PROSPECTUS
[ORYX LOGO]
3,283,660 Shares of Common Stock
40,000 Common Stock Purchase Warrants
ORYX TECHNOLOGY CORP.
This Prospectus (the "Prospectus") relates to 2,283,660 shares of
Common Stock, par value $.001 per share (the "Shares") and 40,000 callable
Common Stock Purchase Warrants (the "Warrants"), of Oryx Technology Corp., a
Delaware corporation ("Oryx" or the "Company"), which may be sold from time to
time by the individuals and entities listed as Selling Security Holders herein
(the "Selling Security Holders"). Each of the Warrants currently entitles the
holder thereof to purchase 1.9 Shares at an exercise price of $3.50 per Warrant.
The Company will not receive any proceeds from the offering.
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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. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE SECURITIES OFFERED HEREBY INVOLVE A SIGNIFICANT DEGREE OF RISK. SEE "RISK
FACTORS" AT PAGES 5 TO 12.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is March 31, 1997.
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The Selling Security Holders have advised the Company that they propose
to sell the Shares and the Warrants, from time to time, publicly through
broker-dealers acting as agents for others, or in private sales. See "Selling
Security Holders" and "Plan of Distribution." The Company will not receive any
of the proceeds from the sale of the Shares or the Warrants offered hereby by
the Selling Security Holders.
The Company will pay all offering expenses for the offering, estimated
at $18,071 including (i) the SEC registration fee ($1,571); (ii) legal fees and
expenses ($7,500); (iii) blue sky fees ($500); (iv) accounting fees and expenses
($7,500); (v) printing expenses ($500); and (vi) miscellaneous expenses ($500),
but will not pay any discounts or commissions incurred by the Selling Security
Holders in connection with the sale of the Shares or Warrants.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, New York, New York 10048. Copies
of such material may be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission also maintains an internet site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission at
http://www.sec.gov.
This Prospectus, which constitutes part of a Registration Statement
filed by the Company with the Commission under the Securities Act of 1933, as
amended (the "Act"), omits certain information contained in the Registration
Statement in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Company and the
securities offered hereby.
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TABLE OF CONTENTS
Page
Available Information........................................ 2
Incorporation of Certain Information by Reference............ 4
Risk Factors................................................. 5
The Company.................................................. 12
Use of Proceeds.............................................. 13
Selling Security Holders..................................... 13
Plan of Distribution......................................... 16
Description of Securities.................................... 16
Stock Transfer Agent......................................... 20
Legal Matters................................................ 20
Experts...................................................... 20
Indemnification.............................................. 20
The Company's Common Stock and Warrants are quoted on the National
Association of Securities Dealers Automated Quotation System (Small Cap)
("NASDAQ") under the symbols "ORYX" and "ORYXW," and on the Pacific Stock
Exchange ("PSE") under the symbols "OXT". and "OXTW," respectively. On March 27,
1997, the closing price on NASDAQ for the Common Stock was $2.25 per share and
the closing price for the Warrants was $2.00. There have been no recent reported
trades on the PSE.
The Company will not receive any proceeds from the sale of Common Stock
or Warrants for the account of the Selling Security Holders. The Company has
informed the Selling Security Holders that the anti-manipulative rules under the
Exchange Act of 1934, Rules 10b-6 and 10b-7, may apply to their sales in the
market and has furnished the Selling Security Holders with a copy of these
rules. The Company has also informed the Selling Security Holders of the need
for delivery of copies of this Prospectus in connection with any sale of
securities registered hereunder.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFERING DESCRIBED HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION TO
ANY PERSON TO WHOM SUCH OFFER WOULD BE UNLAWFUL OR AN OFFERING OF ANY SECURITIES
OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER AT ANY TIME SHALL IMPLY
THAT THE INFORMATION PROVIDED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE. -------------------
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The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 and, in accordance therewith, files reports and
other information with the Securities and Exchange Commission.
The Company has previously and intends to furnish its stockholders with
annual reports containing audited financial statements and may distribute
quarterly reports containing unaudited summary financial information for each of
the first three quarters of each fiscal year.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB as amended by Form
10-KSB/A1 for the fiscal year ended February 29, 1996;
2. The Company's Quarterly Report on Form 10-QSB for the quarter ended
November 30, 1996;
3. The Company's Current Reports on Forms 8-K filed with the Commission
on January 3, 1997 and February 21, 1997; and
4. The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed with the Commission under Section 12 of
the Exchange Act.
All reports and other documents filed pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus
and prior to the termination of the offering of the Shares shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such reports or other documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Copies of any and all documents that have been incorporated by
reference herein, other than exhibits to such documents, may be obtained upon
request without charge from the Company's Chief Financial Officer, Mitchel
Underseth, 47341 Bayside Parkway, Fremont, California 94538, (510) 249-1144.
Please specify the information desired when making such request. The information
relating to the Company contained in this Prospectus does not purport to be
comprehensive and should be read together with the information contained in the
documents or portions of documents incorporated by referenced into this
Prospectus.
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RISK FACTORS
The securities offered hereby involve a high degree of risk. It is
impossible to foresee and describe all the risks and business, economic and
financial factors which may affect the Company. Prospective investors should
carefully consider the risk and speculative factors, as well as other matters
set forth elsewhere in this Prospectus, before making an investment in the
Company.
