Code.
EXERCISE OF OPTIONS
An Option may be exercised, subject to its terms and conditions and the
terms and conditions of the Plan, in full at any time or in part from time to
time by delivery to the Company at the Company's office located at 1500 West
Georgia Street, Suite 1555, Vancouver, B.C. V6G 2Z6, Canada, of a written notice
of exercise specifying the number of shares with respect to which the Option is
being exercised. Any notice of exercise shall be accompanied by full payment of
the option price of the shares being purchased. No shares shall be issued until
full payment therefor has been made.
NONTRANSFERABILITY OF OPTIONS
No Option shall be transferable by an optionee other than by will or the
laws of descent and distribution. Options under the Plan may be exercised during
the life of the optionee only by the optionee or his guardian or legal
representative. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar process,
any Option granted under the Plan, or any right thereunder, contrary to the
provisions hereof, shall be void and ineffective, shall give no right to the
purported transferee, and shall, at the sole discretion of the Committee, result
in forfeiture of the Option with respect to the shares involved in such attempt.
RESTRICTIONS ON RESALE
Under Section 16 of the Exchange Act, any person who is a beneficial owner
of more than 10% of any equity security of the Company registered under the
Exchange Act (such as the Common Stock), or an officer or director of the
Company may be liable to the Company for profit realized from any purchase (or
option grant) and sale (or any sale and purchase (or option grant)) of any
equity security of the Company within a period of less than six months,
irrespective of such person's intention in entering into the transaction. In
determining whether a person is the beneficial owner of stock, such person may
be required to include shares issuable on exercise of options of warrants or
upon conversion of convertible securities. The term "equity security" may
include rights to acquire capital stock upon exercise of warrants or options or
upon conversion of convertible securities, or otherwise.
ELIGIBLE PARTICIPANTS ARE ADVISED TO CONSULT WITH COUNSEL AS TO THEIR STATUS
AS AN "AFFILIATE" OF THE COMPANY AND AS TO THE APPLICABILITY OF SECTION 16 OF
THE EXCHANGE ACT TO THE PURCHASE (OR OPTION GRANT) AND SALE (OR SALE AND
PURCHASE (OR OPTION GRANT)) OF SHARES OF COMMON STOCK OR OTHER EQUITY SECURITY
OF THE COMPANY WITHIN ANY SIX-MONTH PERIOD, WHETHER OR NOT SUCH SHARES OR
SECURITIES WERE PURCHASED THROUGH EXERCISE OF OPTIONS.
TERMINATION OF OPTIONS
Except as provided in the Plan, an Option granted under the Plan to an
Eligible Participant may be exercised only while the recipient is an employee or
director of the Company or any of its Subsidiaries.
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<PAGE> 17
Subject to the terms of any option agreement, in the event an Eligible
Participant ceases to be employed by (or a director of) the Company or a
subsidiary each option granted under the Plan shall terminate as follows:
(a) With respect to Incentive Stock Options not then exercisable, at
the time the Eligible Participant's employment is terminated; and
(b) With respect to Incentive Stock Options then exercisable:
(1) At the time the Eligible Participant's employment is
terminated if his employment is terminated for fraud, theft or
embezzlement committed against the Company or a subsidiary, affiliated
entity or customer of the Company, or for conflict of interest (other
than legitimate competition); or
(2) At the expiration of a period of one year after the
Eligible Participant's death (but in no event later than the Option's
expiration date) if the Eligible Participant's employment is terminated
by reason of his death. An Incentive Stock Option may be exercised by
the Eligible Participant's estate or by the person or persons who
acquire the right to exercise such Incentive Stock Option by bequest or
inheritance; or
(3) At the expiration of a period of three years (but in no
event later than the Option's expiration date) after the Eligible
Participant's employment is terminated if the Eligible Participant's
employment has terminated because of retirement or disability; or
(4) At the expiration of a period of three months after the
Eligible Participant's employment is terminated (but in no event later
than the ISO expiration date) if the Eligible Participant's employment
is terminated for any reason other than the reasons specified in
(1)-(3) above.
(c) With respect to nonstatutory stock options, (except as set forth in
paragraph (e) below), at the time the Eligible Participant's employment is
terminated.
