UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment #1 to
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF
SECURITIES Under Section 12(b) or (g) of the
Securities Exchange Act of 1934
Destiny Media Technolgies Inc.
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(Exact name of Small Business Issuer as specified in its charter)
Colorado 84-1516745
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(State or other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
555 West Hastings Street, Suite 950, Vancouver British Columbia CANADA V6B 4N4
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(Address of principal executive offices)
Issuer's Telephone Number, (604) 609-7736
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Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock $0.001 par value.
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(Title of Class)
Page 1 of xxxxx
Index to Exhibits on Page xx
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Destiny Media Technologies Inc.
Form 10-SB
TABLE OF CONTENTS
PART I
Page
Item 1. Description of Business............................. 3
Item 2. Management's Discussion and Analysis or Plan of
Operation................................ 14
Item 3. Description of Property............................. 19
Item 4. Security Ownership of Certain Beneficial Owners
and Management..................................... 19
Item 5. Directors, Executive Officers, Promoters
and Control Persons................................. 21
Item 6. Executive Compensation.............................. 24
Item 7. Certain Relationships and Related Transactions...... 25
Item 8. Description of Securities........................... 25
PART II
Item 1. Market Price Of And Dividends on the Registrant's
Common Equity and Related Stockholder Matters....... 26
Item 2. Legal Proceedings................................... 27
Item 3. Changes in and Disagreements with Accountants...... 27
Item 4. Recent Sales of Unregistered Securities............ 27
Item 5. Indemnification of Directors and Officers.......... 28
PART F/S
Item 1. Financial Statements................................ 28
PART III
Item 1. Index to Exhibits xx
Item 2. Description of Exhibits
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Introduction
Destiny Meda Technologies Inc. (hereinafter is also referred to as the "Company"
and/or the "Registrant") is a company in the development phase. The Company was
incorporated in August 1998 in the state of Colorado under the name Euro
Industries Ltd.
The Company was originally involved in the acquisition and exploration of mining
properties; however in July of 1999 with the start of the process involving the
Company's acquisition of Destiny Software Productions Inc. and the introduction
of a new management team, the Company became active in the software industry and
ceased all of its work in the mining industry.
On October 20, 1999 the Company completed the process of acquiring Destiny
Software Productions Inc. Destiny is a western Canadian based software
development company specializing in streaming media and MP3 products. Destiny
has created its own proprietary compression format and technologies. It is
currently developing the RadioDestiny Broadcast NetworkTM, where commercial and
hobbyist radio stations can broadcast on the internet using the free
RadioDestiny BroadcasterTM. The recently released Destiny Media PlayerTM is a
combination MP3 player/internet radio receiver which contains a live and
realtime directory of al the current broadcasters on the Destiny network.
The Company's principal office is located at 555 West Hastings Street,
Vancouver, British Columbia V6B 4N4. The contact person is Mr. Steve
Vestergaard, President and Director. The telephone number is (604) 609-7736; the
facsimile number is (604) 609-0611. The Company currently maintains four
websites which are radiodestiny.com; destiny-software.com; destinympe.com; and,
streamingaudio.com.
The Company's authorized capital includes 100,000,000 shares of common stock
with $0.001 par value. As of the close of the Company's latest fiscal year,
August 31, 1999, there were 5,950,000 shares of common stock outstanding. As of
November 11, 1999, there were 7,167,000 shares of common stock outstanding.
The Company's common stock trades in the Pink Sheet Market under the symbol
"DSNY".
The information in this Registration Statement is current as of November 11,
1999, unless otherwise indicated.
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Historical Corporate Development
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Incorporation
The Company was incorporated in the state of Colorado on August 24, 1998 under
the name Euro Industries Ltd. On October 12, 1999 the name of the Company was
changed to Destiny Media Technologies Inc.
By March 1999, the Company sold 5,950,000 common shares for an aggregate
purchase price of $59,500.00
The shares of common stock in the foregoing offering, were offered pursuant to
an exemption to registration provided under Section 3(b), Regulation D, Rule 504
of the Securities Act of 1933, as amended and under the exemption to
registration under Section 11-51-308(1)(p) of the Colorado Securities Act.
The shares of the Company began trading on the National Quotation Bureau's "Pink
Sheets" on June 17, 1999.
On June 16, 1999, the Company entered into an agreement to purchase control of
Destiny Software Productions Inc. ("Destiny"). Since that time the business of
the Company has centered around Destiny. The purchase price of Destiny was
600,000 common shares of the Company. This transaction was finalized on October
20, 1999 when the shares were physically issued to the owners of Destiny. The
contract of sale required that the Company had to raise Cdn$1.1 million of which
Cdn$1 million would be used for development of the Destiny products. The
contract of sale further stipulated that a minimum amount of Cdn$250 thousand
had to be raised by September 16, 1999 and this was accomplished.
On June 16, 1999 the Company entered into a private placement whereby it sold
617,000 shares of its common stock at a price of Cdn$1.86 per common share. The
net proceeds of this private placement was Cdn$1,100,000. This offering
officially closed on November 9, 1999.
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BUSINESS
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Media Internet Applications
Company Background including Destiny
- ------------------------------------
The Company owns a proprietary media compression format known as ".dny". This
format is used to deliver real time streaming media, such as internet radio, on
an on-demand basis.
The ".dny" technology was developed by the Company because internet radio
requires massive compression levels and data packets are not reliably
transmitted across the internet. The Company's media compression technology
recursively compresses an audio stream to any target compression ratio and, at
the same time, interleaves and buffers data packets and estimates missing audio
information.
Since developing this technology, the Company has produced a media player and a
java based streaming web clip compressor and player that allows users to add
streaming audio clips to their web pages. The Company is also developing a low
latency internet telephone; a voice e-mail package and, a voice based chat
engine.
Product Descriptions
Most of the software products are complete and are available for download from
the RadioDestiny website at www.radiodestiny.com. The voice chat and email
applications are not yet in releasable form.
Destiny Media Player(TM)
The Destiny Media Player(TM) is a combination MP3/Music player and radio
receiver. The Destiny Media Player(TM) will receive two separate formats: live
or automated broadcasts from the Destiny Station broadcaster and Audio-on-Demand
which will stream from a standard HTTP server. In Radio mode a user can listen
to radio broadcasts from any of stations on the RadioDestiny Broadcast
Network(TM). Incorporated into the player are features such as a live directory
of stations with direct email and weblink to these broadcasters. In Mp3 mode a
user can play MP3 files directly from the player's instant library. The player
automatically scans the users hard drive for existing music files and creates an
Mp3 library. Another feature is the list of MP3 websites allowing a user to
easily click a
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link to access MP3 sources. The Player also supports playback of streaming
Mp3's, .wav and midi files, as well as music CD's. The Destiny Media Player(TM)
is a small, yet powerful, application and can be downloaded and installed within
two minutes. It will be distributed free from the Destiny web site, partner
sites and via OEM agreements with computer and sound card manufacturers.
