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As filed with the Securities Exchange Commision on April 22, 1999.
Registration No. 333-64987
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM F-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
VERONEX TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's Name into English)
British Columbia, Canada 95-4235375
------------------------ ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
#701 475 Howe Street 18023 Sky Park Circle, Suite E-2
Vancouver, British Columbia, Canada V6C 2B3 Irvine, California 92614
(604) 669-5650 (949) 253-9600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
David A. Hite, Chief Executive Office
18023 Sky Park Circle, Suite E-2
Irvine, California 92614
(949) 253-9600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Randolf W. Katz, Esq., Arter & Hadden LLP
5 Park Plaza, Suite 1000, Irvine, California 92614
Approximate date of commencement of proposed sale to the public
________________.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, check the following box.
[_]
If any securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act, check
the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]_____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, 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(d)
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. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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VERONEX TECHNOLOGIES, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING THE
LOCATION OF INFORMATION REQUIRED BY PART I OF FORM F-2
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Item of Form F-2 Prospectus' Caption or Location
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1. Forepart of the Registration Statement and Outside Cover of Registration Statement; Cross Reference
Front Cover of Prospectus...................................... Sheet; Outside Front Cover of Prospectus
2. Inside Front and Outside Back Cover Page of Prospectus......... Prospectus Summary
3. Summary Information, and Risk Factors.......................... Prospectus Summary; Risk Factors
4. Use of Proceeds................................................ Use of Proceeds
5. Determination of Offering Price................................ The Offering; Description of Securities
6. Dilution....................................................... Dilution
7. Selling Security Holders....................................... Selling Shareholders
8. Plan of Distribution........................................... Prospectus Summary; The Offering; Plan of Distribution
9. Description of Securities to be Registered..................... Prospectus Summary; The Offering; Description of Securities
10. Interests of Named Experts and Counsel......................... Legal Matters
11. Material Changes............................................... Recent Developments
12. Information with Respect to the Registrant..................... Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities..................................... Not Applicable
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective.
PROSPECTUS Subject to Completion, April 22, 1999
1,736,800 SHARES
VERONEX TECHNOLOGIES, INC.
COMMON STOCK
Veronex Technologies, Inc., a British Columbia corporation ("Veronex" or
the "Company"), is offering to sell up to 702,800 shares of its Common Stock, no
par value per share ("Common Stock"), as follows:
(i) Up to 502,000 shares of Common Stock underlying additional warrants
("Additional Warrants") granted to certain shareholders ("Unit Investors") of
the Company who purchased Units, each Unit being comprised of one share of
Common Stock and one unit warrant ("Unit Warrants"), sold during November 1997
in a private placement ("Units");
(ii) Up to 100,400 shares of Common Stock ("Placement Warrant Shares")
underlying warrants granted to Robb Peck McCooey Clearing Corp. ("Placement
Warrants"), the Company's placement agent during its sale of the Units; and
(iii) Up to an additional 100,400 shares of Common Stock ("Additional
Placement Warrant Shares") underlying additional warrants ("Additional Placement
Warrants") granted to the holders of the Placement Warrants. The foregoing
Additional Warrants and Additional Placement Warrants may be referred to
hereinafter collectively as "Contingent Warrants." The foregoing Unit Warrants,
Additional Warrants, Placement Warrants, and Additional Placement Warrants may
be referred to hereinafter collectively as "Warrants." The shares of Common
Stock underlying the Warrants may be referred to hereinafter collectively as
"Warrant Shares."
This Prospectus is also offering for sale for the account of certain of the
Company's shareholders ("Selling Shareholders") up to (i) 30,000 shares of the
Common Stock ("Unit Investor Shares") issued to the Selling Shareholders during
the Company's sale of the Units, (ii) 502,000 shares of Common Stock ("Unit
Warrant Shares") underlying the Unit Warrants; and (iii) an additional 502,000
shares of Common Stock ("Additional Shares"), issued to the Unit Investors (the
Unit Investor Shares, the Unit Warrant Shares, and Additional Shares may be
referred to collectively hereinafter as the "Selling Shareholder Shares").
The Unit Warrants were granted and the Unit Investor Shares were issued by
the Company as part of a private placement of its securities in November 1997.
The Unit Warrant Shares will be issued to the holders of the Unit Warrants upon
the exercise of the Unit Warrants, if at all. The Company will not receive any
proceeds from the sale of any of the Selling Shareholder Shares offered for the
account of the Selling Shareholders; however, it will receive proceeds upon the
exercise of the Unit Warrants by the holders thereof (as to which exercise there
can be no assurance). (See "The Offering," "Risk Factors," "Dilution," "Use of
Proceeds," "Selling Shareholders," and "Plan of Distribution.") The foregoing
Additional Shares and Selling Shareholder Shares may be referred to hereinafter
collectively as "Unit Shares." The Company's Common Stock is quoted on the OTC
Bulletin Board in the United States of America under the symbol "VXTK."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD
BE CONSIDERED BY PROSPECTIVE PURCHASERS.
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
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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 APRIL __, 1999.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING SHAREHOLDERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION SET FORTH HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
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Available Information................................................. 2
Incorporation of Certain Documents by Reference....................... 3
Forward Looking Statements............................................ 3
Prospectus Summary.................................................... 4
The Offering.......................................................... 6
Risk Factors.......................................................... 7
Description of Securities............................................. 11
Dilution.............................................................. 16
Use of Proceeds....................................................... 18
Recent Developments................................................... 19
Selling Shareholders.................................................. 24
Plan of Distribution.................................................. 25
Legal Matters......................................................... 27
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AVAILABLE INFORMATION
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The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form F-2 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the shares of Common
Stock offered in this Offering. For the purposes hereof, the term "Registration
Statement" means the original Registration Statement and any and all amendments
thereto. This prospectus (the "Prospectus"), which constitutes a part of a
Registration Statement, omits certain information contained in the Registration
Statement, and reference is hereby made to the Registration Statement and to the
schedules relating thereto. Each statement made in this Prospectus concerning
any document filed as an exhibit to the Registration Statement is not
necessarily complete, and each statement is qualified in its entirety by
reference to the copy of such document filed with the Commission.
The Registration Statement may be inspected and copied at the public
reference facilities maintained by the Commission at its principal office at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549, or at its regional
offices at 210 South Dearborn Street, Room 1204, Chicago, Illinois 60604; and 7
World Trade Center, 13th Floor, New York, New York 10048. Any interested party
may obtain copies of all or any portion of the Registration Statement at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, Room 1024, Washington, D.C. 20549.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Commission. Such reports
and other information can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, or at its regional offices at 210 South Dearborn Street,
Room 1204, Chicago, Illinois 60604; and 7 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., Washington, D.C.
20549, at prescribed rates.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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The Company's Annual Report on Form 20-F, as amended, for the fiscal year
ended February 28, 1998 ("Form 20-F") and Report of Foreign Issuer on Form 6-K
for the fiscal quarters ended May 31, 1998, August 31, 1998, and November 30,
1998, respectively (individually, "Form 6-K"; collectively, "Forms 6-K"), are
incorporated by reference in this Prospectus and shall be deemed to be a part
hereof, and are delivered herewith.
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FORWARD LOOKING INFORMATION
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"Safe Harbor" statement under the Private Securities Litigation Reform Act
of 1995: Certain statements in this Prospectus, including statements of the
Company and management's expectations, intentions, plans and beliefs, contain
forward-looking statements relating to the expected capabilities of the Company,
as defined in Section 21D of the Securities Exchange Act of 1934, that are
dependent on certain events, risks and uncertainties that are outside the
Company's and/or management's control. Such forward-looking statements include
expressions of belief, expectation, contemplation, estimation and other
expressions not relating to historical facts and circumstances.
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These forward-looking statements are subject to numerous risks and
uncertainties, including the risks that:
(i) other companies will develop products and services perceived to be equal
to or superior than the present and proposed products and services of the
Company;
(ii) the products and services may not be marketed effectively by the Company;
(iii) potential customers may find other products and services more suitable
for the applications marketed by the Company;
(iv) the future outcome of regulatory and litigation matters are not
determinable;
(v) the receipt of adequate additional capital on a timely basis to enable
the Company to implement its business plans;
(vi) the commercial viability of the Company's year 2000 software and the
related business application engineering and re-engineering toolset;
(vii) the success of the Company's marketing and partnering efforts in respect
of such software;
(viii) the continuation of favorable economic conditions; and
(ix) the assumptions described in this Prospectus underlying such forward-
looking statements, as well as other risks that may cause such statements not
to prove accurate.
Any projections or estimates herein made assume certain economic and
industry conditions and parameters subject to change. Any opinions and/or
projections expressed herein are solely those of the Company and are subject to
change without notice. Actual results and developments could differ materially
from those expressed in or implied by such statements due to a number of factors
including those described in the context of such forward-looking
statements.
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PROSPECTUS SUMMARY
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The following summary is qualified in its entirety by reference to the
detailed information, financial statements and related notes appearing elsewhere
in the Prospectus including information under the caption "Risk Factors." Each
investor is urged to read the Prospectus in its entirety.
THE COMPANY
Veronex Technologies, Inc. is a corporation organized under the laws of the
Province of British Columbia, Canada and was incorporated on March 8, 1974 under
the name of Rockel Mines Ltd. The Company changed its name to Veronex Resources
Ltd. on May 1, 1979, International Veronex Resources Ltd. on October 21, 1992,
and to Veronex Technologies, Inc. on December 4, 1997.
In 1978, Veronex began a long-term strategy aggressively to acquire and
develop diversified natural resource properties. The acquisition of these new
natural resource opportunities was usually for a combination of cash and the
issuance of new shares of common stock. Generally, the issuance of a portion of
these new shares of common stock was contingent upon the discovery and
successful production of the desired natural resource. The Company's normal
business approach was to combine its own exploration and operational expertise
with the financial strength of a major partner.
During the early part of 1997, the Company began an effort to redirect its
focus to become a computer software development and publishing company with a
fully integrated business application engineering and re-engineering toolset.
Since then, the Company has completed acquisitions of the worldwide rights,
title, and interest in and to a new software product that (i) provides a
solution to the Millennium issue and Year 2000 computer incompatibilities ("Y2K
Solution") and (ii) provides non-technical personnel with the ability to
analyze, design, modify, document, and implement high quality, custom software
applications. The Company's recent name change to Veronex Technologies, Inc.
reflects its successful transition into the computer software industry and its
mission to become the leading software provider for business application systems
for the New Millennium.
The Company's Common Stock is registered under the Securities Exchange Act
of 1934, as amended, and its stock trades principally on the OTC Bulletin Board
in the United States of America under the symbol "VXTK." The Company's common
stock was also registered with and traded on the Vancouver Stock Exchange in
Canada under its previous name, International Veronex Resources Ltd., and symbol
"IVX," until the Company applied for a voluntary delisting from the Vancouver
Stock Exchange and as of July 4, 1997, the Company's common shares were delisted
from trading on the Vancouver Stock Exchange.
RISK FACTORS
Investment in the securities offered hereby involves a high degree of risk.
Purchasers of the securities should carefully review the factors under headings
"Risk Factors" and "Dilution."
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The Offering
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Securities Offered........ The 702,800 shares of Common Stock offered by the Company hereby
include up to:
(i) 502,000 Additional Warrant Shares,
(ii) 100,400 Placement Warrant Shares, and
(iii) 100,400 Additional Placement Warrant Shares.
(See "Description of Securities," and Prospectus Cover Page.)
The 1,034,000 Selling Shareholder Shares offered by the Selling Shareholders hereby are offered for
their own account. (See "Description of Securities.")
Shares of Common Stock
Outstanding:
Prior to Offering(1).... 7,498,159
After Offering(2)....... 8,702,959
Use of Proceeds........... If the Warrants are exercised (as to which exercise there can be no assurance), the net proceeds
therefrom have been allocated by the Company for working capital and general corporate purposes. Thus,
holders of the Warrants upon the exercise thereof will be entrusting their funds with management
without any specific commitment on the part of the Company for their use. The Company will not receive
any proceeds from the sale of any of the Selling Shareholder Shares offered for the account of the
Selling Shareholders; however, it will receive proceeds upon the exercise of the Unit Warrants by the
holders thereof (as to which exercise there can be no assurance).
Risk Factors.............. Investment in the securities offered hereby involves a high degree
of risk. Purchasers of the securities should carefully review the
factors under headings "Risk Factors" and "Dilution."
Other Information......... This Prospectus incorporates certain other documents and material information by reference. See
"Incorporation of Certain Documents by Reference" and "Recent Developments."
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OTC Bulletin Board
Symbol.................... VXTK
/(1)/ The total shares outstanding represented in this table is comprised of the
sum of the 6,996,159 shares of Common Stock outstanding as of November 30,
1998, and the 502,000 Additional Shares issued by the Company effective April
15, 1999 to the Unit Investors due to its failure to generate the Revenue
Amount during the Revenue Period as set forth under the caption "Description of
Securities."
/(2)/ Assumes that all Warrants are exercised, as to which exercise there can be
no assurance.
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RISK FACTORS
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SUBSTANTIAL HISTORICAL OPERATING LOSSES; LACK OF SALES.
Since inception, the Company has generated a deficit of approximately
$38,500,000. As of November 30, 1998, the Company has generated approximately
$17,400,000 of operating revenues from its Y2K Solution and Related Software.
Although the Company has generated operating revenues from the sale of its Y2K
Solution and Related Software, such sales have occurred primarily in the last
two fiscal quarters and there can be no assurance that any meaningful additional
sales revenues will be generated therefrom or that the Y2K Solution or Related
Software will prove to be commercially feasible.
NEED FOR ADDITIONAL FINANCING.
The development and commercialization of the Company's Y2K Solution and
Related Software may require the expenditure of substantial capital. Subsequent
to the Offering, the Company may require additional funding in order to achieve
its operating objectives. The timing of completion of further commercial
versions of and commercial acceptance of the Y2K Solution and Related Software
may increase the Company's requirements for capital. If additional capital is
required, the Company may seek to obtain such additional funds primarily through
additional public or private equity or debt financings. Such additional
financings may result in dilution to current shareholders. There can be no
assurance that such additional financing, if required, can be obtained on terms
acceptable to the Company, if at all. If additional funds are not available, the
Company may be required to curtail significantly or to eliminate some or all of
its development or sales and marketing programs or to obtain funds through
arrangements with corporate partners or others who may require the Company to
relinquish certain rights to its intellectual property. The Company currently
has no established bank credit arrangements.
LIMITED EXPERIENCE WITH Y2K SOLUTION AND RELATED SOFTWARE.
On January 14, 1997, the Company entered into a Property Purchase Agreement
(the "Purchase Agreement") with Thomas J. Price, a software developer, to
acquire certain software technology including, but not limited to, an
information management application system, including a source program analyzer.
The principal terms of the Purchase Agreement
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initially provided for the Company to issue up to 12,000,000 shares of Common
Stock to acquire such assets, with 11,900,000 of such shares to be issued based
on an earn-out formula, contingent upon future revenues generated from licensing
sales and maintenance contracts relating to the acquired assets.
Effective the same date, the Purchase Agreement was amended to reduce by
5,500,000 the number of shares of Common Stock to be issued to Mr. Price based
on the contingent earn-out formula. Of such reduction, 3,500,000 shares were
reserved for contingent issuance to ProMax Conceptual Strategies ("ProMax"), a
California corporation, of which Mr. Price was the majority shareholder; the
balance of the 2,000,000 contingent earn-out shares were allocated to the
Company's 1997 Contingent Stock Option Plan, which shares are also to be issued
on a contingent basis. Effective as of January 14, 1997, the Board of Directors
of ProMax approved an agreement to merge ProMax with and into PCS Acquisition
Corp., a California corporation and wholly-owned subsidiary of Veronex. Approval
by the ProMax shareholders was obtained in August of 1997, and the merger
documents were filed with the California Secretary of State's office in
September of 1997.
Effective August 1, 1997, the Company acquired additional, complementary
technologies and expertise to assist its efforts in furthering the development
and marketing of its software products (collectively referred to as the "I|NOVA
System"). The Y2K Solution, I|NOVA System, software, and related technologies
are sometimes hereinafter referred to herein as the "Software" or "Y2K Solution
and Related Software."
Although management believes that the Company's software capabilities, and
the individual experience of the Company's key employees, are considerable, the
recent amalgamation of such individuals and their completion of the Y2K Solution
and Related Software leave the Company subject to all risks incident to the
creation of a new business and the development of new products, including the
absence of a history of operations and of proven products that have been
produced, sold, and installed in quantity. Further, the Company is at a
commercial and strategic disadvantage to other companies that earlier commenced
commercialization of their solutions to the year 2000 problem. Thus, there can
be no assurance that the Company will ultimately realize any material level of
revenues from the sale and installation of its products.
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SUCCESSFUL SALES NOT ASSURED.
Notwithstanding the Company's belief that its new, proprietary Y2K Solution
and Related Software provides significant advantages over any other equivalent
products, the Company does not have resources sufficient to assure prospective
investors that the Company will be successful in its sales and marketing
efforts. Although the Company has certain experienced and highly regarded
personnel, the Company, as an enterprise, has limited experience in sales,
marketing, or distribution of software and related products and services. To
market the Y2K Solution and Related Software directly, the Company must continue
to develop a marketing and sales force with technical expertise and support
capability and seek the assistance of various enterprises through licensing
and/or other methods of joint marketing. There can be no assurance that the
Company will be able to establish and maintain sales and distribution
capabilities or obtain and maintain the assistance of one or more enterprises in
such efforts.
As of November 30, 1998, the Company has entered into four Strategic
Alliance Agreements and two Distribution Agreements to license the I|NOVA
System. The terms of the Strategic Alliance Agreements provide for license fees
to be paid out of the revenues generated by the use and/or sub-licensing of the
I|NOVA System by the licensees to their clients. The licensees are also required
to share all gross revenues on a ratio of 65% to Veronex and 35% to the
licensees until Veronex receives the entire license fee. Thereafter, the
revenues generated by the use and/or sub-licensing of the I|NOVA System by the
licensees to their clients will be shared on a ratio of 65% of all gross
revenues to the licensees and the remaining 35% to Veronex.
The Distribution Agreements grant to the distributors a non-exclusive
license to use and sub-license certain specified component software of the
I|NOVA System in various geographical territories. The Distribution Agreements
provide for royalty fees equal to 40% of the revenues generated by the use and
sub-license of such software to be paid to the Company, including certain
guaranteed minimum royalty payments. The distributors also are required to pay
certain periodic maintenance plan fees.
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In addition to the Strategic Alliance Agreements and Distribution
Agreements, the Company also utilizes Teaming Agreements to join forces with
other businesses in developing and pursuing certain business opportunities, as
well as End-User Sales Agreements for the development and/or licensing of
various software.
As of November 30, 1998, the Company has recorded $4,500,000 of revenue
from the Strategic Alliance Agreements, $11,750,000 of revenue from the
Distribution Agreements and has accrued $7,050,000 to cover distribution costs,
and $900,000 of revenue from software royalties.
PROPRIETARY TECHNOLOGY.
Although the Company recently filed a comprehensive patent application and
continuation-in-part applications for its Y2K Solution and Related Software, and
anticipates that its engineering activities will result in a number of
additional patent applications, there can be no assurance that any patents will
issue therefrom or, if issued, that they will provide significant commercial
protection. Moreover, third parties may have filed other patent applications and
patents may be issued on such inventions and such third parties may otherwise
claim proprietary rights to technology useful or necessary to the Company. The
extent to which the Company may be required to seek licenses under such other
patents or other proprietary rights, and the cost or availability of such
licenses, cannot now be predicted. There can be no assurance that others will
not independently develop superior know-how or obtain access to know-how used by
the Company that it now considers proprietary.
SUCCESS DEPENDENT UPON MANAGEMENT.
Success of the Company and its subsidiaries will depend, to a large extent,
upon the active participation of Messrs. David A. Hite, Thomas J. Price, and
Thomas A. Speed, executive officers or senior product development personnel of
the Company. Although all of such individuals have executed employment
agreements with the Company, there can be no assurance that each of such
individuals will continue to be employed by the Company. There are no key-man
life insurance policies in effect in respect of any such individuals. The loss
of the services of any such individuals could materially and adversely affect
the continued development of the products of the Company and their viability in
the marketplace.
COMPETITION IN THE MARKETPLACE.
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The concern raised by the seeming inability of significant numbers of
computers to function as of the turn of the century has generated material
governmental and industrial concern. In response thereto, numerous computer
hardware and software companies (both established and development stage) have
been devoting substantial resources to solving the problem. Veronex is one of
such companies. However, many of such competitors have greater financial and
other resources, experience, and reputation than the Company and, consequently,
the Company has been and may continue to be at a competitive disadvantage in
these areas. Many of such entities have exerted and will continue to exert
extensive research and development efforts that have resulted or may result in
the introduction of a multitude of sophisticated, commercially marketable
products and services for the markets. Notwithstanding management's belief that
the Company's Y2K Solution and Related Software represents a true, viable
solution to the problem, there can be no assurance that the Company will be able
to market and sell its products successfully in the marketplace.
RISKS OF INVESTING IN THE INDUSTRY.
An investment in any aspect of the computer hardware or software industry
is speculative and historically has involved a high degree of risk. This
industry has frequent introductions of new products and product enhancements.
While the Company has certain proprietary software technology, there can be no
assurance that it will be able to develop new products and enhance existing
products in a timely manner, if at all, in response to changing market demand
and competitive pressure. Success of the Company will depend on a number of
factors over which it has little or no control.
GENERAL ALLOCATION OF PROCEEDS.
The net proceeds, if any, of the Offering will be allocated for general
working capital of the Company. The Company will not receive any proceeds from
the sale of any of the Selling Shareholder Shares offered for the account of the
Selling Shareholders; however, it will receive proceeds upon the exercise of the
Unit Warrants by the holders thereof (as to which exercise there can be no
assurance). Investors must entrust the ultimate applications thereof to the
judgment of management. (See "Use of Proceeds.")
DIVIDENDS.
The Company has not declared or paid any dividends on its Common Stock
since 1983. No dividends are contemplated at any time in the foreseeable future.
(See "Description of Securities.")
DILUTION.
Purchasers of shares of Common Stock offered hereby will suffer immediate
dilution in the net tangible book value of their shares of Common Stock. (See
"Dilution.")
REGULATION OF DESIGNATED SECURITIES.
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The Commission has adopted rules that regulate broker-dealer practices in
connection with transactions in "designated securities." Designated securities
generally are equity securities with a price of less than $5.00 (other than
securities registered on certain national securities exchanges or quoted on the
Nasdaq Stock Market, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange system).
The designated securities rules require a broker-dealer, prior to a transaction
in a designated security not otherwise exempted from the rules, to deliver a
standardized risk disclosure document prepared by the Commission that provides
information about designated securities and the nature and level of risks in the
designated securities market. The broker-dealer also must provide the customer
with bid and offer quotations for the designated security, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each designated security held in the
customer's account. In addition, the penny stock rules require that, prior to a
transaction in a designated security not otherwise exempt from such rules, the
broker-dealer must make a special written determination that a designated
security is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in any secondary market for a
stock that becomes subject to the designated security. The Company's Common
Stock is subject to the designated security rules, and, accordingly, investors
in this offering may find it difficult to sell their shares of Common Stock, if
at all.
DESCRIPTION OF SECURITIES
COMMON STOCK.
