UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
Post Effective Amendment #1
REGISTRATION STATEMENT
UNDER
THE SECURITIES
ACT OF 1933
DESTINY MEDIA TECHNOLOGIES
INC.
(Exact Name of Registrant as Specified in Its
Chapter)
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COLORADO
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84-1516745
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(State of Incorporation)
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(I.R.S. Employer Identification No.)
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1055 West Hastings Street, Suite 1040
Vancouver, BC,
Canada V6E 2E9
Telephone: (604) 609-7736
(Address and Telephone Number of Principal Executive Offices)
THE 2006 AMENDED AND RESTATED STOCK OPTION PLAN
(Full Title of the Plan)
DESTINY MEDIA TECHNOLOGIES INC.,
Attention: Steve
Vestergaard, President
1055 West Hastings Street, Suite 1040
Vancouver,
BC, Canada V6E 2E9
Telephone: (604) 609-7736
(Name, Address and Telephone Number of Agent for Service)
CALCULATION OF REGISTRATION FEE
Title of
Securities to be
Registered
(1)
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Amount to
be
Registered
(2)
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Proposed
Maximum
Offering Price
Per Share
(3)
|
Proposed
Maximum
Aggregate
Offering Price (3)
|
Amount of
Registration
Fee
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Common Stock
$0.001 par value
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2,600,000 Shares
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$0.46 Per Share
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$1,196,000
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$36.72
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(1)
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This Registration Statement covers the common stock
issuable upon the exercise of options issued under our 2006 Amended and
Restated Stock Option Plan to directors, officers, employees and eligible
consultants of the registrant.
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(2)
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Represents the additional 2,600,000 shares of common
stock authorized under the 2006 Amended and Restated Stock Option Plan.
The original 2,500,000 shares of common stock authorized under the
original 2006 Stock Option Plan were registered on April 26, 2006 pursuant
to the original Registration Statement No. 333-133552 and a filing fee of
$90.95 was paid in connection with the original Registration Statement.
This Registration Statement shall also cover an indeterminable number of
additional shares of common stock which may become issuable under the 2006
Amended and Restated Stock Option Plan by reason of any stock dividend,
stock split, re-capitalization or any other similar transaction effected
without the receipt of consideration which results in an increase in the
number of the registrant’s outstanding shares of common stock.
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|
|
|
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(3)
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The Proposed Maximum Offering Price Per Share is
calculated in accordance with Rule 457(h) of the Securities Act of 1933,
as amended, based upon the market price of our common stock of $0.46 per
share as of May 11, 2007 with respect of the options to purchase
additional 2,600,000 shares that may be granted pursuant to the 2006
Amended and Restated Stock Option Plan. The Proposed Aggregate Maximum
Aggregate Offering Price is based on the Proposed Maximum Offering Price
Per Share times the total number of shares of Common Stock to be
registered. These amounts are calculated solely for the purpose of
calculating the registration fee pursuant to Rule 457(h)(1) under
Securities Act of 1933, as amended.
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Copies to:
L.K. Larry Yen, Esq.
Clark Wilson LLP
800
– 885 West Georgia Street
Vancouver, British Columbia V6C 3H1
Explanatory Note
On April 26, 2006, we filed with the Securities and Exchange
Commission (“SEC”) a Registration Statement No. 333-133552 on Form S-8,
pertaining to 2,500,000 shares of common stock, $0.001 par value, and options to
purchase common stock available for issuance under the 2006 Stock Option Plan of
Destiny Media Technologies Inc. (the “Plan”). On January 27, 2007, the directors
of the Company approved an increase in the number of shares available under the
Plan from 2,500,000 to 5,100,000, bringing the total authorized for issuance
under the Plan to 5,100,000 common shares. This Post Effective Amendment No. 1
to our Registration Statement No. 333-133552 is being filed to register the
additional 2,600,000 shares added to the Plan on January 27, 2007.
As of the date of this Post Effective Amendment No. 1, a total
of 4,597,778 options have been issued under the Plan, leaving 502,222 options to
purchase common stock available under the Plan.
The Post-Effective Amendment No. 1 to the Registration
Statement includes a reoffer prospectus registering 1,525,000 shares of common
stock, all of which represent shares issuable upon exercise of outstanding
options, awarded pursuant to the Plan to certain officer and directors of our
company for resale by the selling stockholders. The reoffer prospectus which is
filed as a part of this Registration Statement has been prepared in accordance
with the requirements of Form S-8, and, pursuant to General Instruction C of
Form S-8, may be used for reoffers or resales of the shares of common stock that
have been acquired by the selling stockholders pursuant to the Plan.
Except as described above, no other changes have been made to
our Form S-8 Registration Statement No. 333-133552. For the convenience of the
reader and as required under SEC rules, this Post-Effective Amendment No. 1 to
Form S-8 sets forth the complete text of Form S-8 rather than just the amended
portions thereof. For Items not modified herein, reference should be made to our
Registration Statement No. 333-133552 on Form S-8 as filed with the SEC on April
26, 2006. The filing of this Post-Effective Amendment No. 1 is not an admission
that our Registration Statement No. 333-133552 on Form S-8, when filed,
knowingly included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements made therein not misleading.
REOFFER PROSPECTUS
1,525,000 Shares of Common Stock under the 2006 Amended and
Restated Stock Option Plan
DESTINY MEDIA TECHNOLOGIES INC.
The shares of common stock, $0.001 par value, of Destiny Media
Technologies Inc. covered by this Reoffer Prospectus may be offered and sold to
the public by our selling stockholders, some of whom may be deemed to be
“affiliates” (as that term is defined in Rule 405 of the General Rules and
Regulations of the Securities Act of 1933, as amended) of our company. Our
selling stockholders acquired or will acquire the shares through their exercise
of stock options or other awards granted to them under the Company’s 2004 Equity
Incentive Plan (the “Plan”).
All or a portion of the shares of common stock registered
hereunder may be offered for sale, from time to time, on the NASD, Inc.’s OTC
Bulletin Board or otherwise, at prices and terms then obtainable, subject to
certain limitations. However, any shares covered by this Reoffer Prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be sold
under Rule 144 instead of pursuant to this Reoffer Prospectus. See “Plan of
Distribution.”
We will not receive any of the proceeds from the sale of the
shares by the selling stockholders, but we will receive funds in connection with
the exercise of stock options relating to such shares, which funds will be used
by us for working capital. All expenses of registration incurred in connection
with this offering are being borne by us, but all brokerage commissions,
discounts and other expenses incurred by individual selling stockholders will be
borne by such selling stockholders.
Our common stock is listed on the NASD, Inc.’s OTC Bulletin
Board under the symbol “DSNY.” The closing prices of our common stock on the
NASD, Inc.’s OTC Bulletin Board on May 11, 2007 was $0.46.
See “Risk Factors” beginning on page 6 for information that
should be carefully considered by prospective investors.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS REOFFER PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
The date of this Reoffer Prospectus is May 14, 2007.
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TABLE OF CONTENT
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AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and in
accordance therewith is required to file periodic reports, proxy statements and
other information with the U.S. Securities and Exchange Commission (the
“Commission”). The reports, proxy statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at 100 F Street, N.E., Washington, D.C. 20549, and
at the Commission’s Regional Offices. Copies of such materials can also be
obtained by mail from the public reference facilities of the Commission at 100 F
Street, N.E., Washington, D.C. 20549 at prescribed rates. You may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-(800)-SEC-0330. The Commission also maintains a site on the
World Wide Web that contains reports, proxy and information statements and other
information regarding registrants that file electronically. The address of such
site is http://www.sec.gov. See “Incorporation of Certain Documents by
Reference.”
Our public website is http://www.dsny.com. We make available
free of charge on our website, via a link to the SEC’s internet site at
http://www.sec.gov, our annual reports on Form 10-KSB, quarterly reports on Form
10-QSB, current reports on Form 8-K, proxy statements and Forms 3, 4 and 5 filed
on behalf of directors and executive officers and any amendments to such reports
filed or furnished pursuant to the Exchange Act as soon as reasonably
practicable after such material is electronically filed with, or furnished to,
the SEC.
We have filed with the Commission a Registration Statement on
Form S-8 under the Securities Act with respect to the shares of common stock
offered by this Reoffer Prospectus. This Reoffer Prospectus does not contain all
the information set forth in or annexed as exhibits to the Registration
Statement. For further information with respect to our company and the shares of
common stock offered by this Reoffer Prospectus, reference is made to the
Registration Statement and to the financial statements, schedules and exhibits
filed as part thereof or incorporated by reference herein. Copies of the
Registration Statement, together with such financial statements, schedules and
exhibits, may be obtained from the public reference facilities of the Commission
at the addresses listed above, upon payment of the charges prescribed therefor
by the Commission. Statements contained in this Reoffer Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or other documents, each such statement being qualified in its entirety by such
reference. Copies of such contracts or other documents, to the extent that they
are exhibits to the Registration Statement or incorporated by reference, may be
obtained from the public reference facilities of the Commission, upon the
payment of the charges prescribed therefor by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by us with the
Commission pursuant to the Exchange Act are hereby incorporated by reference,
except as superseded or modified herein:
(A) Our Annual report
on Form 10-KSB for the fiscal year ended August 31, 2006 filed on November 30,
2006;
(B) Our Quarterly
Report on Form 10-QSB for the quarter ended November 30, 2006 filed on January
22, 2007;
(C) Our Current
Report on Form 8-K filed with the SEC on March 1, 2007;
(D) Our Current
Report on Form 8-K filed with the SEC on March 8, 2007;
(E) All other reports
filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of
the fiscal year covered by our Annual Report referred to in (A) above;
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(F) The description
of our common stock which is contained in our Form 10-SB Registration Statement,
filed with the SEC pursuant to Section 12(g) of the Securities Exchange Act of
1934 originally on November 23, 1999 and as amended through April 24, 2000.