RadioDestiny Broadcaster(TM)
In live mode, the user simply puts their audio signal into the input of their
sound card, configures the options and clicks 'start broadcast'. Their station
is automatically added to the directory of stations at the Destiny portal. It is
extremely easy to use.
In script mode, the user prerecords a set of audio files, then specifies a
schedule for play back. A broadcaster could spend a couple of hours setting up
the schedule for the week, then the automated DJ could play back the content 24
hours per day, 7 days per week.
The DestinyBroadcaster will also allow the input of metadata which are digital
files such as album cover graphics, lyrics and other artist information that is
of interest to music fans. This metadata then streams out simultaneously with
music files to the Destiny Media Player allowing the listener to view this
information as they are listening to the songs. This technology is unique to
Destiny with no current competition.
ScreamingAudio(TM)
RadioDestiny Web Clip Player and Compressor
The compressor will convert a .WAV file into a streaming .DNY format. Destiny
has developed an online audio based interactive radio play game based on this
technology. It can be used to stream annual stockholders meetings, home shopping
sites or other games.
Competition
The market for software and services for the Internet and intranets is
relatively new, constantly changing and intensely competitive. As streaming
media evolves into a central and necessary component of the Internet experience,
more companies
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are entering the market for, and expending ever greater resources to develop,
streaming media software and services, and competition is thus intensifying.
Many of the Company's current and potential competitors have longer operating
histories, greater name recognition, larger overall installed bases, more
employees and significantly greater financial, technical, marketing, public
relations and distribution resources than the Company.
The Company's two principal competitors in the development and distribution of
streaming media technology are RealNetworks and Microsoft Corporation. Both
Microsoft's and RealNetworks' commitment to and presence in the streaming media
industry has significantly increased and will continue to increase competitive
pressure in the overall market for streaming media software. This could lead to
increased pricing pressure which may result in price reductions in the Company's
products.
In addition to Microsoft and RealNetworks the Company faces increased
competition from other companies that are developing and marketing streaming
media product offerings. As more companies enter the market with products and
services that compete with the Company's players and tools, the competitive
landscape could change significantly to the detriment of the Company.
The Company competes for user traffic and Internet advertising revenues with a
wide variety of Web sites, ISP's and especially audio, video and other media
aggregators, such as Broadcast.com and Microsoft's Web Events. While Internet
advertising revenues across the industry continue to grow, the number of Web
sites competing for such revenue is also growing rapidly. The Company's
advertising sales force and infrastructure are still in early stages of
development relative to its competitors. There can be no assurance that
advertisers will place advertising with the Company or that revenues derived
from such advertising will be material. In addition, if the Company fails to
attract new customers or is forced to reduce proposed advertising rates the
Company's business, financial condition and results of operations may be
materially adversely affected.
Competitive factors in the streaming media market include the quality and
reliability of software; features for creating, editing and adapting content;
ease of use and interactive user features; scalability and cost per user;
pricing and licensing terms; the emergence of new and better formats; and,
compatibility with the user's existing network components and software systems.
To expand its user base and further enhance the user experience, the Company
must continue to innovate and improve the performance of its products. The
Company anticipates
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that consolidation will continue in the streaming media industry and related
industries such as computer software, media and communications. Consequently,
competitors may be acquired by, receive investments from or enter into other
commercial relationships with, larger, well-established and well-financed
companies. There can be no assurance that the Company can establish or sustain a
leadership position in this market segment. The Company is committed to working
toward market penetration of its brand, products and services, which, as a
strategic response to changes in the competitive environment, may require
pricing, licensing, service or marketing changes intended to extend its current
brand and technology franchise. Price concessions or the emergence of other
pricing or distribution strategies by competitors may have a material adverse
effect on the Company's business, financial condition and results of operations.
Government Regulation and Legal Uncertainties
The Company is not currently subject to direct regulation by any governmental
agency other than laws and regulations generally applicable to businesses. It is
possible that a number of laws and regulations may be adopted in both the United
States and Canada with particular applicability to the Internet. Governments
have and may continue to enact legislation applicable to the Company in areas
such as content distribution, performance and copying, other copyright issues,
network security, encryption, the use of key escrow data, privacy protection,
caching of content by server products, electronic authentication or "digital"
signatures, illegal or obscene content, access charges and retransmission
activities. The applicability to the Internet of existing laws governing issues
such as property ownership, content, taxation, defamation and personal privacy
is also uncertain. Export or import restrictions, new legislation or regulation
or governmental enforcement of existing regulations may limit the growth of the
Internet, increase the Company's cost of doing business or increase it legal
exposure.
Risk Factors
Dependence On Key Personnel:
The Company's success is dependent, to a large degree, upon the efforts of its
current executive officers. The loss or unavailability of any such person could
have an adverse effect on the Company. At the present time the Company does not
maintain key man life insurance policies for any of these individuals. Also, the
continued success and viability of the Company is dependent upon its ability to
attract and retain qualified personnel in all areas of its business, especially
management
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positions. In the event the Company is unable to attract and retain qualified
personnel, its business may be adversely affected. There are currently only two
employment agreements in place. Management is; however, currently negotiating
agreements with the remaining executive officers of the Company.
Limited Operating History:
The Company has no operating history upon which to base an evaluation of its
business and prospects. Operating results for future periods are subject to
numerous uncertainties, and there can be no assurance that the Company will
achieve or sustain profitability on an annual or quarterly basis. The Company's
prospects must be considered in light of the risks encountered by companies in
the early stage of development, particularly companies in new and rapidly
evolving markets. Future operating results will depend upon many factors,
including the demand for the Company's software products, the level of product
and price competition, the Company's success in attracting and retaining
motivated and qualified personnel, and in particular, the growth of activity on
the Internet World Wide Web as it relates to the internet broadcast industry.
History of Net Losses:
The Company has had net losses since its inception on August 24, 1998.
In the Period August 24, 1998 (date of inception) to August 31, 1999 the Company
had a net loss of $59,500.
There can be no assurance that this trend will not continue.
Possible Dilution to Present and Prospective Shareholders:
The Company's plan of operation, in part, contemplates the accomplishment of
business negotiations by the issuance of cash, securities of the Company, or a
combination of the two, and possibly, incurring debt. Any transaction involving
the issuance of previously authorized but unissued shares of common stock, or
securities convertible into common stock, would result in dilution, possibly
substantial, to present and prospective holders of common stock.