The Company's equity capital consists of one class of stock -- common. A
holder of Common Stock is entitled to one vote per share on all matters
submitted for action by the shareholders. All shares of Common Stock are equal
to each other with respect to the election of directors. The terms of the
directors are not staggered and the board is not classified. Directors are
elected annually to serve until the next annual meeting of shareholders and
until their successors are elected and qualified. There are no preemptive rights
to purchase any additional Common Stock or other securities of the Company. In
the event of liquidation or dissolution, holders of Common Stock are entitled to
receive, on a pro rata basis, the assets remaining after creditors and holders
of any class of stock having liquidation rights senior to holders of Common
Stock have been paid in full.
The Company has 100,000,000 shares of Common Stock authorized. As of April
15, 1999, the transfer ledgers maintained by the Company's transfer agent,
including individual participants in security position listings, indicated that
there were approximately seven million shares of Common Stock issued and
outstanding, which were held of record by approximately 3,500 persons.
As of April 15, 1999, there were approximately 1,100,000 restricted shares
of Common Stock outstanding. Future sales of these shares under Rule 144 could
depress the market price of the Common Stock. A majority of such shares
are
12
<PAGE>
eligible for sale pursuant to Rule 144; however, given the size of the
shareholdings, the volume limitations of Rule 144 would significantly limit
their resale.
CERTAIN MARKET INFORMATION.
The Common Stock is quoted on the OTC Bulletin Board. The following table
sets forth the high and low bid prices (expressed in U.S. Dollars on the OTC
Bulletin Board) for the Company's Common Stock for its most recent fiscal year
ended February 28, 1998 and fiscal quarters ended November 30, 1998, August 31,
1998, May 31, 1998, and February 28, 1999, respectively, and for that time frame
from March 1, 1999, through April 15, 1999.
Period Ended High Low
------------ ---- ---
April 15, 1999 4.219 2.250
February 28, 1999 6.375 1.281
November 30, 1998 5.250 1.500
August 31, 1998 9.500 3.375
May 31, 1998 13.563 3.750
February 28, 1998 5.875 0.875
The above-stated quotations represent inter-dealer prices, without mark-ups
or commissions, and may not necessarily be indicative of actual sales prices.
On April 15, 1999, the closing price for the Common Stock, as reported on the
OTC Bulletin Board, was $3.875.
DIVIDENDS.
The Company has not declared or paid any dividends on its Common Stock
since 1983. Further, no dividends are contemplated at any time in the
foreseeable future. There are no current or contemplated restrictions which
will limit the ability of the Company to declare and pay dividends. (See "Risk
Factors.")
UNITS.
During its 1998 Fiscal Year, the Company offered to sell, and sold, through
its exclusive placement agent, Robb Peck McCooey Clearing Corp. ("Placement
Agent"), 502,000 Units in a private placement ("Private Placement"). Each Unit
was offered at a price of $4.00 and was comprised of one share of Common Stock
and one redeemable Common Stock purchase warrant (as referred to earlier as a
Unit Warrant). Each Unit Warrant entitles the holder thereof to purchase one
share of Common Stock of the Company at an exercise price of $8.00 per share,
subject to adjustment in the event the Company failed to generate at least
$24,000,000 in gross revenues (the "Revenue Amount") from November 7, 1997 to
November 30, 1998 (the "Revenue Period"). Based upon the Company's gross
revenues of $17,400,000 generated during the Revenue Period, the exercise price
of the Unit Warrants has been reduced to $2.00 per share.
13
<PAGE>
The Unit Warrants are redeemable, in whole or in part, at the option of the
Company, for $0.10 per Unit Warrant on not less than 30 days' prior written
notice, at any time, provided that (i) the closing bid price of the Company's
Common Stock is at least $2.50 (subject to adjustment), and the trading volume
of the of the Common Stock is not less than 30,000 shares per day, on each of
the 20 consecutive trading days ending within 10 days of the date of the notice
of redemption; and (ii) the shares of Common Stock underlying the Unit Warrants
have been registered for public distribution under the Securities Act. Based
upon the Company's gross revenues of $17,400,000 generated during the Revenue
Period, the closing bid price requirement of the Company's Common Stock was
reduced from $10.00 to $2.50.
The Company granted certain registration rights to persons who purchase
Units, and also granted certain additional rights to the Placement Agent
regarding the constituent portions of the Placement Warrants. The Company also
agreed to use its best efforts to register the Unit Shares and the Warrant
Shares.
Warrants.
The Warrants contain general anti-dilution provisions to avoid dilution of
the equity interest represented by the Warrant Shares upon the occurrence of
certain events, e.g., Common Stock share dividends or splits and the issuance of
shares of Common Stock at less than the exercise price of the Warrants, with
certain exceptions. In the event of liquidation, dissolution, or winding up of
the Company, Warrant holders will not be entitled to participate in the assets
of the Company unless they exercise their Warrants. Warrant holders have no
voting, preemptive, liquidation, or other rights of holders of Common Stock, and
are not entitled to participate in dividends.
The Unit Warrants allow the registered holders thereof to acquire
additional shares of Common Stock for a five-year period commencing after the
closing of the Private Placement, unless the Unit Warrants have been previously
redeemed, at the reduced exercise price of $2.00 per share, as discussed
above.
14
<PAGE>
Revenue Amount.
Additional Shares.
-----------------
In the event the Company failed to generate the Revenue Amount during the
Revenue Period, the Company was required to issue additional shares of Common
Stock to those persons who purchased Units, in accordance with the following
schedule:
<TABLE>
<CAPTION>
Additional Shares Gross Revenues of the Company
-------------------------- -----------------------------
(Per Warrant Share)
<S> <C>
0 in excess of $24,000,000
.5 $20,000,000 -- $24,000,000
1.0 $16,000,000 -- $19,999,999
1.5 $12,000,000 -- $15,999,999
2.0 $ 8,000,000 -- $11,999,999
2.5 $ 4,000,000 -- $ 7,999,999
3.0 $ 0 -- $ 3,999,000
</TABLE>
Based upon the Company's gross revenues of $17,400,000 generated during the
Revenue Period, the Company issued one Additional Share of Common Stock for each
Unit purchased, totaling 502,000 Additional Shares of Common Stock.
Additional Warrants.
-------------------
If the Company failed to generate the Revenue Amount during the Revenue
Period, then the Company is required to grant Additional Warrants to the holders
of the Unit Warrants (on terms identical to the Unit Warrants) in accordance
with the following schedule:
<TABLE>
<CAPTION>
Additional Warrants Gross Revenues of the Company
------------------------- -----------------------------
(Per Unit Warrant)
<S> <C>
0 in excess of $24,000,000
. 5 $20,000,000 -- $24,000,000
1.0 $16,000,000 -- $19,999,999
1.5 $12,000,000 -- $15,999,999
2.0 $ 8,000,000 -- $11,999,999
2.5 $ 4,000,000 -- $ 7,999,999
3.0 $ 0 -- $ 3,999,000
</TABLE>
15
<PAGE>
Based upon the Company's gross revenues of $17,400,000 generated during the
Revenue Period, the Company granted one Additional Warrant for each Unit
purchased, totaling 502,000 Additional Warrants to purchase up to 502,000 shares
of Common Stock, at an exercise price of $2.00 per share.
Reserved Shares; Exercise; No Rights as Shareholders.
----------------------------------------------------
The Company has reserved from its authorized but unissued shares a
sufficient number of shares of Common Stock for issuance on exercise of the Unit
Warrants and the Additional Warrants. During the period in which a Unit Warrant
or an Additional Warrant is exercisable, exercise of a Unit Warrant or an
Additional Warrant may be effected by delivery of a certificate therefor duly
endorsed for exercise and accompanied by payment of the exercise price.
The Warrant holders have no rights as shareholders until they exercise
their Warrants, and the Warrants are subject to the terms and conditions of a
Warrant Agreement between the Company and the Warrant holders.
Placement Warrants.
The Company agreed to issue the Placement Warrants to the Placement Agent
allowing it or its permitted assigns to acquire, upon exercise, up to 100,400
shares of Common Stock at an exercise price of $4.00 per share for a five-year
period commencing after the final closing of the Private Placement, unless the
Placement Warrants are previously redeemed. The Placement Warrants cannot be
exercised prior to a date that is one year from the grant date thereof, pursuant
to the rules and regulations of the National Association of Securities Dealers,
Inc. The Placement Warrants contain general anti-dilution provisions, and are
subject to redemption by the Company, under the same terms and conditions as the
Unit Warrants.
If the Company failed to generate the Revenue Amount during the Revenue
Period, then the exercise price of each Placement Warrant was to be reduced
automatically and permanently to $2.00 per share, subject to further adjustment
for stock splits and recapitalizations. In addition, the Company agreed to grant
Additional Placement Warrants to the holders of the Placement Warrants in an
amount equal to 20% of the Additional Warrants, if any, granted to the Warrant
holders, which shall contain an exercise price of $1.00 per share, but otherwise
contain terms identical to the Placement Warrants.
Based upon the Company's gross revenues of $17,400,000 generated during the
Revenue Period, the Company granted 100,400 Additional Placement Warrants to the
Placement Agent at an exercise price of $1.00 per share. In addition, the
exercise price of the Placement Warrants was reduced to $2.00 per share.
The Placement Warrants contain demand and incidental registration rights
provisions. The Company has reserved from its authorized but unissued shares a
sufficient number of shares of Common Stock for issuance on exercise of the
Placement Warrants and the Additional Placement Warrants.
16
<PAGE>
Registration Rights.
The Unit Shares and Warrant Shares are the subject of certain incidental
registration rights by virtue of an agreement entered into between the Company
and the Unit Investors and the Placement Agent, respectively (collectively, the
"Registration Rights Agreements"). The Registration Rights Agreements provide
for registration of such securities (collectively, the "Registrable Securities")
during the period in which the securities remain subject to the registration
requirements set forth under the Securities Act prior to sale, in the event that
the Company proposes to register any other shares of Common Stock under the
Securities Act.
The Company will be solely responsible for the costs and expenses of the
registrations (except or under certain circumstances set forth in the
Registration Rights Agreements). The Company has agreed to indemnify the
Placement Agent and any Warrant holder against any costs or liabilities incurred
by the Placement Agent or any Warrant holder by reason of misstatements or
omissions to state material facts in connection with statements made in the
registration statements required under the Registration Rights Agreements. The
Warrant holders have agreed to indemnify the Company against any liabilities by
reason of misstatements or omissions to state material facts on his/her/its part
in connection with the statements made in the registration statement based on
information furnished in writing by such Warrant holder.
TRANSFER AGENT.
Montreal Trust, 510 Burrard Street, Vancouver, British Columbia, Canada V6C
3B9; and ChaseMellon Shareholder Services, Overpeck Center, 85 Challenger Road,
Ridgefield Park, New Jersey, USA 07660 serve as co-transfer agents for the
Common Stock. The Company acts as its own transfer agent for the Warrants.
DILUTION
The net tangible book value of the Company as of November 30, 1998, was
$9,835,000 or $1.31 per share of Common Stock, based upon 7,498,159 shares of
Common Stock issued and outstanding. The cost to be paid by the Company for
registering the securities is estimated at $40,000 ("Offering Costs"). Net
tangible book value per share of Common Stock represents the amount of the
Company's tangible assets less the amount of its total liabilities, divided by
the number of shares of Common Stock outstanding.
Because of the Company's failure to generate the Revenue Amount during the
Revenue Period, it was required to grant 502,000 Additional Warrants and 100,400
Additional Placement Warrants at an exercise price of $2.00 and $1.00 per share,
respectively. Furthermore, the exercise price associated with the Placement
Warrants was reduced automatically and permanently to $2.00 per share. (See
"Description of Securities.") Thus, if all of the Additional Warrants, Placement
Warrants, and Additional Placement Warrants, which represent shares of Common
Stock being registered hereby, were exercised (as to which exercise there can be
no assurance), 702,800 shares of Common Stock would be issued at an average
price per share of $1.86, and the pro forma net
17
<PAGE>
tangible book value of the Company as so adjusted at November 30, 1998, would be
$11,100,200 (net of Offering Costs), or $1.35 per share of Common Stock,
representing an immediate increase in net tangible book value of approximately
$0.04 per share to present holders of Common Stock and an immediate, average
dilution of $0.51 per share to new investors. (See "Risk Factors.")
The following table illustrates the per share dilution if the shares of
Common Stock, underlying the Additional Warrants, Placement Warrants, and
Additional Placement Warrants, being registered hereby are purchased by
different groups of security holders exclusively. It does not include any of the
Selling Shareholder Shares registered for sale hereby for the account of any of
the Selling Shareholders, including any negative or positive dilution that may
or may not occur in the event the Unit Warrants are exercised at the current
exercise price of $2.00 per share. The Company will not receive any proceeds
from the sale of any of the Selling Shareholder Shares offered for the account
of the Selling Shareholders; however, it will receive proceeds upon the exercise
of the Unit Warrants by the holders thereof (as to which exercise there can be
no assurance).
18
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
Additional
Additional Placement Placement All New
Warrants Warrants Warrants Investors /(1)/
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Public offering price per
share /(2)/ $2.00 /(3)/ $2.00 /(4)/ $1.00 /(4)/ $1.86 /(5)/
======= ======== ======= ========
Net tangible book value per
share prior to offering /(6)/ $1.31 $1.31 $1.31 $1.31
Change per share attributable
to new investors /(8)/ $0.04 $0.01 ($0.01) $0.04 /(5)/
----- ----- ------- -----
Pro forma net tangible book
value per share after
offering /(8)/ $1.35 $1.32 $1.30 $1.35 /(5)/
===== ===== ===== =====
Dilution per
share to new investors /(8)/ $0.65 $0.68 ($0.30) $0.51 /(5)/
====================================================================================================================================
Total shares outstanding /(6)/ 7,498,159 7,498,159 7,498,159 7,498,159
Shares offered to new investors 502,000 100,400 100,400 702,800
------- ------- ------- -------
Total shares after purchase by
new investors 8,000,159 7,598,559 7,598,559 8,200,959
====================================================================================================================================
Net tangible
book value /(7)/ $9,835,000 $9,835,000 $9,835,000 $9,835,000
Investment by new investors $1,004,000 $200,800 $100,400 $1,305,200
---------- -------- -------- ----------
Pro forma net tangible book
value after offering /(8)/ $10,799,000 $9,995,800 $9,895,400 $11,100,200
=========== ========== ========== ===========
</TABLE>
______________
/(1)/ Includes Additional Warrants, Placement Warrants, and Additional
Placement Warrants.
/(2)/ Before deducting the Offering Costs.
/(3)/ As a result of the Company's failure to generate the Revenue Amount
during the Revenue Period, the Company granted Additional Warrants at an
exercise price of $2.00 per share as set forth under the caption
"Description of Securities."
/(4)/ As a result of the Company's failure to generate the Revenue Amount
during the Revenue Period, each Placement Warrant's exercise price was
reduced automatically and permanently to $2.00 per share and the Company
granted Additional Placement Warrants at an exercise price of $1.00 per
share as set forth under the caption "Description of Securities."
/(5)/ Represents a weighted average.
/(6)/ The total shares outstanding represented in this table are comprised of
the sum of the 6,996,159 shares of Common Stock outstanding as of
November 30, 1998, and the 502,000 Additional Shares issued by the
Company effective April 15, 1999 to the Unit Investors due to its failure
to generate the Revenue Amount during the Revenue Period as set forth
under the caption "Description of Securities."
/(7)/ As of November 30, 1998.
/(8)/ Net of the Offering Costs.
===============================================================================
19
<PAGE>
20
<PAGE>
21
<PAGE>
22
<PAGE>
23
<PAGE>
24
<PAGE>
25
<PAGE>
26
<PAGE>
- --------------------------------------------------------------------------------
USE OF PROCEEDS
- --------------------------------------------------------------------------------
The maximum net proceeds, if any, to be received by the Company from the
exercise of Warrants are estimated to be $1,305,200. The Offering Costs are
estimated to be approximately $40,000. The Offering Costs are the direct costs
and expenses that the Company has borne and estimates that it will subsequently
bear in conducting this offering, and include federal and state registration
fees, accounting and legal fees, engraving fees, and other fees and expenses
directly related to this offering. Due to the on-going nature of these fees,
the amount presented is an estimate.
The net proceeds, if any, received by the Company from the exercise of the
Warrants will be added to working capital and used for general corporate
operating purposes. These purposes may include the acquisition of complementary
business or product line; however the Company has not entered into an
understanding or agreement for any such acquisition. Pending use, the proceeds
will be invested in short-term, interest-bearing securities. The Company will
not receive any proceeds from the sale of the Selling Shareholder Shares offered
for the account of the Selling Shareholders, or from the issuance of the
Additional Shares, or from the grant of the Contingent Warrants, unless some or
all of the Contingent Warrants are exercised. (See "Dilution.") There can be no
assurance that any Warrants will be exercised.
Based on its current operating plan, the Company anticipates that the
proceeds of the Offering, if any, together with existing resources and cash
generated from operations, if any, will be sufficient to satisfy the Company's
contemplated cash requirements for at least 12 months. There can be no
assurance, however, that the Company's cash requirements during this period will
not exceed its available resources or that these funds will be sufficient to
meet the Company's longer term cash requirements for operations. In the event
the Company's plans or assumptions change or prove to be inaccurate, or the net
proceeds of the Offering, if any, together with cash generated from future
revenues, if any, prove to be insufficient to fund operations (due to
unanticipated expenses, problems, or other factors), the Company may find it
necessary and/or advisable to seek additional financing or curtail significantly
or eliminate some or all of its operations. There can be no assurance that
additional funds will not be required earlier than anticipated. The Company has
no firm arrangements to obtain any additional financing and there can be no
assurance that the Company will be able to do so at an acceptable cost, if at
all. (See "Forward Looking Information," "Risk Factors," and "Plan of
Distribution.")
27
<PAGE>
- --------------------------------------------------------------------------------
RECENT DEVELOPMENTS
- --------------------------------------------------------------------------------
LITIGATION.
Former Employees.
As has been detailed in the Company's financial reports, the Company was
involved in litigation proceedings and become a party to arbitration proceedings
against certain of its former employees. In the litigation, the Company
alleged, among other causes of action, that the party defendants misappropriated
the Company's intellectual property; and was granted a temporary restraining
order against the party defendants. Further, the Company maintained that the
issues raised in the arbitration proceedings were inextricably intertwined with
the matters that were the subject of the litigation. During the period ended
November 30, 1998, the litigation with its former employees was settled in full
and the Company accrued approximately $150,000 of legal costs associated with
such proceedings.
28
<PAGE>
Shelley Lawsuit.
Between June 26, 1998, and June 14, 1999, Gerald N. Shelley (and his law
corporation) and PCS Acquisition Corp., a wholly-owned subsidiary of the
Company, and the Company (as well as certain related individuals) filed a series
of complaints and cross complaints against each other in the Superior Court for
Orange County, California, styled Promax Conceptual Strategies, a California
------------------------------------------
corporation; Gerald N. Shelley, an individual, v. International Veronex
- -----------------------------------------------------------------------
Resources Ltd.; Jack Lazor, an individual; Tom Price, an individual; and Does 1
- -------------------------------------------------------------------------------
through 100, inclusive, Case No. 796168. On April 16, 1999, the parties reached
- ----------------------
a comprehensive settlement of the disputes among them.
29
<PAGE>
Malicious Prosecution Lawsuit.
On August 22, 1997, the Company, Nordell International Resources, Ltd., a
wholly-owned subsidiary of the Company ("Nordell"), and David A. Hite ("Hite")
(collectively referred to as "Hite, et al.") filed a lawsuit in the Superior
Court of California in Los Angeles for, among other issues, malicious
prosecution, fraud, and a net profits accounting from and against Triton Energy
Corp., Triton Energy Limited, Triton Indonesia, Inc. (a.k.a. Servoc Corp.)
(collectively referred to as "Triton") for the Enim Oil Field joint venture
project, styled Hite, et al. v. Triton Energy Corp., et al., Case No. CV 97-7146
-------------------------------------------
JMI(XCt) ("Hite, et al. v. Triton"). On September 27, 1997, Triton, through a
------------------------
"removal" procedure, transferred the case to the United States District Court
for the Central District of California.
In October 1997, Triton filed a Motion to Dismiss the Complaint. Hite, et
al. opposed Triton's Motion to Dismiss. The District Court ordered a stay of
the case pending the resolution of the Nordell International Resources, Ltd. v.
----------------------------------------
Triton Energy Corporation, Triton Indonesia Inc, and Triton Oil (NZ) Ltd.
- -------------------------------------------------------------------------
("Nordell v. Triton") appeal and reserved its earlier ruling on Triton's motion
-------------------
dismiss. After the Court of Appeals order denying Nordell's appeal in the
Nordell v. Triton case, the District Court in the Hite, et al. v. Triton action
- ----------------- ----------------------
ordered both sides to submit supplemental briefing on the impact, if any, that
the Nordell v. Triton appellate decision had on the Hite, et al. v. Triton case.
----------------- ----------------------
Both sides filed their supplemental briefs with the District Court.
On September 1, 1998, the District Court entered its Order granting in part
and denying in part Triton's Motion to Dismiss. As a result of this Order, the
District Court dismissed all of Nordell's claims, with prejudice. The District
Court also dismissed all of the Company's and Hite's causes of action against
Triton except for the Company's and Hite's individual causes of action against
Triton regarding malicious prosecution and abuse of process, pled as the first
and second causes of action, respectively, of the Complaint. The Company and
Hite plan to pursue vigorously these two remaining causes of action. The
Company, Nordell, and Hite may be precluded from appealing the District Court's
dismissal of their other claims until the entire case is resolved as to all
parties.
On November 2, 1998, Triton filed a summary judgment motion to dispose of
the two remaining causes of action: Veronex's and Hite's causes of action for
malicious prosecution and Hite's cause of action for abuse of process. On
February 1, 1999, the Court denied Triton's summary judgment motion in its
entirety. From September 1, 1998, until the Judge's ruling on February 1, 1999,
the parties had agreed to an informal stay of discovery, pending the Court's
resolution of Triton's Motion to Dismiss and summary judgment motion.
Immediately after the Court's ruling on February 1, 1999 denying Triton's motion
for summary judgment, the parties began discovery. Discovery is now
substantially completed.
On April 12, 1999, the Court conducted a Pretrial Conference. The Court
denied all of Triton's motions to exclude certain evidence that Hite and Veronex
planned to introduce at trial and granted Hite's and Veronex's motion to exclude
evidence of the Texas Court's erroneous ruling granting summary judgment against
Hite and entering a judgment
30
<PAGE>
against him. At the Pretrial Conference, the Court continued the trial date from
April 27, 1999, to May 18, 1999.
Veronex and Hite have retained an expert to present a damage study for the
damages Hite and Veronex claimed to have suffered pursuant to the malicious
prosecution and abuse of process causes of action. The parties expect the
expert witness to present evidence at trial indicating that Hite and Veronex
will seek a combined amount of damages of $679,219, with Veronex claiming
$591,854 of that amount and Hite seeking $87,365.
In or about December 1997, Veronex and Nordell retained Ernst & Young LLP,
as required by the arbitration order from the Nordell v. Triton arbitration, to
-----------------
audit Nordell's 5% net profits interest in the Enim Oil Field project. In or
about February and March 1999, Ernst & Young LLP began discussions with Triton's
outside auditors, PricewaterhouseCoopers LLP about Triton's audit of Nordell's
5% net profits interests. Ernst & Young LLP believe they have uncovered
discrepancies and errors related to Triton's calculation of Nordell's 5% net
profits interest.