In addition, all documents filed by us pursuant to
Sections13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Reoffer Prospectus and prior to the termination of the offering of the shares of
common stock shall be deemed to be incorporated in and made a part of this
Reoffer Prospectus by reference from the date of filing of such 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 Reoffer Prospectus to the extent that a statement contained herein or in
any subsequently filed document that is also incorporated by reference herein
modifies or replaces such statement. Any statements so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Reoffer Prospectus.
We hereby undertake to provide without charge to each person,
including any beneficial owner of shares of common stock, to whom this Reoffer
Prospectus is delivered, on written or oral request of any such person, a copy
of any or all of the foregoing documents incorporated herein by reference (other
than exhibits to such documents). Written or oral requests for such copies
should be directed to our company at 1055 West Hastings Street, Suite 1040,
Vancouver, BC, Canada V6E 2E9, telephone number (604) 609-7736, attention
Corporate Secretary.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
Reoffer Prospectus. This summary is not complete and may not contain all of the
information that you should consider before purchasing our common stock. Certain
statements made in this Reoffer Prospectus constitute “forward-looking
statements” under the Private Securities Litigation Reform Act of 1995. See
“Forward-Looking Statements.”
Overview and Corporate History
We are in the business of development and marketing of digital
software tools for providing media content on the Internet. We were incorporated
under the law of the State of Colorado under the name of “Euro Industries Ltd.”
in August 1998. On October 12, 1999, we changed our name to Destiny Media
Technologies Inc.
We own 100% of the issued and outstanding shares of Destiny
Software Productions, Inc., a company incorporated under the laws of the
Province of British Columbia in 1992. We carry out our business operations
primarily through Destiny Software Productions, Inc. As used in this Reoffer
Prospectus, the terms “we”, “us”, “our”, and “Destiny” mean Destiny Media
Technologies Inc. and our wholly-owned subsidiary, Destiny Software Productions,
Inc. unless otherwise indicated.
Our current CEO, Steve Vestergaard, first started business
operations in software development as a private partnership in January 1991.
This business was sold to Destiny Software Productions, Inc. the following year.
Subsequently, Destiny Software Productions, Inc. developed a dozen video games,
marketing and branding them through outside publishing companies. In 1995,
Destiny Software Productions, Inc. began developing various Internet
technologies, releasing the Radio Destiny Internet radio broadcasting software
in May 1996. Finally, Destiny Media Technologies, Inc. acquired Destiny Software
Productions, Inc. from Mr. Vestergaard in 1999.
Our principal executive office is located at #1040-1055 West
Hastings Street, Vancouver, British Columbia V6E 2E9. Our telephone number is
(604) 609-7736 and our facsimile number is (604) 609-0611. Our corporate website
is located on the Internet at http://www.dsny.com.
Shares of our common stock are quoted on the OTC Bulletin board
under the symbol “DSNY” and traded on the Berlin exchange in Germany
under the symbol “DME”.
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Business Development
Currently, we are in the business of developing and marketing
digital software tools for providing media content on the Internet.
Generally, there are two main ways that media content can be
accessed by users:
1. “streaming media”: through
technologies such as television or radio allowing users to experience the
content as it is broadcast. The analogous technique on the Internet is to
“stream” the media to the users.
2. “secured media distribution”:
consumers can own content which they can experience at any time. For example,
they may buy a music CD or a DVD. The analogous process on the Internet is to
securely download the content from a remote site to a local hard drive.
We have developed our own branded solutions to facilitate both
“streaming media” and “secure media distribution” to allow users to access media
contents on the Internet.
1. Streaming Media Solutions
A) Clipstream™
The Clipstream™ suite of streaming media products are built
around Sun Java, so they play instantly when a web page loads or an email opens.
Clipstream™ reliably reaches more viewers on more operating systems than other
solutions and it has a high level of security. Because it is compatible with
standards based web servers and caching infrastructure, it is uniquely easy to
deploy, it uses up to 90% less bandwidth than competing solutions and it plays
more reliably. Clipstream™ is available in on demand and live versions.
Clipstream™ is a mature product suite that is typically
licensed to media content owners. Research and Development efforts on
Clipstream™ are focused on expanding the potential customer applications and
improving the quality of the compression codecs. During the fiscal year ending
2006, we released a Japanese language version, a stand alone audio-mail server
that facilitates automated encoding of telephone calls and a new remote TV tuner
to facilitate remote viewing of IP TV signals. We also released a new high
quality audio codec during the 2006 fiscal year. A new high end video codec
(Clipstream 3) was released February 22, 2007.
B) Radio Destiny
Radio Destiny allows consumers to start their own Internet
based radio station from their PC. Content is automatically aggregated on our
site: http://www.stationdirectory.com
We are also developing a social network based around real time
audio and video broadcasting based on Radio Destiny and Clipstream™ Live Video
which we expect to launch in spring 2007.
2. Secure Media Distribution Solutions
Our proprietary security system, called MPE™, is a security
system for protecting the movement of digital content through the Internet. It
also incorporates a proprietary watermarking technology that encodes a signal
into audio that identifies the user that created it. The technology is unique in
that the watermarking can not be heard, it can be applied in near real time and
it survives filtering, analogue duplication and compression. This watermarking
technology was developed and released this year and a provisional patent has
been filed in the United States.
Two products are based on the MPE™ security engine:
A) Play MPE™ System
In October 2004, we launched a complete solution for assisting
record labels in securely moving content to trusted
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third parties, including radio stations on a pilot basis. As of
February 2007, we have delivered over 34,000 songs, representing over 36 million
transactions. We are transitioning various record labels from a low fixed
monthly cost to full transactional fee based contracts. Effective March 1, 2007,
we have agreed to a transactional fee based contract with Universal Music
Group.
The system recognizes authorized computers and content is
received in an encrypted secure form. If the content owner allows export, the
system embeds a tracking signature or watermark into the music that identifies
that user. The watermark survives compression and duplication to analog devices.
The system consists of servers at two hosting facilities,
encoding tools, list management tools, a Mac and PC player application and
custom database applications. To utilize the system the following steps occur:
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i)
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A record label initiates a “send” with the encoder tool
of the MPE™ system,
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ii)
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Optional email alert can be sent to the
recipient(s),
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iii)
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The song will become available on the recipient’s
desktop, and
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iv)
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The system automatically generates an invoice in
accordance with the relevant agreement.
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B) PODDS.CA
We have developed our own “iTunes” style online store
application and accompanying server and encoder software. Users can securely
purchase digital music directly from a player application which they download to
their computer. We expect to license this software to third parties that want to
offer digital audio content for sale.
We have licensed catalogue music from all four major record
labels that we are selling to commercial users and digital jukeboxes using our
download service.
These technologies rely on proprietary algorithms, compression
and watermarking technologies that were developed internally.
The Offering
The selling stockholders may offer and sell up to 1,525,000
shares of our common stock under this Reoffer Prospectus. We will not receive
any of the proceeds from the sale of these shares, but we will receive funds in
connection with the exercise of stock options relating to such shares, which
funds will be used by our company for working capital. See “Use of Proceeds” and
“selling stockholders” below.
RISK FACTORS
We face risks in executing our business plan and achieving
revenues. The following risks are material risks that we face. The risks and
uncertainties described below are not the only ones we face. Other risks and
uncertainties, including those that we do not currently consider material, may
impair our business. If any of the risks discussed below actually occur, our
business, financial condition, operating results or cash flows could be
materially adversely affected. This could cause the trading price of our
securities to decline, and you may lose all or part of your investment.
Prospective investors should consider carefully the risk factors set out
below.
RISKS RELATED TO OUR BUSINESS
As there is substantial doubt about our ability to
continue as a going concern, an investment in our common stock is
risky.
We have disclosed in the notes to our financial statements that
we have incurred recurring losses from operations and that we have a working
capital deficiency. Our operating losses to date have been primarily financed by
equity transactions. Depending on our ability to grow sales and related cash
flows, we may need additional capital through public or private financings that
may not be available on reasonable terms. Accordingly, we will require the
continued financial support of our shareholders and creditors until we are able
to generate sufficient cash flows from
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operations on a sustained basis. There can be no assurances
that we will be successful. If we are not, we will be required to reduce
operations or liquidate assets. Our consolidated financial statements do not
include any adjustments relating to the recoverability of assets and
classification of assets and liabilities that might be necessary should we be
unable to continue as a going concern.
We have had negative cash flows from operations and if we
are not able to obtain further financing our business operations may
fail.
We have had negative cash flows from operations and have
depended on sale of our equity securities and shareholder loans to meet our cash
requirements. We will need to raise additional funds to:
- support our planned growth and carry
out our business plan,
- develop new or enhanced services and
technologies,
- increase our marketing efforts,
- acquire complementary businesses or
technologies,
- respond to regulatory requirements,
and
- respond to competitive pressures or
unanticipated requirements.