HISTORY OF UNPROFITABILITY; SUBSTANTIAL RECENT OPERATING LOSSES
AND ACCUMULATED DEFICIT
Since its initial public offering in April 1994, the Company has not
been profitable on a quarterly or annual basis except for its most recent three
quarters ended May 31, 1996, August 31, 1996 and November 30, 1996. At November
30, 1996, the Company had an accumulated deficit of $7,534,000. During the
fiscal year ended February 29, 1996, the Company experienced significant delays
and additional costs in the development of its material analysis, electrostatic
discharge testing and surge protection product lines and experienced
deterioration of gross margins in the power products subsidiary, all of which
have added to the Company's continuing losses. Due to the significant reduction
in sales to Pitney Bowes, discussed below, the Company expects that it will not
be profitable during the fourth quarter of the fiscal year ended February 28,
1997 as well as during the first two quarters of the fiscal year ending February
28, 1998. Therefore, there can be no assurance that the Company will be
profitable for the fiscal year ended February 28, 1997 or thereafter.
SIGNIFICANT CUSTOMER DEPENDENCE
For the nine months ended November 30, 1996 and the fiscal years ended
February 29, 1996 and February 28, 1995, sales to Pitney Bowes accounted for
approximately 50%, 41% and 27% of consolidated revenues, respectively. The
Company will experience a significant reduction in sales to Pitney Bowes during
the fourth quarter of 1997 and the 1998 fiscal year. Accordingly, the Company's
operating results will be materially and adversely affected by the loss of
business from Pitney Bowes. There can be no assurance that such customer or any
other customers will in the future continue to purchase products from the
Company at levels that equal or exceed those of prior periods, if at all. While
the Company actively pursues new customers, there can be no assurances that the
Company will be successful in its efforts, and any significant weakening in
customer demand would have a material adverse effect on the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was approximately $5,856,000 at November 30,
1996. On February 28, 1996, the Company's line of credit terminated and the
outstanding balance was repaid. The Company's operating losses, increasing
accounts payable, loss of its line of credit and inventory build-up continued or
occurred in the fiscal year ended February 29, 1996, and together with payments
made to Zenith Electronics Corporation ("Zenith") and required payments on
certain short term financings, further exacerbated the Company's cash flow
needs. During the fourth quarter of the fiscal year ended February 28, 1997, the
Company raised additional capital of
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$3,510,462 pursuant to a private placement in which it issued and sold an
aggregate of 2,044,130 shares of its common stock to certain qualified
institutional investors under Regulation S of the Securities Act of 1933, as
amended. The Company is currently pursuing other credit arrangements and hopes
to establish a line of credit facility by May 31, 1997. Failure to obtain such a
credit facility or other financing, however, could have a material adverse
impact on the Company's growth and liquidity.
NEED FOR ADDITIONAL FINANCING
The Company's current financial resources may not be sufficient to
enable it to satisfy all of its anticipated financing needs for the fiscal year
ending February 28, 1998. In the event the Company requires additional equity or
debt financing, or attempts to raise capital through an asset sale, there can be
no assurance that such transactions can be effected in a timely manner to meet
all the Company's needs, or at all, or that any such transaction will be on
terms acceptable to the Company or in the interest of its stockholders.
RISKS OF NEW PHASE OF DEVELOPMENT AND ACQUISITION
The Company has invested substantially in the development of
proprietary technologies in surface analysis, electrostatic surge testing of
integrated circuits and surge protection, and has shipped four units of its new
secondary ion mass spectrometer as well as completed a licensing agreement for
part of its SurgX technology with an electronic component manufacturer. There
can be no assurance that the Company will be successful in further
commercializing these technologies or any other products, or developing
financially viable businesses based on these technologies or products. Results
of operations in the future will be influenced by numerous factors, including
technological developments by the Company, its customers and competitors,
increases in expenses associated with product development and sales growth,
market acceptance of the Company's products, the ability of the Company to
successfully control its costs of development, overhead and other costs and
manage its operations, the capacity of the Company to develop and manage the
introduction of new products, and by competition. There can be no assurance that
revenue growth will be sustained or profitability on a quarterly or annual basis
will be achieved. Accordingly, there can be no assurance that the Company will
be able to implement its business plan, expand its operations and develop and
sustain profitable operations.
On December 19, 1996, Oryx Power Products Corporation ("Power
Products"), the Company's power products subsidiary, acquired all of the assets,
assumed a portion of the liabilities, and hired key personnel of Power Sensors
Corporation, an Illinois corporation ("Power Sensors") for 6 percent of the
outstanding Series A Common Stock of Power Products and cash payment of
$120,000. The Asset Purchase Agreement for this acquisition provides that if,
within 3 years of December 19, 1996, Power Products is not itself sold in its
entirety to, or purchased by, a third party for cash or public securities of
such third party or publicly traded as a company whose securities are registered
under the Securities Act of 1933 or is a reporting company under the Securities
Exchange Act of 1934, then each of the holders of the Power Products Series A
Common Stock issued in the acquisition, shall have the option on that date to
exchange such Common Stock into a non-interest bearing promissory note of Power
Products in an amount equal to $2.50 per share of Common Stock for a total
indebtedness of $1,500,000. Power Sensors is a developer and
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manufacturer of DC-to-DC power conversion products. While this acquisition is
intended to provide the Company with entry into the DC to DC power supply market
and to generate sales sufficient to help offset the reduction in sales to Pitney
Bowes as discussed above, there can be no assurance that the Company will be
able to successfully market such products or that any sales of such products
will offset any reductions in the Company's sales to Pitney Bowes or any other
customer.
RISKS ASSOCIATED WITH MANAGEMENT OF GROWTH; INTERNAL CONTROL DEFICIENCIES
The Company has recently experienced and may continue to experience
substantial growth in the number of employees and the scope of its operations,
resulting in increased responsibilities for management. To manage growth
effectively, the Company will need to continue to improve its operational,
financial and management information systems and to develop and maintain sound
internal controls. In connection with the Company's audit for the fiscal year
ended February 28, 1995, the Company's independent accountants identified a
reportable condition in the Company's internal controls with respect to its
inventory management systems as it relates to tracking the movement of costed
inventory which resulted in an adjustment to the fiscal 1995 financial
statements. Another reportable condition was identified with respect to the
Company's record keeping for equity financing and share issuance transactions.