Nordell had asserted as a cause of action, in the Hite, et al. v. Triton
----------------------
complaint, against Triton's claims that Nordell had been denied its right to a
5% net profits audit. Part of the relief from the Court that Nordell requested
is that it be allowed, pursuant to the December 13, 1990 arbitration award, to
review the 5% net profits calculation by way of Ernst & Young LLP. The Court
dismissed that cause of action in its September 1, 1998 Order Granting in Part
and Denying in Part Triton's Motion to Dismiss the Complaint. Triton claims
that this ruling precludes Nordell, by the use of Ernst & Young LLP, or by any
other method, from conducting an audit of the 5% net profits calculation.
Nordell maintains the position that it should be allowed to conduct a review of
the 5% net profits calculation, so long as Ernst & Young LLP conducts the audit.
There is no agreement yet between Ernst & Young LLP and the management of
the Company as to what precise amount is still owing Nordell pursuant to the 5%
net profits amount, except that Ernst & Young LLP does agree with the Company
that some amount of money is owing. The estimates of the amounts which may be
owing Nordell range from $800,000 to $25 million.
The court has suggested that the parties attempt to mediate the dispute and
the attorneys for Veronex and Hite are now exploring with Triton's attorneys the
possibility of conducting a mediation before the trial begins on May 18, 1999.
Triton is deciding whether to agree to a mediation, and if so, whether the
mediation would be limited to the malicious prosecution damages or would also
include the 5% net profits claim.
31
<PAGE>
Options to Purchase Securities From Registrant or Subsidiaries.
As of April 15, 1999, the following stock options to purchase the
Company's shares were outstanding to various directors and employees:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Name Shares Price (Cdn.$) Date
- ---------------------------- --------- ------------ --------------
<S> <C> <C> <C>
David Wooldridge 50,000 $3.69 Nov. 12, 2002
Jay Geier 15,000 $3.69 Nov. 12, 2002
Theodore G. Elser 15,000 $3.69 Nov. 13, 2002
Betty B. Lee 20,500 $2.25US Jul. 31, 1999
Donald R. Johnston 15,000 $6.26 Sept. 14, 2003
James H. Townsend 25,000 $6.26 Sept. 14, 2003
Sandra M. Milligan 50,000 $7.19 Feb. 3, 2004
Peggy Martin 50,000 $7.19 Feb. 3, 2004
Gennen McDowall 25,000 $7.19 Feb. 3, 2004
Pru Zerny 25,000 $7.19 Feb. 3, 2004
Gerald D. Lamont 25,000 $7.19 Feb. 3, 2004
Pamela E. Day 20,000 $7.19 Feb. 3, 2004
William Dannemeyer 25,000 $7.19 Feb. 3, 2004
N. David Hamilton 25,000 $7.19 Feb. 3, 2004
Timothy W. Hite 18,600 $7.19 Feb. 3, 2004
Damon S. Young 140,000 $4.13 Apr. 1, 2004
Premier Equities Inc. 80,000 $4.13 Apr. 1, 2004
Michael Fryer 40,000 $4.13 Apr. 1, 2004
Rahim Besharaty 40,000 $4.13 Apr. 1, 2004
-------
704,100
=======
</TABLE>
32
<PAGE>
Contingent Options - Two-Year Term.
As of April 15, 1999, the following contingent, earn-out options are
allocated from the Company's 1997 Contingent Stock Option Plan, the options for
which shall vest on the same contingent, earn-out basis as those reserved for
contingent issuance to Promax:
<TABLE>
<CAPTION>
Number of Exercise Expiration
Name Shares Price (Cdn.$) Date
- ---------------------------------- --------- -------------- -------------
<S> <C> <C> <C>
Tony Speed 100,000 $ 3.13 Aug. 1, 1999
David Wilson 40,000 $ 3.13 Aug. 1, 1999
Mike Schaefer 25,000 $ 3.13 Aug. 1, 1999
Jeanna Cobalis 20,000 $ 3.13 Aug. 1, 1999
Andrew Zide 40,000 $ 5.60 Jan. 16, 2000
Millie Egerton 20,000 $ 5.45 Mar. 13, 2000
Maxine English 20,000 $ 5.45 Mar. 13, 2000
Charles E. Armstrong 40,000 $10.33 May 27, 2000
Gregg Puckett 30,000 $10.71 Jun. 22, 2000
William P. Habig 40,000 $ 5.37 Mar. 5, 2000
Tony Speed 100,000 $ 2.28 Dec. 31, 2000
Timothy W. Hite 40,000 $ 2.28 Dec. 31, 2000
Peggy Martin 40,000 $ 2.28 Dec. 31, 2000
Millie Egerton 40,000 $ 2.28 Dec. 31, 2000
-------
595,000
=======
</TABLE>
33
<PAGE>
Earnout Options - Two-Year Term.
<TABLE>
<CAPTION>
Number of Exercise Expiration
Name Shares Price (Cdn.$) Date
- ---------------------------------- --------- ------------ -------------
<S> <C> <C> <C>
John C. Lazor 20,000 $ 0.90 Nov. 30, 1999
Beverly Lazor-Bahr 20,000 $ 0.90 Nov. 30, 1999
Shirley Lazor 20,000 $ 0.90 Nov. 30, 1999
Siamak Elghanian 20,000 $ 0.90 Nov. 30, 1999
Eddie Lepkowski 20,000 $ 0.90 Nov. 30, 1999
Ralph T. McCabe 300,000 $ 0.90 Nov. 30, 1999
Art Kotowitz 20,000 $ 0.90 Nov. 30, 1999
Pat McNiff 20,000 $ 0.90 Nov. 30, 1999
Lorraine DeBaca-
Rodriguez 10,000 $ 0.90 Nov. 30, 1999
Pravin Parmar 20,000 $ 0.90 Nov. 30, 1999
Chelly D. Speed 12,000 $ 0.90 Nov. 30, 1999
Nina Alvarez-
Shumway 12,000 $ 0.90 Nov. 30, 1999
-------
494,000
=======
</TABLE>
EARNOUT PERIOD EXTENDED.
At the Company's Annual General Meeting of Stockholders held September 21,
1998, the stockholders of the Company voted to extend the deadline from November
30, 1998 until November 30, 1999, before which (i) shares of Common Stock are
available for earnout under the Purchase Agreement and under that certain Merger
Agreement made by and among the Company, Promax, and PCS Acquisition Corp., a
California corporation, respectively, and (ii) options may vest under the
Company's 1997 Contingent Stock Option Plan. The extension of the earnout
period applies to the 6,400,000 shares of Common Stock available for earnout by
Mr. Price under the Purchase Agreement, the 3,500,000 shares of Common Stock
available for earnout by Promax under the Merger Agreement, and the 2,000,000
shares allocated to the Company's 1997 Contingent Stock Option Plan.
OPTION TERM REDUCED.
The term of each outstanding contingent and earnout option allocated from
the Company's 1997 Contingent Stock Option Plan was reduced by one year.
UNITS.
Effective April 15, 1999, the Company granted the Additional Warrants and
the Additional Placement Warrants, and issued the Additional Shares as set forth
more specifically under the caption "Description of Securities."
34
<PAGE>
- --------------------------------------------------------------------------------
SELLING SHAREHOLDERS
- --------------------------------------------------------------------------------
The following table sets forth certain information with respect to the
Selling Shareholders' beneficial ownership of the Company's Common Stock as of
the date of this Prospectus. Other than Mr. Robert E. Enright, none of the
Selling Shareholders has had any material relationship within the past three
years with the Company or any of its predecessors or affiliates. Mr. Enright
served as the Company's Vice President of Sales between February and October 31,
1998. (See "Plan of Distribution.")
35
<PAGE>
<TABLE>
<CAPTION>
Number of
Selling Shareholder
Shareholder Name(1) Shares(2) Percent(3)
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Jose Maria Salema Garcao 200,000 2.67%
Fred C. Hoeppner & Margaret J. Hoeppner 20,000 *
James L. Kurtz 50,000 *
George Scritchfield & Cynthia H. Scritchfield 20,000 *
JR. & Marshal L. Bloom 20,000 *
Jay Robert Bloom 10,000 *
Paul C. Kalvin & Irene Kalvin 22,000 *
Michael H. Male & Judith R. Male 10,000 *
Richard A. Adler & Marcella K. Adler Living Trust 20,000 *
Viola M. Enright & Robert E. Enright 100,000 1.33%
Seaview Investment Group 100,000 1.33%
Carlos J. Villaneuva 20,000 *
Viola M. Enright & Robert E. Enright 25,000 *
Frank K Kriz, Jr. MD PA Profit Sharing Plan Trust 30,000 *
Frank K Kriz, Jr. MD PA Pension Plan Trust 20,000 *
John J. Yanapoulos 20,000 *
Rodolfo Hernandez 20,000 *
Armando J. Guerra & Maria C. Guerra 20,000 *
Rodney R. Schoemann 20,000 *
Jose A. & Ileana Garcia 20,000 *
Hi Tel Group Inc. 40,000 *
Pablo Andrade 20,000 *
P. H. Walker Construction Corp. 30,000 *
Angela Joy Coppola 15,000 *
Paul Grover 2,000 *
Hathaway Partners, L.P. 70,000 *
JLA Partners Ltd. 20,000 *
Roy & Cathleen Mollard 20,000 *
Jan Nordmark 15,000 *
Management Plus Inc. Pension Trust FBO Perlow, Barry 15,000 *
Camalyn Randolph 20,000 *
</TABLE>
________________________________
* Less than one percent.
(1) Each Selling Shareholder's beneficial ownership of Company securities as of
the date of this Prospectus consists solely of the Unit Investor Shares,
Additional Shares, and Unit Warrants as set forth in this Prospectus.
Thus, the amount and percentage of Common Stock to be owned by each Selling
Shareholder after completion of this offering is zero, assuming that all
Selling Shareholders sell all of the Selling Shareholder Shares.
(2) Includes the balance of Unit Investor Shares not sold by the Selling
Shareholders as of the date of this Prospectus, all Additional Shares, and
assumes that all Unit Warrants are exercised (as to which exercise there
can be no assurance) and that all Selling Shareholders sell all of their
Selling Shareholder Shares.
(3) Total shares outstanding is comprised of the sum of the 6,996,159 shares
outstanding as of November 30, 1998, and 502,000 Additional Shares issued
by the Company effective April 15, 1999 to the Unit Investors.
36
<PAGE>
PLAN OF DISTRIBUTION
The Company will not employ the services of any person to (i) grant any of
the Contingent Warrants; (ii) obtain the exercise of any Warrants exercisable
into Common Stock; or (iii) offer for sale or purchase, sell, purchase, or
distribute any Warrant Shares or Additional Shares.
The Selling Shareholders will not employ the services of any person to
exercise any Warrants exercisable into Common Stock.
The Selling Shareholders may from time to time sell all or a portion of the
Selling Shareholder Shares in the over-the-counter market on the OTC Bulletin
Board, on any other national securities exchange on which the Common Stock is
listed or traded, in negotiated transactions or otherwise, at prices then
prevailing or related to the then-current market price or at negotiated prices.
The Selling Shareholder Shares will not be sold in an underwritten public
offering.
The Selling Shareholder Shares may be sold directly or through brokers or
dealers. The methods by which the Selling Shareholder Shares may be sold
include: (i) a block trade (which may involve crosses) in which the broker or
dealer so engaged will attempt to sell the securities as agent but may position
and resell a portion of the block as principal to facilitate the transaction;
(ii) purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this Prospectus; (iii) ordinary brokerage
transactions and transactions in which the broker solicits purchasers; and (iv)
privately negotiated transactions. In effecting sales, brokers and dealers
engaged by Selling Shareholders may arrange for other brokers or dealers to
participate.
Brokers or dealers may receive commissions or discounts from Selling
Shareholders (or, if any such broker-dealer acts as agent for the purchaser of
such shares, from such purchaser) in amounts to be negotiated, which, amounts
are not expected to exceed those customary in the types of transactions
involved. A broker-dealer may agree with a Selling Shareholder to sell a
specified number of such shares at a stipulated price per share, and, to the
extent such broker-dealer is unable to do so acting as agent for a Selling
Shareholder, to purchase as principal any unsold shares at the price required to
fulfill the broker-dealer's commitment to such Selling Shareholder. Broker-
dealers who acquire shares as principals may thereafter resell such shares from
time to time in transactions (which may involve crosses and block transactions
and sales to and through other broker-dealers, including transactions of the
nature described above) in the over-the-counter market or otherwise at prices
and on terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions and, in connection with
such resales, may pay to or receive from the purchasers of such shares
commissions as described above.
In connection with the distribution of the Selling Shareholder Shares, the
Selling Shareholders may enter into hedging transactions with broker-dealers.
In connection with such transactions, broker-dealers may engage in short sales
of the Selling Shareholder
37
<PAGE>
Shares in the course of hedging the positions they assume with the Selling
Shareholders. The Selling Shareholders may also sell the Selling Shareholder
Shares short and redeliver the Selling Shareholder Shares to close out the short
positions. The Selling Shareholders may also enter into option or other
transactions with broker-dealers, which transactions require the delivery to the
broker-dealer of the Selling Shareholder Shares. The Selling Shareholders may
also loan or pledge the Selling Shareholder Shares to a broker-dealer and the
broker-dealer may sell the Selling Shareholder Shares so loaned or, upon a
default, the broker-dealer may effect sales of the pledged shares. In addition
to the foregoing, the Selling Shareholders may enter into, from time to time,
other types of hedging transactions.
The Selling Shareholders and any broker-dealers participating in the
distributions of the Selling Shareholder Shares may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act and any
profit on the sale of Selling Shareholder Shares by the Selling Shareholders and
any commissions or discounts given to any such broker-dealer may be deemed to be
underwriting commissions or discounts under the Securities Act. The Selling
Shareholder Shares may also be sold pursuant to Rule 144 under the Securities
Act, beginning one year after the Selling Shareholder Shares were issued.
The Company has filed the Registration Statement, of which this Prospectus
forms a part, with respect to the sale of the Selling Shareholder Shares, as
well as with respect to the issuance of the Additional Shares and the Warrant
Shares. The Company has agreed to use its best efforts to keep the Registration
Statement current and effective for a period commencing on the effective date of
the Registration Statement and terminating 24 months after the Registration
Statement is declared effective by the Commission. There can be no assurance
that the Selling Shareholders will sell any or all of the Selling Shareholder
Shares offered hereunder. Under the Exchange Act and the regulations
thereunder, any person engaged in a distribution of the shares of Common Stock
of the Company offered by this Prospectus may not simultaneously engage in
market-making activities with respect to the Common Stock of the Company during
the applicable "cooling off" periods prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Shareholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Rules 10b-6
and 10b-7, which provisions may limit the timing of purchases and sales of
Common Stock by the Selling Shareholders.
There may not be any direct relation between the exercise price of the
Warrants or the issuance price of the Additional Shares and the assets, book
value, shareholder's equity or net worth of the Company. Neither the exercise
price of the Warrants nor the issuance price of the Additional Shares should be
considered an indication of the actual value of the Company or of the Common
Stock. The Company does not participate in determining the prices at which the
Selling Shareholders may offer their shares of Common Stock to the public.
All costs and expenses incurred in the registration, issuance, and primary
sale of the Additional Shares and the Warrant Shares registered hereby will be
borne by the Company. Further, all costs and expenses incurred by the Selling
Shareholders in the registration of the Selling Shareholder Shares registered
38
<PAGE>
hereby will be borne by the Company. However, the Company will not bear any of
the selling expenses incurred by the Selling Shareholders in the sale of the
Selling Shareholder Shares, including, but not limited to, discounts,
commissions, brokerage fees or taxes.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Arter & Hadden LLP, Irvine, California.
The consolidated balance sheet of Veronex Technologies, Inc. and its
subsidiaries as of February 28, 1998, and May 31, 1998, respectively, and the
related statements of operations, stockholders' equity, and cash flows for the
Company's fiscal year ended February 28, 1998, and the fiscal quarter ended May
31, 1998, have been incorporated by reference herein in reliance upon the report
of Schvaneveldt & Company, independent auditors, and upon the authority of said
firm as experts in accounting and auditing.
The consolidated balance sheet of Veronex Technologies, Inc. and its
subsidiaries as of February 28, 1997, and the related statements of operations,
stockholders' equity, and cash flows for the Company's fiscal year ended
February 28, 1997, have been incorporated by reference herein in reliance upon
the report of Coopers & Lybrand, Chartered Accountants, independent auditors,
and upon the authority of said firm as experts in accounting and auditing.
39
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Below is an itemized statement of all expenses in connection with the
issuance and distribution of the securities to be registered:
<TABLE>
<S> <C>
Registration Fee - Securities and Exchange Commission $ 2,885
Printing and Engraving Expenses $ --
Legal Fees and Expenses $25,000*
Accounting Fees and Expenses $ 7,500*
Insurance Policy for Directors or Officers $ --
Miscellaneous $ 4,615*
-------
Total $40,000*
=======
</TABLE>
______________
*Estimated and subject to amendment
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Except as hereinafter set forth, there is no charter provision, by law,
contract, arrangement or statute under which any director or officer of the
Company is insured or indemnified in any manner against any liability which he
may incur in his capacity as such.
STATUTORY PROVISIONS.
Section 128 of the British Columbia Company Act of 1979, as amended (the
"Company Act"), provides that a company may, with the approval of the court,
indemnify a person who is a director or former director of the Company or a
director or former director of a corporation of which the company is or was a
shareholder, and the person's heirs and personal representatives, against all
costs, charges and expenses, including an amount paid to settle an action or
satisfy a judgment, actually and reasonably incurred by the person, including an
amount paid to settle an action or satisfy a judgment in a civil, criminal or
administrative action or proceeding to which the person is made a party because
of being or having been a director, including an action brought by the company
or corporation, if, the person acted honestly and in good faith with a view to
the best interests of the corporation, and in the case of a criminal or
administrative action or proceeding, the person had reasonable grounds for
believing that the person's conduct was lawful.
Upon application, the court may make an order approving an indemnity under
this section, the court may make any further order it considers appropriate, and
the court may order notice to be given to any interested person.
The provisions of Section 128 described above apply to officers or former
officers of a company or of a corporation of which the company is or was a
shareholder.
40
<PAGE>
A company may obtain insurance for the benefit of directors or
officers against any liability incurred by the person as a director or officer.
ARTICLES OF INCORPORATION.
Subject to the provisions of the Company Act, Part 19 of the Company's
Articles of Incorporation provides that the Company shall indemnify each person
serving or having served as a director, secretary or an assistant secretary of
the Company or any combination thereof and the heirs and personal
representatives of any such person against all costs, charges and expenses
whatsoever, including legal fees and any amount paid to settle any action or
proceeding or satisfy any judgment in respect of any threatened, pending or
completed civil, criminal or administrative action or proceeding to which he is
or they are or threatened to be made a party by reason of his being or having
been a director, secretary or an assistant secretary of the Company or by reason
of his serving or having served, at the request of the Company, as a director,
officer, employee or agent of the Company or any other corporation, partnership,
joint venture, trust or other enterprise or in any other capacity for any such
or other entity whatsoever, including any action whether brought by the Company
or any such entity as above described; provided that he shall have acted
honestly and in good faith in the best interests of the Company or such entity
and shall have exercised the care, diligence and skill of a reasonably prudent
person in respect of the matter or matters giving rise to such threatened,
pending or completed civil, criminal or administrative action or proceeding.
The determination of any action, suit or proceeding by judgment,
order, settlement, conviction or otherwise shall not, of itself, create a
presumption that the person did not act honestly and in good faith and in the
best interests of the Company and did not exercise the care, diligence and skill
of a reasonably prudent person and, with respect to any criminal action or
proceeding, did not have reasonable grounds to believe that his conduct was
lawful.
The failure of a director or officer of the Company to comply with the
provisions of the Company Act or the Company's Articles of Incorporation shall
not invalidate any indemnity to which he is entitled under Part 19 of the
Articles of Incorporation.
Subject to the Company Act, the directors are authorized from time to
time to cause the Company to give indemnities to any director, officer,
employee, agent or other person who has undertaken or is about to undertake any
liability on behalf of the Company or any corporation controlled by it.
The directors may cause the Company to purchase and maintain insurance
for the benefit of any person for whom and against any liability for which the
directors shall or may cause the Company to provide indemnity pursuant to the
Articles of Incorporation.
The indemnification provided by Part 19 of the Articles of
Incorporation shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any other part of the Articles of
Incorporation, or any valid agreement, and shall continue as to a person who has
ceased to be a director, officer, employee or agent and shall enure to the
benefit of the heirs, executors and administrators of such person. The
indemnification provided
41
<PAGE>
by Part 19 of the Articles of Incorporation shall not be exclusive of any
powers, rights, agreements or undertakings which may be legally permissible or
authorized by or under any applicable law.
REGISTRATION RIGHTS AGREEMENTS.
Section 5 of the Registration Rights Agreements entered into between the
Company and each of the Unit Investors provide as follows:
In connection with any registration statement relating to a sale of
Restricted Registrable Securities, each seller thereof will furnish to the
Company in writing such information and affidavits with respect to such
seller as the Company reasonably requests for use in connection with any
such registration statement (or prospectus contained therein) and will
indemnify, to the extent permitted by law, the Company, its directors, its
officers who sign the registration statement and each person who controls
the Company (within the meaning of the Securities Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue or
alleged untrue statement of material fact or any omission or alleged
omission of a material fact required to be stated in such registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein (in the case of a prospectus, in
the light of the circumstances under which they were made) not misleading,
in each case to the extent, but only to the extent, that any such loss,
liability, claim, damage or expense arises out of or is based upon any such
untrue statement or alleged untrue statement or omission or alleged
omission made therein in reliance upon and in conformity with such written
information or affidavits relating to such seller furnished to the Company
by such seller expressly for use therein. Notwithstanding the provisions
of this Section 5(b), in no case shall any seller of Restricted Registrable
Securities be liable or responsible for any amount in excess of the net
proceeds received by such seller from the sale of the Restricted
Registrable Securities of such seller which are included in any
registration statement contemplated by this Agreement.
* * *
If the indemnification provided for in this Section 5 from the indemnifying
party is unavailable to an indemnified party hereunder in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then
the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute (on the basis of relative fault) to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses. The relative fault of such indemnifying
and indemnified parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied
by, such indemnifying or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and
42
<PAGE>
expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 5(c), any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding. Notwithstanding the provisions of this Section 5(d)(i), in no
case shall any seller of Restricted Registrable Securities be liable or
responsible for any amount in excess of the net proceeds received by such
seller from the sale of the Restricted Registrable Securities of such
seller which are included in any registration statement contemplated by
this Agreement.
* * *
No person guilty of fraudulent misrepresentation (within the meaning of
Section 8(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
* * *
If indemnification is available under this Section 5, the indemnifying
parties shall indemnify each indemnified party to the full extent provided
in Sections 5(a) and (b) without regard to the relative fault of said
indemnifying party or indemnified party.
PLACEMENT AGENT AGREEMENT.