We may not able to obtain additional equity or debt financing
on acceptable terms when we need it. Even if financing is available, it may not
be available on terms that are favourable to us or in sufficient amounts to
satisfy our requirements. If we require, but are unable to obtain, additional
financing in the future, we may be unable to implement our business plan and our
growth strategies, respond to changing business or economic conditions,
withstand adverse operating results, consummate desired acquisitions and compete
effectively. More importantly, if we are unable to raise further financing when
required, our continued operations may have to be scaled down or even ceased and
our ability to generate revenues would be negatively affected.
If we are unable to increase our revenues, then our
business and our financial condition will suffer.
Our operating expenses to date still exceed our revenues.
Accordingly, our ability to attain profitability and to decrease our dependence
on external financing is contingent upon our ability to increase all product
revenues. We are working to continue the increase in revenues from sales of our
Clipstream™ software. There is no assurance that we will be able to continue to
increase revenues from our Clipstream™ software or that the MPE™ secure media
distribution system will generate revenues in excess of the expenses
attributable to the marketing of this product. If we are not successful in
increasing revenues, then our ability to achieve profitable operations will be
adversely affected.
If revenues from our
Clipstream
TM
Software decline, then our
financial condition and results of operations will be adversely affected.
Substantially all of our revenue is generated from sales of our
Clipstream™ streaming media software. The market for streaming media software is
extremely competitive and includes competitors such as Real Networks and
Microsoft. Due to this competition, there is a risk that our competitors will
gain an increased market share or may cause the price that we are able to charge
for Clipstream™ software to decrease. Either of these factors could cause our
revenue to decrease with the result that our financial condition and operating
results would be adversely affected.
If we are not able to control our operating expenses,
then our financial condition may be adversely affected.
We have been successful in containing our operating expenses.
Operating expenses increased slightly to $1,404,667 for the year ended August
31, 2006 from $1,301,691 for the year ended August 31, 2005. Our ability to
achieve profitability is conditional upon our ability to maintain our operating
expenses. While we have been successful in
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containing our operating expenses, there is a risk that we will
have to increase our operating expenses in the future. Factors that could cause
our operating expenses to increase include our determination to spend more on
sales and marketing in order to increase product sales or our determination that
more research and development expenditures are required in order to keep our
current software products competitive or in order to develop new products for
the market. To the extent that our operating expenses increase without a
corresponding increase in revenue, our financial condition would be adversely
impacted.
Our financial results may be adversely impacted by
currency fluctuations.
Our revenues are primarily in United States dollars as most of
our revenues are generated from sales in the United States. Our operating
expenses are primarily in Canadian dollars due to the fact that our operations
are located in Vancouver, British Columbia, Canada. An increase in the value of
the Canadian dollar in relation to the United States dollar could have the
effect of increasing our loss from operations.
If we are not successful in legal proceedings against us,
then our business and financial condition could be adversely affected.
We are currently party to one material legal proceeding, as
described under the heading “Legal Proceedings.” If we are not successful in
this legal proceeding and are forced to make payments of damages to the
plaintiff, then our business and our financial condition would be adversely
affected.
If our products are defective or contain errors, we may
become subject to product liability claims.
As a result of their complexity, our software products may
contain undetected errors or failures when first introduced or as new versions
are released. There can be no assurance that, despite testing we undertake and
testing and use by current and potential customers, errors will not be found in
new products after commencement of commercial shipments. The occurrence of such
errors could result in loss of or delay in market acceptance of our products,
which could have a material adverse effect on our business, financial condition
and results of operations. Our products also may be vulnerable to break-ins and
similar disruptive problems caused by Internet or other users.
Such computer break-ins and other disruptions would jeopardize
the security of information stored in and transmitted through the computer
systems of our customers, which may result in significant liability to us and
deter potential customers. The sale and support of our products may entail the
risk of liability claims. A product liability claim brought against us could
have a material adverse effect on our business, financial condition and results
of operations.
If we cannot effectively manage risk of system failures
and/or security risk, our business and financial condition could be adversely
affected.
Despite the implementation of security measures, our network
infrastructure could be vulnerable to unforeseen computer problems. Although we
believe we have taken steps to mitigate much of the risk, we may in the future
experience interruptions in service as a result of the accidental or intentional
actions of Internet users, current and former employees or others. Unknown
security risks may result in liability to us and also may deter new customers
from purchasing our software and services, and individuals from utilizing it.
Although we intend to continue to implement and establish security measures,
there can be no assurance that measures implemented by us will not be
circumvented in the future, which could have a material adverse effect on our
business, financial condition or results of operations.
Our success is dependent on Internet and intranet as
mediums of commerce and communication and our future growth may be materially
and adversely affected if the technological infrastructure of the Internet
cannot support the demands placed on it.
The market for our streaming media products and services is new
and evolving rapidly. It depends on increased use of the Internet and intranets.
If the Internet and intranets are not adopted as methods for commerce and
- 9 -
communications, or if the adoption rate slows, the market for
our products and services may not grow, or may develop more slowly than
expected.
The electronic commerce market is relatively new and evolving.
Sales of our products depend in large part on the development of the Internet as
a viable commercial marketplace. There are now substantially more users and much
more “traffic” over the Internet than ever before, use of the Internet is
growing faster than anticipated, and the technological infrastructure of the
Internet may be unable to support the demands placed on it by continued growth.
Delays in development or adoption of new technological standards and protocols,
or increased government regulation, could also affect Internet use. In addition,
issues related to use of the Internet and intranets, such as security,
reliability, cost, ease of use and quality of service, remain unresolved and may
affect the amount of business that is conducted over the Internet and intranets.
Delays and cost overruns associated with our product
development may materially and adversely affect our ability to respond to
technological changes, evolving industry standards, competitive developments or
customer requirements.
We have experienced development delays and cost overruns
associated with its product development. We may encounter such problems in the
future. Delays and cost overruns could affect our ability to respond to
technological changes, evolving industry standards, competitive developments or
customer requirements. Our products also may contain undetected errors that
could cause adverse publicity, reduced market acceptance of the products, or
lawsuits by customers.
Any compromise of our ability to transmit confidential
information securely could have a material adverse effect on our business.
Online commerce and communications depend on the ability to
transmit confidential information securely over public networks. Any compromise
of our ability to transmit confidential information securely, and costs
associated with the prevention or elimination of such problems, could have a
material adverse effect on our business.
Our international operations subject us to a number of
risks, including unfavourable political, economic, regulatory and tax conditions
in foreign countries.
We market and sell our products in the United States, Canada,
Europe, Asia, South America, Africa and Australia. As such, we are subject to
the normal risks of doing business abroad. Risks include unexpected changes in
regulatory requirements, export and import restrictions, tariffs and trade
barriers, difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable, potential adverse
tax consequences, exchange rate fluctuations, increased risks of piracy, limits
on the our ability to enforce our intellectual property rights, discontinuity of
our infrastructures, limitations on fund transfers and other legal and political
risks. Such limitations and interruptions could have a material adverse effect
on our business. We do not currently hedge our foreign currency exposures.
RISKS RELATED TO OUR COMPANY
Our success is dependent, to a large degree, upon the
efforts of Mr. Steve Vestergaard, our current executive officer.
Mr. Vestergaard was the founder of Destiny Software
Productions, Inc. and has been involved in our business operations since our
inception. The loss or unavailability of Mr. Vestergaard could have an adverse
effect on our business operations and financial condition. We do not maintain
key man life insurance policies for Mr. Vestergaard or for any of our other
employees. In addition, our continued success is dependent upon our ability to
attract and retain qualified personnel in all areas of our business, especially
management positions. In the event that we are unable to attract and retain
qualified personnel, our business would be adversely affected.
If we fail to effectively manage the growth of our
company, our future business results could be harmed and our managerial and
operational resources may be strained.
- 10 -
Should we be successful in the sales and marketing efforts of
our software products, we will experience significant growth in operations. If
this occurs, management anticipates that additional expansion will be required
in order to continue our product development. Any expansion of our business
would place further demands on our management, operational capacity and
financial resources. We anticipate that we will need to recruit qualified
personnel in all areas of its operations, including management, sales,
marketing, delivery, and software development. There can be no assurance that we
will be effective in attracting and retaining additional qualified personnel,
expanding its operational capacity or otherwise managing growth. In addition,
there can be no assurance that our current systems, procedures or controls will
be adequate to support any expansion of our operations. The failure to manage
growth effectively could have a material adverse effect on our business,
financial condition and results of operations.
Because some of our officers and directors are located in
non-U.S. jurisdictions, you may have no effective recourse against the
management for misconduct and may not be able to enforce judgement and civil
liabilities against our officers, directors, experts and agents.
Most of our directors and officers are nationals and/or
residents of countries other than the United States, and all or a substantial
portion of their assets are located outside the United States. As a result, it
may be difficult for investors to enforce within the United States any judgments
obtained against our officers or directors, including judgments predicated upon
the civil liability provisions of the securities laws of the United States or
any U.S. state.
If we are unable to protect our proprietary technology,
we may not be able to compete as effectively.