In connection with the Company's audit for the fiscal year ended February 29,
1996, the Company's independent accountants identified a further reportable
condition relating to physical inventory procedures specifically with regard to
substantial adjustments that resulted from physical inventories taken during the
fiscal year ended February 29, 1996. The resulting adjustments were reflected in
the fiscal 1996 financial statements. A reportable condition indicates that a
material error or irregularity may occur in the Company's quarterly and year-end
financial statements and may not be detected on a timely basis by the Company's
employees, thereby possibly resulting in a misstatement of the Company's
financial statements. While the Board of Directors has instituted action to
correct the preceding conditions, there can be no assurance that the Company
will be able to effectively achieve or manage any future growth, or develop and
maintain strong internal controls. Such failure could result in a material
adverse effect on the Company's financial condition and results of operations
and could result in a misstatement of operating results.
COST OF POWER CONVERSION PRODUCTS
In July 1995, the Company's contract with Zenith, pursuant to which
Zenith manufactured certain power conversion products for the Company at a fixed
price per unit, expired in accordance with its terms. Since such time, the
Company has manufactured power conversion products at its facility in Reynosa,
Mexico, while purchasing components for such products from various third party
manufacturers and distributors. The Company has purchased many components for
power conversion products from distributors at prices which are higher than
those offered directly from manufacturers, and the current market prices of such
components are substantially higher than the prices of such components
anticipated by the Company at the time it entered into the Zenith contract.
Accordingly, the Company has incurred higher costs in producing its power
conversion products and the Company's per unit profit margin on such products
has decreased. There can be no assurance that the Company will be able to
produce such products at a lower cost or negotiate more favorable, or even as
favorable, terms for the components thereof, in the future and, therefore, the
Company's profit margin on power products may be subject to further erosion,
which would have a material adverse affect on the Company.
RELIANCE ON THIRD PARTY MANUFACTURERS MAY DISRUPT OPERATIONS
The Company relies on third-party manufacturers for the supply of
substantially all key components for all of its products. The Company's reliance
on outside manufacturers generally, and a sole manufacturer or a limited group
of manufacturers in particular, involves several risks, including without
limitation, a potential inability to obtain an adequate supply of required
components and reduced control over pricing, quality, cost, and timely delivery
of components. Any inability to obtain adequate deliveries or any other
circumstances that would require the Company to seek alternative sources of
supply or to manufacture such components internally could lead to disruption of
the operations of the Company, product deficiencies, unanticipated and
fluctuating expenses, unpredictable revenues, and sales and marketing
dislocations that are beyond the Company's control, and may have a material
adverse effect on the Company's business and operations.
TECHNOLOGICAL CHANGES AFFECTING PRODUCTS AND PRODUCT DEVELOPMENT RISKS
The design and manufacture of technologically advanced components and
equipment continually undergo rapid and significant technological change. The
Company's success will depend upon its ability to maintain a competitive
position with respect to its proprietary and other enhanced technology and to
continue to attract and retain qualified personnel in all phases of its
operations. The Company's business is, to a large degree, dependent on the
enhancement of its current products and the development of new products.
Critical to the Company's success and future profitability will be its capacity
to develop new technologies for new product lines and product upgrades. Product
development and enhancement involve substantial research and development
expenditures and a high degree of risk, and there is no assurance that the
Company's product development efforts will be successful, will be accepted by
the market, or that such development efforts can be completed on a
cost-effective or timely basis. There can be no assurance that future
technological developments will not render existing or proposed products of the
Company uneconomical or obsolete or that the Company will not be adversely
affected by competition or by the future development of commercially viable
products by others.
QUARTERLY FLUCTUATIONS OF OPERATING RESULTS
The Company's quarterly operating results have in the past been, and
will in the future be, subject to fluctuation. The Company's operating results
are impacted by numerous factors, such as product introductions or modifications
by competitors, market acceptance of the Company's products and its customers'
products, product price changes, product mix, purchasing patterns of original
equipment manufacturers ("OEMs") and other customers, delays in, or failure to
receive, orders due to customer financial difficulties, and overall economic
trends. The Company plans to introduce product upgrades or new product lines
from time-to-time, which could generate short-term order fluctuations and have
an adverse impact on sales of certain existing products. In addition, customer
orders may involve competing capital budget considerations for the customer,
thus making the timing of customer orders difficult to predict and uneven. Any
delay or failure to receive anticipated orders, or any deferrals or cancellation
of existing orders, would adversely affect the Company's financial performance.
The Company's expense levels are based in part on its expectations as to future
revenues and, in particular, revenue growth, and the Company may be unable to
adjust spending in a timely manner to compensate for any revenue shortfall.
Accordingly, operating results in any one quarter could be materially adversely
affected by, among other factors, a failure to receive, ship or obtain customer
acceptance of sufficient orders in that quarter. Any weakening in demand for the
Company's products could have a material adverse effect on the Company's
operating results and the Company's ability to achieve profitability.
BACKLOG AND INVENTORY
Power Products, the Company's power products subsidiary, generally
operates with a substantial backlog due primarily to orders from OEMs for custom
power supplies, which generally comprise between 30% to 40% of the Company's
total revenues. However, Power Products' backlog at the beginning of a quarter
typically does not include all sales required to achieve the Company's sales
objectives for Power Products for that quarter. Therefore, Power Products' net
sales and operating results for a quarter depend on the Company shipping orders
scheduled to be sold during that quarter and obtaining additional orders for
products to be sold during that same quarter. Moreover, the terms of customer
purchase orders generally provide that the customer may cancel or reschedule all
or a substantial portion of the order with limited notice and with little or no
penalty. The Company has experienced rescheduling in the past and, to a lesser
extent, cancellations, and expects that it will experience such changes in the
future. If the Company is unable to timely adjust its parts orders to meet its
actual product demand, the result may be that the Company has a parts or product
inventory which is substantially different from the number and mix of products
actually sold. Any such inventory imbalance could result in inventory write
downs or other unexpected charges, contributing to significant fluctuations in
operating results from quarter to quarter.