Risks of Product Defects and Product Liability:
As a result of their complexity, 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 by the Company and testing and use by current
and
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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 the Company's products, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's product 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 the Company's
customers, which may result in significant liability to the Company and deter
potential customers. The sale and support of the Company's products may entail
the risk of liability claims. A product liability claim brought against the
Company could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Ability to Manage Growth:
Should the Company be successful in the sales and marketing efforts of its
software products it will experience significant growth in operations. If this
occurs, management anticipates that additional expansion will be required in
order to continue its product development. Any expansion of the Company's
business would place further demands on its management, operational capacity and
financial resources. The Company anticipates that it 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 the
Company 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 the Company's current systems,
procedures or controls will be adequate to support any expansion of it's
operations. The failure to manage growth effectively could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Risk of System Failure and/or Security Risks:
Despite the implementation of security measures, the core of the Company's
network infrastructure could be vulnerable to unforeseen computer problems.
Although the Company believes it has taken steps to mitigate much of the risk,
it 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 the
Company and also may deter new customers from purchasing its software and
services, and individuals from utilizing it. Although the Company intends to
continue to implement and establish security measures, there can be no
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assurance that measures implemented by it will not be circumvented in the
future, which could have a material adverse effect on the Company's business,
financial condition or results of operations.
Lack of Established Market for Products and Services; Dependence on Internet and
Intranets as Mediums of Commerce and Communications:
The market for the Company's 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
communications, or if the adoption rate slows, the market for the Company's
products and services may not grow, or may develop more slowly than expected.
The Company believes that increased Internet use may depend on the availability
of greater bandwidth or data transmission speeds or on other technological
improvements, and the Company is largely dependent on third party companies to
provide or facilitate these improvements. Changes in content delivery methods
and emergence of new Internet access devices such as TV set-tops boxes could
dramatically change the market for streaming media products and services if new
delivery methods or devices do not use streaming media or if they provide a more
efficient method for transferring data than streaming media.
The electronic commerce market is relatively new and evolving. Sales of the
Company's 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.
Product Delays and Errors:
The Company has experienced development delays and cost overruns associated with
its product development. It may encounter such problems in the future. Delays
and cost overruns could affect the Company's ability to respond to technological
changes, evolving industry standards, competitive developments or customer
requirements. The Company's products also may contain undetected
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errors that could cause adverse publicity, reduced market acceptance of the
products, or lawsuits by customers.
Online Commerce Security Risks:
Online commerce and communications depend on the ability to transmit
confidential information securely over public networks. Any compromise of the
Company's ability to transmit confidential information securely, and costs
associated with the prevention or elimination of such problems, could have a
material adverse effect on the Company's business.
International Operations:
The Company markets and sells its products in both the United States and Canada.
As such, it is 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 Company's ability to enforce its
intellectual property rights, discontinuity of the Company's infrastructures,
limitations on fund transfers and other legal and political risks. Such
limitations and interruptions could have a material adverse effect on the
Company's business. The Company does not currently hedge its foreign currency
exposures.
Dividend Policy:
The Company does not presently intend to pay cash dividends in the foreseeable
future, as any earnings are expected to be retained for use in developing and
expanding its business. However, the actual amount of dividends received from
the Company will remain subject to the discretion of the Company's Board of
Directors and will depend on results of operations, cash requirements and future
prospects of the Company and other factors.
The Lack of Assurance That the Company Will Be Able to Meet Its Future Capital
Requirements:
The Company currently has no source of operating cash flow to fund future
projects or corporate overhead. The Company has limited financial resources, and
there is no assurance that additional funding will be available. The Company's
ability to continue to operate will be dependent upon its ability to raise
significant additional funds in the future.
Risks Associated with Penny Stock Classification:
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The Company's stock is subject to "penny stock" rules as defined in 1934
Securities and Exchange Act rule 3151-1. The Commission has adopted rules that
regulate broker-dealer practices in connection with transactions in penny
stocks. The Company's common shares are subject to these penny stock rules.
Transaction costs associated with purchases and sales of penny stocks are likely
to be higher than those for other securities. Penny stocks generally are equity
securities with a price of less than U.S. $5.00 (other than securities
registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to
transactions in such securities is provided by the exchange or system).
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 that 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 such 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 common shares in the United
States and shareholders may find it more difficult to sell their shares.
Significant Customers and/or Suppliers
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The Company is currently in the development stage and, as such, has no
significant customers and/or suppliers.
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Employees
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At 11/04/99 the Company operated with the services of its Directors, Executive
Officers, thirteen additional employees and four independent contractors. There
is no collective bargaining agreement in place.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
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OR PLAN OF OPERATION
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SELECTED FINANCIAL DATA
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The selected financial data in Table No. 1 for the period from incorporation on
"August 24, 1998 to August 31, 1999 was derived from the financial statements of
the Company.
The selected financial data for Destiny Software Products Inc. in Table No.1a
for Fiscal 1999, ended August 31st, was derived from the financial statements of
Destiny Software Products Inc.
The selected financial data was extracted from the more detailed financial
statements and related notes included herein and should be read in conjunction
with such financial statements and with the information appearing under the
heading, "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Table No. 1 (Destiny Media Technologies Inc.)
Selected Financial Data (US$)
- ------------------------------- ---------------------------
The Period 8/24/98 (date of
incorporation) to 8/31/99
- ------------------------------- ---------------------------
Revenue 0
- ------------------------------- ---------------------------
Net Income(Loss) ($59,500)
- ------------------------------- ---------------------------
Earnings (Loss) per Share ($0.01)
- ------------------------------- ---------------------------
Dividends per Share 0
- ------------------------------- ---------------------------
Number of Shares Outstanding 5,950,000
- ------------------------------- ---------------------------
- ------------------------------- ---------------------------
Working Capital ($594,236)
- ------------------------------- ---------------------------
Long Term Debt 0
- ------------------------------- ---------------------------
Shareholders' Equity 0
- ------------------------------- ---------------------------
Total Assets $594,236
- ------------------------------- ---------------------------
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<TABLE>
Table No. 1a (Destiny Software Productions Inc.)
Selected Financial Data (Cdn$)
- ------------------------------- --------------------------- ---------------------------
Fiscal Year Ended 8/31/99 Fiscal Year Ended 8/31/98
- ------------------------------- --------------------------- ---------------------------
<S> <C> <C>
Revenue $15,678 $6,221
- ------------------------------- --------------------------- ---------------------------
Net Income (Loss) ($285,239) ($62,759)
- ------------------------------- --------------------------- ---------------------------
Earnings (Loss per Share) ($2,852.39) ($627.59)
- ------------------------------- --------------------------- ---------------------------
Dividends per Share 0 0
- ------------------------------- --------------------------- ---------------------------
Number of Shares Outstanding 100 100
- ------------------------------- --------------------------- ---------------------------
- ------------------------------- --------------------------- ---------------------------
Working Capital $507,033 ($19,696)
- ------------------------------- --------------------------- ---------------------------
Shareholder's Equity (Deficit) ($304,935) ($19,696)
- ------------------------------- --------------------------- ---------------------------
Total Assets $830,299 $47,809
- ------------------------------- --------------------------- ---------------------------
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ---------------------------------------------------------------
RESULTS OF OPERATION
- --------------------
The following discussion of the Company's financial condition and results of
operations should be read together with the financial statements and related
notes that are included later in this registration statement. This discussion
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results may differ materially from those anticipated in these
forward-looking statements as a result of various factors, including those set
forth under "Risk Factors" or in other parts of this registration statement.