Where appropriate, we seek patent protection for certain
aspects of our technology. Patent protection may not be available for some of
the product we are developing. If we must spend significant time and money
protecting our patents, designing around patents held by others or licensing,
potentially for large fees, patents or other proprietary rights held by others,
our business and financial prospects may be harmed.
Because we can issue additional common shares, purchasers
of our common stock may incur immediate dilution and may experience further
dilution.
We are authorized to issue up to 100,000,000 common shares, of
which 49,703,001 are issued and outstanding. Our board of directors has the
authority to cause our company to issue additional shares of common stock
without the consent of any of our shareholders. Consequently, our shareholders
may experience more dilution in their ownership of our company in the future.
RISKS RELATED TO OUR COMMON STOCK
Because we do not intend to pay any dividends on our
common stock, investors seeking dividend income or liquidity should not purchase
shares of our common stock.
We have not declared or paid any dividends on our common stock
since our inception, and we do not anticipate paying any such dividends for the
foreseeable future. Investors seeking dividend income or liquidity should not
invest in our common stock.
Our stock is a penny stock. Trading of our stock may be
restricted by the SEC’s penny stock regulations and the NASD’s sales practice
requirements, which may limit a stockholder’s ability to buy and sell our stock.
Our stock is a penny stock. The SEC has adopted Rule 15g-9
which generally defines “penny stock” to be any equity security that has a
market price less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. Our securities are covered by the
penny stock rules, which impose additional sales practice requirements on
broker-dealers who sell to persons other than established customers and
“accredited investors.” The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC which
- 11 -
provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the compensation
of the broker-dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer’s
account. The bid and offer quotations, and the broker-dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer’s confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules, the broker-dealer must make a special written determination
that the penny stock 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
the secondary market for the stock that is subject to these penny stock rules.
Consequently, these penny stock rules may affect the ability of broker-dealers
to trade our securities. We believe that the penny stock rules discourage investor
interest in and limit the marketability of our common stock.
In addition to the “penny stock” rules promulgated
by the SEC, the NASD has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for believing
that the investment is suitable for that customer. Prior to recommending speculative
low priced securities to their non-institutional customers, broker-dealers must
make reasonable efforts to obtain information about the customer’s financial
status, tax status, investment objectives and other information. Under interpretations
of these rules, the NASD believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. The
NASD requirements make it more difficult for broker-dealers to recommend that
their customers buy our common stock, which may limit your ability to buy and
sell our stock.
FORWARD-LOOKING STATEMENTS
This Reoffer Prospectus contains forward-looking statements
which relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as “may”,
“should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”,
“predicts”, “potential” or “continue” or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled “Risk Factors” on pages 6 to 11, that may cause our or our
industry’s actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect our current
judgment regarding the direction of our business, actual results will almost
always vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested herein. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results. The safe harbor for forward-looking statements
provided in the Private Securities Litigation Reform Act of 1995 does not apply
to the offering made in this Reoffer Prospectus.
USE OF PROCEEDS
The shares of common stock offered by this Reoffer Prospectus
are being registered for the account of the selling stockholders named in this
Reoffer Prospectus. As a result, all proceeds from the sales of the common stock
will go to the selling stockholders and we will not receive any proceeds from
the resale of the common stock by the selling stockholders. We may, however,
receive proceeds upon exercise of the options to purchase shares of our common
stock, if they are ever exercised, and these proceeds will be used for general
working capital purposes. We will incur all costs associated with this
Registration Statement and Reoffer Prospectus.
SELLING STOCKHOLDERS
The shares offered under this Reoffer Prospectus are being
registered for reoffers and resales by selling stockholders who have and may in
the future acquire such shares under the Plan. The selling stockholders named in
the following
- 12 -
table may resell all, a portion, or none of such shares. There
is no assurance that any of the selling stockholders will sell any or all of the
shares offered by them hereunder.
Participants in the Plan who are deemed to be “affiliates” of
our company who acquire shares of common stock under the Plan may be added to
the selling stockholders listed below from time to time by use of a prospectus
supplement filed pursuant to Rule 424(b) under the Securities Act.
The following table sets forth certain information concerning
the selling stockholders as of the date of this Reoffer Prospectus, and as
adjusted to reflect the sale by the selling stockholders of the shares offered
hereby, assuming all of the shares offered hereby are sold:
Name of Selling
Stockholder
|
Number of
Common
Shares and
Options owned by
the Selling
Stockholder
(2)
|
Number of
Common
Shares Issuable
to the Selling
Stockholder
upon Exercise of
Options
(2)
|
Total Shares
to
be Registered
Pursuant to
this
Offering
|
Number of Shares Owned
by Selling
Stockholder After
Offering and Percent of Total
Issued
and Outstanding
(1)
|
|
# of Shares
|
% of Class
|
|
Steve Vestergaard
(3)
|
10,754,665
|
300,000
|
300,000
|
10,454,665
|
21.03
|
|
Larry Langs
(4)
|
300,000
|
300,000
|
300,000
|
Nil
(8)
|
Nil
(8)
|
|
Edward Kolic
(5)
|
461,300
|
300,000
|
300,000
|
161,300
|
0.32
|
|
Wayne Koshman
(6)
|
505,000
|
300,000
|
300,000
|
205,000
|
0.41
|
|
Yoshitaro Kumagai
(7)
|
425,000
|
325,000
|
325,000
|
100,000
|
0.20
|
|
(1)
|
Assumes all of the shares of common stock offered are
sold. Based on 49,703,001 shares of common stock issued and outstanding on
May 14, 2007.
|
|
|
|
|
(2)
|
Beneficial ownership is determined in accordance with SEC
rules and generally includes voting or investment power with respect to
securities. Shares of common stock subject to options, warrants and
convertible preferred stock currently exercisable or convertible, or
exercisable or convertible within sixty (60) days, are counted as
outstanding for computing the percentage of the person holding such
options or warrants but are not counted as outstanding for computing the
percentage of any other person.
|
|
|
|
|
(3)
|
Mr. Steve Vestergaard is the Chief Executive Officer,
Chief Financial Officer and a director of our company.
|
|
|
|
|
(4)
|
Mr. Larry Langs is a director of our company.
|
|
|
|
|
(5)
|
Mr. Edward Kolic is the corporate secretary and a
director of our company.
|
|
|
|
|
(6)
|
Mr. Wayne Koshman is a director of our company.
|
|
|
|
|
(7)
|
Mr. Yoshitaro Kumagai is a director of our
company.
|
|
|
|
|
(8)
|
Indicates less than 1%.
|
PLAN OF DISTRIBUTION
The selling stockholders and any of their assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on the OTC Bulletin Board or any other stock exchange, market or
trading facility on which the shares are traded or in private transactions.
These sales may be at fixed or negotiated prices. The selling stockholders may
use any one or more of the following methods when selling shares:
-
ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
-
block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
- 13 -
-
purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
-
an exchange distribution in accordance with the rules of the applicable
exchange;
-
privately negotiated transactions;
-
broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
-
through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;
-
a combination of any such methods of sale; or
-
any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144
under the Securities Act of 1933, as amended, if available, rather than under
this Reoffer Prospectus.
The selling stockholders and any broker-dealers or agents that
are involved in selling the shares may be deemed to be “underwriters” within the
meaning of the Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each selling stockholder has
informed us that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the common
stock. In no event shall any broker-dealer receive fees, commissions and markups
which, in the aggregate, would exceed eight percent (8%).
Because selling stockholders may be deemed to be “underwriters”
within the meaning of the Securities Act, they will be subject to the Reoffer
Prospectus delivery requirements of the Securities Act including Rule 172
thereunder. In addition, any securities covered by this Reoffer Prospectus which
qualify for sale pursuant to Rule 144 under the Securities Act may be sold under
Rule 144 rather than under this Reoffer Prospectus. There is no underwriter or
coordinating broker acting in connection with the proposed sale of the resale
shares by the selling stockholders.
Under applicable rules and regulations under the Securities
Exchange Act of 1934, as amended, any person engaged in the distribution of the
resale shares may not simultaneously engage in market making activities with
respect to the common stock for the applicable restricted period, as defined in
Regulation M, prior to the commencement of the distribution. In addition, the
selling stockholders will be subject to applicable provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder,
including Regulation M, which may limit the timing of purchases and sales of
shares of the common stock by the selling stockholders or any other person. We
will make copies of this Reoffer Prospectus available to the selling
stockholders and have informed them of the need to deliver a copy of this
Reoffer Prospectus to each purchaser at or prior to the time of the sale
(including by compliance with Rule 172 under the Securities Act).
INTEREST OF NAMED EXPERTS AND COUNSEL
No expert or counsel named in this Reoffer Prospectus as having
prepared or certified any part of this Reoffer Prospectus or having given an
opinion upon the validity of the securities being registered or upon other legal
matters in connection with the registration or offering of the common stock was
employed on a contingency basis or had, or is to receive, in connection with the
offering, a substantial interest, directly or indirectly, in the registrant or
any of its parents or subsidiaries. Nor was any such person connected with the
registrant or any of its parents, subsidiaries as a promoter, managing or
principal underwriter, voting trustee, director, officer or employee.