The Company's other subsidiaries currently operate with virtually no
backlog. Therefore, because the Company ships most of its current products
within a short period after receipt of an order, the Company's net sales and
operating results for a quarter depend on the Company's ability to obtain orders
for and ship products within the same quarter. There can be no assurance,
however, that the Company will be able to obtain a sufficient level of orders to
obtain annual profitability.
COMPETITION
The Company is engaged in certain highly competitive and rapidly
changing segments of the electronic components and systems manufacturing
industry in which technological advances, costs, consistency and reliability of
supply are critical to competitive position. In addition, the competition for
recruitment of personnel in the technologically-advanced manufacturing industry
is continuous and highly intense. The Company competes or may subsequently
compete, directly or indirectly, with a large number of companies which may
provide products or components comparable to those provided by the Company. In
addition, many present or prospective competitors are larger, better
capitalized, more established and have greater access to resources necessary to
produce a competitive advantage. In particular, there are a large number of
competitors producing power conversion products, many of which are larger and
more established technology oriented companies in the United States as well as
low cost manufacturers in the Far East who may be expected to introduce more
technologically advanced power conversion products in the future. There can be
no assurance that the Company will be able to compete effectively in some or all
of its markets.
NO ASSURANCES OF PROTECTION FOR PATENTS AND PROPRIETARY RIGHTS;
RELIANCE ON TRADE SECRETS
The Company relies on a combination of patent, copyright, trademark and
trade secret laws, non-disclosure agreements and other intellectual property
protection methods to protect its proprietary technology. There can be no
assurance that any existing or subsequently obtained patents will provide the
Company with substantial competitive advantages, or that challenges will not be
instituted against the validity or enforceability of any patents owned by the
Company, or if initiated, that such challenges will not be successful. To the
extent the Company wishes to assert its patent rights, there can be no assurance
that any claims of the Company's patents will be sufficient to protect the
Company's technology, and the cost of any litigation to uphold the validity of a
patent and prevent infringement can be substantial even if the Company prevails.
In addition, there can be no assurance that others will not independently
develop similar technologies, duplicate the Company's technology, or
legitimately design around the patented aspects of the Company's technology.
Competitors or potential competitors may have filed applications for or received
patents, and may obtain additional patents and proprietary rights relating to
technology competitive with that of the Company. Furthermore, if additional
patents do not issue from present or future patent applications, the Company may
be subject to greater competition.
In certain cases, the Company also relies on trade secrets to protect
proprietary technology and processes which it has developed or may develop in
the future. There can be no assurance that secrecy obligations will be honored
or that others will not independently develop similar or superior technology.
The protection of proprietary technology through claims of trade secret status
has been the subject of increasing claims and litigation by various companies,
both in order to protect proprietary rights, and for competitive purposes, even
where proprietary claims are unsubstantiated. The prosecution of proprietary
claims or the defense of such claims is costly and uncertain given the rapid
development of the principles of law pertaining to this area.
NO DIVIDENDS ON COMMON STOCK
The Company has not paid any cash dividends on its Common Stock since
its inception and does not anticipate paying cash dividends on its Common Stock
in the foreseeable future. Payment of dividends is likely to be restricted under
the terms of any new credit facility. The future payment of dividends is
directly dependent upon future earnings of the Company, its financial
requirements and other factors to be determined by the Company's Board of
Directors, as well as the possible consent of any of its prospective lenders.
For the foreseeable future, it is anticipated that any earnings which may be
generated from the Company's operations will be used to finance the growth of
the Company and will not be paid to holders of Common Stock.
RISK OF SIGNIFICANT DILUTION
On December 23, 1996, the Company issued and sold 1,134,130 shares of
Common Stock to various investors in a private placement exempt from the
registration requirements of the Securities Act under Regulation S thereunder.
On February 7, 1997, the Company issued and sold an additional 910,000 shares of
Common Stock in a second closing of the same offering described above (the
transactions described in the previous two sentences shall be referred to herein
collectively as the "Regulation S Offering.")
In connection with the Regulation S Offering, the Company retained
Yorkton Securities, Inc. ("Yorkton") to act as placement agent pursuant to that
certain Agency Agreement dated as of December 4, 1996 and amended as of January
23, 1997 (the "Agency Agreement"). Under the terms of the Agency Agreement, the
Company issued Yorkton warrants to purchase 90,730 and 72,800 shares of Common
Stock for a per share exercise price of $1.90 (the "Yorkton Warrants"). The
Yorkton Warrants are exercisable for a period of five years from the date of
each closing of the Regulation S Offering.
As a result of these and various other transactions previously
undertaken by the Company as of February 7, 1997, there were convertible
securities and warrants and options of the Company currently outstanding for the
conversion and purchase of up to approximately 5,482,000 shares of Common Stock,
which represent significant additional potential dilution for existing
stockholders of the Company. These underlying shares of Common Stock are not
included in currently outstanding shares. In addition, as a result of the
anti-dilution provisions included in certain of these derivative securities,
there may be further dilution based on the price that the Company issues other
securities in the future.