(d) With respect to nonstatutory stock options then exercisable:
(1) At the expiration of a period of 90 days after the
eligible Participant's death (but in no event later than the Option
expiration date) if the Eligible Participant's employment is terminated
by reason of his death.
(2) At the expiration of a period of 90 days after the
Eligible Participant's employment is terminated (but in no event later
than the Option expiration date) if such termination is for any reason
other than death or retirement.
(e) In the event of the termination of an Eligible Participant's
employment at any time during the term of a nonstatutory stock option by
reason of retirement at or after the age of 60 or after 20 years of
employment by the Company, the right to purchase shares under the Option
which have accrued to the Eligible Participant and remain unexercised at, or
which accrue subsequent to, the date of his retirement shall remain
exercisable beyond that date in accordance with the terms of the Option as
if the Eligible Participant had not retired, subject to the following:
(1) in no event shall rights under the Option be exercisable
beyond the expiration date set forth in the Option at the time of its
grant;
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<PAGE> 18
(2) if at or after the retirement of the Eligible Participant,
such person has attained the age of 65, he may elect by notice given
within the period of 90 days immediately following the later of his
65th birthday or the date of retirement, to exercise the right to
purchase shares under the Option in respect of all or any part of the
shares subject thereto (including rights accruing in respect of shares
during the remainder of the term of the Option); and
(3) if no election as contemplated in subparagraph (2) is
made, the retired Eligible Participant may thereafter exercise rights
to purchase shares under the Option which have accrued and remain
unexercised from time to time in accordance with the terms of the
Option as if the Eligible Participant had not retired.
AMENDMENT OF PLAN
The Board shall have the right to amend the Plan at any time and for any
reason; provided that each amendment to the Plan (a) extending the period within
which options may be granted under the Plan, (b) increasing the aggregate number
of shares of Common Stock to be optioned under the Plan except as provided in
the adjustment provisions hereof, (c) materially modifying the requirements as
to eligibility of employees or consultants receiving options under, or changing
the eligibility of employees or class of employees to whom options may be
granted hereunder, (d) materially increasing the benefits to optionees under the
Plan, shall, in each case, be subject to approval by the shareholders of the
Company. Any amendment of the Plan shall not, without the consent of the
optionee, alter or impair any of the rights or obligations under any option
previously granted to the optionee.
PRIVILEGES OF STOCK OWNERSHIP
An optionee shall have no rights as a shareholder with respect to shares
covered by an Option until such shares have been issued to the optionee upon
exercise of the Option and only after such shares are fully paid. Neither the
Plan nor any option granted under the Plan shall confer upon any optionee the
right to continue as an employee or as a director of the Company.
TAX WITHHOLDING
The Company and its subsidiaries shall have the right to deduct any sums
required by federal, state or local tax laws to be withheld with respect to the
exercise of any Option. Alternatively, the option holder or other person
exercising such Option may elect to pay such sums. Required withholdings may
include, but not necessarily be limited to, federal and state income taxes,
contributions under the Federal Insurance Contributions Act (Social Security)
and contributions under state disability insurance laws. Any of the
aforementioned withholding requirements may apply to the exercise of an Option
during employment or subsequent to termination of employment including
retirement. No obligation exists under the Plan to advise any option holder of
the existence of the tax or the amount subject to withholding.
FEDERAL INCOME TAX CONSEQUENCES
Prior to the exercise of any option or the disposition of stock acquired
under the exercise of an option, each option holder should consult with his or
her own tax adviser.
The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 and is not qualified under Section 401(a) of the Code.
(a) NONQUALIFIED OPTIONS. An employee receiving a nonstatutory stock option
does not recognize ordinary income on the date of grant of the option, but
recognizes ordinary income generally at the date of exercise in the amount of
the difference between the option exercise price and the fair market value of
the common stock on the date of exercise. If, however, an employee is subject to
the restrictions on
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<PAGE> 19
resale of common stock under Section 16 of the Exchange Act, such person
generally recognizes ordinary income at the date that the six-month restriction
lapses in the amount of the difference between the option exercise price and the
fair market value of common stock on the date of lapse. Nevertheless, such an
employee may elect within 30 days of the date of exercise to recognize ordinary
income as of the date of exercise. The amount of ordinary income recognized by
the option holder is deductible by the Company in the year that income is
recognized.