The Company was incorporated in Colorado, USA on August 24, 1998.
The Company started business on March 1, 1999 with initial shareholder
contributions of $59,500.
Initially the Company was involved in the acquisition of mineral properties with
the intent to explore the properties for economic reserves of ore. In June of
1999 the Company abandoned this business direction and began the process of
acquiring Destiny Software Productions Inc.
Since beginning the process of acquiring Destiny Software Production Inc., the
Company's operating activities have related primarily to recruiting personnel,
purchasing operating assets, conducting research and development, marketing the
Destiny Media Player, the RadioDestiny Broadcaster and the ScreamingAudio
RadioDestiny Web Clip Player and Compressor, and continuing development of the
Company's low latency internet telephone, voice e-mail package and voice based
chat engine.
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The Company has a limited operating history upon which an evaluation of it and
its prospects can be based. The Company's prospects must be considered in light
of the risks, expenses and difficulties frequently encountered by companies in
early stages of development, particularly companies in rapidly changing markets
such as media delivery and electronic commerce over the Internet and intranets.
There can be no assurance that the Company will achieve or sustain
profitability.
The Company plans to invest heavily in research and development and sales and
marketing. The Company anticipates having to raise additional funds by equity
issuance in the next several years, as the Company expects to grow at rates that
will require more funds than will be generated by profitable operations which
the Company expects to report during Fiscal 2001 and Fiscal 2002. The Company
has had preliminary discussions with various parties regarding the sale of
equity capital; however, there are no definitive agreements and there can be no
assurance that additional equity capital sales can be completed.
Cash Balances
The Company maintains its major cash balances at one financial institution
located in Vancouver, British Columbia CANADA. The balances are insured up to
Cdn$60,000 per account by the Canada Deposit Insurance Corporation. At November
11, 1999, there was an uninsured cash balance of Cdn$190,000.
Commitments and Contingencies
The Company leases its office facility in Vancouver, British Columbia CANADA.
The Company entered into a one year lease in April 1999. The lease payment is
Cdn$6,704 per month.
Liquidity and Capital Resources
The Period August 24, 1998 (Date of Inception) to August 31, 1999
Cash used in Fiscal 1999 Operating Activities totaled ($59,500), including the
($59,500) Net Loss. There were no primary adjusting items. Cash used in Fiscal
1999 Investing Activities totaled ($594,236). Cash provided by Fiscal 1999
Financing Activities totaled $653,736.
Results of Operations
The Period August 24, 1998 (Date of Inception) to August 31, 1999
The Company received no revenues during this period.
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General and administrative expenses totaled $59,500. These were broken down as
follows: Filing fees of $450; Management fees of $38,958; Office and
miscellaneous related expenses of $9,374; Professional fees of $1,968; Rent of
$8,000; and Transfer agent fees of $750.
For the Period August 24, 1998 (Date of Inception) to August 31, 1999 the
Company reported a net loss of ($59,500).
Subsequent Events
On October 20, 1999, the Company completed the purchase of Destiny Software
Productions Inc. with the issuance of 600,000 common shares in the capital of
the Company to the owners of Destiny Software Productions Inc.
On November 9, 1999 the Company completed a private placement financing whereby
it sold 617,000 shares of common stock at a price of Cdn$1.86 per share. This
financing began in June 1999 and did not officially close until November 9,
1999. The Company intends on using the proceeds from this financing to repay
long term debt outstanding at fiscal year end; to repay an additional note
payable in the amount of $120,000 received subsequent to fiscal year end; and,
continue development work on its products.
Known Trends
Management has determined that because of the deficiency in working capital,
significant operating losses and lack of liquidity, there is doubt about the
ability of the Company to continue in existence unless additional working
capital is obtained. Consequently such trends or conditions could have a
material adverse effect on the Company's financial position, future results of
operations, or liquidity. The Company currently has plans to raise sufficient
working capital through equity financing or reorganization of the Company.
Inflation
The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a material impact on its operations
in the future.
Y2K Compliance
Many currently installed computer systems and software products worldwide are
coded to accept only two-digit entries to identify a year in the date code
field. Consequently, on January 1, 2000, many of these systems could fail or
malfunction because they are not able to distinguish between the year 1900 and
the year 2000.
17
<PAGE>
Accordingly, many companies, including Registrant and its customers, potential
customers, vendors and strategic partners, may need to upgrade their systems to
comply with applicable year 2000 requirements.
Because the Company and its customers depend, to a very substantial degree, upon
the proper functioning of computer systems, a failure of these systems to
correctly recognize dates beyond January 1, 2000 could disrupt operations. Any
disruptions could harm the Company's business. Additionally, the Company's
failure to provide year 2000 compliant solutions to its customers could result
in financial loss, reputational harm and legal liability. The Company believes
that its products and services are year 2000 compliant; however, these products
and services are often integrated with other systems that may not be compliant.
Management has initiated communication with the Company's significant vendors to
determine the extent to which they are vulnerable to year 2000 issues. The
Company has not yet received sufficient information on year 2000 remediation
plans of these vendors in order to predict the outcome of their efforts.
The Company has not made a full assessment of the extent to which its customers
might be vulnerable to year 2000 issues. Likewise, it has not made a full
assessment of the extent to which other third parties with which it transacts
business have determined their vulnerability to year 2000 issues.
The Company is developing contingency plans for critical individual information
technology systems and non-information technology systems to address year 2000
risks not fully resolved by its year 2000 program. Management believes that the
year 2000 risk will not present significant operational problems for the
Company. However, there can be no assurance that the Company's year 2000 program
will prevent any harm to its business. Management believes that the total cost
of the Company's year 2000 program will not be material.
FORWARD-LOOKING STATEMENTS
From time-to-time, the Company or its representatives may have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by the Company with the Securities and Exchange Commission
or other regulatory agencies. Words or phrases "will likely result", "are
expected to", "will continue", " is anticipated", "estimate", "project or
projected", or similar expressions are intended to identify "forward-looking
statements" within the
18
<PAGE>
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). The Reform Act does not apply to initial registration statements,
including this filing by the Company. The Company wishes to ensure that such
statements are accompanied by meaningful cautionary statements, so as to
maximize to the fullest extent possible the protections of the safe harbor
established in the Reform Act. Accordingly, such statements are qualified in
their entirety by reference to and are accompanied by the following discussion
of certain important factors that could cause actual results to differ
materially from such forward-looking statements.
The risks identified here are not inclusive. Furthermore, reference is also made
to other sections of this Registration Statement that include additional factors
that could adversely impact the Company's business and financial performance.