VOLATILITY OF STOCK PRICE
There can be no assurance that the market price of the Common Stock
will not decline below the price at which such shares are being offered pursuant
to this Prospectus, particularly since the market price of the Company's Common
Stock has fluctuated substantially since the Company's initial public offering
in April 1994. The Company believes that a variety of factors could cause the
price of the Company's Common Stock to fluctuate substantially, including, for
example, the Company's ability to establish a credit facility to replace its
former facility with its bank, announcements of developments related to the
Company's business, liquidity and financial viability, fluctuations in the
Company's operating results and order levels, general conditions in the
Company's industries, the technology industry in general or the United States or
worldwide economy, announcements of technological innovations, new products or
product enhancements by the Company or its competitors, developments in patents
or other intellectual property rights, and developments in the Company's
relationships with its customers, distributors and suppliers. In addition, in
recent years, the stock market in general and the market for shares of small
capitalization stocks in particular has experienced extreme price fluctuations
which have often been unrelated to the operating performance of affected
companies. Such fluctuations could adversely affect the market price of the
Company's Common Stock and the Warrants and ability to obtain additional
financing.
AUTHORIZATION OF PREFERRED STOCK
The Board of Directors is authorized to issue shares of preferred stock
and to fix the dividend, liquidation, conversion, redemption and the rights,
preferences and limitations of such shares without any further vote or action of
the stockholders. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
of other rights of the holders of the Company's Common Stock. In the event of
issuance, the preferred stock could be utilized, under certain circumstances, as
a method of discouraging and delaying or preventing a change of control of the
Company. Although the Company has no present intention to issue any additional
shares of its preferred stock, there can be no assurance that the Company will
not do so in the future.
THE COMPANY
Oryx Technology Corp. designs, manufactures and markets specialized
components, analytical equipment and instrumentation products for original
equipment manufacturers ("OEMs") in the information technology industry. This
industry includes office equipment, computers, telecommunications and consumer
electronics. The Company markets or has in product development, technologically-
advanced products which perform diagnostic and analytical functions and address
industry requirements for efficient power conversion, surge protection and
specialized materials technology. The Company has concentrated its product
development programs in critical areas where the larger manufacturers of office
equipment, computers, computer peripherals and other electronic and
telecommunications products depend upon complementary technology and product
support. The Company operates in three distinct market segments: (i) power
conversion products, (ii) electrical surge protection products, and (iii)
materials analysis and test equipment and specialized materials products.
In November 1995, the Company made a strategic decision to improve
business focus and execution by separating its core businesses and placing
assets for each core business into wholly-owned subsidiaries. Three new
subsidiaries were formed: Oryx Power Products Corporation ("Power Products"),
SurgX Corporation ("SurgX") and Oryx Instruments and Materials Corporation
("Instrument and Materials"). The subsidiaries are intended to provide
additional management and employee motivation to increase the value of each
business through potential equity ownership tied more closely to each business
unit, and to position the Company to be better able to seek financing or equity
investment at the subsidiary level in order to develop the Company's businesses.
On December 19, 1996, Power Products acquired all of the assets,
assumed a portion of the liabilities, and hired key personnel of Power Sensors
Corporation, an Illinois corporation ("Power Sensors") for 6 percent amounting
to 600,000 shares of the outstanding Series A Common Stock of Power Products and
cash payment of $120,000. Power Sensors is a developer and manufacturer of DC to
DC power conversion products.
Oryx' and its subsidiaries' customer base for their current product
lines includes the following OEMs: Akashic Memories Corporation, Cooper
Industries, IBM Corporation, Pitney Bowes, Seagate Technology, Inc., Western
Digital Media Corporation, and Xerox Corporation. The Company plans to market
its existing lines, and, possibly additional product lines to these and other
OEMs during fiscal 1998.
Oryx also derives revenues from sales of products based on its patented
IntrageneTM ceramic metallization and joining system and from the design and
fabrication of electromagnet systems. IntrageneTM is a proprietary metallurgical
technology developed by Oryx which affords the Company the capacity to
metallize, solder or braze a comprehensive range of difficult-to-join
engineering ceramics, graphite and refractory metals used in electronic and
structural applications.
The Company's predecessor, Advanced Technology, Inc. ("ATI"), was
incorporated on April 21, 1976 in New Jersey. On July 25, 1993, ATI formed the
Company as a wholly-owned Delaware subsidiary, and on September 29, 1993, ATI
merged into the Company. The Company's principal executive offices are located
at 47341 Bayside Parkway, Fremont, California 94538, and its telephone number is
(510) 249-1144.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
for the account of the Selling Security Holders. However, with respect to the
Warrants, the Company will receive proceeds only from the exercise of the
Warrants, the timing of which is at the discretion of the holders of the
Warrants. In the event all of the Warrants were to be exercised, the Company
would receive net proceeds of approximately $432,476, after payment of offering
expenses estimated to be approximately $18,071. It is anticipated that the net
proceeds, if any, will be used by the Company for expansion of operations and
product lines and for working capital. The actual allocation of proceeds
realized from the exercise of the Warrants will depend upon the amount and
timing of such exercises, the Company's operating revenues and cash position at
such time and its working capital requirements during the course of such
exercise period. There can be no assurances that any of the Warrants will be
exercised.
While the intended use of proceeds is consistent with the Company's
current business plan objectives, the Company reserves the right to change the
use of proceeds depending on working capital requirements and opportunities
afforded to the Company. Pending utilization of the proceeds as described above,
the net proceeds of the offering will be deposited in interest bearing accounts
or invested in money market instruments, government obligations, certificates of
deposits or similar short-term investment grade interest bearing investments.
SELLING SECURITY HOLDERS
The following table sets forth the name of the Selling Security
Holders, the amount of shares of Common Stock held directly or indirectly or
underlying the Warrants and other derivative securities of the Company owned by
the Selling Security Holders on the date hereof, the amount of shares of Common
Stock to be offered by the Selling Security Holders, the amount to be owned by
the Selling Security Holders following sale of such shares of Common Stock and
the percentage of shares of Common Stock to be owned by the Selling Security
Holders following completion of such offering. As of November 30, 1996, there
were issued and outstanding 10,918,725 shares of Common Stock of the Company as
to which the percentages referred to below are based.