Section 12 of the Placement Agent Agreement made between the Company and
the Placement Agent provides as follows:
[The Placement Agent] agrees to indemnify and hold harmless the Company,
its officers, directors, partners, employees, agents, and counsel and each
person, if any, who control the Company within the meaning of Section 15 of
the Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnify from the Company to [the Placement Agent], but only
with respect to statements, if any, made in the Confidential Offering
Memorandum, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by [the
Placement Agent] concerning [the Placement Agent] expressly for inclusion
in the Confidential Offering Memorandum, or any amendment or supplement
thereto and violations or breaches of any representation, warranty,
covenant or agreement contained or incorporated in the Agreement, provided,
however, that [the Placement Agent's] obligations to provide
indemnification hereunder shall be limited to the fees actually received by
[the Placement Agent] pursuant to this Agreement. If any action shall be
brought against the Company in respect of which indemnification may be
sought against [the Placement Agent] pursuant hereto, [the Placement Agent]
shall have the rights and duties given to the Company above, and the
Company shall have the rights and duties so given to [the Placement Agent].
Section 12 of the Placement Agent Agreement also provides:
43
<PAGE>
The Company, agrees to indemnify and hold harmless [the Placement Agent],
its officers, directors, partners, employees, agents, and counsel, and each
person, if any, who controls [the Placement Agent] within the meaning of
Section 15 of the Act or Section 20(a) of the * * * Exchange Act * * *
against any and all losses, claims, damages, obligations, penalties,
judgments, awards, settlements, liabilities, costs, expenses and
disbursements and any and all actions, suits, proceedings and
investigations in respect thereof and any and all legal and other costs,
expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, the
costs, expenses and disbursements, as and when incurred, of investigating,
preparing or defending any such action, suit, proceeding or investigation
(whether or not in connection with litigation in which [the Placement
Agent] is a party), directly or indirectly, caused by, relating to, based
upon, arising out of, or in connection with (a) an untrue statement or
alleged untrue statement of a material fact contained in, or omissions from
the Offering Documents, including any amendment thereof or supplement
thereto, or similar statements or omissions in or from any other
information furnished by the Company to [the Placement Agent] or any
prospective purchaser of the Securities in the Offering; (b) violations or
breaches of any representation, warranty, covenant or agreement contained
or incorporated in the Agreement or in any instrument, document, agreement
or certificate delivered by the Company to [the Placement Agent] or any
prospective purchaser of the Securities in the Offering; [the Placement
Agent's] acting for the Company, including, without limitation, any act or
omission by [the Placement Agent] in connection with its acceptance of or
the performance or no-performance of its obligations under the Agreement;
and (d) the Offering. The Company also agrees that [the Placement Agent]
shall not have any liability, whether direct or indirect, in contract or
tort (excluding intentional torts) to the Company for or in connection with
the engagement of [the Placement Agent], except as provided below with
respect to [the Placement Agent's] obligations to indemnify to the Company.
These indemnification provisions shall be in addition to any liability
which the Company may otherwise have to [the Placement Agent] or the person
indemnified below in this sentence and shall extend to the following: [the
Placement Agent], its affiliated entities, partners, employees, legal
counsel, agents and controlling persons (within the meaning of the federal
securities laws), and the officers, directors, employees, legal counsel,
agents and controlling persons of any of them. All references to [the
Placement Agent] in these indemnification provisions shall be understood to
include any and all of the foregoing.
In order to provide for just and equitable contribution, if a claim for
indemnification pursuant to these indemnification provisions is made but it
is found in a final judgment by a court of competent jurisdiction (not
subject to further appeal) that such indemnification may not be enforced in
such case, even though the express provisions hereof provide for
indemnification in such case, then the Company, on the one hand, and [the
Placement Agent], on the other hand, shall contribute to the losses,
claims, damages, obligations, penalties,
44
<PAGE>
judgments, awards, liabilities, costs, expenses and disbursements to which
the indemnified person may be subject in accordance with the relative
benefits received by the Company, on the one hand, [the Placement Agent],
on the other hand, and also the relative fault of the Company, on the one
hand, and [the Placement Agent], on the other hand, in connection with the
statements, acts or omissions which resulted in such losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs,
expenses or disbursements and the person found liable for a fraudulent
misrepresentation shall be entitled to contribution from any person who is
not also found liable for such fraudulent misrepresentation.
Notwithstanding the foregoing, [the Placement Agent], shall not be
obligation to contribute any amount hereunder that exceeds the amount of
fees previously received by [the Placement Agent] pursuant to the
Agreement.
ITEM 16. EXHIBITS.
5 [X] Opinion of Arter & Hadden LLP, counsel to the Company.
10.1* Agreement of Sale dated July 12, 1995 between the Registrant and
Martin J. Garo, Barbara A. Garo, Daniel R. Garo, Kevin W. Garo, Joe
Jones, Damon Young, Lisa Anderson and Timothy O'Connor whereby the
Registrant acquired four placer mining claims, all situate in Avawatz
Mining District, County of San Bernardino, State of California, United
States of America is incorporated by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended February 28,
1995.
10.2* Director's Stock Option Agreement dated January 28, 1997 between the
Registrant and David A. Hite is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1997.
10.3* Director's Stock Option Agreement dated January 30, 1997 between the
Registrant and Sandra M. Milligan is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
February 28, 1997.
10.4* Director's Stock Option Agreement dated November 12, 1997 between the
Registrant and J. Lewis Dillman is incorporated by reference to the
Registrant's Annual Report on Form 20-F for the fiscal year ended
February 28, 1998, filed with the Securities & Exchange Commission on
July 20, 1998.
10.5* Director's Stock Option Agreement dated November 12, 1997 between the
Registrant and Pru Zerny is incorporated by reference to the
Registrant's Annual Report on Form 20-F for the fiscal year ended
February 28, 1998, filed with the Securities & Exchange Commission on
July 20, 1998.
__________________________
* Items so noted were previously filed.
[X] Items so noted are filed herewith.
45
<PAGE>
10.6* Director's Stock Option Agreement dated November 12, 1997 between the
Registrant and Sandra M. Milligan is incorporated by reference to the
Registrant's Annual Report on Form 20-F for the fiscal year ended
February 28, 1998, filed with the Securities & Exchange Commission on
July 20, 1998.
10.7* Employees Stock Option Agreement dated November 12, 1997 between the
Registrant and Peggy Martin is incorporated by reference to the
Registrant's Annual Report on Form 20-F for the fiscal year ended
February 28, 1998, filed with the Securities & Exchange Commission on
July 20, 1998.
10.8* 1997 Contingent Stock Option Planis incorporated by reference to the
Registrant's Annual Report on Form 20-F for the fiscal year ended
February 28, 1998, filed with the Securities & Exchange Commission on
July 20, 1998.
10.9* Agreement of Sale dated November 20, 1995 between the Registrant and
David A. Hite and Timothy Hite whereby the Registrant acquired the
Alexander Star #2 Claim, comprised of 160 acres and located in San
Bernardino, California is incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
February 29, 1996.
10.10* Agreement of Sale dated November 20, 1995 between the Registrant and
David A. Hite, Donna L. Hite, Timothy W. Hite and Bradley Hite whereby
the Registrant was granted an option to acquire eight placer mining
claims known as the Alexander Star #91-98 Claims, all l,280 acres and
located in San Bernardino, California is incorporated by reference to
the Registrant's Annual Report on Form 10-K for the fiscal year ended
February 29, 1996.
10.11* Amending Agreement dated April 1, 1997 to the Property Purchase
Agreement dated January 14, 1997 between the Registrant and Thomas J.
Price, extending the date for receipt of all requisite regulatory
approvals from June 30, 1997 to December 31, 1997 is incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1997.
10.12* Property Purchase Agreement dated January 14, 1997 between the
Registrant and Thomas J. Price whereby the Registrant will acquire a
100% interest in and to certain software technology and intellectual
property created by Thomas J. Price, known as the Automated
Information Management (the "AIM Technology") is incorporated by
reference to the Registrant's Annual Report on Form 10-K for the
fiscal year ended February 28, 1997.
___________________
* Items so noted were previously filed.
[X] Items so noted are filed herewith.
46
<PAGE>
10.13* Property Purchase Agreement effective August 1, 1997 between the
Registrant and Terry G. Goodbody whereby the Registrant acquired a
100% interest in and to certain proprietary intellectual property
created by Goodbody, known as the Archidata Technology is incorporated
by reference to the Registrant's Annual Report on Form 20-F for the
fiscal year ended February 28, 1998, filed with the Securities &
Exchange Commission on July 20, 1998.
10.14* Stock Purchase Agreement dated the August 1, 1997 between the
Registrant and Thomas A. Speed whereby the Registrant acquired a 100%
interest in and to Mainstream Technologies, Inc., a California
corporation is incorporated by reference to the Registrant's Annual
Report on Form 20-F for the fiscal year ended February 28, 1998, filed
with the Securities & Exchange Commission on July 20, 1998.
10.15[X] Warrant Agreement dated November 7, 1997 among the Registrant and each
of the Unit Investors as part of the Registrant's Private Placement.
10.16[X] Placement Agent Agreement dated November 7, 1997 between the
Registrant and the Placement Agent as part of the Registrant's Private
Placement.
10.17 Placement Agent's Common Stock Warrant Agreement dated November 7,
1997 between the Registrant and the Placement Agent as part of the
Registrant's Private Placement.
23.1[X] Consent of Arter & Hadden LLP (Incorporated into Item 5.)
23.2[X] Consent of Schvaneveldt & Company.
24* Power of Attorney.
_________________
* Items so noted were previously filed.
[X] Items so noted are filed herewith.
47
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to which the prospectus is sent or
given, (i) the registrant's latest filing on Form 20-F, Form 40-F, or Form 10-K;
and any filing on Form 10-Q, Form 8-K or Form 6-K incorporated by reference into
the prospectus; (ii) the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 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.
48
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Irvine, State of California, on April 22, 1999.
VERONEX TECHNOLOGIES, INC.
By: /s/ DAVID A. HITE
-------------------
David A. Hite,
Chairman of the Board,
Chief Executive Officer,
Chief Financial Officer, and Director
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
DATE SIGNATURE TITLE
---- --------- -----
<S> <C> <C>
April 22, 1999 /s/ DAVID A. HITE Chairman of the Board, Chief
--------------------------------------
David A. Hite Executive Officer, Chief
Financial Officer, Director
April 22, 1999 /s/ THOMAS J. PRICE President and Director
--------------------------------------
Thomas J. Price
April 22, 1999 /s/ * Director
--------------------------------------
Sandra M. Milligan
April 22, 1999 /s/ GENNEN MC DOWALL Director
--------------------------------------
Gennen McDowall
April 22, 1999 /s/ * Director
--------------------------------------
Pru Zerny
</TABLE>
* /s/ DAVID A. HITE
- -------------------
David A. Hite
Attorney-in-Fact
49
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
Number Description
- --------------------------------------------------------------
<S> <C>
5 Opinion of Arter & Hadden LLP, counsel to the Company.
10.15 Warrant Agreement dated November 7, 1997 among the
Registrant and each of the Unit Investors as part of the
Registrant's Private Placement.
10.16 Placement Agent Agreement dated November 7, 1997 between
the Registrant and the Placement Agent as part of the
Registrant's Private Placement.
10.17 Placement Agent's Common Stock Warrant Agreement dated
November 7, 1997 between the Registrant and the Placement
Agent as part of the Registrant's Private Placement.
23.1 Consent of Arter & Hadden LLP (Incorporated into Item 5.)
23.2 Consent of Schvaneveldt & Company.
</TABLE>
<PAGE>
EXHIBIT 5
April 22, 1999
Veronex Technologies, Inc.
18023 Sky Park Circle, Suite E-2
Irvine, CA 92614
RE: Registration Statement on Form F-2
SEC File No. 333-64987
Gentlemen:
At your request, we have examined the Registration Statement on Form F-2
and Amendment No. 1 thereto, No. 333-64987 (the Registration Statement and all
amendments thereto, including, without limitation, Amendment No. 1, being
referred to herein as the "Registration Statement"), in connection with the
registration and sale of up to 1,736,800 shares of Common Stock of Veronex
Technologies, Inc., a British Columbia corporation (the "Company"), in the
manner described in the Registration Statement and the exhibits thereto (the
"Shares").
We have examined the proceedings heretofore taken and are familiar with
the procedures proposed to be taken by the Company in connection with the
authorization, issuance, and sale of the Shares. It is our opinion that the
Shares to be sold pursuant to the Registration Statement will be, if, when, and
as sold and paid for pursuant to the terms of the relevant warrant instruments
or other contractual obligations of the Company, legally issued, fully paid, and
non-assessable.
We consent to use of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
ARTER & HADDEN LLP
<PAGE>
EXHIBIT 10.15
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or any state securities laws and neither
the securities nor any interest therein may be offered, sold, transferred,
pledged or otherwise disposed of except pursuant to an effective registration
statement under such Act and such laws or an exemption from registration under
such Act and such laws which, in the opinion of counsel for the holder, which
counsel and opinion are reasonably satisfactory to counsel for this
corporation, is available.
WARRANT AGREEMENT
This Agreement (the "Agreement") dated November 7, 1997, between International
Veronex Resources Ltd., a British Columbia corporation (the "Company" and the
"Warrant Agent") and those individuals and entities purchasing the "Units" in a
private offering by the Company,
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company proposes to offer privately (the "Private Offering") up
to 1,200,000 Units to individuals and entities, each Unit to consist of one
share of the Company's common stock (the "Common Stock"), and one warrant to
purchase one additional share of Common Stock, such right to be evidenced by a
"Warrant", with the Warrants being collectively referred to herein as the
"Warrants";
WHEREAS, in connection with the proposed Private Offering, the Company
anticipates its issuance of not less than 500,000 Warrants to purchase up to an
aggregate of 500,000 shares of Common Stock and not more than 1,200,000 Warrants
to purchase up to an aggregate of 1,200,000 shares of Common Stock, subject to
increase upon the occurrence of certain events (the "Warrant Shares");
WHEREAS, the Company desires to provide for the issuance of certificates
representing the Warrants;
WHEREAS, the Company desires to act as its own warrant agent in connection
with the issuance, registration, transfer and exchange of certificates and the
exercise of the Warrants;
NOW, THEREFORE, in consideration of the above and foregoing premises and the
mutual promises and agreements hereinafter set forth, it is agreed that:
1. Warrant Certificates.
--------------------
(a) (i) Each Warrant shall entitle the holder (the "Registered Holder,"
or, in the aggregate, the "Registered Holders") in whose name the certificate
shall be registered on the books maintained by the Company to purchase one (1)
share of Common Stock on the exercise thereof, subject to modification and
adjustment as provided in Section 9 hereof. Warrant certificates shall be
executed by the Company's Chief Executive Officer and attested to by the
Company's Secretary. The Warrant certificates shall be immediately detachable
from certificates
<PAGE>
representing shares of Common Stock and shall be distributed to the purchasers
thereof simultaneously with the closing of the Private Offering.
(b) Subject to the provisions of Sections 3, 5, and 7 hereof, the Company
shall deliver Warrant certificates in required whole number denominations to
Registered Holders in connection with any transfer or exchange permitted under
this Agreement. Except as provided in Section 7 hereof, no certificates shall be
issued except (i) certificates initially issued hereunder, (ii) certificates
issued on or after their initial issuance date upon the exercise of any Warrant
to evidence the unexercised Warrants held by the exercising Registered Holder
and (iii) Warrant certificates issued after their initial issuance date, upon
any transfer or exchange of certificates or replacements of lost or mutilated
certificates.
2. Form and Execution of Certificates.
----------------------------------
(a) The Warrant certificates shall be dated the date of their issuance,
whether on initial transfer or exchange or in lieu of mutilated, lost, stolen or
destroyed certificates. The form of Warrant certificate is attached hereto as
Exhibit A.
(b) Each Warrant certificate shall be numbered serially in accordance with
the Common Stock initially attached thereto. Each Warrant certificate shall have
set forth thereon the designation "RPA."
(c) The Warrant certificates shall be manually signed on behalf of the
Company by a proper officer thereof and shall not be valid for any purpose
unless so signed. In the event any officer of the Company who executed
certificates shall cease to be an officer of the Company such certificates may
be issued and delivered by the Company or transferred by the Registered Holders
with the same force and effect as though the person who signed such certificate
had not ceased to be an officer of the Company; and any certificate signed on
behalf of the Company by any person, who at the actual date of the execution of
such certificate was a proper officer of the Company, shall be proper
notwithstanding that at the date of execution of this Agreement any such person
was not such an officer.
3. Exercise.
--------
(a) (i) Subject to the provisions of Sections 5 and 9 hereof, the
Warrants, as they may be adjusted as set forth herein, may be exercised at a
price (the "Warrant Exercise Price") of $8.00 per share of Common Stock subject
to adjustment, in whole or in part at any time during the period (the "Warrant
Exercise Period") commencing November 7, 1997 (the "Initial Warrant Exercise
Date"), and terminating on a date (the "Warrant Expiration Date") ending five
years after the final closing of the Private Offering (unless extended by a
majority vote of the Board of Directors for such length of time as they, in
their sole discretion, deem reasonable and necessary).
(b) Each Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date (each, an "Exercise Date") of the surrender
for exercise of the Warrant certificate. The exercise form shall be executed by
the Warrant Holder thereof or his attorney duly authorized in writing and shall
be delivered together with payment to the Company at its corporate offices
located at 18023 Sky Park Circle, Suite EB2, Irvine, California 92614 (the
"Corporate Office"), or at any such other office or agency as the Company may
designate, in cash
-2-
<PAGE>
or by official bank or certified check, of an amount equal to
the aggregate Exercise Price, in lawful money of the Untied States of America.
(c) Unless Warrant Shares may not be issued as provided herein, the person
entitled to receive the number of Warrant Shares deliverable on exercise shall
be treated for all purposes as the holder of such Warrant Shares as of the close
of business on the Exercise Date. The Company shall not be obligated to issue
any fractional share interest in Warrant Shares issuable or deliverable on the
exercise of any Warrant or scrip or cash therefore and such fractional shares
shall be of no value whatsoever.
(d) Within three business days after the Exercise Date and in any event
prior to the Warrant Expiration Date, the Company, at its own expense, shall
cause to be issued and delivered to the person or persons entitled to receive
the same, a certificate or certificates in the name requested by the Registered
Holder of the Warrants for the number of Warrant Shares deliverable on such
exercise. No adjustment shall be made in respect of cash dividends on Warrant
Shares delivered on exercise of any Warrant. All shares of Common Stock or other
securities delivered upon the exercise of the Warrants shall be validly issued,
fully paid and non-assessable.
(e) The Company may deem and treat the Registered Holder of the Warrants
at any time as the absolute owners thereof for all purposes, and the Company
shall not be affected by any notice to the contrary. The Warrants shall not
entitle the Registered Holders thereof to any of the rights of shareholders or
to any dividend declared on the Common Stock unless such holder or holders shall
have exercised the Warrants prior to the record date fixed by the Board of
Directors for the determination of holders of Common Stock entitled to such
dividends or other rights.
4. Adjustment to Initial Exercise Price and Grant of Additional Warrants.
---------------------------------------------------------------------
If the Company generates less than $24,000,000 in gross revenues during the
period that commenced September 11, 1997, and terminates November 30, 1998, then
the exercise price of each Warrant will be reduced automatically and permanently
to $2.00, subject to further adjustment for stock splits and recapitalizations.
In addition, the Company has agreed to grant, on a pro rata basis, to the
Registered Holders of the Warrants (as of December 1, 1998) additional warrants
(on terms identical to the Warrants) in accordance with the schedule set forth
below.
<TABLE>
<CAPTION>
Additional Warrants Gross Revenues of the Company
- ------------------- -----------------------------
(Per Warrant Sold in
the Private Offering)
<S> <C> <C> <C>
0 in excess of $24,000,000
.5 $20,000,000 C $24,000,000
1.0 $16,000,000 C $19,999,999
1.5 $12,000,000 C $15,999,999
2.0 $ 8,000,000 C $11,999,999
2.5 $ 4,000,000 C $ 7,999,999
3.0 $0 C $ 3,999,000
</TABLE>
-3-
<PAGE>
5. Registration Rights.
-------------------
The Registered Holders of Warrants shall have the registration rights under
the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations promulgated thereunder by the Securities and Exchange Commission
(the "Commission"), provided for in that certain Registration Rights Agreement
executed by the Company and the Registered Holders on even date herewith (the
"Registration Rights Agreement"). The Registration Rights Agreement is
incorporated herein by this reference in its entirety as if fully set forth
herein.
6. Reservation of Shares; Redemption of Warrants and Procedure Therefor; and
--------------------------------------------------------------------------
Payment of Taxes.
- ----------------
(a) Reservation of Shares. The Company covenants that it shall at all
---------------------
times reserve and have available from its authorized Common Stock such number of
shares as shall then be issuable on the exercise of all outstanding Warrants.
The Company covenants that all Warrant Shares shall be duly and validly issued,
fully paid and non-assessable, and shall be free from all taxes, liens and
charges with respect to the issuance thereof.
(b) Redemption of Warrants and Procedure Therefor. No Warrants may be
---------------------------------------------
redeemed by the Registered Holder, nor may any Warrant Shares be issued or
delivered by the Company unless on the Exercise Date (i) a Registration
Statement for the Warrant Shares has been declared effective by the Commission,
(ii) the Warrant Shares are listed on a national exchange or the Nasdaq Stock
Market, (iii) the closing bid price (or last sales price) of the Common Stock as
recorded by such exchange on which the Common Stock is then traded (or as
reported by Nasdaq) is not less than $10.00 per share for 20 consecutive
business days ending not less than 10 trading days prior to the date of the
notice of redemption, and (iv) the trading volume of the Common Stock is not
less than 30,000 shares per trading day.
In the event that fewer than all of the then outstanding Warrants are to be
redeemed, the Warrants to be redeemed shall be determined by lot or pro rata as
may be determined by the Board of Directors or any other method selected by the
Board of Directors which is not inconsistent with applicable law.
In the event the Company shall redeem the Warrants, notice of such redemption
(the "Notice of Redemption") shall be given by first class mail, postage
prepaid, mailed not less than 30, nor more than 60, days prior to the redemption
date, to each holder of record of the Warrants to be redeemed at such holder's
address as the same appears on the stock register of the Company. Each such
notice shall state: (i) the redemption date; (ii) the aggregate number of
Warrants to be redeemed from all holders of record, and, if less than all the
Warrants to be redeemed from all holders of record, and, if less than all the
Warrants held by a holder are to be redeemed from such holder, the number of
Warrants to be redeemed from such holder; (iii) the redemption price; and (iv)
the place or places where certificates for such Warrants are to be surrendered
for payment of the redemption price.
Notice having been mailed as provided in this Section 6(b), from and after the
redemption date (unless default shall be made by the Company in providing money
for the payment of the redemption price of the Warrants called for redemption),
and such Warrants shall no longer be deemed to be outstanding, and all rights of
the holders thereof as Warrantholders of the Company (except the right to
receive from the Company the redemption price) shall cease. Upon
-4-
<PAGE>
surrender, in accordance with the Notice of Redemption of the certificates for
any Warrants so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the Notice of Redemption shall so
state), such Warrants shall be redeemed by the Company at the aforesaid
redemption price. In the event that fewer than all the Warrants represented by
any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed Warrants without cost to the holder thereof.