Also, the Company operates in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible
for management to predict all such risk factors, nor can it access the impact of
all such risk factors on the Company's business or the extent to which any
factor or combination of factors may cause actual results to differ
significantly from those contained in any forward-looking statements.
Accordingly, forward-looking statements should not be relied upon as a
prediction of actual results.
ITEM 3. DESCRIPTION OF PROPERTY
- -------------------------------
The Company leases approximately 2,400 square feet of space at 950 - 555 West
Hastings Street, Vancouver, British Columbia CANADA V6B 4N4 for administrative
and sales efforts. The Company pays $6704.00 per month for this facility. The
Company considers the facility adequate for current purposes.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- ------------------------------------------------------------
MANAGEMENT
----------
The Registrant is a publicly-owned corporation, the shares of which are owned by
United States and Canadian residents. The Registrant is not controlled directly
or indirectly by another corporation or any foreign government.
Table No. 2 lists as of November 3, 1999 all persons/companies the Registrant is
aware of as being the beneficial owner of more than five percent (5%) of the
common stock of the Registrant.
19
<PAGE>
Table No. 2
Title Amount and Nature Percent
of of Beneficial of
Class Name of Beneficial Owner Ownership Class #
- ------ ------------------------ ----------------- -------
Common Steve Vestergaard (1) 1,813,888 25.3%
TOTAL 1,813,888 25.3%
# Based on 7,167,000 shares outstanding as of November 11, 1999 and options to
purchase shares of common stock.
(1) Includes a vested option to purchase 13,888 shares of common stock.
Table No. 3 lists as of November 11, 1999 all Directors and Executive Officers
who beneficially own the Registrant's voting securities and the amount of the
Registrant's voting securities owned by the Directors and Executive Officers as
a group.
Table No. 3
Shareholdings of Directors and Executive Officers
Title Amount and Nature Percent
of of Beneficial of
Class Name of Beneficial Owner Ownership Class #
- ------ ------------------------------------------------ ---------- -------
Common Steve Vestergaard, Pres. & Director (1) 1,813,888 25.3%
Common Mark Lotz, Chief Financial Officer (2) 8,500 0.1%
Common Ed Kolic, Chief Operating Officer & Secretary (3) 113,888 1.6%
Common Greg Foisy, Director (4) 4,000 0.1%
Common Howard Louie, Director (5) 100,000 1.2%
Total 2,040,276 28.3%
# Based on 7,167,000 shares outstanding as of November 11, 1999.
(1) Includes vested options to purchase 13,888 shares of common stock.
(2) Includes vested options to purchase 4,000 shares of common stock.
(3) Includes vested options to purchase 13,888 shares of common stock.
(4) Includes vested options to purchase 4,000 shares of common stock.
(5) Includes vested options to purchase 4,000 shares of common stock.
20
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
- -----------------------------------------------------
CONTROL PERSONS
---------------
Table No. 4 lists as of November 11, 1999 the names of the Directors of the
Company. The Directors have served in their respective capacities since their
election and/or appointment and will serve until the next Annual Shareholders'
Meeting or until a successor is duly elected, unless the office is vacated in
accordance with the Articles/By-Laws of the Company. All Directors are residents
and citizens of Canada.
Table No. 4
Directors
Date First
Elected
Name Age or Appointed
- ---------------------------- ------------------- ----------------
Steve Vestergaard (1) 33 July 1999
Greg Foisy (1) 38 Oct. 1999
Howard Louie (1) 39 Oct. 1999
Ed Kolic 40 July 1999
(1) Member of Audit Committee.
Table No. 5 lists, as of November 11, 1999, the names of the Executive Officers
of the Company. The Executive Officers serve at the pleasure of the Board of
Directors. All Executive Officers are residents/citizens of Canada.
Table No. 5
Executive Officers
Name Position Date of Board Approval
- ----------------- -------------------------------------- ----------------------
Steve Vestergaard President Oct. 1999
Mark Lotz Chief Financial Officer Oct. 1999
Ed Kolic Chief Operating Officer and Secretary Oct. 1999
Business Experience
- -------------------
Steve Vestergaard. Mr. Vestergaard is President and a Director of the Company.
He has been employed by the Company since June 1999 when the Company began
negotiations to purchase Destiny Software Productions Inc. His responsibilities
include coordinating strategy, planning, and product development. Mr.
Vestergaard devotes 100% of his time to the affairs of the Company. He has been
involved in the software development industry since 1982 at which time he
founded a private company called Tronic Software. Tronic Software was a
developer of computer games which were sold by mail order. In 1990 he became
employed by Distinctive Software Inc., a company which later
21
<PAGE>
changed its name to Electronic Arts Canada. At Electronic Arts Canada he was
involved in developing game products. In 1991 he became the Chief Executive
Officer of Destiny Software Productions, Inc. At Destiny Software Productions
Inc. his responsibilities included not only general managerial functions, but
also supervision of the development of computer games. Mr. Vestergaard hold an
International Baccalaureate Degree and a Bachelor of Science Degree in Computer
Science from the University of British Columbia.
Ed Kolic. Mr. Kolic is the Chief Operating Officer and Secretary. His
responsibilities include overseeing the marketing efforts of the Company. He
devotes 100% of his time to the affairs of the Company. From 1988 until 1995, he
was employed as the President of Target Canada Production Ltd. His experience
includes the production of documentary television, educational and information
programming for the Canadian Educational Television Networks, large screen
interactive presentation media for international conferences and a range of
communication programs for corporate, government and institutional clients. From
1993 until 1997, he was a partner in a private company called Jacqueline Conoir
Designs Ltd. which is a fashion design house. At Conoir Designs Ltd. he
developed all of the marketing, communications and image strategies for the
company. From 1997 until June of 1999, he was the president of WonderFall
Productions Inc., a computer game development company, which he sold to the
Company in June of 1999.
Mark Lotz. Mr. Lotz is the Chief Financial Officer of the Company. He devotes
100% of his time to the affairs of the Company. Prior to joining the Company in
August 1999, Mr. Lotz was an Examiner with the Vancouver Stock Exchange where he
was responsible for the regulation of Canadian stockbrokerage firms. Prior to
joining the Vancouver Stock Exchange in 1995, Mr. Lotz was employed by Coopers &
Lybrand as an auditor. Mr. Lotz holds the designation of Chartered Accountant.
He graduated from Simon Fraser University in Vancouver, British Columbia where
he received a Bachelors Degree in Business Administration.
Howard Louie. Mr. Louie is a member of the Company's Board of Directors. His
private and public company activity during the past five years includes serving
as the President and a Director of Unimet Capital Corp from 1992 until 1997.
Unimet Capital Corp. is a private investment group which provides advisory
services in corporate finance for both public and private corporations. From
1994 until 1997 he served as the President and a Director of GR Unimet Financial
Corp. which is a joint venture between Unimet Capital Corp. and Grand Resources
Group Joint, a financial institution based in Hong Kong. As a member of the
22
<PAGE>
Company's Board of Directors, Mr. Louie devotes ten percent of his time to the
affairs of the Company.