<PAGE>
SHARES OF COMMON STOCK
<TABLE>
Percentage Owned
Name of Selling Number of Shares Shares to Before Shares Owned After
Security Holder Owned be Offered Offering Offering
<S> <C> <C> <C> <C>
Saraville Limited (1) 210,525 210,525 1.9% -0-
Value Management & Research (1)
50,000 50,000 * -0-
VMR High Octane Fund Ltd. (1)
842,105 842,105 7.7% -0-
Caisse Centrale des Banques
Populaires (1) 31,500 31,500 * -0-
Govett American Smaller Companies
Trust PLC (1) 465,000 465,000 4.3% -0-
Govett Global Smaller Companies
Investment Trust PLC (1) 60,000 60,000 * -0-
Chase Manhattan Trustees Ltd. (1)
125,000 125,000 1.1% -0-
Royal Bank of Scotland Trust
Company Ltd. (1) 90,000 90,000 * -0-
VPB Finanz AG (1) 70,000 70,000 * -0-
Dreadnought Limited (1) 100,000 100,000 * -0-
Yorkton Securities, Inc. (2) 163,530 163,530 1.5% -0-
JW Charles Financial Services,
Inc. (3) 76,000 76,000 * -0-
TOTAL 2,283,660
</TABLE>
- -----------------------
* Represents less than 1%.
(1) Represents shares issued in the Company's Regulation S offering
undertaken between December 1996 and February 7, 1997.
(2) Represents shares issuable upon exercise of two warrants issued in
consideration for serving as placement agent for the Company's
Regulation S offering to institutional non-U.S. investment firms
completed on February 7, 1997. The warrants are exercisable at $1.90
per share for 90,730 shares on or prior to December 24, 2001, and for
72,800 shares on or prior to February 7, 2002
(3) Represents shares issuable upon exercise of 40,000 callable Common
Stock Purchase Warrants (the "Warrants") issued in connection with
repurchase by the Company of the Underwriters' Warrant described below.
Each Warrant entitles the holder to purchase 1.9 shares of Common Stock
at a price of $3.50 per Warrant.
<PAGE>
WARRANTS
Number of Warrants
Name of Selling Owned Warrants to
Security Holder be Offered
JW Charles Financial Services, 40,000 40,000
Inc. (1)
TOTAL 40,000
- -----------------------
(1) See Note 3 above.
Between December 1996 and February 1997, the Company issued and sold
2,044,130 shares of the Company's Common Stock to a limited group of qualified
institutional investors which are not "U.S. Persons" (as that term is defined in
Rule 902(o) under the Securities Act of 1933, as amended (the "Act")). The
transaction was intended to be exempt from the registration requirements of the
Act pursuant to Regulation S thereunder. The Company retained Yorkton Securities
Inc. ("Yorkton") to act on a best efforts basis as its exclusive agent in
connection with this offering. The Company paid Yorkton commissions and expenses
totaling $388,000 and further issued to Yorkton two warrants to purchase a total
of 163,530 shares of the Company's common stock at a price of $1.90 per share.
On December 27, 1996, the Company repurchased from JW Charles
Financial Services, Inc. ("JW Charles"), the Underwriters' Unit Purchase Warrant
(the "Underwriters' Warrant") issued by the Company to JW Charles in connection
with the Company's initial public offering of its securities in April 1994. The
Underwriters' Warrant originally entitled JW Charles to purchase 110,000 Units,
which was subsequently increased to 318,421 Units due to the anti-dilution
provisions contained therein. In September 1996, however, JW Charles paid to the
Company $371,000 to exercise a portion of the Underwriters' Warrant and thereby
acquired 100,000 Units. Therefore, on the date of repurchase, the Underwriters'
Warrant entitled JW Charles to purchase 218,421 Units, with each Unit consisting
of two shares of Common Stock and one warrant to purchase 1.9 shares of Common
Stock. As consideration for the repurchase of the Underwriters' Warrant, the
Company paid to JW Charles $475,000 and issued to it 40,000 callable Common
Stock Purchase Warrants (the "Warrants"), with each Warrant entitling the holder
thereof to purchase 1.9 shares of the Company's Common Stock at an exercise
price of $3.50 until April 6, 1999. This Prospectus also relates to the Warrants
and to the shares of Common Stock underlying the Warrants as hereinafter
described.
The Company has agreed to pay for all costs and expenses incident to
the issuance, offer, sale and delivery of the Shares and the Warrants,
including, but not limited to, all expenses and fees of preparing, filing and
printing the Registration Statement and Prospectus and related exhibits,
amendments and supplements thereto and mailing of such items. The Company will
not pay selling commissions and expenses associated with any such sales by the
Selling Security Holders. The Company has agreed to indemnify the Selling
Security Holders against civil liabilities including liabilities under the
Securities Act of 1933. The Selling Security Holders have advised the Company
that sales of the Shares may be made from time to time by or for the account of
the Selling Security Holders in one or more transactions in the over-the-counter
market, in negotiated transactions or otherwise, at prices related to the
prevailing market prices or at negotiated prices.
PLAN OF DISTRIBUTION
The Shares and the Warrants may be sold from time to time by the
Selling Security Holders. Such sales may be made in the over-the-counter market
or otherwise at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The Shares and the
Warrants may be sold by one or more of the following methods: (i) a block trade
in which the broker or dealer so engaged will attempt to sell the Shares as
agent for the Selling Security Holder; (ii) ordinary brokerage transactions;
(iii) transactions in which the broker solicits purchasers and (iv) privately
negotiated transactions. In effecting sales, brokers or dealers engaged by the
Selling Security Holders may arrange for other brokers or dealers to
participate. Brokers or dealers may receive commissions from the Selling
Security Holders in amounts to be negotiated immediately prior to the sale. Such
brokers or dealers and any other participating brokers or dealers may be deemed
to be "underwriters" within the meaning of the Securities Act in connection with
such sales.