- 14 -
EXPERTS
The consolidated financial statements of Destiny Media
Technologies Inc. appearing in Destiny Media Technologies Inc’s Annual Report
(Form 10-KSB) for the year ended August 31, 2006, have been audited by Ernst
& Young LLP, independent registered public accounting firm, as set forth in
their report thereon, (which contains an explanatory paragraph describing
conditions that raise substantial doubt about the company’s ability to continue
as a going concern as described in note 2 to the consolidated financial
statements) incorporated by reference herein. Such financial statements are, and
audited financial statements to be included in subsequently filed documents will
be, incorporated herein in reliance upon the report of Ernst & Young LLP
pertaining to such financial statements (to the extent covered by consents filed
with the Securities and Exchange Commission) given on the authority of such firm
as experts in accounting and auditing.
- 15 -
PART II
Item 3. Incorporation of Documents by Reference.
The SEC allows us to "incorporate by reference" information
into this registration statement, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of this
registration statement, except for any information superseded by information in
this registration statement.
The following documents filed by our company with the United
States Securities and Exchange Commission (the "Commission ") are incorporated
herein by reference:
(A) Our Annual report
on Form 10-KSB for the fiscal year ended August 31, 2006 filed on November 30,
2006;
(B) Our Quarterly
Report on Form 10-QSB for the quarter ended November 30, 2006 filed on January
22, 2007;
(C) Our Current
Report on Form 8-K filed with the SEC on March 1, 2007;
(D) Our Current
Report on Form 8-K filed with the SEC on March 8, 2007;
(E) All other reports
filed pursuant to Section 13(a) or 15(d) of the Exchange Act since the end of
the fiscal year covered by our Annual Report referred to in (A) above;
(F) The description
of our common stock which is contained in our Form 10-SB Registration Statement,
filed with the SEC pursuant to Section 12(g) of the Securities Exchange Act of
1934 originally on November 23, 1999 and as amended through April 24, 2000.
In addition to the foregoing, all documents that we
subsequently file pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, prior to the filing of a post-effective
amendment indicating that all of the securities offered pursuant to this
registration statement have been sold or deregistering all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
registration statement and to be part hereof from the date of filing of such
documents. Any statement contained in a document incorporated by reference in
this registration statement shall be deemed to be modified or superseded for
purposes of this registration statement to the extent that a statement contained
in this registration statement or in any subsequently filed document that is
also incorporated by reference in this registration statement modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
registration statement.
You may read and copy any reports, statements or other
information we have filed at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the Public Reference Rooms. Our filings are also
available on the Internet at the SEC's website at http://www.sec.gov.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
Not applicable.
- 16 -
Item 6. Indemnification of Directors and Officers.
The officers and directors of our company are indemnified as
provided by the Colorado Business Corporations Act (the "CBCA"), the Articles of
Incorporation and the Bylaws of our company.
Under Article 7-109-102 of the CBCA, a corporation may
indemnify an officer or director made a party to a proceeding because the person
is or was a director against liability incurred in the proceeding if:
|
(a)
|
The person conducted himself or herself in good faith;
and
|
|
|
|
|
|
(b)
|
The person reasonably believed:
|
|
|
|
|
|
|
(i)
|
In the case of conduct in an official capacity with the
corporation, that his or her conduct was in the corporation’s best
interests; and
|
|
|
|
|
|
|
(ii)
|
In all other cases, that his or her conduct was at least
not opposed to the corporation’s best interests; and
|
|
|
|
|
|
(c)
|
In the case of any criminal proceeding, the person had no
reasonable cause to believe his or her conduct was
unlawful.
|
A corporation may not indemnify a director under the CBCA:
|
(a)
|
In connection with a proceeding by or in the right of the
corporation in which the director as adjudged liable to the corporation;
or
|
|
|
|
|
(b)
|
In connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not involving
action in an official capacity, in which proceeding the director was
adjudged liable on the basis that he or she derived an improper personal
benefit.
|
Under the CBCA, a corporation may not indemnify a director
under section 7-109-102 unless authorized in the specific case after a
determination has been made that indemnification of the director is permissible
in the circumstances because the director has met the standard of conduct set
forth in section 7-109-102.
Under Article 7-109-103 of the CBCA, a corporation shall
indemnify an officer or director who was wholly successful, on the merits or
otherwise, in the defense of any proceeding to which the person was a party
because the person is or was a director, against reasonable expenses incurred by
him or her in connection with the proceeding, unless limited by the
corporation’s articles of incorporation. Our articles of incorporation do not
contain any such limitation.
Our articles of incorporation provide that we shall indemnify,
to the maximum extent permitted by Colorado law, any person who is or was a
director, officer, agent, fiduciary or employee of our company against any
claim, liability or expense arising against or incurred by such person made
party to a proceeding because he is or was a director, officer, agent, fiduciary
or employee of the corporation or because he is or was serving another entity or
employee benefit plan as a director, officer, partner, trustee, employee,
fiduciary or agent at our request. We shall further have the authority to the
maximum extent permitted by Colorado law to purchase and maintain insurance
providing such indemnification.
The Bylaws of our company provide that we shall indemnify any
officer and director against reasonably incurred expenses (including attorneys’
fees), judgments, penalties, fines (including any excise tax assessed with
respect to an employee benefit plan) and amounts paid in settlement reasonably
incurred by him in connection with such action, suit or proceeding if it is
determined in accordance with the Bylaws of our company that he conducted
himself in good faith and that he reasonably believed (i) in the case of conduct
in his official capacity with our company, that his conduct was in our best
interests, or (ii) in all other cases (except criminal cases), that his conduct
was at least not opposed to our best interest, or (iii) in the case of any
criminal proceeding, that he had no reasonable cause to believe his conduct was
unlawful.
- 17 -
No indemnification shall be made under our Bylaws to an officer
or director with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the officer or director
was adjudged liable to the corporation or in connection with any proceeding
charging the officer or director derived an improper personal benefit, whether
or not involving action in an official capacity, in which he was adjudged liable
on the basis that he derived an improper personal benefit. Further,
indemnification under the Bylaws in connection with a proceeding brought by or
in the right of our company shall be limited to reasonable expenses, including
attorney’s fees, incurred in connection with the proceeding.
The Bylaws also provide that we shall indemnify any officer or
director who was wholly successful, on the merits or otherwise, in defence of
any action, suit, or proceeding as to which he was entitled to indemnification
under the Bylaws against expenses (including attorneys’ fees) reasonably
incurred by him in connection with the proceeding without the necessity of any
action by us other than the determination in good faith that the defence has
been wholly successful.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
Item 9. Undertakings.
We hereby undertakes:
|
(1)
|
(a)
|
To file, during any period in
which offers or sales are being made, a post-effective amendment to this
|
|
|
|
registration:
|
|
|
(1)
|
To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
|
|
|
|
|
|
|
(2)
|
To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and
|
|
|
|
|
|
|
(3)
|
To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement;
|
Provided however, that that paragraphs
(a) (1) and (2) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by us pursuant to section 13 or section 15(d) of the Exchange Act that are
incorporated by reference herein.
- 18 -
|
|
(b)
|
That, for the purpose of determining any liability under
the Securities Act of 1933, each such post- effective amendment shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
|
|
|
|
|
|
|
(c)
|
To remove from registration by means of post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
|
|
(2)
|
We hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of our annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 that is incorporated by reference in the Registration Statement
shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering
thereof.
|
|
|
|
|
(3)
|
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of our company pursuant to the foregoing provisions,
or otherwise, we have been advised that in the opinion of the SEC 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 our company of
expenses incurred or paid by the director, officer or controlling person
of our 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, we will, unless in the
opinion of the counsel the matter has been settled by controlling
precedent, submit to the appropriate jurisdiction the question of 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.
|
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Destiny Media Technologies, Inc., certifies that it has reasonable
grounds to believe that it meets all of the requirements for filing a Form S-8
and has duly caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized
,
in the City of Vancouver,
British Columbia, on May 15, 2007.
|
|
DESTINY MEDIA TECHNOLOGIES INC.
|
|
|
|
|
|
|
By:
|
|
|
|
|
/s/ Steven Vestergaard
|
|
|
|
Steven Vestergaard, President and Director
|
|
|
|
(Principal Executive Officer)
|
|
|
|
(Principal Accounting Officer)
|
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints Steven Vestergaard, as his true and lawful attorney-in-fact and agent
with full power of substitution and re-substitution for him and his name, place
and stead, in any and all capacities, to sign any or all amendments to this
Registration Statement (including post-effective amendments or any abbreviated
registration statements and any amendments thereto filed pursuant to Rule 462(b)
increasing the number of securities for which registration is sought) and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the foregoing, as
fully to all intents and purposes as he might or could do in person hereby
ratifying and confirming all that said attorney-in-fact, or his substitute, may
lawfully do or cause to be done by virtue hereof.
- 19 -
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following person in the
capacities and on the date indicated.
|
SIGNATURE
|
|
CAPACITY IN WHICH SIGNED
|
DATE
|
|
|
|
|
|
|
/s/ Steven
Vestergaard
|
|
Principal Executive Officer,
|
May 15, 2007
|
|
STEVEN VESTERGAARD
|
|
Principal Financial Officer,
|
|
|
|
|
Principal Accounting
Officer
|
|
|
|
|
and Director
|
|
|
|
|
|
|
|
/s/ Lawrence Langs
|
|
Director
|
May 15, 2007
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LAWRENCE J. LANGS
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/s/ Wayne Koshman
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Director
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May 15, 2007
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WAYNE KOSHMAN
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DESTINY
MEDIA
TECHNOLOGIES
INC.