Greg Foisy. Mr. Foisy is a member of the Company's Board of Directors. From 1986
until 1991 Mr. Foisy worked in sales with Apollo Computer, which subsequently
became the workstation division of Hewlett-Packard. In 1991 he became employed
by a company called Interactive Development Environments, a software company
specializing in development tools. He opened up the first offices in Canada for
Interactive Development Environments and was successful in making the Canadian
organization one of the top producing regions within that company. He left
Interactive Development Environments in 1995 and founded a private company
called Red Brick Systems. Red Brick Systems is a provider of database technology
for the Data Warehousing and Decision Support market space and was involved in
providing loyalty management and click-stream analysis for companies involved in
e-commerce or internet access. In 1998, Red Brick Systems was purchased by a
company called Informix. Mr. Foisy is now employed as the Director of Sales for
Data Warehousing for Informix. As a member of the Board of Directors, Mr. Foisy
devotes 5% of his time to the affairs of the Company.
There have been no events during the last five years that are material to an
evaluation of the ability or integrity of any director, person nominated to
become a director, executive officer, promoter or control person including:
a) any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time;
b) any conviction in a criminal proceeding or being subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
c) being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
enjoining, barring, suspending or otherwise limiting his/her involvement in any
type of business, securities or banking activities;
d) being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
23
<PAGE>
Family Relationships
- --------------------
There are no family relationships between any of the officers and/or directors.
Other Relationships/Arrangements
- --------------------------------
There are no arrangements or understandings between any two or more Directors or
Executive Officers, pursuant to which he/she was selected as a Director or
Executive Officer. There are no material arrangements or understandings between
any two or more Directors or Executive Officers.
ITEM 6. EXECUTIVE COMPENSATION
- -------------------------------
The Company has no formal plan for compensating its Directors for their service
in their capacity as Directors. Directors are entitled to reimbursement for
reasonable travel and other out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors. The Board of Directors may
award special remuneration to any Director undertaking any special services on
behalf of the Company other than services ordinarily required of a Director.
During Fiscal 1999, no Director received and/or accrued any compensation for his
services as a Director, including committee participation and/or special
assignments.
The Company has no material bonus or profit sharing plans pursuant to which cash
or non-cash compensation is or may be paid to the Company's Directors or
Executive Officers. The Company has no formal stock option plan which has been
approved by regulatory authorities or other long-term compensation program.
During Fiscal 1999, no funds were set aside or accrued by the Company to provide
pension, retirement or similar benefits for Directors or Executive Officers.
The Company has no plans or arrangements in respect of remuneration received or
that may be received by Executive Officers of the Company in Fiscal 2000 to
compensate such officers in the event of termination of employment (as a result
of resignation, retirement, change of control) or a change of responsibilities
following a change of control, where the value of such compensation exceeds
$60,000 per Executive Officer.
The Company has two written employment agreements.
24
<PAGE>
Other than that disclosed above, no compensation was paid during Fiscal 1999 to
any of the officers or directors of the Company to the extent that they were
compensated in excess of $60,000.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------
On October 20, 1999 the Company completed the purchase of Destiny Software
Productions Inc., a private corporation wholly owned by Steve Vestergaard, the
current president of the Company. The purchase price was 600,000 shares of
restricted common stock.
Other than described above, there have been no transactions since August 24,
1998 (Date of Inception), or proposed transactions, which have materially
affected or will materially affect the Company in which any Director, Executive
Officer, or beneficial holder of more that 10% of the outstanding common stock,
or any of their respective relatives, spouses, associates or affiliates has had
or will have any direct or material indirect interest.
ITEM 8. DESCRIPTION OF SECURITIES
- ----------------------------------
The authorized capital of the Registrant is 100,000,000 shares of common stock
with a par value of $0.001 per share. 5,950,000 shares of common stock were
issued and outstanding at August 31, 1999, the end of the most recent fiscal
year. At November 11, 1999, there were 7,167,000 shares of common stock
outstanding.
All common shares are equal to each other, and when issued, are fully paid and
non-assessable, and the private property of shareholders who are not liable for
corporate debts. Each holder of a common share of record has one vote for each
share of stock outstanding in his name on the books of the Corporation and shall
be entitled to vote said stock.
The common stock of the Company shall be issued for such consideration as shall
be fixed from time to time by the Board of directors. In the absence of fraud,
the judgment of the Directors as to the value of any property or services
received in full or partial payment for shares shall be conclusive. When shares
are issued upon payment of the consideration fixed by the board of Directors,
such shares shall be taken to be fully paid stock and shall be non-assessable.
Except as may otherwise be provided by the Board of Directors, holders of shares
of stock of the Corporation shall have no preemptive right to purchase,
subscribe for or otherwise acquire shares of stock of the Company, rights,
25
<PAGE>
warrants or options to purchase stocks or securities of any kind convertible
into stock of the Company.
Dividends in cash, property or shares of the Company may be paid, as and when
declared by the Board of Directors, out of funds of the Company to the extent
and in the manner permitted by law.
Upon any liquidation, dissolution or winding up of the Company, and after paying
or adequately providing for the payment of all its obligations, the remainder of
the assets of the company shall be distributed, either in cash or in kind, pro
rata to the holders of the common stock, subject to preferences, if any, granted
to holders of the preferred shares. The Board of Directors may, from time to
time, distribute to the shareholders in partial liquidation from stated capital
of the Company, in cash or property, without the vote of the shareholders, in
the manner permitted and upon compliance with limitations imposed by law.
Each outstanding share of common stock is entitled to one vote and each
fractional share of common stock is entitled to a corresponding fractional vote
on each matter submitted to a vote of shareholders. Cumulative voting shall not
be allowed in the election of Directors of the company and every shareholder
entitled to vote at such election shall have the right to vote the number of
shares owned by him for as many persons as there are Directors to be elected,
and for whose election he has a right to vote.
When, with respect to any action to be taken by the Shareholders of the Company,
the Colorado Corporation Code requires the vote or concurrence of the holders of
two-thirds of the outstanding shares entitled to vote thereon, or of any class
or series, any and every such action shall be taken, notwithstanding such
requirements of the Colorado Corporation Code, by the vote or concurrence of the
holders of a majority of the outstanding shares entitled to vote thereon, or of
any class or series.
Debt Securities to be Registered. Not applicable.
- --------------------------------
American Depository Receipts. Not applicable.
- ----------------------------
Other Securities to be Registered. Not applicable.
- ---------------------------------
PART II
Item 1. Market Price Of And Dividends on the Registrant's
- ----------------------------------------------------------
Common Equity and Other Shareholder Matters
-------------------------------------------
The Company's common stock trades in the "Pink Sheets" in the United States,
having the trading symbol "DSNY" and CUSIP# 25063G 105. Trading volume and
high/low/closing prices, on a monthly
26
<PAGE>
basis, since the stock began trading on the Pink Sheets on June 17, 1999.