(c) Payment of Taxes. The Company shall pay all documentary, stamp or
----------------
similar taxes and other government charges that may be imposed with respect of
the issuance of the Warrants, and/or the issuance, transfer or delivery of any
Common Stock constituting the Warrant Shares on the exercise or redemption of
the Warrants. In the event the Common Stock constituting the Warrant Shares are
to be delivered in a name other than the name of the Registered Holder of the
certificate, no such delivery shall be made unless the person requesting the
same has paid to the Company the amount of any such taxes, charges, or transfer
fees incident thereto.
7. Registration of Transfer.
------------------------
(a) The Warrant certificates may, subject to provisions of the Federal
Securities Laws, be transferred in whole or in part. Certificates to be
exchanged shall be surrendered to the Company at its Corporate Office. The
Company shall execute, issue and deliver in exchange therefor the Warrant
certificates that the holder making the transfer shall be entitled to receive.
(b) The Company shall keep transfer books at its Corporate Office which
shall register certificates and the transfer thereof. On due presentment for
registration of transfer of any certificate at the Corporate Office, the Company
shall execute, issue and deliver to the transferee or transferees a new
certificate or certificates representing an equal aggregate number of
securities. All such certificates shall be duly endorsed or be accompanied by a
written instrument or instruments of transfer in form reasonably satisfactory to
the Company. The established transfer fee for any registration of transfer of
certificates shall be paid by the Warrant Holder or the person presenting the
certificate for transfer.
(c) Prior to due presentment for registration or transfer thereof, the
Company may treat the Registered Holder of any certificate as the absolute owner
thereof (notwithstanding any notations of ownership or writing thereon made by
anyone), and the parties hereto shall not be affected by any notice to the
contrary.
8. Loss or Mutilation.
------------------
On receipt by the Company of evidence satisfactory as to the ownership of and
the loss, theft, destruction or mutilation of any Warrant certificate, the
Company shall execute and deliver in lieu thereof a new certificate representing
an equal number of Warrants. In the case of loss, theft or destruction of any
certificate, the individual representing reissuance of a new certificate shall
be required to indemnify the Company and also to post an open-penalty insurance
or indemnity bond. In the event a certificate is mutilated, such certificate
shall be surrendered and canceled by the Company prior to delivery of a new
certificate. Applicants for a new certificate shall also comply with such other
regulations and pay such other reasonable charges as the Company may prescribe.
-5-
<PAGE>
9. Adjustment of Initial Exercise Price and Number of Shares Purchasable.
---------------------------------------------------------------------
For purposes hereof, the term "Initial Exercise Price" shall mean, with
respect to the Warrants, $8.00. The Initial Exercise Price and the number of
shares of Common Stock purchasable pursuant to the Warrants shall be subject to
adjustment from time to time as hereinafter set forth in this Section 9;
provided, however, that no adjustment shall be made unless by reason of the
happening of any one or more of the events hereinafter specified, the Exercise
Price then in effect shall be changed by one percent or more, but any adjustment
that would otherwise be required to be made but for this proviso shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, amounts to one percent or more.
(a) Adjustment to Initial Exercise Price. See Section 4.
(b) Right to Reduce Exercise Price. The Company shall have the right to
reduce the Warrant Exercise Price at any time and from time to time that such
appears in the Company's best interests to do so.
(c) Anti-Dilution Provisions. The Exercise Price shall be subject to
further adjustment as follows:
(i) Adjustment Upon Issuances of Common Stock Below the Exercise
------------------------------------------------------------
Price. In case the Company shall issue any shares of Common Stock other than
- -----
Excluded Stock (as hereinafter defined) for a consideration per share less than
$4.00 per share, as adjusted for stock splits and recapitalization as set forth
below, the Exercise Price in effect immediately prior to each such issuance
shall be reduced to a price determined by dividing (A) the sum of (x) the number
of shares of Common Stock outstanding immediately prior to such issue,
multiplied by the Exercise Price in effect immediately prior to such issue, plus
(y) the consideration, if any, received by the Company upon such issue, by (B)
the number of shares of Common Stock outstanding immediately after such issue.
For the purposes of this clause 9(c)(i), the following provisions shall also be
applicable:
(1) Convertible Securities, Options, and Rights. If the Company
-------------------------------------------
shall issue any stock, warrant, security, obligation, option, or other right
which directly or indirectly may be converted, exchanged, or satisfied in shares
of Common Stock other than Excluded Stock (as hereinafter defined), the maximum
total number of shares of Common Stock issuable upon such Exercise, exchange, or
other exercise of such securities or rights shall thereupon be deemed to have
been issued and to be outstanding, and the consideration received by the Company
therefor shall be deemed to include the sum of the consideration received for
the issue of such securities or rights and the minimum additional consideration
payable upon such Exercise, exchange or other exercise of such securities or
rights. No further adjustment shall be made for the actual issuance of Common
Stock upon such Exercise, exchange, or other exercise of any such securities or
rights. If the provisions of any such securities or rights with respect to
purchase price or shares purchasable shall change or expire, any adjustment
previously made hereunder therefor shall be readjusted to such as would have
been obtained on the basis of the securities or rights as modified by such
change or expiration.
(2) Stock Dividends and Splits. In case the Company shall declare
--------------------------
a dividend or other distribution payable in Common Stock or shall subdivide
Common
-6-
<PAGE>
Stock into a greater number of shares of Common Stock, such issue of
Common Stock shall be deemed to have been made without consideration.
(3) Consideration. In case the Company shall issue shares of
-------------
Common Stock for consideration wholly or partly other than cash, the amount of
the consideration other than cash received by the Company shall be deemed to be
the fair value of such consideration as determined by the Board of Directors by
any method that the Board of Directors deems appropriate; provided, however,
that in the event that any such shares of Common Stock are to be issued to any
person or entity in which any director or directors of the Company has an
interest, such determination shall be made solely by those members of the board
of Directors who have no such interest.
(4) Record Dates. In case the Company shall take a record of the
------------
holders of Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, or (ii) to subscribe for
or purchase Common Stock, then such record date shall be deemed to be the date
of issue or sale of the shares of Common Stock deemed to have been issued upon
the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
(5) Treasury Stock. The number of shares of Common Stock
--------------
outstanding at any given time shall include shares owned or held by or for the
account of the Company, and the disposition of any such shares so owned or held
shall not be considered an issue of Common Stock.
(6) Excluded Stock. The term "Excluded Stock" shall mean (i) the
--------------
shares of Common Stock issuable upon exercise of the warrant to be issued to the
Placement Agent in connection with the placement of the Warrants; (ii) up to
250,000 shares of Common Stock issuable upon exercise of options and shares of
Common Stock issuable under the Company's Stock Option Plans approved by the
shareholders; and (iii) all shares of Common Stock to be issued in accordance
with, or in contemplation of, the transactions set forth in the Property
Purchase Agreement, as amended, between the Company and Thomas J. Price (dated
as of January 14, 1997), and the Agreement of Merger among the Company, PCS
Acquisition Corp., a wholly-owned subsidiary of the Company, and Promax
Conceptual Strategies (dated as of January 14, 1997).
(ii) Adjustments for Changes in Capital Stock. If the Company (A) pays
----------------------------------------
a dividend in Shares of Common Stock to holders of Common Stock; (B) subdivides
outstanding shares of Common Stock into a greater number of shares; (C) combines
outstanding shares of Common Stock into a smaller number of shares; (D) pays a
dividend on shares of Common Stock in shares of capital stock other than Common
Stock or makes a distribution on Common Stock in shares of capital stock other
than Common Stock; or (E) issues by reclassification of shares of Common Stock
any shares of its capital stock; then the Exercise Price in effect immediately
prior to such action shall be adjusted so that the holder of Warrants thereafter
exercised may receive the number of shares of capital stock of the Company which
such holder would have owned immediately following such action if such holder
had exercised his Warrant immediately prior to such action.
For a dividend or distribution, the adjustment shall become effective
immediately after the record date for the dividend or distribution. For a
subdivision, combination, or
-7-
<PAGE>
reclassification, the adjustment shall become effective immediately after the
effective date of the subdivision, combination, or reclassification.
If, after an adjustment, a holder of a Warrant upon Exercise thereof may
receive shares of two or more classes of capital stock of the Company, the Board
of Directors shall determine the allocation of the adjusted Exercise Price
between or among the classes of capital stock. After such allocation, the
Exercise Price of the classes of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock contained in
Section 9(c), above.
(iii) Voluntary Adjustment. The Company at any time may decrease the
--------------------
Exercise Price, temporarily or otherwise, by any amount but in no event shall
such Exercise Price result in the issuance of Common Stock at a price less than
the par value of the Common Stock at the time such decrease is made. Any such
decreased Exercise Price shall be available for at least 20 days from the date
on which notice of such decrease is filed by the Company with the transfer agent
for the Common Stock, and such decrease shall be irrevocable during such period.
The Company shall notify each holder of a Warrant at least 15 days prior to the
date on which the reduced Exercise Price takes effect.
(iv) When Adjustment May be Deferred, Etc. No adjustment in the
-------------------------------------
Exercise Price need be made under this Section 9(c) unless cumulative
adjustments equal at least $.125. Any adjustments which are not made shall be
carried forward and taken into account in any subsequent adjustment. No
adjustment of the Exercise Price will be made for cash distributions or cash
dividends paid out of funds legally available therefor. All calculations under
this Section 9(c) shall be made to the nearest cent or to the nearest 1/100th of
a share, as the case may be.
(v) Notice of Adjustment. Whenever the Exercise Price is adjusted, the
--------------------
Company shall calculate the adjustment to be made and shall promptly mail to
holders of the Warrants at such holder's address as set forth in the stock
register of the Company and to the transfer agent of the Company a certificate
from an officer of the Company briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct, absent manifest error.
(d) No fractional shares or scrip representing fractional shares. No
fractional shares or scrip representing fractional shares of Common Stock shall
be issued upon Exercise of the Warrants. If more than one Warrant certificate
shall be surrendered for Exercise at one time by the same holder, the number of
full shares issuable upon exercise thereof shall be computed on the basis of the
aggregate number of Warrants so surrendered. Instead of any fractional share of
Common Stock that would otherwise be issuable upon Exercise of any Warrants, the
Company will pay a cash adjustment in respect of such fractional interest in an
amount equal to the same fraction of the Exercise Price.
(e) Stock Options; Placement Agent Warrants.
(i) The provisions of this Section 9 shall not apply to the issuance
of up to 250,000 shares of Common Stock in accordance with the Company's current
stock option or share bonus plan provided, however, that the equity securities
issued in such offerings (or the equity securities to be received upon
conversion of debt incurred in connection with such offerings) are not priced
less than $4.00 per share in the case of Common Stock.
-8-
<PAGE>
(ii) The Company has agreed, as more fully described in the
Confidential Private Placement Memorandum providing for the Private Offering, to
issue to the Placement Agent certain Placement Agent Warrants which, upon
exercise, will entitle the Placement Agent or its permitted assigns to acquire
up to 240,000 shares of Common Stock, subject to increase of up to 20% upon the
same circumstances as the increase in Warrants.
(f) Terminology of "Shares." Whenever reference is made in this Section 9
to the issue or sale of shares of Common Stock, or simply shares, such term
shall mean any stock of any class of the Company other than preferred stock with
a fixed limit on dividends and a fixed amount payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
The shares issuable upon exercise of the Warrants shall, however, be shares of
Common Stock of the Company, without par value, as constituted at the date
hereof, except as otherwise provided in this Section 9(c).
(g) Prior Notice to Warrant Holders. In the event that at any time:
(1) The Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than cash dividends) to the
holders of its Common Stock; or
(2) The Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or any
other rights; or
(3) The Company shall effect any capital reorganization or any
reclassification of or change in the outstanding capital stock of the
Company (other than a change in par value, or a change from par value to
no par value, or a change from no par value to par value, or a change
resulting solely from a subdivision or combination of outstanding shares),
or any consolidation or merger, any sale, transfer or other disposition of
all or substantially all of its property, assets, business and goodwill as
an entirety, or the liquidation, dissolution or winding up of the Company;
or
(4) The Company shall declare a dividend upon its Common Stock payable
otherwise than out of earnings or earned surplus or otherwise than in
shares or any stock or obligations directly or indirectly convertible into
or exchangeable for shares;
then, in any such event, the Company shall cause at least thirty (30) days'
prior written notice to be mailed to each Warrant Holder at the address of such
holder shown on the books of the Company. The notice shall also specify the
date on which the books of the Company shall close or a record be taken for such
stock dividend, distribution or subscription rights, or the date on which such
reclassification, reorganization, consolidation, merger, sale, transfer,
disposition, liquidation, dissolution, winding up, or dividend, as the case may
be, shall take place, and the date of participation therein by the holders of
shares of Common Stock if any such date is to be fixed, and shall also set forth
such facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the rights of the holder.
-9-
<PAGE>
(h) Disputes. In the event that there is any dispute as to the computation
of the Exercise Price or the number of shares of Common Stock required to be
issued upon the exercise of the Warrants, the Company will retain an independent
and nationally recognized accounting firm to conduct an audit of the
computations pursuant to the terms hereof involved in such dispute, including
the financial statements or other information upon which such computations were
based. The determination of such nationally recognized accounting firm shall, in
the absence of manifest error, be binding. If there shall be a dispute as to the
selection of such nationally recognized accounting firm, such firm shall be
appointed by the American Institute of Certified Public Accountants ("AICPA") if
willing, otherwise the American Arbitration Association ("AAA"). If the Exercise
Price or number of shares of Common Stock as determined by such accounting firm
is one percent or more higher or lower than the calculations thereof computed by
the Company, the expenses of such accounting firm and, if any, of AICPA and AAA,
shall be borne completely by the Company. In all other cases, they shall be
borne by the complaining Warrant Holders, as applicable.
(i) Corporate Action. Before taking any action which would cause an
adjustment reducing the Exercise Price below the then par value of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and non-assessable
shares of Common Stock at the adjusted Exercise Price.
10. Notices.
-------
All notices, demands, elections, opinions or requests (however characterized
or described) required or authorized hereunder shall be deemed given
sufficiently if in writing and sent by registered or certified mail, return
receipt requested and postage prepaid, or by confirmed telex, telegram,
facsimile transmission or cable to, in the case of the Company:
International Veronex Resources Ltd.
18023 Sky Park Circle, Suite EB2
Irvine, California 92614
Fax: (714) 253-9677
Attention: Chief Executive Officer
and if to the Warrant Holder at the address of such holder as set forth on the
books maintained by or on behalf of the Company.
11. Binding Agreement.
-----------------
This Agreement shall be binding upon and inure to the benefit of the Company
and the Warrant Holders. Nothing in this Agreement is intended or shall be
construed to confer upon any other person any right, remedy or claim or to
impose on any other person any duty, liability or obligation.
12. Further Instruments.
-------------------
The parties shall execute and deliver any and all such other instruments and
take any and all other actions as may be reasonably necessary to carry out the
intention of this Agreement.
-10-
<PAGE>
13. Severability.
------------
If any provision of this Agreement shall be held, declared or pronounced void,
voidable, invalid, unenforceable, or inoperative for any reason by any court of
competent jurisdiction, government authority or otherwise, such holding,
declaration or pronouncement shall not affect adversely any other provision of
this Agreement, which shall otherwise remain in full force and effect and be
enforced in accordance with its terms, and the effect of such holding,
declaration or pronouncement shall be limited to the territory or jurisdiction
in which made.
14. Waiver.
------
No delay or failure on the part of any party in the exercise of any right or
remedy arising from a breach of this Agreement shall operate as a waiver of any
subsequent right or remedy arising from a subsequent breach of this Agreement.
15. Relevant Markets.
----------------
For the purposes of this Agreement, it is assumed that the Common Stock is
quoted on the Nasdaq OTC Bulletin Board; however, in the event the Common Stock
is:
(a) listed on a national securities exchange or admitted to unlisted trading
privileges on such exchange, the price of the Common Stock to be determined
during any applicable trading period, e.g., the periods set forth in Section
6(b), above, shall be the last reported sale price of the Common Stock on such
exchange; or
(b) not quoted on the Nasdaq OTC Bulletin Board or is not so listed or
admitted to unlisted trading privileges, the price of the Common Stock to be
determined during any applicable trading period shall be the high closing bid as
reported on the "pink sheets" by the National Quotation Bureau, Inc.
16. General Provisions.
------------------
THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND
GOVERNED BY, THE LAWS OF THE STATE OF CALIFORNIA. This Agreement may not be
modified or amended or any term or provision hereof waived or discharged except
in writing by the party against which such amendment, modification, waiver or
discharge is sought to be enforced. The headings of this Agreement are for
convenience and reference only and shall not limit or otherwise affect the
meaning hereof.
-11-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on the date first set forth above.
[CORPORATE SEAL] INTERNATIONAL VERONEX RESOURCES, LTD.
By: _____________________________________
David A. Hite
Chief Executive Officer
ATTEST: ________________________
Secretary
WARRANT HOLDERS:
By: ROBB PECK MCCOOEY CLEARING CORP.,
as Placement Agent
By: ________________________________
-12-
<PAGE>
EXHIBIT A
The securities represented hereby have not been registered under the
Securities Act of 1933, as amended, or any state securities laws and
neither the securities nor any interest therein may be offered, sold,
transferred, pledged or otherwise disposed of except pursuant to an
effective registration statement under such Act and such laws or an
exemption from registration under such Act and such laws which, in the
opinion of counsel for the holder, which counsel and opinion are reasonably
satisfactory to counsel for this corporation, is available.
WARRANT CERTIFICATE
INTERNATIONAL VERONEX RESOURCES LTD.
Warrant No. RPA-________ No. of Warrants: __________
This certifies that, for value received and subject to the terms and
conditions set forth herein, ________________________________ or his registered
assign (the "Warrant Holder") is the registered holder of
______________________________ warrants.
1. Exercise. The warrants evidenced hereby ("Warrants"), as they may be
adjusted from time to time, may be exercised at a price of $8.00 per Warrant to
acquire one (1) share of the common stock of International Veronex Resources
Ltd. which is without par value (the "Common Stock" and the "Company,"
respectively). (The Common Stock acquirable upon exercise hereof is referred to
herein as "Warrant Stock.") If, at the time of any exercise of a Warrant, the
Shares deliverable upon exercise of such Warrant shall not be registered under
the Securities Act, the Company may require, as a condition of allowing such
exercise, that the holder or transferee of such Warrant, furnish to the Company
an opinion of counsel or recognized standing in securities law, to the effect
that such exercise may be made without registration under the Securities Act,
provided that subject to receipt of the aforementioned opinion, the exercise of
the Warrant shall at all times be within the control of such holder or
transferee, as the case may be, and, if required by the Company, by written
representation that the shares being acquired by the exercise of the Warrant are
being purchased for investment and not for distribution; acknowledging that such
shares have not been registered under the Securities Act of 1933, as amended
(the "1933 Act"); and agreeing that such shares may not be sold or transferred
unless there is an effective Registration Statement for them under the 1933 Act,
or in the opinion of counsel to the Company such sale or transfer is not in
violation of the 1933 Act. No fractional shares may be acquired upon exercise
hereof.
2. Term of Warrant. This Warrant may be exercised at any time and from time to
time in whole or in part commencing the date of issuance, and ending at 5:00
P.M. on the date five years thereafter.
3. Adjustment of Exercise Price; Grant of Additional Warrants. The number of
shares purchasable upon exercise of this Warrant is subject to adjustment if the
Company shall, prior to exercise of any Warrants, effect one or more stock
splits, stock dividends or other increases or reductions in the number of shares
of Common Stock outstanding in certain circumstances. No such anti-dilution
provisions shall apply in the event of a merger, acquisition or consolidation
should any of these events occur prior to the exercise of the Warrants;
provided, however, that the
-13-
<PAGE>
price negotiated for the sale of any shares of Common Stock issuable upon such
event is not less than the exercise price of the Common Stock then acquirable
under the terms and conditions of the Warrant Agreement governing the issuance
of these Warrants.
Further, if the Company generates less than $24,000,000 in gross revenues
during the period that commenced September 11, 1997, and terminates November 30,
1998, then the exercise price of each Warrant will be reduced automatically and
permanently to $2.00, subject to further adjustment for stock splits and
recapitalizations. In addition, the Company has agreed to grant, on a pro rata
basis, to the Registered Holder hereof (as of December 1, 1998) additional
warrants (on terms identical to this Warrant) in accordance with the schedule
set forth below.
<TABLE>
<CAPTION>
Additional Warrants Gross Revenues of the Company
- ------------------- -----------------------------
(Per Warrant Sold in
the Private Offering)
<S> <C> <C> <C>
0 in excess of $24,000,000
.5 $20,000,000 C $24,000,000
1.0 $16,000,000 C $19,999,999
1.5 $12,000,000 C $15,999,999
2.0 $8,000,000 C $11,999,999
2.5 $4,000,000 C $ 7,999,999
3.0 $0 C $ 3,999,000
</TABLE>
4. Reservation of Common Stock. The Company agrees that the number of shares
of Common Stock sufficient to provide for the exercise of the Warrants upon the
basis set forth herein will at all times during the term of this Warrant be
reserved for the exercise hereof.
5. Manner of Exercise. Exercise, or redemption, may be made of all or any part
of the Warrants by surrendering this certificate, with the purchase form to be
provided by the Company, duly executed by the Warrant Holder or by the Warrant
Holder's duly authorized attorney, plus, in the case of exercise, payment of the
exercise price therefor in cash at the office of the Company or its designated
assign.
6. Issuance of Common Stock upon Exercise. The Company, at its own expense,
shall cause to be issued, within three (3) business days after exercise of this
Warrant, a certificate or certificates in the name requested by the Warrant
Holder of the number of shares of Common Stock to which the Warrant Holder is
entitled upon such exercise. All shares of Common Stock or other securities
delivered upon the exercise of this Warrant shall be validly issued, fully paid
and non-assessable.
Irrespective of the date of issuance and delivery of any shares of Common
Stock upon the exercise of this Warrant, each person in whose name any such
certificate is to be issued will for all purposes be deemed to have become the
holder of record of the Common Stock acquired on the date on which a duly
executed notice of exercise of this Warrant and payment for the number of shares
exercised are received by the Company.
7. Registration Rights. The Warrant Shares are the subject of certain
incidental registration rights by virtue of an agreement to be entered into
between the Company and the investors (the "Registration Rights Agreements").
The Registration Rights Agreement provide for regis-
-14-
<PAGE>
tration of the Warrant Shares (the "Registrable Securities") during the period
in which the securities remain subject to the registration requirements set
forth under the Securities Act prior to sale, in the event that the Company
proposes to register any other shares of Common Stock under the Securities Act.
8. No Right as Shareholder. The Warrant Holder is not, by virtue of his
ownership of this Warrant, entitled to any rights whatsoever as a shareholder of
the Company.
9. Assignment. This Warrant may not be assigned without providing the Company
an opinion satisfactory to its counsel that an exemption from registration for
the transfer exists.
10. State Legends.
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 THE CONFIDENTIAL PRIVATE OFFERING
MEMORANDUM GOVERNING THE ISSUANCE OF THESE SECURITIES. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
11. Warrant Agreement. The actual terms and conditions of this Warrant are
contained in a Warrant Agreement entered into by and between the Company and the
Warrant holder, the terms and conditions of which are incorporated herein by
this reference as if fully set forth herein and made a part hereof. To the
extent of any conflict herewith, the terms and conditions of the Warrant
Agreement shall apply.