If a holder of a nonstatutory stock option pays the option exercise price
solely in cash, his or her basis in such shares is equal to the fair market
value of the stock on the date ordinary income is recognized and, upon
subsequent disposition, any further gain or loss is again taxable to the seller
of the shares.
If a holder of a nonstatutory stock option pays the exercise price, in full
or in part, with shares of previously acquired common stock, based upon rulings
issued by the Internal Revenue Service, no gain or loss is recognized upon the
disposition of such previously acquired shares. Shares of common stock received
by the option holder, equal in number to the previously acquired shares
exchanged therefor, have the same basis and holding period as such previously
acquired shares. Shares of common stock received by the option holder, in excess
of the number of previously acquired shares, have a basis equal to the fair
market value of such additional shares as of the date ordinary income is
recognized. The holding period for such additional shares commences as of the
date ordinary income is recognized.
(b) INCENTIVE STOCK OPTIONS. An employee granted an Incentive Stock Option
does not recognize taxable income either at the date of grant or at the date of
exercise. The excess of the fair market value of Incentive Stock Options on the
date of exercise over the exercise price constitutes an "item of adjustment" for
alternative minimum tax purposes pursuant to Section 56(b)(3) of the Code and
may be subject to the alternative minimum tax imposed by Section 55 of the Code.
Upon disposition of stock acquired on exercise of an Incentive Stock Option,
long-term capital gain or loss is recognized in an amount equal to the
difference between the sale price and the option exercise price, provided that
the option holder has not disposed of the stock within two years from the date
of grant or within one year from the date of exercise. If the option holder
disposes of the acquired stock without complying with both holding period
requirements ("Disqualifying Disposition"), the option holder recognizes
ordinary income at the time of disposition in an amount equal to the lesser of
the amount of gain realized or the difference between the fair market value of
the stock on the date of exercise and the option exercise price. Unlike the case
when a nonstatutory stock option is exercised, the Company and its subsidiaries
are not entitled to a tax deduction upon either exercise of an Incentive Stock
Option or disposition of stock acquired pursuant to such an exercise, except to
the extent that the option holder recognizes ordinary income in a Disqualifying
Disposition.
If the holder of an Incentive Stock Option pays the exercise price, in full
or in part, with shares of previously acquired common stock, the exchange should
not affect the Incentive Stock Option tax treatment of the exercise. If,
however, such an exercise is effected using common stock previously acquired
through the exercise of an Incentive Stock Option, the exchange of the
previously acquired common stock will be considered a disposition of such shares
for the purpose of determining whether a Disqualifying Disposition has occurred.
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<PAGE> 20
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
All reports and other documents subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), prior to the filing of a post-effective amendment
which indicates that all securities offered hereby have been sold, or which
deregisters all securities remaining unsold, shall be deemed incorporated by
reference into the Registration Statement and shall be a part hereof from the
date of filing such documents.
The following documents are incorporated by reference in the Registration
Statement:
(a) The Company's annual report on Form 10-K for the fiscal year ended
December 31, 1995.
(b) The Company's Quarterly Report on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1996.
(c) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year ended December 31, 1995.
(d) The description of the Company's securities contained in the
Company's registration statement on Form 20-FR previously filed under the
Exchange Act on November 1, 1985, together with any amendment or report
filed pursuant to such Exchange Act amending or updating such description.
ITEM 4. DESCRIPTION OF SECURITIES.
[Not Applicable]
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
[Not Applicable]
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Bylaws of the Registrant provide that, subject to Section 124 of the
Canada Business Corporations Act ("CBCA"), the Registrant shall indemnify a
director or officer of the Registrant, a former director or officer of the
Registrant or a person who acts or acted at the Registrant's request as a
director or officer of a body corporate of which the Registrant is or was a
shareholder or creditor, and his heirs and legal representatives, against all
costs, charges and expenses reasonably incurred by him in respect of certain
actions or proceedings to which he is made a party by reason of his office, if
he met certain specified standards of conduct.