2006 AMENDED AND RESTATED STOCK OPTION PLAN
This
2006 Amended and Restated Stock Option Plan (the "Plan") provides for the grant
of options to acquire common shares (the "Common Shares") in the capital of
Destiny Media Technologies Inc., a corporation formed under the laws of the
State of Colorado (the "Corporation"). Stock options granted under this Plan
that qualify under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") are referred to in this Plan as "Incentive Stock Options" and stock
options that do not qualify under Section 422 of the Code are referred to as
"Non-Qualified Stock Options". Incentive Stock Options and Non-Qualified Stock
Options granted under this Plan are collectively referred to as "Options".
1. PURPOSE
1.1 The purpose of this Plan is
to retain the services of valued key employees and consultants of the
Corporation and such other persons as the Plan Administrator shall select in
accordance with Section 2 below, and to encourage such persons to acquire a
greater proprietary interest in the Corporation, thereby strengthening their
incentive to achieve the objectives of the shareholders of the Corporation, and
to serve as an aid and inducement in the hiring of new employees and to provide
an equity incentive to consultants and other persons selected by the Plan
Administrator.
1.2 This Plan shall at all times
be subject to all legal requirements relating to the administration of stock
option plans, if any, under applicable corporate laws, applicable United States
federal and state securities laws, the Code, the rules of any applicable stock
exchange or stock quotation system, and the rules of any foreign jurisdiction
applicable to Options granted to residents therein (collectively, the
"Applicable Laws").
2. ADMINISTRATION
2.1 This Plan shall be
administered initially by the Board of Directors of the Corporation (the
"Board"), except that the Board may, in its discretion, establish a committee
composed of two (2) or more members of the Board or two (2) or more other
persons to administer the Plan, which committee (the "Committee") may be an
executive, compensation or other committee, including a separate committee
especially created for this purpose. The Board or, if applicable, the Committee
is referred to herein as the "Plan Administrator".
2.2 If and so long as the Common
Shares is registered under Section 12(b) or 12(g) of the
Securities Exchange
Act
of 1934, as amended (the "Exchange Act") and the Corporation wishes to
grant Incentive Stock Options, then the Board shall consider in selecting the
Plan Administrator and the membership of any Committee, with respect to any
persons subject or likely to become subject to Section 16 of the Exchange Act,
the provisions regarding (a) "outside directors" as contemplated by Section
162(m) of the Code, and (b) "Non-Employee Directors" as contemplated by Rule
16b-3 under the Exchange Act.
2.3 The Committee shall have the
powers and authority vested in the Board hereunder (including the power and
authority to interpret any provision of the Plan or of any Option). The
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members of any such Committee shall serve at the pleasure of
the Board. A majority of the members of the Committee shall constitute a quorum,
and all actions of the Committee shall be taken by a majority of the members
present. Any action may be taken by a written instrument signed by all of the
members of the Committee and any action so taken shall be fully effective as if
it had been taken at a meeting.
2.4 Subject to the provisions of
this Plan and any Applicable Laws, and with a view to effecting the purpose of
the Plan, the Plan Administrator shall have sole authority, in its absolute
discretion, to:
(a) construe and interpret this
Plan;
(b) define the terms used in the
Plan;
(c) prescribe, amend and rescind
the rules and regulations relating to this Plan;
(d) correct any defect, supply
any omission or reconcile any inconsistency in this Plan;
(e) grant Options under this Plan;
(f) determine the individuals to
whom Options shall be granted under this Plan and whether the Option is granted
as an Incentive Stock Option or a Non-Qualified Stock Option;
(g) determine the time or times
at which Options shall be granted under this Plan;
(h) determine the number of
Common Shares subject to each Option, the exercise price of each Option, the
duration of each Option and the times at which each Option shall become
exercisable;
(i) determine all other terms and
conditions of the Options; and
(j) make all other determinations
and interpretations necessary and advisable for the administration of the Plan.
2.5 All decisions, determinations
and interpretations made by the Plan Administrator shall be binding and
conclusive on all participants in the Plan and on their legal representatives,
heirs and beneficiaries.
3. ELIGIBILITY
3.1 Incentive Stock Options may
be granted to any individual who, at the time the Option is granted, is an
employee of the Corporation or any Related Corporation (as defined below)
("Employees").
3.2 Non-Qualified Stock Options
may be granted to Employees and to such other persons who are not Employees as
the Plan Administrator shall select, subject to any Applicable Laws.
3.3 Options may be granted in
substitution for outstanding Options of another corporation in connection with
the merger, consolidation, acquisition of property or stock or other
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reorganization between such other corporation and the
Corporation or any subsidiary of the Corporation. Options also may be granted in
exchange for outstanding Options.
3.4 Any person to whom an Option
is granted under this Plan is referred to as an "Optionee". Any person who is
the owner of an Option is referred to as a "Holder".
3.5 As used in this Plan, the
term "Related Corporation" shall mean any corporation (other than the
Corporation) that is a "Parent Corporation" of the Corporation or "Subsidiary
Corporation" of the Corporation, as those terms are defined in Sections 424(e)
and 424(f), respectively, of the Code (or any successor provisions) and the
regulations thereunder (as amended from time to time).
4. STOCK
4.1 The Plan Administrator is
authorized to grant Options to acquire up to a total of
________________________Common Shares. The number of Common Shares with respect
to which Options may be granted hereunder is subject to adjustment as set forth
in Section 5.1(m) hereof. In the event that any outstanding Option expires or is
terminated for any reason, the Common Shares allocable to the unexercised
portion of such Option may again be subject to an Option granted to the same
Optionee or to a different person eligible under Section 3 of this Plan;
provided however, that any cancelled Options will be counted against the maximum
number of shares with respect to which Options may be granted to any particular
person as set forth in Section 5.1(a) hereof.
5. TERMS AND
CONDITIONS OF OPTIONS
5.1 Each Option granted under
this Plan shall be evidenced by a written agreement approved by the Plan
Administrator (each, an "Agreement"). Agreements may contain such provisions,
not inconsistent with this Plan or any Applicable Laws, as the Plan
Administrator in its discretion may deem advisable. All Options also shall
comply with the following requirements:
(a) Number of Shares and Type of
Option
Each Agreement shall state the number of Common Shares to which
it pertains and whether the Option is intended to be an Incentive Stock Option
or a Non-Qualified Stock Option;
provided that
:
(i) the
number of Common Shares that may be reserved pursuant to the exercise of Options
granted to any person shall not exceed 10% of the issued and outstanding Common
Shares of the Corporation;
(ii) in the
absence of action to the contrary by the Plan Administrator in connection with
the grant of an Option, all Options shall be Non-Qualified Stock Options;
(iii) the
aggregate fair market value (determined at the Date of Grant, as defined below)
of the Common Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (granted
under this Plan and all other Incentive Stock Option plans of the Corporation, a
Related Corporation
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or a predecessor corporation) shall not
exceed U.S.$100,000, or such other limit as may be prescribed by the Code as it
may be amended from time to time (the "Annual Limit"); and
(iv) any
portion of an Option which exceeds the Annual Limit shall not be void but rather
shall be a Non-Qualified Stock Option.
(b) Date of Grant
Each Agreement shall state the date the Plan Administrator has
deemed to be the effective date of the Option for purposes of this Plan (the
"Date of Grant").
(c) Option Price
Each Agreement shall state the price per Common Share at which
it is exercisable. The Plan Administrator shall act in good faith to establish
the exercise price in accordance with Applicable Laws;
provided
that:
(i) the
per share exercise price for an Incentive Stock Option or any Option granted to
a "covered employee" as such term is defined for purposes of Section 162(m) of
the Code shall not be less than the fair market value per Common Share at the
Date of Grant as determined by the Plan Administrator in good faith;
(ii) with
respect to Incentive Stock Options granted to greater-than-ten percent (>10%)
shareholders of the Corporation (as determined with reference to Section 424(d)
of the Code), the exercise price per share shall not be less than one hundred
ten percent (110%) of the fair market value per Common Share at the Date of
Grant as determined by the Plan Administrator in good faith; and
(iii) Options
granted in substitution for outstanding options of another corporation in
connection with the merger, consolidation, acquisition of property or stock or
other reorganization involving such other corporation and the Corporation or any
subsidiary of the Corporation may be granted with an exercise price equal to the
exercise price for the substituted option of the other corporation, subject to
any adjustment consistent with the terms of the transaction pursuant to which
the substitution is to occur, and provided that for Incentive Stock Options:
A. the
excess of the aggregate fair market value of the shares subject to the option
immediately after the substitution over the aggregate exercise price of such
shares is not more than the excess of the aggregate fair market value of all
shares subject to the option immediately before such substitution over the
aggregate exercise price of such shares, and
B. the
substituted option does not give the employee additional benefits which he did
not have under the previously held Option; and
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(iv) with
respect to Non-Qualified Stock Options, the exercise price per share shall be
the fair market value of the Common Shares as determined by the Plan
Administrator in good faith.