///
///
///
///
///
///
-15-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant certificate to be
signed on its behalf by its President, his signature to be attested to by its
Secretary, and its corporate seal to be hereunto affixed this 7th day of
November, 1997.
[SEAL] INTERNATIONAL VERONEX RESOURCES LTD.
on behalf of the Company
and as Warrant Agent
By: ________________________________
David A. Hite
Chief Executive Officer
Attest: _______________________________
Name: __________________________
Title: _________________________
-16-
<PAGE>
FORM OF SUBSCRIPTION AGREEMENT
(To be signed and delivered
upon exercise of Warrant)
INTERNATIONAL VERONEX RESOURCES LTD.
18023 Sky Park Circle
Suite EB2
Irvine, California 92614
Attention: Corporate Secretary
The undersigned, the holder of the within Warrant, hereby irrevocably elects
to exercise the purchase right represented by such Warrant for, and to purchase
thereunder, __________ shares of common stock, no par value per share (the
"Stock"), of INTERNATIONAL VERONEX RESOURCES LTD. (the "Company") and herewith
makes payment of ______________ Dollars (US$__________) therefor and requests
that the certificates for such shares be issued in the name of, and delivered
to,
_______________________________________________________________________________
whose address is ______________________________________________________________
_______________________________________________________________________________
If the exercise of this Warrant is not covered by a registration statement
effective under the Securities Act of 1933, as amended (the "Securities Act"),
the undersigned represents that
(i) the undersigned is acquiring such Stock for investment for its
own account, not as nominee or agent, and not with a view to the distribution
thereof and the undersigned has not signed or otherwise arranged for the
selling, granting any participation in, or otherwise distributing the same,
(ii) the undersigned has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of the
undersigned's investment in the Stock,
(iii) the undersigned has received all of the information the
undersigned has requested from the Company and considers necessary or
appropriate for deciding whether to purchase the shares of Stock,
(iv) the undersigned has the ability to bear the economic risks of
its prospective investment,
(v) the undersigned is able, without materially impairing its
financial condition, to hold the shares of Stock for an indefinite period of
time and to suffer complete loss on its investment,
-1-
<PAGE>
(vi) the undersigned understands and agrees that (A) it may be
unable to readily liquidate its investment in the shares of Stock and that the
shares must be held indefinitely unless a subsequent disposition thereof is
registered or qualified under the Securities Act and applicable state securities
or Blue Sky laws or is exempt from such registration or qualification, and that
the Company is not required to register the same or to take any action or make
such an exemption available except to the extent provided in the within Warrant;
and (B) the exemption from registration under the Securities Act afforded by
Rule 144 promulgated by the Securities and Exchange Commission ("Rule 144")
depends upon the satisfaction of various conditions by the undersigned and the
Company and that, if applicable, Rule 144 affords the basis for sales under
certain circumstances in limited amounts, and that if such exemption is utilized
by the undersigned, such conditions must be fully complied with by the
undersigned and the Company, as required by Rule 144,
(vii) the undersigned either (A) is familiar with the definition of
and the undersigned is an "accredited investor" within the meaning of such term
under Rule 501 of Regulation D promulgated under the Securities Act, or (B) is
providing representations and warranties reasonably satisfactory to the Company
and its counsel, to the effect that the sale and issuance of Stock upon exercise
of such Warrant may be made without registration under the Securities Act or any
applicable state securities and Blue Sky laws, and
(viii) the address set forth below is the true and correct address for
the undersigned.
DATED: ____________________
___________________________
___________________________
___________________________
(Address)
-2-
<PAGE>
EXHIBIT 10.16
Board of Directors
International Veronex Resources LTD.
18023 Skypark Circle, Suite E-2
Irvine, CA 92614
Attention: Mr. David Hite, Chairman of the Board
Gentlemen:
You have advised us that International Veronex Resources LTD. (the
"Company") proposes to privately offer and sell (the "offering") up to
$4,000,000 of its securities (the "Securities") in reliance upon an exemption
from registration pursuant to Section 4(s) of the Securities Act of 1933, as
amended (the "Act") or other appropriate exemption. The offering will be on a
"best efforts basis" and the anticipated terms of the Securities are more fully
described in Exhibit A annexed hereto.
The purpose of this agreement (the "Agreement") is to set forth the
terms pursuant to which the Company hereby engages Robb Peck McCooey Clearing
Corporation ("Robb") as its exclusive investment banker and placement agent to
assist the Company in arranging the offer and sale of the Securities.
1. (a) The Company hereby appoints Robb as the company's
exclusive agent for the purpose of assisting the Company in finding purchasers
for the Securities for the account and risk of the Company through the private
offerings herein contemplated (the "offering"). Subject to the terms and
conditions contained in this Agreement, Robb hereby accepts such appointment.
The exclusive agency granted Robb hereunder shall extend to any other equity or
debt financing which the Company may consider during the term hereof and the
Company agrees to refer all proposals for any such financing to Robb. The
Company expressly acknowledges and agrees that Robb's obligations hereunder are
not on a firm commitment basis and that the execution of this Agreement does not
constitute a commitment by Robb to purchase the Securities and does not ensure
the successful placement of the Securities or any portion thereof. Further,
Robb's obligation to use its best efforts to assist the Company in the Offering
is subject to the completion of a due diligence review of the Company.
(b) The Company agrees that during the term of Robb's agency
hereunder, which terminates as set forth in paragraph 13, neither the Company
nor any person authorized to act on the Company's behalf will offer the
Securities, for sale to, or solicit any offers to purchase the Securities from,
or except as Robb may specifically request, otherwise approach or negotiate in
respect thereof with, any other person or persons. Neither the Company or any
person authorized to act on the Company's behalf will, directly or indirectly,
take any action that would prevent the offering and sale of the Securities from
complying with the
<PAGE>
requirements of all applicable securities laws or render unavailable any
exemption from the registration provisions of the Act relied upon in making any
offer or sale of the Securities, or the state securities or "blue sky" laws of
jurisdictions in which the Securities will be offered.
2. In connection with Robb's activities pursuant to this Agreement,
the Company will furnish Robb with all information (the "Information")
concerning the Company and its subsidiaries which Robb may request and will
provide Robb access to the Company's officers, directors, accountants and
counsel. The Company acknowledges that in rendering its services hereunder,
Robb will be using and relying on the Information. The company represents and
warrants that the Information and the information contained in the confidential
Offering memorandum referred to below will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
which they were made not misleading. Robb agrees to hold all of the Information
which is confidential and proprietary to the Company in confidence and will use
such information only in furtherance of the transactions contemplated herein.
3. (a) The company shall prepare or cause to be prepared a
Confidential Offering Memorandum, and/or other appropriate offering documents in
form and substance satisfactory to Robb, containing information concerning,
among other things, the terms of the Offering and the Securities, the risks
attendant to an investment in the Securities, information concerning the
business and finances of the Company and its subsidiaries and other relevant
matters. Robb and its counsel shall have the opportunity to make such review
and investigation of the information contained in the Confidential Offering
Memorandum as it deems appropriate. The company authorizes and directs Robb to
furnish to prospective purchasers of the Securities, the Confidential Offering
Memorandum, as same may be amended or supplemented, and agrees to provide Robb
with such number of copies thereof as Robb may reasonably request. If any event
relating to or affecting the company shall occur as a result of which it is
necessary or advisable to amend or supplement result of which it is necessary or
advisable to amend or supplement the Confidential Offering Memorandum in order
to make the statements contained therein not misleading in light of the
circumstances existing at the time it is delivered to prospective purchasers or
in order to comply with any applicable federal or state securities or "blue sky"
laws, the Company shall forthwith prepare and furnish to Robb a reasonable
number of copies of an amendment or amendments of or a supplement or supplements
to the Confidential Offering Memorandum (in form and substance satisfactory to
Robb) which will amend or supplement the Confidential Offering Memorandum so
that as amended or supplemented it will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances existing at the
time the Confidential Offering Memorandum is delivered to prospective
purchasers, not misleading and it will comply with any applicable federal or
state securities or "blue sky" laws. The company shall advise Robb of the
happening of any such event known to it, shall advise Robb promptly after it
receives knowledge or notice thereof of any communication with the Securities
and Exchange Commission or any state securities commissioner concerning the
initiation of any proceeding concerning the Offering, and shall advise Robb
promptly after it receives knowledge or notice thereof of the commencement of
any lawsuit or proceeding relating to the Offering.
2
<PAGE>
(b) The Company shall also prepare or cause to be prepared
such subscription agreements, other documentation (including, without
limitation, subscription agreements, warrants, escrow agreements and
certificates), all of which shall be in form and substance satisfactory to Robb,
as Robb may reasonably request in connection with the Offering. The Company will
designate an auditor in connection with the Offering reasonably satisfactory to
Robb. As a condition to the closing of the Offering, the Company shall also
deliver to Robb and the purchasers of the Securities such instruments, documents
and certificates and opinions as Robb may reasonably request in order to
evidence the truth, accuracy and completeness of the Information and the
information contained in the Confidential Offering Memorandum, the Company's
authority to make the Offering, the validity, legality and enforceability of the
Securities and the various instruments, documents and agreements executed in
connection with the Offering and such other matters as Robb may reasonably
request. The Confidential Offering Memorandum and all other documents prepared
by the Company in connection with the Offering and the closing of the Offering
are hereinafter referred to as the "Offering Documents."
4. The Company will endeavor in good faith, in cooperation with
Robb and its counsel, to qualify, to the extent required by applicable law, the
sale of the Securities for offering and sale under the applicable securities or
"blue sky" laws of such jurisdictions as Robb may designate, and the Company
will use its best efforts to maintain such qualifications in effect for as long
as may be required for the distribution of the Securities. In each jurisdiction
where the Securities shall have been qualified as above provided, the Company
will make and file such statements and reports in each year as are or may be
required by the laws of such jurisdiction.
5. For acting as exclusive agent in connection with the Offering,
Robb shall be entitled to receive and the Company hereby agrees to pay to Robb
upon consummation of each financing, a commission equal to 9% of the gross
proceeds of the Offering and a non-accountable expense allowance equal to 2% of
the gross proceeds of the Offering. Immediately upon the execution of this
letter, the Company shall deliver to Robb a check in the amount of $50,000, of
which $25,000 shall be non-refundable, and which shall be applied against the
expense allowance.
6. The Company shall pay all fees, charges, expenses and
disbursements relating to the Offering, including, without limitation, all fees,
charges, expenses and disbursements in connection with (a) the presentation,
printing, filing, distribution and mailing of the Confidential Offering
Memorandum and any supplement and amendment thereto and all other documents
relating to the Offering and the purchase, sale and delivery of the Securities,
including the cost of all copies thereof; (b) the issuance, sale, transfer and
delivery of the Securities, including any transfer or other taxes payable
thereon and the fees of any transfer agent or registrar; (c) the registration or
qualification of the Securities for offer and sale under the securities laws of
such states and other jurisdictions as Robb may designate (including, without
limitation, and all filing and registration fees and the reasonable `blue sky"
fees and disbursements of Robb's counsel); and (d) not to exceed $20,000 travel
and lodging expenses, an independent consultant to evaluate the Company's
technology and other out-of-pocket expenses incurred by Robb in connection with
this offering. Upon Robb's request, the Company shall provide funds to pay all
such fees, charges, expenses and disbursements in advance.
3
<PAGE>
7. Concurrent with, and as a condition precedent to, the closing of
the Offering, the Company shall sell to Robb (or its designated affiliates)
common stock purchase warrants (the "Agent Warrants"), at a price of $.001 per
warrant, to purchase 200,000 shares of the Company's Common Stock. Such
warrants will expire five years after the Offering is consummated and will be
exercisable at $4.00 per share. The Agent Warrants may be exercised as to all
or a lesser number of shares, will be redeemable under the same conditions as
the warrants included in the Units, as defined below, and will contain
provisions for registration of the resale of the underlying shares at the
Company's expense, subject to the warrant cashless exercise and for adjustment
in the number of such shares and the exercise price to prevent dilution. In
addition, the holders of the Agent's Warrants will be entitled to receive a
reduction in the exercise price and additional warrants equal to 20% of the
Additional Warrants, as defined in Exhibit A, issued by the company (the
"Additional Agent's Warrants") in the event the Company fails to achieve
$24,000,000 in revenues from the date hereof to November 30, 1998. The
Additional Agent's Warrants shall be on the same terms as the Agent's Warrants
except the exercise price shall be $1.00 per share.
8. The Company agrees that if its Securities are sold in the
Offering, the Company shall not issue any securities for a period of 12 months
from the Final Closing without Robb's approval, which shall not be unreasonably
withheld, except for options granted under the Company's existing stock option
plans, not to exceed an amount to be agreed upon in writing by Robb and the
Company.
9. [Intentionally left blank]
10. The Company shall, for a period of equal to five years
following the completion of the offering, provide to Robb within 45 days from
the end of each quarter, a quarterly balance sheet and statement of operations.
Robb shall be entitled to appoint a senior advisor to the board of directors who
shall be given notice by the Company of all board meetings and be entitled to
attend such meetings at the Company's expense for a period equal to five years
following the completion of the Offering.
11. The Company agrees that, for a period of three years from the
date hereof, it shall not solicit any offer to buy from or offer to sell any
person introduced to the Company by Robb in connection with the Offering,
directly or indirectly, any securities of the Company or of any other entity, or
provide the name of any such person to any other securities broker or dealer or
selling agent. In the event that the Company or any of its affiliates, directly
or indirectly, solicits, offers to buy from or offers to sell to any such person
any such securities, or provides the name of any such person to any other
securities broker or dealer or selling, and such person purchases such
securities or purchases securities from any other securities broker or dealer or
selling agent, the Company shall pay to Robb an amount equal to 10% of the
aggregate purchase price of the securities so purchased by such person. The
foregoing shall not apply to person(s) referred to Robb by the Company for this
Offering.
12. The Company agrees to indemnify and hold harmless Robb, its
officers, directors, partners, employees, agents, and counsel, and each person,
if any, who controls Robb within the meaning of Section 15 of the Act or Section
20(a) of the securities Exchange Act of
4
<PAGE>
1934, as amended (the "Exchange Act"), against any and all losses, claims,
damages, obligations, penalties, judgments, awards, settlements, liabilities,
costs, expenses and disbursements (and any and all actions, suits, proceedings
and investigations in respect thereof and any and all legal and other costs,
expenses and disbursements in giving testimony or furnishing documents in
response to a subpoena or otherwise), including, without limitation, the costs,
expenses and disbursements, as and when incurred, of investigating, preparing or
defending any such action, suit, proceeding or investigation (whether or not in
connection with litigation in which Robb is a party), directly or indirectly,
caused by, relating to, based upon, arising out of, or in connection with (a)
any untrue statement or alleged untrue statement of a material fact contained
in, or omissions from the Offering Documents, including any amendment thereof or
supplement thereto, or similar statements or omissions in or from any other
information furnished by the Company to Robb or any prospective purchaser of the
Securities in the offering; (b) violations or breaches of any representations,
warranty, covenant or agreement contained or incorporated in the Agreement or in
any instrument, document, agreement or certificate delivered by the Company to
Robb or any prospective purchaser of the Securities in the Offering; (c) Robb's
acting for the Company, including, without limitation, any act or omission by
Robb in connection with its acceptance of or the performance or non-performance
of its obligations under the Agreement; and (d) the Offering. The Company also
agrees that Robb shall not have any liability (whether direct or indirect, in
contract or tort (excluding intentional torts) to the Company for or in
connection with the engagement of Robb, except as provided below with respect to
Robb's obligations to indemnify to the Company.
These indemnification provisions shall be in addition to any liability
which the Company may otherwise have to Robb or the persons indemnified below in
this sentence and shall extend to the following: Robb, its affiliated entities,
partners, employees, legal counsel, agents and controlling persons (within the
meaning of the federal securities laws), and the officers, directors, employees,
legal counsel, agents and controlling persons of any of them. All references to
Robb in these indemnification provisions shall be understood to include any and
all of the foregoing.
If any action, suit, proceeding or investigation is commenced, as to
which Robb proposes to demand indemnification, it shall notify the Company with
reasonable promptness (provided, however, that any failure by Robb to notify the
Company shall not relieve the Company from its obligations hereunder), and the
Company shall have the right to assume the defense of such action. Robb shall
have the right to retain counsel of its own choice to represent it, but the fees
and expenses of such counsel shall be at its expense unless the employment of
such counsel shall have been authorized in writing by the Company in connection
with the defense of such action or the Company shall not have promptly employed
counsel reasonably satisfactory to Robb to have charge of the defense of such
action or Robb shall have reasonably concluded that there may be one or more
legal defenses available to it which are different from or additional to those
available to the Company, in any of which events such fees and expenses shall be
borne by the Company. Any such counsel or Robb shall, to the extent consistent
with its professional responsibilities, cooperate with the Company and any
counsel designated by the Company. In no event shall the indemnifying parties
be liable for fees and expenses or more than one counsel (in addition to any
local counsel) separate from their own counsel for all
5
<PAGE>
indemnified parties in connection with the any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances. The company shall not, without the prior
written consent of Robb, settle or compromise any claim, or permit a default or
consent to the entry of any judgment in respect thereof, unless such settlement,
compromise or consent includes, as a unconditional term thereof, the giving by
the claimant to Robb of an unconditional release from all liability in respect
of such claim. Anything in this paragraph 12 to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement of any claim or action
effected without its written consent; provided, however, that such consent was
not unreasonably withheld.
Robb agrees to indemnify and hold harmless the Company, its officers,
directors, partners, employees, agents, and counsel, and each person, if any,
who control the Company within the meaning of Section 15 of the Act or Section
20(a) of the Exchange Act, to the same extent as the foregoing indemnity from
the Company to Robb, but only with respect to statements, if any, made in the
Confidential Offering Memorandum, or any amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company by Robb concerning Robb expressly for inclusion in the Confidential
Offering Memorandum, or any amendment or supplement thereto and violations or
breaches of any representation, warranty, covenant or agreement contained or
incorporated in the Agreement, provided, however, that Robb's obligations to
provide indemnification hereunder shall be limited to the fees actually received
by Robb pursuant to this Agreement. If any action shall be brought against the
Company in respect of which indemnification may be sought against Robb pursuant
hereto, Robb shall have the rights and duties given to the Company above, and
the Company shall have the rights and duties so given to Robb.
In order to provide for just and equitable contribution, if a claim
for indemnification pursuant to these indemnification provisions is made but it
is found in a final judgment by a court of competent jurisdiction (not subject
to further appeal) that such indemnification may not be enforced in such case,
even though the express provisions hereof provide for indemnification in such
case, then the Company, on the one hand, and Robb, on the other hand, shall
contribute to the losses, claims, damages, obligations, penalties, judgments,
awards, liabilities, costs, expenses and disbursements to which the indemnified
persons may be subject in accordance with the relative benefits received by the
Company, on the one hand, Robb, on the other hand, and also the relative fault
of the Company, on the one hand, and Robb, on the other hand, in connection with
the statements, acts or omissions which resulted in such losses, claims,
damages, obligations, penalties, judgments, awards, liabilities, costs, expenses
or disbursements and the relevant equitable considerations shall also be
considered. No person found liable for a fraudulent misrepresentation shall be
entitled to contribution from any person who is not also found liable for such
fraudulent misrepresentation. Notwithstanding the foregoing, Robb, shall not be
obligated to contribute any amount hereunder that exceeds the amount of fees
previously received by Robb pursuant to the Agreement.
Neither termination nor completion of the engagement of Robb referred
to above shall affect these indemnification provisions which shall remain
operative and in full force and effect.
6
<PAGE>
13. (a) The agency created hereby shall remain in effect until
(i) the execution and delivery by the Company of an Agency Agreement relating to
the Offering incorporating the terms set forth herein in substantially the form
customarily used in the industry, (ii) the completion of the Offering, or (iii)
the earlier termination as herein provided. If no Securities are sold pursuant
to the Offering or any other financing within the contemplation of paragraph 1,
this agreement will terminate upon the earlier of (A) September 30, 1997 (to be
automatically extended to Oct. 15, 1997) if Robb requires such additional time
to complete the funding of the Offering), or (B) 5 days' prior written notice to
Robb after September 30, 1997 (October 15, if automatically extended). Robb may
terminate the agency created hereby for any reason upon written notice to the
Company.
(b) Neither party shall have any liability or continuing
obligation to the other upon termination of the agency created hereby in
accordance with paragraph 13(a) except that, regardless of which party elects to
terminate, (i) the Company agrees to reimburse Robb for, or otherwise pay and
bear, the expenses and fees to be paid and borne by the Company as provided for
in paragraph 6 above and to reimburse Robb for the full amount of its actual
out-of-pocket expenses (which shall include, without limitation, the fees and
disbursements of Robb's counsel, travel and lodging expenses, mailing, printing
and reproduction expenses, and any expenses reasonably incurred by Robb in
conducting its due diligence) less amounts previously paid to Robb in
reimbursement for such expenses and the advance against the non-accountable
expense allowance delivered upon the execution of this Agreement, and (ii) the
provisions of paragraph 11 and 12 shall remain in full force and effect;
provided further, that in the event the Company terminates this agreement prior
to the consummation of the offering, Robb shall be entitled to receive $440,000
and the Agent's Warrants described in Paragraph 7. In the event Robb arranges
the sale of any securities under this Agreement, paragraphs 6, 7, 8, 9, 10, 11
and 12 shall survive the termination of this Agreement.
14. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and shall be mailed, hand-
delivered, or telexed or telegraphed and confirmed by letter, to the party to
whom it is addressed at the address set forth above. All notices hereunder
shall be effective upon receipt by the party to which it is addressed.
15. The benefits of this Agreement shall inure to the respective
successors and assigns of the parties hereto and of the indemnified parties
hereunder and their successors and assigns and representatives, and the
obligations and liabilities assumed in this Agreement by the parties hereto
shall be binding upon their respective successors and assigns; provided, that
the rights and obligations of either party under this Agreement may not be
assigned without the prior written consent of the other party hereto and any
other purported assignment shall be null and void.
7
<PAGE>
16. The validity and interpretation of this Agreement shall be
governed by the laws of the State of New York applicable to agreements made and
to be fully performed therein.
If the foregoing correctly sets forth our agreement, please sign two
copies of this letter in the space provided below and return same to us.
Very truly yours,
Robb Peck McCooey Clearing Corporation
By: _______________________________________
Confirmed and Agreed to
this 12th day of September, 1997
International Veronex Resources LTD.
___________________________________
Name:
Title:
8
<PAGE>
EXHIBIT A
<TABLE>
<C> <S>
Units Maximum of 1,000,000 Units, each unit consisting
of one share of Common Stock (the "Shares") and
one common Stock Purchase Warrant (the
"Warrants'). The Units will be offered on a
10,000 Unit minimum-1,000,000 Unit maximum basis
at an offering price of $4.00 per Unit.
Common Stock 1,000,000 shares included in the Units.
Additional Shares Up to 3,000,000 additional shares in accordance
with Schedule I will be issued to the holders of
the Shares in the event the Company does not
achieve $24,000,000 in revenue from the date
hereof to November 30, 1998.
Warrants 1,000,000 Warrants included in the Units.
Terms Each Warrant will entitle the holder to purchase
one share of Common Stock during the period
commencing on the date of issuance and
terminating five years thereafter, unless
redeemed.