The inclusion of the above provision in the Bylaws of the Registrant may
have the effect of reducing the likelihood of derivative litigation against
directors and may discourage or deter shareholders or management from bringing a
lawsuit against directors for breach of their duty of care, even though such an
action, if successful, might otherwise have benefitted the Registrant and its
shareholders.
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<PAGE> 21
At present, there is no litigation or proceeding pending involving a
director of the Registrant as to which indemnification is being sought, nor is
the Registrant aware of any threatened litigation that may result in claims for
indemnification by any director.
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.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
[Not Applicable]
ITEM 8. EXHIBITS.
(5) Opinion of Lawson Lundell Lawson & McIntosh regarding legality.
(23.1) Consent of Raymond, Chabot, Martin, Pare.
(23.2) Consent of Doane Raymond
(23.3) Consent of Arthur Andersen & Company
(23.4) Consent of Jay Shapiro, C.P.A.
(24) Power of Attorney (see signature page hereto).
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement (unless the information
required by paragraphs (i) and (ii) below is contained in periodic reports filed
by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in this Registration Statement):
(i) To include any prospectus required by Section 10(a)(3) of
the Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
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<PAGE> 22
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liability arising under the 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 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 Act and will be governed by the final adjudication of
such issue.
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<PAGE> 23
SIGNATURES
THE REGISTRANT
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on January 9, 1997.
HARISTON CORPORATION,
a Canadian corporation
By: /s/ Kevin R. McCarthy
---------------------------------------------------
Kevin R. McCarthy, President (Principal Executive
Officer and Authorized Representative in the United
States)
<PAGE> 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Kevin R. McCarthy his attorney-in-fact,
with power of substitution, for him in any and all capacities, to sign this
Registration Statement and any amendments thereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby satisfying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons, including a
majority of the Board of Directors, in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Nuno Brandolini
- ---------------------------- Chairman of the Board and January 9, 1997
NUNO BRANDOLINI Chief Executive Officer
/s/ Kevin R. McCarthy
- ---------------------------- President and Director January 9, 1997
KEVIN R. MCCARTHY
/s/ L. James Porter
- ---------------------------- Chief Financial Officer, January 10, 1997
L. JAMES PORTER Secretary and Director
/s/ James Angus
- ---------------------------- Director January 13, 1997
JAMES ANGUS
/s/ Neil S. MacKencie
- ---------------------------- Director January 10, 1997
NEIL S. MACKENZIE
</TABLE>
<PAGE> 25
LIST OF EXHIBITS
(5) OPINION AND CONSENT OF LEGAL COUNSEL
(23.1) CONSENT OF INDEPENDENT ACCOUNTANT (Raymond Chabot, Martin, Pare)
(23.2) CONSENT OF INDEPENDENT ACCOUNTANT (Doane, Raymond)
(23.3) CONSENT OF INDEPENDENT ACCOUNTANT (Arthur Andersen)
(23.4) CONSENT OF INDEPENDENT ACCOUNTANT (Jay Shapiro)
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Exhibit 5
January 20, 1997
Hariston Corporation
Suite 1555
1500 West Georgia Street
Vancouver, British Columbia
V6G 2Z6
CANADA
Dear Sirs:
At your request, we have examined the form of Registration Statement on
Form S-8 (the "Registration Statement") which we understand has been filed by
Hariston Corporation (the "Company") with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended, for the purpose
of registering an aggregate of 2,000,000 common shares in the capital of the
Company issuable pursuant to the 1996 Hariston Corporation Stock Option Plan
No. 2 (the "Plan").
In this regard and for the purpose of the opinions expressed herein, we
have also examined a copy of the Plan, the constating documents of the Company
and such corporate records, certificates of public officials and governmental
bodies and authorities, certificates of officers or representatives of the
Company and other documents, and have made such investigations and searches and
considered such matters of law, as we believe necessary and relevant to enable
us to give, and as the basis for, the opinion expressed herein. We have,
without making any independent investigation, assumed the conformity to
originals of telecopied, certified and photographically reproduced documents
which we have examined and the proper authority of all signatories, other than
those on behalf of the Company, to and the authenticity of all signatures on
documents that have been examined by us.