(d) Duration of Options
At the time of the grant of the Option, the Plan Administrator
shall designate, subject to Section 5.1(g) below, the expiration date of the
Option, which date shall not be later than ten (10) years from the Date of
Grant;
provided
, that the expiration date of any Incentive Stock Option
granted to a greater-than-ten percent (>10%) shareholder of the Corporation
(as determined with reference to Section 424(d) of the Code) shall not be later
than five (5) years from the Date of Grant. In the absence of action to the
contrary by the Plan Administrator in connection with the grant of a particular
Option, and except in the case of Incentive Stock Options as described above,
all Options granted under this Section 5 shall expire ten (10) years from the
Date of Grant.
(e) Vesting Schedule
No Option shall be exercisable until it has vested. The vesting
schedule for each Option shall be specified by the Plan Administrator at the
time of grant of the Option prior to the provision of services with respect to
which such Option is granted;
provided
, that if no vesting schedule is
specified at the time of grant, the Option shall vest according to the following
schedule:
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Number of Years
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Percentage of Total
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Following
Date of Grant
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Option Vested
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One
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25%
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Two
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50%
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Three
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75%
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Four
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100%
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The Plan Administrator may specify a
vesting schedule for all or any portion of an Option based on the achievement of
performance objectives established in advance of the commencement by the
Optionee of services related to the achievement of the performance objectives.
Performance objectives shall be expressed in terms of objective criteria,
including but not limited to, one or more of the following: return on equity,
return on assets, share price, market share, sales, earnings per share, costs,
net earnings, net worth, inventories, cash and cash equivalents, gross margin or
the Corporation's performance relative to its internal business plan.
Performance objectives may be in respect of the performance of the Corporation
as a whole (whether on a consolidated or unconsolidated basis), a Related
Corporation, or a subdivision, operating unit, product or product line of either
of the foregoing. Performance objectives may be absolute or relative and may be
expressed in terms
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of a progression or a range. An Option
that is exercisable (in full or in part) upon the achievement of one or more
performance objectives may be exercised only following written notice to the
Optionee and the Corporation by the Plan Administrator that the performance
objective has been achieved.
(f) Acceleration of Vesting
The vesting of one or more outstanding Options may be
accelerated by the Plan Administrator at such times and in such amounts as it
shall determine in its sole discretion.
(g) Term of Option
(i)
Vested Options shall terminate, to the extent not previously exercised, upon the
occurrence of the first of the following events:
A. the
expiration of the Option, as designated by the Plan Administrator in accordance
with Section 5.1(d) above;
B. the
date of an Optionee's termination of employment or contractual relationship with
the Corporation or any Related Corporation for cause (as determined by the Plan
Administrator, acting reasonably);
C. the
expiration of three (3) months from the date of an Optionee's termination of
employment or contractual relationship with the Corporation or any Related
Corporation for any reason whatsoever other than cause, death or Disability (as
defined below) unless, in the case of a Non-Qualified Stock Option, the exercise
period is extended by the Plan Administrator until a date not later than the
expiration date of the Option; or
D. the
expiration of one year (1) from termination of an Optionee's employment or
contractual relationship by reason of death or Disability (as defined below)
unless, in the case of a Non-Qualified Stock Option, the exercise period is
extended by the Plan Administrator until a date not later than the expiration
date of the Option.
(ii)
Notwithstanding Section 5.1(g)(i) above, any vested Options which have been
granted to the Optionee in the Optionee's capacity as a director of the
Corporation or any Related Corporation shall terminate upon the occurrence of
the first of the following events:
A. the
event specified in Section 5.1(g)(i)A above;
B. the
event specified in Section 5.1(g)(i)D above; and
C. the
expiration of three (3) months from the date the Optionee ceases to serve as a
director of the Corporation or Related Corporation, as the case may be unless,
in the case of a Non-Qualified Stock Option, the exercise period is
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extended by the Plan Administrator
until a date not later than the expiration date of the Option.
(iii) Upon the
death of an Optionee, any vested Options held by the Optionee shall be
exercisable only by the person or persons to whom such Optionee's rights under
such Option shall pass by the Optionee's will or by the laws of descent and
distribution of the Optionee's domicile at the time of death and only until such
Options terminate as provided above.
(iv) For
purposes of the Plan, unless otherwise defined in the Agreement, "Disability"
shall mean medically determinable physical or mental impairment which has lasted
or can be expected to last for a continuous period of not less than twelve (12)
months or that can be expected to result in death. The Plan Administrator shall
determine whether an Optionee has incurred a Disability on the basis of medical
evidence acceptable to the Plan Administrator. Upon making a determination of
Disability, the Plan Administrator shall, for purposes of the Plan, determine
the date of an Optionee's termination of employment or contractual relationship.
(v)
Unless accelerated in accordance with Section 5.1(f) above, unvested Options
shall terminate immediately upon termination of employment of the Optionee by
the Corporation for any reason whatsoever, including death or Disability.
(vi) For
purposes of this Plan, transfer of employment between or among the Corporation
and/or any Related Corporation shall not be deemed to constitute a termination
of employment with the Corporation or any Related Corporation. Employment shall
be deemed to continue while the Optionee is on military leave, sick leave or
other
bona fide
leave of absence (as determined by the Plan
Administrator). The foregoing notwithstanding, employment shall not be deemed to
continue beyond the first ninety (90) days of such leave, unless the Optionee's
re-employment rights are guaranteed by statute or by contract.
(h) Exercise of Options
(i)
Options shall be exercisable, in full or in part, at any time after vesting,
until termination. If less than all of the Common Shares included in the vested
portion of any Option are purchased, the remainder may be purchased at any
subsequent time prior to the expiration of the Option term. Only whole Common
Shares may be issued pursuant to an Option, and to the extent that an Option
covers less than one (1) share, it is unexercisable.
(ii) Options or
portions thereof may be exercised by giving written notice to the Corporation,
which notice shall specify the number of Common Shares to be purchased, and be
accompanied by payment in the amount of the aggregate exercise price for the
Common Shares so purchased, which payment shall be in the form specified in
Section 5.1(i) below. The Corporation shall not be obligated to issue, transfer
or deliver a certificate representing Common Shares to the Holder of any Option,
until provision has been made by the Holder, to the satisfaction of the
Corporation, for the payment of the
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aggregate exercise price for all Common Shares for which the
Option shall have been exercised and for satisfaction of any tax withholding
obligations associated with such exercise. During the lifetime of an Optionee,
Options are exercisable only by the Optionee.
(i) Payment upon Exercise of
Option
Upon the exercise of any Option, the aggregate exercise price
shall be paid to the Corporation in cash or by certified or cashier's check. In
addition, if pre-approved in writing by the Plan Administrator who may
arbitrarily withhold consent, the Holder may pay for all or any portion of the
aggregate exercise price by complying with one or more of the following
alternatives:
(i) by
delivering a properly executed exercise notice together with irrevocable
instructions to a broker promptly to sell or margin a sufficient portion of the
Common Shares and deliver directly to the Corporation the amount of sale or
margin loan proceeds to pay the exercise price; or
(ii) by
complying with any other payment mechanism approved by the Plan Administrator at
the time of exercise.
(j) No Rights as a Shareholder
A Holder shall have no rights as a shareholder of the
Corporation with respect to any Common Shares covered by an Option until such
Holder becomes a record holder of such Common Shares, irrespective of whether
such Holder has given notice of exercise. Subject to the provisions of Section
5.1(m) hereof, no rights shall accrue to a Holder and no adjustments shall be
made on account of dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other rights declared on, or
created in, the Common Shares for which the record date is prior to the date the
Holder becomes a record holder of the Common Shares covered by the Option,
irrespective of whether such Holder has given notice of exercise.
(k) Non-transferability of
Options
(i) Options granted under this Plan
and the rights and privileges conferred by this Plan may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or by applicable laws of descent and distribution
or, in the case of a Non-Qualified Stock Option, pursuant to a qualified
domestic relations order, and shall not be subject to execution, attachment or
similar process; provided however that, subject to applicable laws:
A. for
Non-Qualified Stock Options, any Agreement may provide or be amended to provide
that a Non-Qualified Stock Option to which it relates is transferable without
payment of consideration to immediate family members of the Optionee or to
trusts or partnerships or limited liability companies established exclusively
for the benefit of the Optionee and the Optionee's immediate family members;
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B. for all
Options, the Optionee's heirs or administrators may exercise any portion of the
outstanding Options within one year of the Optionee's death.
(ii) Upon any
attempt to transfer, assign, pledge, hypothecate or otherwise dispose of any
Option or of any right or privilege conferred by this Plan contrary to the
provisions hereof, or upon the sale, levy or any attachment or similar process
upon the rights and privileges conferred by this Plan, such Option shall
thereupon terminate and become null and void.
(l) Securities Regulation and Tax
Withholding
(i)
Common Shares shall not be issued with respect to an Option unless the exercise
of such Option and the issuance and delivery of such Common Shares shall comply
with all Applicable Laws, and such issuance shall be further subject to the
approval of counsel for the Corporation with respect to such compliance,
including the availability of an exemption from prospectus and registration
requirements for the issuance and sale of such Common Shares. The inability of
the Corporation to obtain from any regulatory body the authority deemed by the
Corporation to be necessary for the lawful issuance and sale of any Common
Shares under this Plan, or the unavailability of an exemption from prospectus
and registration requirements for the issuance and sale of any Common Shares
under this Plan, shall relieve the Corporation of any liability with respect to
the non-issuance or sale of such Common Shares.