Table No. 7
DSNY Stock Trading Activity
---------- ----- ----- ----- --------
Month High Low Close Volume
---------- ----- ----- ----- ---------
June $1.50 $0.05 $1.50 920,200
---------- ----- ----- ----- ---------
July $2.85 $1.49 $2.80 587,400
---------- ----- ----- ----- ---------
August $3.25 $2.50 $3.20 185,200
---------- ----- ----- ----- ---------
September $3.10 $2.50 $3.05 152,400
---------- ----- ----- ----- ---------
October $3.13 $2.00 $2.98 293,500
---------- ----- ----- ----- ---------
The Company's common stock is issued in registered form. American Securities
Transfer and Trust (located in Denver, Colorado) is the registrar and transfer
agent for the common stock.
On November 3, 1999 shareholders' list for the Company's common shares showed
fourteen (14) registered shareholders and 6,550,000 shares outstanding.
The Company has not declared any dividends since incorporation and does not
anticipate that it will do so in the foreseeable future. The present policy of
the Company is to retain future earnings for use in its operations and expansion
of its business.
ITEM 2. LEGAL PROCEEDINGS
- --------------------------
The Company knows of no material, active or pending legal proceedings against
them; nor is the Company involved as a plaintiff in any material proceeding or
pending litigation.
The Company knows of no active or pending proceedings against anyone that might
materially adversely affect an interest of the Company.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- ------------------------------------------------------
Not Applicable
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
- ------------------------------------------------
By March 1999, the Company sold 5,950,000 common shares for an aggregate
purchase price of $59,500.
27
<PAGE>
The shares of common stock in the foregoing offering, was offered pursuant to an
exemption to registration provided under Section 3(b), Regulation D, Rule 504 of
the Securities Act of 1933, as amended and under the exemption to registration
under Section 11-51-308(1)(p) of the Colorado Securities Act.
On October 20, 1999, the Company issued 600,000 shares of its restricted common
stock to complete its purchase of Destiny Software Productions Inc.
The shares of common stock issued to Destiny Software Productions Inc., were
offered pursuant to an exemption to registration provided under Section 4(2), of
the Securities Act of 1933.
On November 9, 1999, the Company completed a private placement financing which
was begun in June 1999. As a result of this financing the Company issued 617,000
restricted common shares. These shares were offered pursuant to an exemption to
registration provided under Section 4(2), of the Securities Act of 1933.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- --------------------------------------------------
The Company's By-Laws address indemnification under Article Seven (b).
The corporation shall indemnify, to the maximum extent permitted by Colorado
law, any person who is or was a director, officer, agent, fiduciary or employee
of the corporation 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 the corporation's
request. The corporation shall further have the authority to the maximum extent
permitted by Colorado law to purchase and maintain insurance providing such
indemnification.
PART F/S
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
The financial statements and notes thereto as required under ITEM #13 are
28
<PAGE>
attached hereto and found immediately following the text of this Registration
Statement. The audit report of KPMG LLP, independent Chartered Accountants, for
the audited financial statements for Fiscal 1999, ended August 31, 1999 and
notes thereto is included herein immediately preceding the audited financial
statements.
(A-1) Audited Financial Statements: Fiscal 1999
- -----------------------------------------------
Auditors' Report, dated October 22, 1999
Balance Sheet at 8/31/99
Statement of Operations and Deficit from incorporation on 8/24/98 to 8/31/99
Statement of Cash Flows from incorporation on 8/24/98 to 8/31/99
Statement of Changes in Stockholders' Equity from inception to 8/31/99
Notes to Financial Statements
(A-2) Destiny Software Production Inc. Consolidated Financial
- -------------------------------------------------------------
Statements: August 31, 1999
- ---------------------------
Auditors' Report, dated October 22, 1999
Consolidated Balance Sheets at 8/31/99 and 8/31/98
Consolidated Statement of Operations and Deficit for the Fiscal Year ended
8/31/99 with comparative figures for 1998
Consolidated Statement of Cash Flows for the Fiscal Year ended 8/31/99 with
comparative figures for 1998
Notes to Consolidated Financial Statements
(A-3) Destiny Media Technologies Inc. Proforma Consolidated
- -----------------------------------------------------------
Financial Statements (Unaudited): August 31, 1999
- -------------------------------------------------
Pro Forma Consolidated Balance Sheet at 8/31/99
Pro Forma Consolidated Statement of Loss for the Period ended August 31, 1999
Notes to Pro Forma Consolidated Financial Statements
29
<PAGE>
PART III
Item 1. INDEX TO EXHIBITS:
Exhibit Description
- ------- -----------
3(I) Registrant's Amended Articles of Incorporation
3(II) Registrant's Bylaws
4 Share Purchase Agreement
10.1 Employment Agreement
10.2 Employment Agreement
27 Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
DESTINY MEDIA TECHNOLOGIES INC.
(Registrant)
By: /s/ Steve Vestergard
-------------------------------
Name: Steve Vestergard
Title: President
Date: November 23, 1999
<PAGE>
(A-1) Audited Financial Statements: Fiscal 1999
- ------------------------------------------------
DESTINY MEDIA TECHNOLOGIES INC.
Financial Statements
(Expressed in United States dollars)
August 31, 1999
INDEX
Page
----
Independent Auditors' Report 1
Financial Statements
Balance Sheet 2
Statement of Operations and Deficit 3
Statement of Stockholders' Equity 4
Statement of Cash Flows 5
Notes to Financial Statements 6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Destiny Media Technologies Inc.
We have audited the balance sheet of Destiny Media Technologies Inc. (A
Development Stage Company) as at August 31, 1999 and the statements of
operations and deficit, stockholders' equity, and cash flows for the period from
inception on August 24, 1998 to August 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform an audit
to obtain reasonable assurance whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, these financial statements referred to above present fairly, in
all material respects, the financial position of the Company as at August 31,
1999 and the results of its operations and its cash flows from inception on
August 24, 1998 to August 31, 1999 in conformity with generally accepted
accounting principles in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 2 to the
financial statements, the Company has had no operations and has no established
source of revenue. This raises substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in note 2. The financial statements do not include any adjustment that
might result from the outcome of this uncertainty.
/s/KPMG LLP
KPMG LLP
Chartered Accountants
Richmond, Canada
October 22, 1999, except as in note 9(c) which is as of November 9, 1999
1
<PAGE>
<TABLE>
DESTINY MEDIA TECHNOLOGIES INC.