As to various questions of fact material for the opinions expressed
herein, information with respect to which is in the possession of the Company,
we have relied upon certificates, reports, opinions or representations of or by
an officer of the Company.
We express no opinion as to laws other than the laws of the Province of
British Columbia and the federal laws of Canada applicable therein and we have
assumed that there is nothing in any other law that affects our opinions
expressed herein.
We are familiar with the proceedings taken and proposed to be taken in
connection with the issuance and sale of securities in the manner set forth in
the Registration Statement. Accordingly, based upon and subject to the
foregoing, we are of the opinion that the issuance of all of the securities
included in the Registration Statement identified therein pursuant to the
provisions of the Plan has been duly authorized by the Company and, when such
securities have been issued and paid for in accordance with the terms of the
Plan, they will be validly and legally issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, or any amendment thereto.
Yours very truly,
/s/ LAWSON LUNDELL LAWSON & McINTOSH
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Exhibit 23.1
Consent of Independent Accountant
Securities and Exchange Commission
Washington, D.C. 20549
We refer to Form S-8 Registration Statement of Hariston Corporation
("Hariston") to be dated on or about January 20, 1997 relating to 2,000,000
shares of common stock of Hariston issuable upon exercise of options which have
been or may be granted under the 1996 Hariston Corporation Stock Option Plan No.
2.
We consent to the inclusion by reference in the Registration Statement
of our audit report dated March 22, 1994 on the financial statements of Hariston
for the year ended December 31, 1993, including the consolidated balance sheet
as at December 31, 1993 and the consolidated statements of loss and deficit and
changes in financial position for the year then ended. The inclusion by
reference is made to the Form 10-K of Hariston for the fiscal year ended
December 31, 1995 which contains those financial statements.
We have read the Registration Statement and have no reason to believe
that there are any misrepresentations in the information contained therein that
is derived from the financial statements upon which we have reported or that is
within our knowledge as a result of our audit of such financial statements.
This letter is provided to the securities regulatory authority to which
it is addressed pursuant to the requirements of its securities legislation and
not for any other purpose.
/s/ Raymond, Chabot, Martin, Pare
January 20, 1997
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Exhibit 23.2
Consent of Independent Accountant
Securities and Exchange Commission
Washington, D.C. 20549
We refer to Form S-8 Registration Statement of Hariston Corporation
("Hariston") to be dated on or about January 20, 1997 relating to 2,000,000
shares of common stock of Hariston issuable upon exercise of options which have
been or may be granted under the 1996 Hariston Corporation Stock Option Plan No.
2.
We consent to the inclusion by reference in the Registration Statement
of our audit report dated March 24, 1995 on the financial statements of Hariston
for the year ended December 31, 1994, including the consolidated balance sheet
as at December 31, 1994 and the consolidated statements of loss and deficit and
changes in financial position for the year then ended. The inclusion by
reference is made to the Form 10-K of Hariston for the fiscal year ended
December 31, 1995 which contains those financial statements.
We have read the Registration Statement and have no reason to believe
that there are any misrepresentations in the information contained therein that
is derived from the financial statements upon which we have reported or that is
within our knowledge as a result of our audit of such financial statements.
This letter is provided to the securities regulatory authority to which
it is addressed pursuant to the requirements of its securities legislation and
not for any other purpose.
/s/ Doane Raymond
January 20, 1997
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Exhibit 23.3
Consent of Independent Accountant
---------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-8 of our reports dated
March 18, 1996 included in Hariston Corporation's Form 10-K for the year ended
December 31, 1995 and to all references to our firm included in this
registration statement.
/s/ Arthur Andersen & Co.
January 20, 1997
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Exhibit 23.4
Consent of Independent Accountant
I consent to the inclusion in this registration statement on Form S-8
through the incorporation by reference of my report dated March 20, 1996 on my
audit of the financial statements of Gazelle Technologies, Inc. and affiliates
for the period from March 1, 1995 to August 24, 1995, and my report dated
October 31, 1995 for the fiscal years ended February 28, 1995, 1994 and 1993.
/s/ Jay J. Shapiro, C.P.A.
January 20, 1997