Exercise Price $8.00 per share of Common Stock, subject to
adjustment to prevent dilution.
Redemption The Warrants will be redeemable at any time after
the Company's Common Stock underlying the
Warrants is registered for public distribution
under the Securities Act of 1933, as amended, and
is listed on a national exchange or the Nasdaq
Stock Market, provided, that during the 20
consecutive trading days ending within 10 days of
the date of the notice of redemption, the closing
bid price of the Company's Common Stock is not
less than $10.00 per share and the trading volume
of the Common Stock is not less than 30,000
shares per day. The redemption price shall be
$.10 per Warrant.
Registration Rights The holders of the Warrants shall have unlimited
piggy-back registration rights for the shares
underlying the Warrants.
Anti-dilution (a) The Warrants will contain provisions for
adjustment in the number of shares and the
exercise price to prevent dilution including the
additional sale of the Company's Common Stock at
a price less than $4.00 as adjusted for stock
splits and recapitalizations. No adjustments will
be made for shares to be issued to Thomas J.
Price or upon
</TABLE>
9
<PAGE>
<TABLE>
<C> <S>
issuance of up to 250,000 under the Company's
current management stock option plan.
(b) In addition to the foregoing, the Warrant
exercise price shall be reduced to $2.00 per
share, and additional warrants (the "Additional
Warrants") will be issued to each Warrant Holder
in accordance with Schedule (I), in the event the
Company's revenues from the date hereof to
November 30, 1998 are less than $24,000,000. The
terms of the Additional Warrants will be
identical to the Warrants.
Minimum Investment 10,000 Units, provided Robb may allow investments
for smaller quantities in its discretion.
Other conditions The Offering is also subject to the following
conditions:
1. The Company's capitalization shall be acceptable
to Robb. It is anticipated that the Company will
have no more than 6,400,000 shares of Common
Stock outstanding on a fully diluted basis prior
to the Offering.
2. The proceeds of the Offering shall be used for
working capital. However, no proceeds shall be
used to pay any existing indebtedness, at the
time of closing, of the Company without the
consent of Robb.
3. Favorable background review of the principals of
the Company.
4. The Company becomes listed on Nasdaq or another
national exchange on or before November 30,
1998.
5. Robb will offer 200,000 Units to Round Hill
Securities as a member of the selling group.
</TABLE>
10
<PAGE>
SCHEDULE I
Unit Holders will be issued the following additional Shares and Warrants pro-
rata based on the Company's gross revenue from the date hereof through November
30, 1998 as follows:
<TABLE>
<C> <S> <C>
0 Shares/Warrants if Gross Revenues exceed $24,000,000
500,000 Shares/Warrants if Gross Revenues are $20,000,000 $24,000,000
1,000,000 Shares/Warrants if Gross Revenues are $16,000,000 $19,999,999
1,500,000 Shares/Warrants if Gross Revenues are $12,000,000 $15,999,999
2,000,000 Shares/Warrants if Gross Revenues are $ 8,000,000 $11,999,999
2,500,000 Shares/Warrants if Gross Revenues are $ 4,000,000 $ 7,999,999
3,000,000 Shares/Warrants if Gross Revenues are $ 0 $ 3,999,000
</TABLE>
11
<PAGE>
EXHIBIT 10.17
______________________________________________________________________________
ROBB PECK McCOOEY CLEARING CORPORATION
AND
INTERNATIONAL VERONEX RESOURCES LTD.
_____________________
PLACEMENT AGENT'S COMMON STOCK
WARRANT AGREEMENT
Dated as of November 7, 1997
________________________________________________________________________
<PAGE>
PLACEMENT AGENT'S WARRANT AGREEMENT dated as of November 7, 1997 between
INTERNATIONAL VERONEX RESOURCES LTD., a British Columbia corporation (the
"Company") and, ROBB PECK McCOOEY CLEARING CORPORATION a New York corporation
(hereinafter referred to variously as the "Holder" or the "Placement Agent").
W I T N E S S E T H
-------------------
WHEREAS, the Company proposes to issue to the Placement Agent warrants (the
"Firm Warrants") to purchase an aggregate of up to 100,400 shares of common
stock, no par value, of the Company ("Common Stock") and additional warrants
under certain circumstances (the "Additional Warrants") (the Firm Warrants and
the Additional Warrants are hereinafter collectively referred to as the
"Warrants"); and
WHEREAS, the Placement Agent has agreed pursuant to the sales agency
agreement (the "Sales Agency Agreement") dated as of September 11, 1997 between
the Placement Agent and the Company, to sell on behalf of the company in a
private offering (the "Offering') pursuant to Regulation D under the Securities
Act of 1933, as amended (the "Act") up to 1,200,000 Units (the "Units"), each
Unit consisting of one share of Common Stock and one Redeemable Common Stock
Purchase Warrant, each of which entitles the holder to purchase one share of
Common Stock at $8.00 per share, subject to adjustment; and
WHEREAS, the Warrants to be issued pursuant to this Agreement will be
issued on the closing date of the Offering (the "Closing Date") by the Company
to the Placement Agent in consideration for $.001 per warrant and as part of the
compensation in connection with the Offering;
<PAGE>
NOW, THEREFORE, in consideration of the premises, the agreements herein set
forth and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Grant. (a) Firm Warrants. The Holder is hereby granted the right to
-----
purchase, at any time from November 7, 1997 until 5:30 P.M., New York time,
until November 6, 2002 (the "Warrant Exercise Term"), up to an aggregate of
100,400 shares of the Company's Common Stock (the "Warrant Shares") at an
initial exercise price (subject to adjustment as provided in Section 8 hereof)
of $4.00 per Share, subject to the terms and conditions of this Agreement.
(b) Additional Warrants. The Company hereby agrees to issue to
the Placement Agent such number of Additional Warrants as shall equal 20% of the
additional warrants issued to the purchasers of the Units in the Offering. The
Additional Warrants shall be issued simultaneously with the issuance of the
additional warrants to the purchasers of Units in the Offering, but in no event
not later than December 15, 1998. The Additional Warrants shall be on the same
terms as the Firm Warrants, except the initial exercise price of the Additional
Warrants shall be $1.00 per share.
2. Warrant Certificates. The warrant certificates (the "Warrant
--------------------
Certificates") delivered and to be delivered pursuant to this Agreement shall be
in the form set forth in Exhibit A, attached hereto and made a part hereof, with
such appropriate insertions, omissions, substitutions, and other variations as
required or permitted by this Agreement.
3. Exercise of Warrant.
-------------------
(S)3.1 The Firm Warrants initially are exercisable at an initial exercise
price of $4.00 per share, and the Additional Warrants initially are exercisable
at an initial exercise price $1.00 per share, payable by certified or official
bank check in New York -Clearing House funds, subject to
2
<PAGE>
adjustment as provided in Section 8 hereof. Upon surrender of a Warrant
-------
Certificate with the annexed Form of Election to Purchase duly executed,
together with payment of the Purchase Price (as hereinafter defined) for the
Warrant Shares purchased, at the Company's principal offices, the registered
holder of a Warrant Certificate ("Holder" or "Holders") shall be entitled to
receive a certificate or certificates for the Warrant Shares so purchased. The
purchase rights represented by each Warrant Certificate are exercisable at the
option of the Holder thereof, in whole or in part (but not as to fractional
shares of the Common Stock underlying the Warrants). In the case of the purchase
of less than all the Warrant Shares purchasable under any Warrant Certificate,
the Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Warrant Shares purchasable thereunder.
3A. Redemption.
----------
3A.1 The Warrants are redeemable, in whole or in part, at the option of
the Company, for $.10 per Warrant at any time, provided that (i) the closing bid
price of the Company's Common Stock is at least $10.00, and the trading volume
of the of the Common Stock is not less than 30,000 shares per day, on each of
the 20 consecutive trading days ending within 10 days of the date of the notice
of redemption; (ii) the Company's Common Stock is listed on a national exchange
or the Nasdaq Stock Market; (iii) the Warrant Shares have been registered for
public distribution under the Act; and (iv) all of the Redeemable Common Stock
Purchase Warrants sold in the Offering have been redeemed, or are simultaneously
being called for redemption with the Warrants, or, if less than all of such
Redeemable Common Stock Purchase warrants are being so redeemed or called for
redemption, then the percentage of such outstanding Redeemable
3
<PAGE>
Common Stock Purchase Warrants being so redeemed or called for redemption shall
be not less than the percentage of outstanding Warrants then being redeemed or
called for redemption.
3A.2 Procedure for redemption. (a) In the event that fewer than all of
the then outstanding Warrants are to be redeemed, the Warrants to be redeemed
shall be determined by lot or pro rata as may be determined by the Board of
Directors or any other method selected by the Board of Directors which is not
inconsistent with applicable law.
(b) In the event the Corporation shall redeem the Warrants, notice of
such redemption (the "Notice of Redemption") shall be given by first class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
redemption date, to each holder of record of the Warrants to be redeemed at such
holder's address as the same appears on the stock register of the Corporation.
Each such notice shall state: (i) the redemption date; (ii) the aggregate number
of Warrants to be redeemed from all holders of record, and, if less than all the
Warrants held by a holder are to be redeemed from such holder, the number of
Warrants to be redeemed from such holder; (iii) the redemption price; and (iv)
the place or places where certificates for such Warrants are to be surrendered
for payment of the redemption price.
(c) Notice having been mailed as provided in Section 3A(b), from and
after the redemption date (unless default shall be made by the Company in
providing money for the payment of the redemption price of the Warrants called
for redemption), and such Warrants shall no longer be deemed to be outstanding,
and all rights of the holders thereof as Warrantholders of the Company (except
the right to receive from the Company the redemption price) shall cease. Upon
surrender, in accordance with the Notice of Redemption of the certificates for
any Warrants so redeemed (properly endorsed or assigned for transfer, if the
Board of Directors shall so require and the Notice of Redemption shall so
state), such Warrants
4
<PAGE>
shall be redeemed by the Company at the aforesaid redemption price. In the event
that fewer than all the Warrants represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed Warrants
without cost to the holder thereof.
4. Issuance of Certificates. Upon the exercise of the Warrants, the
------------------------
issuance of certificates for Warrant Shares or other securities, properties or
rights underlying such Warrants shall be made forthwith (and in any event within
five (5) business days thereafter) without charge to the Holder thereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall (subject to the provisions of
Section 7 hereof) be issued in the name of, or in such names as may be directed
- -------
by, the Holder thereof; provided, however, that the Company shall not be
-------- --------
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any such certificates in a name other than that
of the Holder and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
The Warrant Certificates and the certificates representing the Warrant
Shares (and/or other securities, property or rights issuable upon the exercise
of the Warrants) shall be executed on behalf of the Company by the manual or
facsimile signature of the then present Chairman or Vice Chairman of the Board
of Directors or Chief Executive Officer, President or Vice President of the
Company under its corporate seal reproduced thereon, attested to by the manual
or facsimile signature of the then present Secretary or Assistant Secretary of
the Company. Warrant Certificates shall be dated the date of execution by the
Company upon initial issuance, division, exchange, substitution or transfer.
5
<PAGE>
5. Restriction on Transfer of Warrants. Upon exercise, in part or in
-----------------------------------
whole, of the Warrants, certificates representing the Warrant Shares, shall bear
a legend substantially similar to the legend set forth in Section 7.1.
The Holder of a Warrant Certificate, by its acceptance thereof,
covenants and agrees that the Warrants are being acquired as an investment and
not with a view to the distribution thereof.
6. Exercise Price.
--------------
(S)6.1 Initial and Adjusted Exercise Price. Except as otherwise provided
------- --- -------- -------- ------
in Section 8 hereof, the initial exercise price of each Firm Warrant shall be
-------
$4.00 and the initial exercise price of each Additional Warrant shall be $1.00.
The adjusted exercise price shall be the price which shall result from time to
time from any and all adjustments of the initial exercise price in accordance
with the provisions of Section 8 hereof.
-------
(S)6.2 Exercise Price. The term "Exercise Price" herein shall mean the
--------------
initial exercise price or the adjusted exercise price, depending upon the
context.
7. Registration Rights.
-------------------
(S)7.1 Registration Under the Securities Act of 1933. The Warrants, the
---------------------------------------------
Warrant Shares and any of the other securities issuable upon exercise of the
Warrants have not been registered under the Act. Upon exercise, in part or in
whole, of the Warrants, certificates representing the Warrant Shares and any of
the other securities issuable upon exercise of the Warrants (collectively, the
"Warrant Securities") shall bear the following legend:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act"), and
may not be offered or sold except pursuant to (i) an effective
registration statement under the Act, (ii) to the extent applicable,
6
<PAGE>
Rule 144 under the Act (or any similar rule under such Act relating to
the disposition of securities), or (iii) an opinion of counsel, if
such opinion shall be reasonably satisfactory to counsel to the
issuer, that an exemption from registration under such Act is
available.
The securities represented by this certificate are subject to a hold
period and may not be traded in British Columbia until November 7,
1998 except as permitted by the securities act (British Columbia) and
regulations made thereunder.
(S)7.2 Piggyback Registration. If, at any time, the Company proposes to
----------------------
register any of its securities under the Act (other than in connection with a
merger or pursuant to Form S-8, or any successor form) it will give written
notice by registered or certified mail, postage prepaid, at least thirty (30)
days prior to the filing of each such registration statement, to each of the
Placement Agent and to all other Holders of the Warrants and/or the Warrant
Securities of its intention to do so. If any of the Placement Agent or other
Holders of the Warrants and/or Warrant Securities notify the Company within
twenty (20) days after receipt of any such notice of its or their desire to
include any such securities in such proposed registration statement, the Company
shall afford each of the Placement Agent and such Holders (the "Requesting
Holders") of the Warrants and/or Warrant Securities the opportunity to have any
such Warrants and/or Warrant Securities registered under such registration
statement (the "Registration Statement"); provided, however, that if, in the
written opinion of the Company's managing underwriter for such offering, the
inclusion of all or a portion of the Warrant and/or Warrant Securities requested
to be registered, when added to the securities being registered by the Company
or any selling shareholder(s), will exceed the maximum amount of the Company's
securities which can be marketed (i) at a price reasonably related to their then
current market value, or (ii) without otherwise materially adversely affecting
the entire offering, then the Company may exclude from
7
<PAGE>
any offering which includes only securities to be sold by the Company, all or a
portion of the Warrant and/or Warrant Securities which the managing underwriter
states in writing will materially and adversely affect the offering it has been
requested to register; provided, further, that any Warrant and/or Warrant
securities so excluded shall nevertheless be registered to be sold in a separate
prospectus as long as the Registered Holder agrees not to publicly sell such
Warrant and/or Warrant Securities, without the consent of the Underwriter for a
period of six months from the effective date of the Registration Statement. If
securities are proposed to be offered for sale pursuant to such Registration
Statement by other security holders of the Company and the total number of
securities to be offered by the Requesting Holders and such other selling
security holders is required to be reduced pursuant to a request from the
managing underwriter (which request shall be made only for the reasons and in
the manner set forth above) the aggregate number of Warrant and/or Warrant
Securities to be offered by Requesting Holders pursuant to such Registration
Statement shall equal the number which bears the same ratio to the maximum
number of securities that the underwriter believes may be included for all the
selling security holders (including the Requesting Holders) as the original
number of Warrant and/or Warrant Securities proposed to be sold by the
Requesting Holders bears to the total original number of securities proposed to
be offered by the Requesting Holders and the other selling security holders;
-------
provided, however, that any Warrant and/or Warrant Securities so excluded shall
nevertheless be registered to be sold in a separate prospectus as long as the
Registered Holder agrees not to publicly sell such Warrant and/or Warrant
Securities, without the consent of the Underwriter for a period of six months
from the effective date of the Registration Statement.
Notwithstanding the provisions of this Section 7.2, the Company shall have
--------
the right at any time after it shall have given written notice pursuant to this
Section 7.2 (irrespective of
- -------
8
<PAGE>
whether a written request for inclusion of any such securities shall have been
made) to elect not to file any such proposed Registration Statement, or to
withdraw the same after the filing but prior to the effective date thereof.
(S)7.3 Demand Registration.
(a) At any time commencing after six months from the date hereof, and only
in the event the Company has not previously filed and caused to be declared
effective, a registration statement covering the Warrant Securities, the Holders
of the Warrants and/or Warrant Securities representing a "Majority" (as
hereinafter defined) of such securities (assuming the exercise of all of the'
Warrants) shall have the right (which right is in addition to the registration
rights under Section 7.2 hereof), exercisable by written notice to the Company,
to have the Company prepare and file with the Securities and Exchange Commission
(the "Commission") , on one occasion, a registration statement and such other
documents, including a prospectus, as may be necessary in the opinion of both
counsel for the Company and counsel for the Placement Agent and such Holders, in
order to comply with the provisions of the Act, so as to permit a public
offering and sale of their respective Warrant Securities for nine (9)
consecutive months by such Holders and any other Holders of the Warrants and/or
Warrant Securities who notify the Company within ten (10) days after receiving
notice from the Company of such request.
(b) The Company covenants and agrees to give written notice of any
registration request under this Section 7.3 by any Holder or Holders to all
other registered Holders of the Warrants and the Warrant Securities within ten
(10) days from the date of the receipt of any such registration request.
(c) Notwithstanding anything to the contrary contained herein, if the
Company shall not have filed a registration statement for the Warrant Securities
within the time period specified
9
<PAGE>
in Section 7.4(a) hereof pursuant to the written notice specified in Section
------- -------
7.3(a) of a Majority of the Holders of the Warrants and/or Warrant Securities,
the Company agrees that upon the written notice of election of a Majority of the
Holders of the Warrants and/or Warrant Securities it shall repurchase (i) any
and all Warrant Securities at the higher of the Market Price (as defined in
Section 8.1(a)) per share of Common Stock on (x) the date of the notice sent
- -------
pursuant to Section 7.3(a) or (y) the expiration of the period specified in
Section 7.4(a) and (ii) any and all Warrants at such Market Price less the
exercise prices of such Warrants. Such repurchase shall be in immediately
available funds and shall close within two (2) days after the later of (i) the
expiration of the period specified in Section 7.4(a) or (ii) the delivery of the
written notice of election specified in this Section 7.3(c).
(S)7.4 Covenants of the Company With Respect to Registration. In
-----------------------------------------------------
connection with any registration under Section 7.2 or 7.3 hereof, the Company
-----------
covenants and agrees as follows:
(a) The Company shall use its best efforts to file a registration
statement within sixty (60) days of receipt of any demand therefor, shall use
its best efforts to have any registration statements declared effective at the
earliest possible time, and shall furnish each Holder desiring to sell Warrant
Securities such number of prospectuses as shall reasonably be requested. Such
Registration Statement shall include the Additional Warrants and the Warrant
Shares issuable upon exercise of the Additional Warrants irrespective of whether
any Additional Warrants have been issued at the time of the filing of such
Registration Statement, unless the Company shall have attained $24,000,000 in
revenues during the period from September 11, 1997 to November 30, 1998.
(b) The Company shall pay all costs (excluding fees and expenses of
Holder(s) counsel and any underwriting or selling commissions), fees and
expenses in connection with all
10
<PAGE>
registration statements filed pursuant to Sections 7.2 and 7.3(a) hereof
--------
including, without limitation, the Company's legal and accounting fees, printing
expenses, blue sky fees and expenses. If the Company shall fail to comply with
the provisions of Section 7.4(a), the Company shall, in addition to any other
--------
equitable or other relief available to the Holder(s), be liable for any or all
incidental, special and consequential damages and damages due to loss of profit
sustained by the Holder(s) requesting registration of their Warrant Securities.
(c) The Company will take all necessary action which may be required in
qualifying or registering the Warrant Securities included in a registration
statement for offering and sale under the securities or blue sky laws of such
states as reasonably are requested by the Holder (s) , provided that the Company
shall not be obligated to execute or file any general consent to service of
process or to qualify as a foreign corporation to do business under the laws of
any such jurisdiction.
(d) The Company shall indemnify the Holder(s) of the Warrant Securities to
be sold pursuant to any registration statement and each person, if any, who
controls such Holders within the meaning of Section 15 of the Act or Section 20
(a) of the Securities Exchange Act of 1934, as amended ("Exchange Act") ,
against all loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement but only to the same
extent and with the same effect as the provisions pursuant to which the Company
had agreed to indemnify the Placement Agent contained in Section 10 of the Sales
----------
Agency Agreement.
(e) The Holder(s) of the Warrants and Warrant Securities to be sold
pursuant to a registration statement, and their successors and assigns, shall
severally, and not jointly,
11
<PAGE>
indemnify the Company, its officers and directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Act or Section 20
-------
(a) of the Exchange Act, against all loss, claim, damage or expense or liability
(including all expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever) to which they may become subject under
the Act, the Exchange Act or otherwise, arising from information furnished by or
on behalf of such Holders, or their successors or assigns, for specific
inclusion in such registration statement to the same extent and with the same
effect as the provisions contained in Paragraph 12 of the Sales Agency Agreement
pursuant to which the Placement Agent has agreed to indemnify the Company.
(f) Nothing contained in this Agreement shall be construed as requiring the
Holder(s) to exercise their Warrants prior to the initial filing of any
registration statement or the effectiveness thereof.
(g) The Company shall use its best efforts not to permit the' inclusion of
any securities other than the Warrants and Warrant Securities, and the
securities sold in the Offering, to be included in any registration statement
filed pursuant to Section 7.3 hereof, or permit any other registration statement
-------
to be or remain effective during the effectiveness of a registration statement
filed pursuant to Section 7.3 hereof, without the prior written consent of the
-------
Holders of the Warrants and Warrant Securities representing a majority of such
securities.
(h) The Company shall furnish to each Holder participating in the offering
and to each underwriter, if any, a signed counterpart, addressed to such Holder
or underwriter, of (i) an opinion of counsel to the Company, dated the effective
date of such registration statement (and, if such registration includes an
underwritten public offering, an opinion dated the date of the closing under the
underwriting agreement), and (ii) a "cold comfort" letter dated the effective
12
<PAGE>
date of such registration statement (and, if such registration includes an
underwritten public offering, a letter dated the date of the closing under the
underwriting agreement) signed by the independent public accountants who have
issued a report on the Company's financial statements included in such
registration statement, in each case covering substantially the same matters
with respect to such registration statement (and the prospectus included
therein) and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities.
(i) The Company as soon as practicable, but in any event not later than 45
days after the end of the 12-month period beginning on the day after the end of
the fiscal quarter of the Company during which the effective date of the
Registration Statement occurs (90 days in the event that the end of such fiscal
quarter is the end of the Company's fiscal year), shall make generally available
to its security holders, in the manner specified in Rule 158(b) of the Rules and
Regulations, and to the Placement Agent, an earnings statement which will be in
the detail required by, and will otherwise comply with, the provisions of
Section 11 (a) of the Act and Rule 158(a) of the Rules and Regulations, which
statement need not be audited unless required by the Act, covering a period of
at least 12 consecutive months after the effective date of the Registration
Statement.
(j) The Company shall deliver promptly to each Holder participating in the
offering requesting the correspondence and memoranda described below and the
managing underwriters copies of all correspondence between the Commission and
the Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement and
permit each Holder and underwriters to do such investigation, upon
13
<PAGE>
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the National Association of Securities
Dealers, Inc. ("NASD"). Such investigation shall include access to books,
records and properties and opportunities to discuss the business of the Company
with its officers and independent auditors, all to such reasonable extent and at
such reasonable times and as often as any such Holder shall reasonably request.