DESCRIPTION OF SECURITIES
The Company is currently authorized to issue up to 25,000,000 shares of
Common Stock par value $.001 per share, of which 10,918,725 shares were
outstanding as of November 30, 1996. The Company is also authorized to issue up
to 3,000,000 shares of Preferred Stock, par value $.001 per share, of which
4,500 shares of Series A Preferred Stock were outstanding as of November 30,
1996.
COMMON STOCK
Each share of Common Stock entitles the holders thereof to one vote.
Holders of Common Stock do not have cumulative voting rights which means that
the holders of more than 50% of the shares voting for the election of directors
can elect all of the directors if they choose to do so, and in such event, the
holders of the remaining shares will not be able to elect any directors. The
Bylaws of the Company require that only a majority of the issued and outstanding
shares of Common Stock of the Company need be represented to constitute a quorum
and to transact business at a stockholders' meeting.
Subject to the dividend rights of the holders of any outstanding shares
of Preferred Stock, holders of shares of Common Stock are entitled to share, on
a ratable basis, such dividends as may be declared by the Board of Directors out
of funds legally available therefor. Upon liquidation, dissolution or winding up
of the Company, after payment to creditors and holders of any outstanding shares
of preferred stock, the assets of the Company will be divided pro rata on a per
share basis among the holders of the Common Stock. The Common Stock has no
preemptive, subscription or conversion rights and is not redeemable by the
Company. The Shares of the Company's Common Stock which may be issued upon
exercise of the Company's publicly traded warrants (the "Public Warrants"), and
other warrants and options issued by the Company when issued in accordance with
the terms thereof, will be duly authorized, validly issued, fully paid and
non-assessable.
COMMON STOCK PURCHASE WARRANTS
The Public Warrants were issued in registered form pursuant to an
Agreement, dated April 6, 1994 (the "Warrant Agreement"), between the Company
and North American Transfer Co., as Warrant Agent (the "Warrant Agent"). The
following discussion of certain terms and provisions of the Public Warrants is
qualified in its entirety by reference to the detailed provisions of the
Statement of Rights, Terms and Conditions for the Public Warrants which forms a
part of the Warrant Agreement.
Each of the Public Warrants currently entitles the registered holder to
purchase 1.9 shares of Common Stock. The Public Warrants are exercisable at
$3.50 per Warrant which is the equivalent of $1.84 per share of Common Stock,
subject to certain further adjustments. The Public Warrants are entitled to the
benefit of adjustments in their exercise prices and in the number of shares of
Common Stock or other securities deliverable upon the exercise thereof in the
event of a stock dividend, stock split, reclassification, reorganization,
consolidation or merger.
The Public Warrants may be exercised at any time commencing October 6,
1994 and continuing thereafter until April 6, 1999, unless such period is
extended by the Company. After the expiration date, Public Warrant holders shall
have no further rights. Public Warrants may be exercised by surrendering the
certificate evidencing such Public Warrant, with the form of election to
purchase on the reverse side of such certificate properly completed and
executed, together with payment of the exercise price and any transfer tax, to
the Warrant Agent. If less than all of the Public Warrants evidenced by a
warrant certificate are exercised, a new certificate will be issued for the
remaining number of Public Warrants. Payment of the exercise price may be made
by cash, bank draft or official bank or certified check equal to the exercise
price.
Public Warrant holders do not have any voting or any other rights as
stockholders of the Company. The Company has the right at any time beginning
October 6, 1994 to repurchase the Public Warrants, at a price of $.05 per Public
Warrant, by written notice to the registered holders thereof, mailed 30 days
prior to the repurchase date. The Company may exercise this right only if the
closing bid price for the Common Stock for 20 trading days during a 30
consecutive trading day period ending no more than 10 days prior to the date
that the notice of repurchase is given, equals or exceeds $5.10 per share [145%
of the offering price per share, attributing no value to the Public Warrants]
subject to adjustment for stock dividends and stock splits. Any such repurchase
shall be for all outstanding Public Warrants. If the Company exercises its right
to call Public Warrants for repurchase, such Public Warrants may still be
exercised until the close of business on the day immediately preceding the date
fixed for repurchase. If any Public Warrant called for repurchase is not
exercised by such time, it will cease to be exercisable, and the holder thereof
will be entitled only to the repurchase price. Notice of repurchase will be
mailed to all holders of Public Warrants of record at least thirty (30) days,
but not more than sixty (60) days, before the repurchase date. The foregoing
notwithstanding, the Company may not call the Public Warrants at any time that a
current registration statement under the Act is not then in effect.
The Warrant Agreement permits the Company and the Warrant Agent,
without the consent of Public Warrant holders, to supplement or amend the
Warrant Agreement in order to cure any ambiguity, manifest error or other
mistake, or to address other matters or questions arising thereunder that the
Company and the Warrant Agent deem necessary or desirable and that do not
adversely affect the interest of any Public Warrant holder. The Company and the
Warrant Agent may also supplement or amend the Warrant Agreement in any other
respect with the written consent of holders of not less than a majority in the
number of the Public Warrants then outstanding; however, no such supplement or
amendment may (i) make any modification of the terms upon which the Public
Warrants are exercisable or may be redeemed; or (ii) reduce the percentage
interest of the holders of the Public Warrants without the consent of each
Public Warrant holder affected thereby.
In order for the holder to exercise a Public Warrant, there must be an
effective registration statement, with a current prospectus, on file with the
Securities and Exchange Commission covering the shares of Common Stock
underlying the Public Warrant, and the issuance of such shares to the holder
must be registered, qualified or exempt under the laws of the state in which the
holder resides. If required, the Company will file a new registration statement
with the Commission with respect to the securities underlying the Public
Warrants prior to the exercise of such Public Warrants and will deliver a
prospectus with respect to such securities to all holders thereof as required by
Section 10(a)(3) of the Securities Act of 1933.