(ii) As a
condition to the exercise of an Option, the Plan Administrator may require the
Holder to represent and warrant in writing at the time of such exercise that the
Common Shares are being purchased only for investment and without any
then-present intention to sell or distribute such Common Shares. If necessary
under Applicable Laws, the Plan Administrator may cause a stop-transfer order
against such Common Shares to be placed on the stock books and records of the
Corporation, and a legend indicating that the Common Shares may not be pledged,
sold or otherwise transferred unless an opinion of counsel is provided stating
that such transfer is not in violation of any Applicable Laws, may be stamped on
the certificates representing such Common Shares in order to assure an exemption
from registration. The Plan Administrator also may require such other
documentation as may from time to time be necessary to comply with applicable
securities laws. THE CORPORATION HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF
OPTIONS OR THE COMMON SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS.
(iii) The
Holder shall pay to the Corporation by certified or cashier's check, promptly
upon exercise of an Option or, if later, the date that the amount of such
obligations becomes determinable, all applicable federal, state, local and
foreign withholding taxes that the Plan Administrator, in its discretion,
determines to result upon exercise of an Option or from a transfer or other
disposition of Common Shares acquired upon exercise of an Option or otherwise
related to an Option or Common Shares acquired in connection with an Option.
Upon approval of the Plan Administrator, a Holder may satisfy such obligation by
complying with one or more of the following alternatives selected by the Plan
Administrator:
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A. by
delivering to the Corporation Common Shares previously held by such Holder or by
the Corporation withholding Common Shares otherwise deliverable pursuant to the
exercise of the Option, which Common Shares received or withheld shall have a
fair market value at the date of exercise (as determined by the Plan
Administrator) equal to any withholding tax obligations arising as a result of
such exercise, transfer or other disposition; or
B. by
complying with any other payment mechanism approved by the Plan Administrator
from time to time.
(iv) The
issuance, transfer or delivery of certificates representing Common Shares
pursuant to the exercise of Options may be delayed, at the discretion of the
Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of all Applicable Laws and the withholding provisions of
the Code have been met and that the Holder has paid or otherwise satisfied any
withholding tax obligation as described in Section 5.1(l)(iii) above.
(m) Adjustments Upon Changes In
Capitalization
(i) The
aggregate number and class of shares for which Options may be granted under this
Plan, the number and class of shares covered by each outstanding Option, and the
exercise price per share thereof (but not the total price), and each such
Option, shall all be proportionately adjusted for any increase or decrease in
the number of issued Common Shares of the Corporation resulting from:
A. a
subdivision or consolidation of Common Shares or any like capital adjustment, or
B. the
issuance of any Common Shares, or securities exchangeable for or convertible
into Common Shares, to the holders of all or substantially all of the
outstanding Common Shares by way of a stock dividend (other than the issue of
Common Shares, or securities exchangeable for or convertible into Common Shares,
to holders of Common Shares pursuant to their exercise of options to receive
dividends in the form of Common Shares, or securities convertible into Common
Shares, in lieu of dividends paid in the ordinary course on the Common Shares).
(ii) Except as provided in Section
5.1(m)(iii) hereof, upon a merger (other than a merger of the Corporation in
which the holders of Common Shares immediately prior to the merger have the same
proportionate ownership of common shares in the surviving corporation
immediately after the merger), consolidation, acquisition of property or stock,
separation, reorganization (other than a mere re-incorporation or the creation
of a holding Corporation) or liquidation of the Corporation, as a result of
which the shareholders of the Corporation, receive cash, shares or other
property in exchange for or in connection with their Common Shares, any Option
granted hereunder shall terminate, but the Holder shall have the right to
exercise such Holder's Option immediately prior to any such merger,
consolidation, acquisition of property or shares, separation,
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reorganization or liquidation, and to
be treated as a shareholder of record for the purposes thereof, to the extent
the vesting requirements set forth in the Option agreement have been satisfied.
(iii) If the
shareholders of the Corporation receive shares in the capital of another
corporation ("Exchange Shares") in exchange for their Common Shares in any
transaction involving a merger (other than a merger of the Corporation in which
the holders of Common Shares immediately prior to the merger have the same
proportionate ownership of Common Shares in the surviving corporation
immediately after the merger), consolidation, acquisition of property or shares,
separation or reorganization (other than a mere re-incorporation or the creation
of a holding Corporation), all Options granted hereunder shall be converted into
options to purchase Exchange Shares unless the Corporation and the corporation
issuing the Exchange Shares, in their sole discretion, determine that any or all
such Options granted hereunder shall not be converted into options to purchase
Exchange Shares but instead shall terminate in accordance with, and subject to
the Holder's right to exercise the Holder's Options pursuant to, the provisions
of Section 5.1(m)(ii) . The amount and price of converted options shall be
determined by adjusting the amount and price of the Options granted hereunder in
the same proportion as used for determining the number of Exchange Shares the
holders of the Common Shares receive in such merger, consolidation, acquisition
or property or stock, separation or reorganization. Unless accelerated by the
Board, the vesting schedule set forth in the option agreement shall continue to
apply to the options granted for the Exchange Shares.
(iv) In the
event of any adjustment in the number of Common Shares covered by any Option,
any fractional shares resulting from such adjustment shall be disregarded and
each such Option shall cover only the number of full shares resulting from such
adjustment.
(v) All
adjustments pursuant to Section 5.1(m) shall be made by the Plan Administrator,
and its determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive.
(vi) The grant
of an Option shall not affect in any way the right or power of the Corporation
to make adjustments, reclassifications, reorganizations or changes of its
capital or business structure, to merge, consolidate or dissolve, to liquidate
or to sell or transfer all or any part of its business or assets.
6. EFFECTIVE DATE;
AMENDMENT; SHAREHOLDER APPROVAL
6.1 Options may be granted by the
Plan Administrator from time to time on or after the date on which this Plan is
adopted by the Board (the "Effective Date").
6.2 Unless sooner terminated by
the Board, this Plan shall terminate on the tenth anniversary of the Effective
Date. No Option may be granted after such termination or during any suspension
of this Plan.
6.3 Any Incentive Stock Options
granted by the Plan Administrator prior to the ratification of this Plan by the
shareholders of the Corporation shall be granted subject to approval of this
Plan
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by the holders of a majority of the Corporation's outstanding
voting shares, voting either in person or by proxy at a duly held shareholders'
meeting within twelve (12) months before or after the Effective Date. If such
shareholder approval is sought and not obtained, all Incentive Stock Options
granted prior thereto and thereafter shall be considered Non-Qualified Stock
Options and any Options granted to Covered Employees will not be eligible for
the exclusion set forth in Section 162(m) of the Code with respect to the
deductibility by the Corporation of certain compensation.
7. NO OBLIGATIONS TO
EXERCISE OPTION
7.1 The grant of an Option shall
impose no obligation upon the Optionee to exercise such Option.
8. NO RIGHT TO
OPTIONS OR TO EMPLOYMENT
8.1 Whether or not any Options
are to be granted under this Plan shall be exclusively within the discretion of
the Plan Administrator, and nothing contained in this Plan shall be construed as
giving any person any right to participate under this Plan. The grant of an
Option shall in no way constitute any form of agreement or understanding binding
on the Corporation or any Related Corporation, express or implied, that the
Corporation or any Related Corporation will employ or contract with an Optionee
for any length of time, nor shall it interfere in any way with the Corporation's
or, where applicable, a Related Corporation's right to terminate Optionee's
employment at any time, which right is hereby reserved.
9. APPLICATION OF
FUNDS
9.1 The proceeds received by the
Corporation from the sale of Common Shares issued upon the exercise of Options
shall be used for general corporate purposes, unless otherwise directed by the
Board.
10. INDEMNIFICATION OF PLAN
ADMINISTRATOR
10.1 In addition to all other rights of
indemnification they may have as members of the Board, members of the Plan
Administrator shall be indemnified by the Corporation for all reasonable
expenses and liabilities of any type or nature, including attorneys' fees,
incurred in connection with any action, suit or proceeding to which they or any
of them are a party by reason of, or in connection with, this Plan or any Option
granted under this Plan, and against all amounts paid by them in settlement
thereof (provided that such settlement is approved by independent legal counsel
selected by the Corporation), except to the extent that such expenses relate to
matters for which it is adjudged that such Plan Administrator member is liable
for willful misconduct; provided, that within fifteen (15) days after the
institution of any such action, suit or proceeding, the Plan Administrator
member involved therein shall, in writing, notify the Corporation of such
action, suit or proceeding, so that the Corporation may have the opportunity to
make appropriate arrangements to prosecute or defend the same.
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11. AMENDMENT OF PLAN
11.1 The Plan Administrator may, at any time,
modify, amend or terminate this Plan or modify or amend Options granted under
this Plan, including, without limitation, such modifications or amendments as
are necessary to maintain compliance with the Applicable Laws. The Plan
Administrator may condition the effectiveness of any such amendment on the
receipt of shareholder approval at such time and in such manner as the Plan
Administrator may consider necessary for the Corporation to comply with or to
avail the Corporation and/or the Optionees of the benefits of any securities,
tax, market listing or other administrative or regulatory requirements.
Effective Date: January _____, 2007