(k) The Company shall enter into an underwriting agreement, containing only
usual and customary terms, with the managing underwriters selected for such
underwriting by Holders holding a Majority of the Warrant Securities requested
to be included in such underwriting. Such agreement shall be satisfactory in
form and substance to the Company, each Holder and such managing underwriters,
and shall contain such representations, warranties and covenants by the Company
and such other terms as are customarily contained in agreements of that type
used by the managing underwriter.
The Holders shall be parties to any underwriting agreement relating to an
underwritten sale of their Warrant Securities and may, at their option, require
that any or all the representations, warranties and covenants of the Company to
or for the benefit of such underwriters shall also be made to and for the
benefit of such Holders. Such Holders shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters except as they may relate to such Holders and their intended
methods of distribution.
(1) For purposes of this Agreement, the term "Majority" in reference to the
Holders of Warrants or Warrant Securities, shall mean in excess of fifty percent
(50%) of the then outstanding Warrants or Warrant Securities that (i) are not
held by the Company, an affiliate,
14
<PAGE>
officer, creditor, employee or agent thereof or any of their respective
affiliates, members of their family, persons acting as nominees or in
conjunction therewith or (ii) have not been resold to the public pursuant to a
registration statement filed with the Commission under the Act, or exemption
therefrom.
8. Adjustments to Exercise Price and Number of Securities.
-------------------------------------------------------
(S)8.1(a)(i) Computation of Adjusted Exercise Price. Except as
--------------------------------------
hereinafter provided, in case the Company shall at any time after the date
hereof issue or sell any shares of Common Stock (other than the issuances or
sales referred to in Section 8.7 hereof), including shares held in the Company's
treasury and shares of Common Stock issued upon the exercise of any options,
rights or warrants, to subscribe for shares of Common Stock and shares of Common
Stock issued upon the direct or indirect conversion or exchange of securities
for shares of Common Stock, for a consideration per share less than the Exercise
Price in effect immediately prior to the issuance or sale of such shares or
without consideration, then forthwith upon such issuance or sale, the Exercise
Price shall (until another such issuance or sale) be reduced to the price
(calculated to the nearest full cent) equal to the quotient derived by dividing
(A) an amount equal to the sum of X the product of (a) the Exercise Price in
effect immediately prior to such issuance or sale, reduced, but not below .001,
by the positive difference between the (u) Exercise Price per share of Common
Stock on the date immediately prior to the issuance or sale and (v) the amount
per share received in connection with such issuance or sale, multiplied by (b)
the total number of shares of Common Stock outstanding immediately prior to such
issuance or sale plus (Y) the aggregate of the amount of all consideration, if
any, received by the Company upon such issuance or sale, by (B) the total number
of shares of Common Stock outstanding immediately after such issuance or sale;
provided, however, that in no event shall the Exercise Price be
- -------- -------
15
<PAGE>
adjusted pursuant to this computation to an amount in excess of the Exercise
Price in effect immediately prior to such computation, except in the case of a
combination of outstanding shares of Common Stock, as provided by Section 8.3
-------
hereof.
(ii) In addition to the other adjustments set forth in this
Section 8, in the event the Company fails to achieve $24,000,000 in revenue
during the period September 11, 1997 to November 30, 1998, the exercise price
shall be deemed automatically reduced to $1.00 per share, as adjusted for stock
splits and recapitalizations.
(b) For the purposes of this Section 8 the term Exercise Price shall
---------
mean the Exercise Price per share of Common Stock set forth in Section 6 hereof,
---------
as adjusted from time to time pursuant to the provisions of this Section 8.
-------
For the purposes of any computation to be made in accordance with this
Section 8.1, the following provisions shall be applicable:
- -----------
(i) In case of the issuance or sale of shares of Common Stock for
a consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if shares of Common Stock are offered by the
Company for subscription, the subscription price, or, if either of such
securities shall be sold to underwriters or dealers for public offering without
a subscription offering, the initial public offering price) before deducting
therefrom any compensation paid or discount allowed in the sale, underwriting or
purchase thereof by underwriters or dealers or others performing similar
services, or any expenses incurred in connection therewith; and the balance of
the consideration which is other than cash, if any, shall be determined in
accordance with paragraph 8.1(b)(ii).
16
<PAGE>
(ii) In case the Company shall issue shares of Common Stock for
consideration wholly or partly other than cash, the amount of the consideration
other than cash received by the Company shall be deemed to be the fair value of
such consideration as determined by the Board of Directors by any method that
the Board of Directors deems appropriate (provided, however, that in the event
-----------------
that any such shares of Common Stock are to be issued to any person or entity in
which any director or directors of the Company has an interest, such
determination shall be made solely by those members of the Board of Directors
who have no such interest).
(iii) Shares of Common Stock issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Company other than
shares of Common Stock into securities including shares of Common Stock shall be
deemed to involve the issuance of such shares of Common Stock for a
consideration other than cash immediately prior to the close of business on the
date fixed for the determination of security holders entitled to receive such
shares, and the value of the consideration allocable to such shares of Common
Stock shall be determined as provided in subsection (ii) of this Section 8.1.
-------
(v) The number of shares of Common Stock at any one time
outstanding shall include the aggregate number of shares issued or issuable
(subject to
17
<PAGE>
readjustment upon the actual issuance thereof) upon the exercise of options,
rights, warrants and upon the conversion or exchange of convertible or
exchangeable securities.
(vi) As used herein, the phrase "Market Price" at any date shall be
deemed to be the last reported sale price, or, in case no such reported sale
takes place on such day, the average of the last reported sale prices for the
last three (3) trading days, in either case as officially reported by the
principal securities exchange on which the Common Stock is listed or admitted to
trading or by the Nasdaq Stock Market, National Market or SmallCap ("Nasdaq"),
or, if the Common Stock is not listed or admitted to trading on any national
securities exchange or quoted by Nasdaq, the average closing bid price as
furnished by the NASD through Nasdaq or similar organization if Nasdaq is no
longer reporting such information, or if the Common Stock is not quoted on
Nasdaq, as determined in good faith by resolution of the Board of Directors of
the Company, based on the best information available to it.
(S)8.2 Options. Rights Warrants and Convertible and Exchangeable
---------------------------------------------------------
Securities. In case the Company shall at any time after the date hereof issue
- ----------
options, rights or warrants to subscribe for shares of Common Stock, or issue
any securities convertible into or exchangeable for shares of Common Stock, for
a consideration per share less than the Exercise Price in effect or the Market
Price immediately prior to the issuance of such options, rights or warrants, or
such convertible or exchangeable securities, or without consideration, the
Purchase Price in effect immediately prior to the issuance of such options,
rights or warrants, or such convertible or exchangeable securities, as the case
may be, shall be reduced to a price determined by making a computation in
accordance with the provisions of Section 8.1 hereof, provided that:
-----------
18
<PAGE>
(a) The aggregate maximum number of shares of Common Stock, as the
case may be, issuable under such options, rights or warrants shall be
deemed to be issued and outstanding at the time such options, rights or
warrants were issued, and for a consideration equal to the minimum purchase
price per share provided for in such options, rights or warrants at the
time of issuance, plus the consideration (determined in the same manner as
consideration received on the issue or sale of shares in accordance with
the terms of the Warrants), if any, received by the Company for such
options, rights or warrants.
(b) The aggregate maximum number of shares of Common Stock issuable
upon conversion or exchange of any convertible or exchangeable securities
shall be deemed to be issued and outstanding at the time of issuance of
such securities, and for a consideration equal to the consideration
(determined in the same manner as consideration received on the issue or
sale of shares of Common Stock in accordance with the terms of the
Warrants) received by the Company for such securities, plus the minimum
consideration, if any, receivable by the Company upon the conversion or
exchange thereof.
(c) If any change shall occur in the price per share provided for in
any of the options rights or warrants referred to in subsection (a) of this
Section 8.2, or in the price per share at which the securities referred to
-------
in subsection (b) of this Section 8.2 are convertible or exchangeable, such
-------
options, rights or warrants or conversion or exchange rights, as the case
may be, shall be deemed to have expired or terminated on the date when such
price change became effective in respect of shares not theretofore issued
pursuant to the exercise or conversion or exchange thereof, and the Company
shall be
19
<PAGE>
deemed to have issued upon such date new options, rights or warrants or
convertible or exchangeable securities at the new price in respect of the
number of shares issuable upon the exercise of such options, rights or
warrants or the conversion or exchange of such convertible or exchangeable
securities.
(S)8.3 Subdivision and Combination. In case the Company shall at any
---------------------------
time subdivide or combine the outstanding shares of Common Stock, the Exercise
Price shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
(S)8.4 Adjustment in Number of Securities. Upon each adjustment of the
----------------------------------
Exercise Price pursuant to the provisions of this Section 8, the number of
-------
Warrant Securities issuable upon the exercise of each Warrant shall be adjusted
to the nearest full amount by multiplying a number equal to the Exercise Price
in effect immediately prior to such adjustment by the number of Warrant
Securities issuable upon exercise of the Warrants immediately prior to such
adjustment and dividing the product so obtained by the adjusted Exercise Price.
(S)8.5 Definition of Common Stock. For the purpose of this Agreement, the
--------------------------
term "Common Stock" shall mean (i) the class of stock designated as Common Stock
in the Articles of Incorporation of the Company as may be amended as of the date
hereof, or (ii) any other class of stock resulting from successive changes or
reclassifications of such Common Stock, consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value.
(S)8.6 Merger or Consolidation. In case of any consolidation of the
-----------------------
Company with, or merger of the Company with, or merger of the Company into,
another corporation (other than a consolidation or merger which does not result
in any reclassification or change of the outstanding Common Stock), the
corporation formed by such consolidation or merger shall execute and
20
<PAGE>
deliver to the Holder a supplemental warrant agreement providing that the holder
of each Warrant then outstanding or to be outstanding shall have the right
thereafter (until the expiration of such Warrant) to receive, upon exercise of
such warrant, the kind and amount of shares of stock and other securities and
property receivable upon such consolidation or merger, by a holder of the number
of shares of Common Stock of the Company for which such warrant might have been
exercised immediately prior to such consolidation, merger, sale or transfer.
Such supplemental warrant agreement shall provide for adjustments which shall be
identical to the adjustments provided in Section 8. The above provision of this
-------
subsection shall similarly apply to successive consolidations or mergers.
(S)8.7 No Adjustment of Exercise Price in Certain Cases. No adjustment
------------------------------------------------
of the Exercise Price shall be made:
(a) Upon the issuance or sale of the Common Stock sold in the Offering
or the shares of Common Stock issuable upon the exercise of these Warrants
or the Warrants sold in the Offering, or the conversion or exercise of
securities outstanding on the date hereof; or shares of Common Stock issued
or issuable pursuant to the Company's 1997 contingent Stock Option Plan; or
up to 250,000 shares of Common Stock issuable upon exercise of options and
shares of Common Stock issuable under the Company's Stock Option Plans
approved by the shareholders.
(b) If the amount of said adjustment shall be less than two cents
($.02) per Warrant Security provided, however, that in such case any
-------- -------
adjustment that would otherwise be required then to be made shall be
carried forward and shall be made at the time of and together with the next
subsequent adjustment which, together with any
21
<PAGE>
adjustment so carried forward, shall amount to at least two cents ($.02)
per Warrant Security.
(S)8.8 Dividends and Other Distributions. In the event that the Company
----------------------------------
shall at any time prior to the exercise of all Warrants declare a dividend
(other than a dividend consisting solely of shares of Common Stock) or otherwise
distribute to its stockholders any assets, property, rights, evidences of
indebtedness, securities (other than shares of Common Stock), whether issued by
the Company or by another, or any other thing of value, the Holders of the
unexercised Warrants shall thereafter be entitled, in addition to the shares of
Common Stock or other securities and property receivable upon the exercise
thereof, to receive, upon the exercise of such Warrants, the same property,
assets, rights, evidences of indebtedness, securities or any other thing of
value that they would have been entitled to receive at the time of such dividend
or distribution as if the Warrants had been exercised immediately prior to such
dividend or distribution. At the time of any such dividend or distribution, the
Company shall make appropriate reserves to ensure the timely performance of the
provisions of this subsection 8.8.
9. Exchange and Replacement of Warrant Certificates. Each Warrant
------------------------------------------------
Certificate is exchangeable without expense, upon the surrender thereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Securities in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Warrant Certificate, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrants, if
22
<PAGE>
mutilated, the Company will make and deliver a new Warrant Certificate of like
tenor, in lieu thereof.
10. Elimination of Fractional Interests. The Company shall not be
-----------------------------------
required to issue certificates representing fractions of shares of Common Stock
upon the exercise of the Warrants, nor shall it be required to issue scrip or
pay cash in lieu of fractional interests, it being the intent of the parties
that all fractional interests shall be eliminated by rounding any fraction up to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
11. Reservation and Listing of Securities. The Company shall at all times
-------------------------------------
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock or other securities, properties or rights as shall be
issuable upon the exercise thereof. The Company covenants and agrees that, upon
exercise of the Warrants and payment of the Exercise Price therefor, all shares
of Common Stock and other securities issuable upon such exercise shall be duly
and validly issued, fully paid, non-assessable and not subject to the preemptive
rights of any stockholder. As long as the Warrants shall be outstanding, the
Company shall use its best efforts to cause all shares of Common Stock issuable
upon the exercise of the Warrants to be listed (subject to official notice of
issuance) on all securities exchanges on which the Common Stock may then be
listed and/or quoted.
12. Notices to Warrant Holders. Nothing contained in this Agreement shall
--------------------------
be construed as conferring upon the Holders the right to vote or to consent or
to receive notice as a stockholder in respect of any meetings of stockholders
for the election directors or any other matter, or as having any rights
whatsoever as a stockholder of the Company. If, however, at any
23
<PAGE>
time prior to the expiration of the Warrants and their exercise, any of the
following events shall occur:
(a) the Company shall take a record of the holders of its shares of
Common Stock for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or
distribution payable otherwise than out of current or retained earnings, as
indicated by the accounting treatment of such dividend or distribution on
the books of the Company; or
(b) the Company shall offer to all the holders of its Common Stock any
additional shares of capital stock of the Company or securities convertible
into or exchangeable for shares of capital stock of the Company, or any
option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation or merger) or a sale of all or
substantially all of its property assets and business as an entirety shall
be proposed; then, in any one or more of said events the Company shall give
written notice of such event at least fifteen (15) days prior to the date
fixed as a record date or the date of closing the transfer books for the
determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer
books, as the case may be. Failure to give such notice or any defect
therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend, or the issuance of
any convertible or
24
<PAGE>
exchangeable securities, or subscription rights, options or warrants, or
any proposed dissolution, liquidation, winding up or sale.
13. Notices.
-------
All notices requests, consents and other communications hereunder shall be
in writing and shall be deemed to have been duly made when delivered, or mailed
by registered or certified mail, postage prepaid, return receipt requested:
(a) If to the registered Holder of the Warrants, to the address of
such Holder as shown on the books of the Company; or
(b) If to the Company, to the address of the Company's principal
executive office or to such other address as the Company may designate by
notice to the Holders.
14. Supplements and Amendments. The Company and the Placement Agent may
--------------------------
from time to time supplement or amend this Agreement without the approval of any
holders of Warrant Certificates (other than the Placement Agent) in order to
cure any ambiguity, to correct or supplement any provision contained herein
which may be defective or inconsistent with any provisions herein or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Placement Agent may deem necessary or desirable and which the
Company and the Placement Agent deem shall not adversely affect the interests of
the Holders of Warrant Certificates.
15. Successors. All the covenants and provisions of this Agreement shall
----------
be binding upon and inure to the benefit of the Company, the Holders and their
respective successors and assigns hereunder.
25
<PAGE>
16. Termination. This Agreement shall terminate at the close of business
-----------
on November 6, 2003. Notwithstanding the foregoing, the indemnification
provisions of Section 7(d) and (e) shall survive such termination until the
-------
close of business on November 6, 2005.
17. Governing Law: Submission to Jurisdiction. This Agreement and each
-----------------------------------------
Warrant Certificate issued hereunder shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be construed in
accordance with the laws of said State without giving effect to the rules of
said State governing the conflicts of laws.
The Company, the Placement Agent and the Holders hereby agree that any
action, proceeding or claim against it arising out of, or relating in any way
to, this Agreement shall be brought and enforced in the courts of the State of
New York or of the United States of America for the Southern District of New
York, and irrevocably submit to such jurisdiction, which jurisdiction shall be
exclusive. The Company, the Placement Agent and the Holders hereby irrevocably
waive any objection to such exclusive jurisdiction or inconvenient forum. Any
such process or summons to be served upon any of the Company, the Placement
Agent and the Holders (at the option of the party bringing such action,
proceeding or claim) may be served by transmitting a copy thereof, by registered
or certified mail, return receipt requested, postage prepaid, addressed to it at
the address set forth in Section 13 hereof. Such mailing shall be deemed
-------
personal service on the earlier of when delivered, or (ii) three (3) business
days after mailing is attempted to be delivered, and shall be legal and binding
upon the party so served in any action, proceeding or claim. The Company, the
Placement Agent and the Holders agree that the prevailing party(ies) in any such
action or proceeding shall be entitled to recover from the
26
<PAGE>
other party(ies) all of its/their reasonable legal costs and expenses relating
to such action or proceeding and/or incurred in connection with the preparation
therefor.
18. Entire Agreement: Modification. This Agreement (including the Sales
------------------------------
Agency Agreement to the extent portions thereof are referred to herein) contains
the entire understanding between the parties hereto with respect to the subject
matter hereof and may not be modified or amended except by a writing duly signed
by the party against whom enforcement of the modification or amendment is
sought.
19. Severability. If any provision of this Agreement shall be held to be
------------
invalid or unenforceable, such invalidity or nonenforceability shall not affect
any other provision of this Agreement.
20. Captions. The caption headings of the Sections of this Agreement are
--------
for convenience of reference only and are not intended, nor should they be
construed as, a part of this Agreement and shall be given no substantive effect.
21. Benefits of this Agreement. Nothing in this Agreement shall be
--------------------------
construed to give to any person or corporation other than the Company and the
Placement Agent and any other registered Holder(s) of the Warrant Certificates
or Warrant Securities any legal or equitable right, remedy or claim under this
Agreement; and this Agreement shall be for the sole and exclusive benefit of the
Company and the Placement Agent and any other Holder(s) of the Warrant
Certificates or Warrant Securities.
22. Counterparts. This Agreement may be executed in any number of
------------
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and such counterparts shall together constitute but one and the
same instrument
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
[SEAL] INTERNATIONAL VERONEX RESOURCES LTD.
By: _____________________________________
Name:
Title:
________________________
Secretary
ROBB PECK McCOOEY CLEARING
CORPORATION
By: _____________________________________
Name:
Title:
28
<PAGE>
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, (ii) TO THE
EXTENT APPLICABLE, RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT
RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) AN OPINION OF COUNSEL, IF
SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL FOR THE ISSUER, THAT AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A HOLD PERIOD AND
MAY NOT BE TRADED IN BRITISH COLUMBIA UNTIL NOVEMBER 7, 1998 EXCEPT AS PERMITTED
BY THE SECURITIES ACT (BRITISH COLUMBIA) AND REGULATIONS MADE THEREUNDER.
EXERCISABLE ON OR BEFORE
5:30 P.M., NEW YORK TIME, November 7, 2002
No. RPPA-1 100,400 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that ROBB, PECK, McCOOEY CLEARING
CORPORATION, or registered assigns, is the registered holder of One Hundred
Thousand, Four Hundred (100,400) Warrants to purchase initially, at any time
from November 7, 1997 until 5:30 p.m. New York time on November 7, 2002
("Expiration Date"), up to 100,400 fully-paid and non-assessable shares of
common stock, no par value ("Common Stock") of INTERNATIONAL VERONEX RESOURCES
LTD., a British Columbia corporation (the "Company"), at the initial exercise
price, subject to adjustment in certain events (the "Exercise Price"), of $4.00
per share of Common Stock upon surrender of this Warrant Certificate and payment
of the Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the placement agent's common stock warrant
agreement dated as of November 7, 1997 between the Company and ROBB PECK McCOOEY
CLEARING CORPORATION, (the "Warrant Agreement"). Payment of the Exercise Price
shall be made by certified or official bank check in New York Clearing House
funds payable to the order of the Company.
No Warrant may be exercised after 5:30 p.m., New York time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, hereby shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants pursuant to the Warrant Agreement, which Warrant
Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to for a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain events
the Exercise Price and/or number of the Company's securities issuable thereupon
may, subject to certain conditions, be adjusted. In such event, the Company
will, at the request of the holder, issue a new Warrant Certificate evidencing
the adjustment in the Exercise Price and the number and/or
<PAGE>
type of securities issuable upon the exercise of the Warrants; provided,
however, that the failure of the Company to issue such new Warrant Certificates
shall not in any way change, alter or otherwise impair, the rights of the holder
as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate at
an office or agency of the Company, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax or other governmental charge
imposed in connection with such transfer.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such numbered unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the Warrant
Agreement shall have the meanings assigned to them in the Warrant Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed under its corporate seal.
Dated as of November 7, 1997
[SEAL] INTERNATIONAL VERONEX RESOURCES LTD.
Attest: By:____________________________________
David A. Hite
______________________________ Chairman of the Board
Secretary
2
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _____________ shares of
Common Stock and herewith tenders in payment for such securities a certified or
official bank check payable in New York Clearing House funds to the order of
INTERNATIONAL VERONEX RESOURCES LTD. in the amount of $________________, all in
accordance with the terms hereof. The undersigned requests that a certificate
for such securities be registered in the name of _____________________________
whose address is ________________________________________________________ and
that such Certificate be delivered to _______________________________ whose
address is _______________________________________________.
Dated:
Signature ________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
Certificate
__________________________________________________
Insert social Security or other Identifying Number
of Holder
3
<PAGE>
ASSIGNMENT FORM
---------------
The Holder hereby assigns and transfers unto
Name
_____________________________________________________________
(Please typewrite or print in block letters)
Address
_____________________________________________________________
_____________________________________________________________
the right to purchase Common Stock of ___________________________ represented by
this Warrant to the extent of ____________ shares of common Stock as to which
such right is exercisable and does hereby irrevocably constitute and appoint
___________________________ Attorney, to transfer the same on the books of
_____________________________ with full power of substitution in the premises.
Date: _______________, 199__
__________________________________
Name of Registered Holder
__________________________________
Signature
__________________________________
Signature, if held jointly
4
<PAGE>
EXHIBIT 23.2
Schvaneveldt and Company
Certified Public Accountant
275 E. South Temple, Suite 300
Salt Lake City, Utah 84111
(801)521-2392
Darrell T. Schvaneveldt, C.P.A.
April 22, 1999
U.S. Securities & Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Re: Consent to be named in the F-2 Registration Statement of Veronex
Technologies, Inc.
Ladies and Gentlemen:
I hereby consent to the use of my report for the year ended February 28,
1998, dated July 14, 1998, and for the period ended May 31, 1998, dated August
10, 1998, in the above-referenced Registration Statement, as amended. I also
consent to the use of our name as an expert in such Registration Statement.
Schvaneveldt & Company