PREFERRED STOCK
The Company is authorized to issue 3,000,000 shares of Preferred Stock,
par value $.001 per share, issuable in such series and bearing such voting,
dividend, conversion, liquidation and other rights and preferences as the Board
of Directors may determine. Of such shares, 45,000 shares were designated Series
A $25 2% Convertible Cumulative Preferred Stock (the "Series A Preferred
Stock"), and 4,500 shares were outstanding as of November 30, 1996.
Shares of Series A Preferred Stock accrue cumulative preferred cash
dividends at the annual rate of 2% or $0.50 per share, payable semi-annually
commencing November 1, 1993. The holders of the Series A Preferred Stock have no
right to have the Company redeem such shares, and the Company is not obligated
to redeem such shares under any circumstances. The holders of Series A Preferred
Stock are entitled to receive, upon a voluntary or involuntary dissolution,
liquidation or winding up of the Company, $25.00 per share plus an amount equal
to all accrued and unpaid dividends, if any.
At the election of the holder thereof, each share of Series A Preferred
Stock is convertible into 11.6666 shares of Common Stock, subject to certain
adjustments. If all 4,500 shares of outstanding Series A Preferred Stock were
converted, there would be issued approximately 52,650 shares of Common Stock of
the Company. Holders of Series A Preferred Stock have one vote per share on all
matters submitted to the stockholders of the Company. In addition, the
affirmative vote of at least a majority of the outstanding Series A Preferred
Stock is required to approve any adverse change in the preferences, rights or
limitations with respect to the Series A Preferred Stock.
INTERIM FINANCING SECURITIES
In March 1994, the Company issued $150,000 principal amount of 9%
Promissory Notes (the "Interim Notes") and bridge warrants to purchase 37,500
shares of Common Stock. The Interim Notes were retired from the proceeds of the
Company's public offering in April 1994.
Each bridge warrant entitles the holder to purchase one share of Common
Stock at an exercise price of $2.28 per share on or prior to March 31, 1999. The
resale of the shares of Common Stock issuable upon exercise of the bridge
warrants has been registered in a separate public offering, and the Company has
agreed to maintain an effective registration statement and current prospectus
concerning the issuance of the shares upon exercise of the bridge warrants
during their term.
The Company has also issued warrants in the private offerings and
commercial transactions described under "Selling Security Holders."
CAPITALIZATION OF SUBSIDIARIES
In November 1995, the Company restructured its operations and organized
three initially wholly-owned subsidiaries into which the Company placed its core
businesses and related assets. The three subsidiaries formed were Oryx Power
Products Corporation, SurgX Corporation and Oryx Instruments and Materials
Corporation (collectively the "Subsidiaries"). Each of the Subsidiaries was
organized under the laws of Delaware with authorized capitalization of
20,000,000 shares of Class A Common Stock, 5,000,000 shares of Class B Common
Stock and 5,000,000 shares of Preferred Stock for all subsidiaries except SurgX
Corporation. The Class B Common Stock will be used to fulfill options granted to
members of management and other key employees of the Subsidiaries. The Class A
Common Stock was issued to the Company in exchange for all assets and
liabilities including intellectual property associated with the respective
businesses. The Class A Common Stock and Class B Common Stock are identical
except that the Class A Common Stock possesses a liquidation preference. As of
the date hereof, SurgX and Instruments and Materials each has 10,000,000 shares
of Class A Common Stock issued and outstanding and held by the Company. Power
Products has 10,600,000 shares of Class A Common Stock issued and outstanding,
with 10,000,000 of such shares held by the Company and 600,000 of such shares
held by Power Sensors Corporation. No shares of Class B Common Stock or
Preferred Stock have been issued by any of the Subsidiaries. Power Products has
granted options to purchase 1,177,000 shares of its Class B Common Stock,
Instruments and Materials has granted options to purchase 1,119,000 shares of
its Class B Common Stock and SurgX has granted options to purchase 280,000
shares of its Class B Common Stock to management and key employees which will
vest ratably over a period of five years.
STOCK TRANSFER AGENT
The transfer agent for the shares of Common Stock is North American
Transfer Co., 147 West Merrick Road, Freeport, New York 11520.
LEGAL MATTERS
Certain legal matters in connection with the Shares and the Warrants
being offered hereby will be passed upon for the Company by Wise & Shepard LLP,
3030 Hansen Way, Suite 100, Palo Alto, California 94304.
EXPERTS
The financial statements incorporated in this Prospectus by reference
to the Annual Report on Form 10-KSB/A1 for the year ended February 29, 1996,
have been so incorporated in reliance on the report (which contains an
explanatory paragraph relating to the Company's ability to continue as a going
concern as described in Note 1 to the financial statements) of Price Waterhouse
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
INDEMNIFICATION
Section 145 of the General Corporation Law of Delaware, under which
jurisdiction the Company is incorporated, empowers a corporation to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he or she
is or was a director, officer, employee or agent of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise. A corporation may indemnify against
expenses (including attorneys' fees) and, other than in respect of an action by
or in the right of the corporation, against judgments, fines and amounts paid in
settlement actually and reasonably incurred in connection with such action, suit
or proceeding if the person indemnified acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. In the case of an
action by or in the right of the corporation, no indemnification of expenses may
be made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery or the court in which such action was brought shall
determine that, despite the adjudication of liability, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper. Section 145 of the General Corporation Law of Delaware further provides
that to the extent a director, officer, employee or agent of the corporation has
been successful in the defense of any action, suit or proceeding referred to
above or in the defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.
The By-laws of the Company require the Company to indemnify its
directors and officers to the fullest extent permitted by the General
Corporation Law of the State of Delaware.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions or otherwise, the
Company 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 Company
of expenses incurred or paid by a director, officer or controlling person of the
Company 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 Company 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.