Balance Sheet
As at August 31, 1999
(Expressed in United States dollars)
- ------------------------------------------------------------------------------------------
<S> <C>
Assets
Loan receivable (note 4) $ 594,236
- ------------------------------------------------------------------------- ----------------
Liabilities and Stockholders' Equity
Current liabilities
Loans payable (note 5) $ 594,236
Stockholders' equity
Common stock
Authorized
100,000,000 shares with a par value of $0.001 per share
Issued
5,950,000 shares 5,950
Additional paid-in capital 53,550
Deficit accumulated during the development stage (59,500)
- ------------------------------------------------------------------------- ----------------
-
Uncertainties (notes 2 and 8) Subsequent events (note 9)
- ------------------------------------------------------------------------- ----------------
$ 594,236
- ------------------------------------------------------------------------- ================
</TABLE>
See accompanying notes to financial statements
On behalf of the Board
/s/S. Vestergaard Director /s/Ed Kolic Director
- ------------------------- -------------------------
2
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
Statement of Operations and Deficit
For the period from incorporation on August 24, 1998 to August 31, 1999
(Expressed in United States dollars)
- ----------------------------------------------------------------------
Expenses
Filing fees $ 450
Management fees (note 7) 38,958
Office and miscellaneous 9,374
Professional fees 1,968
Rent 8,000
Transfer agent 750
- ----------------------------------------------------- ----------------
59,500
- ----------------------------------------------------- ----------------
Net loss, being deficit, end of period $ (59,500)
- ----------------------------------------------------- ================
Net loss per common share
Basic and diluted $ (0.015)
Weighted average common shares outstanding
Basic and diluted 3,917,123
- ----------------------------------------------------- ================
See accompanying notes to financial statements
3
<PAGE>
<TABLE>
DESTINY MEDIA TECHNOLOGIES INC.
Statement of Stockholders' Equity
For the period from incorporation on August 24, 1998 to August 31, 1999
(Expressed in United States dollars)
- -----------------------------------------------------------------------------------------
Additional
Common Stock Paid-in
Number Amount Capital Deficit Total
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Issued for cash 5,950,000 $ 5,950 $ 53,550 $ - $ 59,500
Net loss - - - (59,500) (59,500)
--------- ----------- ------------ ------------ ------------
Balance,
August 31, 1999 5,950,000 $ 5,950 $ 53,550 $ (59,500) $ -
========= =========== ============ ============ ============
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
<TABLE>
DESTINY MEDIA TECHNOLOGIES INC.
Statement of Cash Flows
For the period from incorporation on August 24, 1998 to August 31, 1999
(Expressed in United States dollars)
- -----------------------------------------------------------------------------------------------
<S> <C>
Cash flows from operating activities
Net loss $ (59,500)
Cash flows from investing activities
Investment in mineral properties (17,500)
Investment in marketable securities (22,700)
Proceeds on disposal of mineral properties and marketable securities to
related party 40,200
Loan to third party (594,236)
- ------------------------------------------------------------------------------ ----------------
(594,236)
Cash flows from financing activities
Proceeds from issue of common stock 59,500
Proceeds from loans payable 594,236
- ------------------------------------------------------------------------------ ----------------
653,736
- ------------------------------------------------------------------------------ ----------------
Cash, end of period $ -
- ------------------------------------------------------------------------------ ================
</TABLE>
See accompanying notes to financial statements
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
Notes to Financial Statements
For the period from incorporation on August 24, 1998 to August 31, 1999
(Expressed in United States dollars)
- --------------------------------------------------------------------------------
1. Organization
The Company was incorporated in August 24, 1998 as Euro Industries Ltd.
under the laws of the State of Colorado. On October 19, 1999, the Company's
name was changed to Destiny Media Technologies Inc.
During the period from incorporation on August 24, 1998 to August 31, 1998,
the Company earned no revenue and incurred no expenses.
2. Future operations
From inception of the business, the Company has incurred cumulative losses
of $59,500 and used cash for operating activities of $59,500.
These financial statements have been prepared on the going concern basis
under which an entity is considered to be able to realize its assets and
satisfy its liabilities in the ordinary course of business. Operations to
date have been primarily financed by long-term debt and equity
transactions. The Company's future operations are dependent upon continued
support by creditors and shareholders, the achievement of profitable
operations and the successful completion of management's plan to obtain
additional equity financing. There can be no assurances that the Company
will be successful. The 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 the Company be
unable to continue as a going concern.
3. Significant accounting policies
(a) Basis of presentation
These financial statements are prepared in accordance with generally
accepted accounting principles in the United States and present the
financial position, results of operations and cash flows of the Company
as at and for the period from incorporation on August 24, 1998 to
August 31, 1999. For United States accounting and reporting purposes
the Company is considered to be in the development stage as it is
devoting all of its efforts to developing its business operations.
(b) Use of estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenue and
expenses during the reporting period. Actual amounts may differ from
these estimates.
6
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
Notes to Financial Statements, Continued
For the period from incorporation on August 24, 1998 to August 31, 1999
(Expressed in United States dollars)
- --------------------------------------------------------------------------------
3. Significant accounting policies, continued
(c) Income taxes
The Company follows the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized based
on the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
(d) Net loss per common share
Basic loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding during the period. Diluted
loss per share is computed including in the weighted average number of
common shares outstanding, potentially dilutive common shares
outstanding during the period. As the Company had a net loss in the
period presented, basic and diluted net loss per share is the same.
4. Loan receivable
The loan receivable is unsecured, non-interest bearing and has no specific
terms of repayment.
5. Loans payable
<TABLE>
- -----------------------------------------------------------------------------------------
1999
- -----------------------------------------------------------------------------------------
<S> <C>
Loan payable, due to a shareholder, unsecured,
non-interest bearing, due on demand, and convertible
at the Company's option into 100,000 common shares $ 99,013
Loan payable, unsecured, non-interest bearing, due on demand, and
convertible at the Company's option into 396,908 common shares 495,223
- ------------------------------------------------------------------------- ---------------
$ 594,236
- ------------------------------------------------------------------------- ---------------
</TABLE>
7
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
Notes to Financial Statements, Continued
For the period from incorporation on August 24, 1998 to August 31, 1999
(Expressed in United States dollars)
- --------------------------------------------------------------------------------
6. Income taxes
To August 31, 1999, the Company has incurred losses for income tax purposes
of approximately $59,500, which are available to reduce income for tax
purposes through the year 2006.
The unrecorded benefit of these loss carry forwards is approximately
$17,850. Under the provisions of the Statement 109, the effect of this
benefit has been fully offset by a valuation allowance due to the
uncertainty of the realization of the benefits.
7. Related party transactions
(a) During the period, there was a management contract in place that
allowed the former president, director and shareholder of the Company
to bill the Company $2,500 per month for administrative duties.
Included in management fees is $15,000 related to these fees.
(b) The Company paid $14,500 for an option on certain mineral properties on
which the Company proposed to perform various work programs. This
option was transferred to the former president, director and
shareholder to settle outstanding management fees. No gain or loss was
recognized on the transfer.
(c) During the year, cash, investments and all liabilities of the Company
existing at March 31, 1999 were used to settle outstanding management
and other fees, including those described in note 7(a), provided by the
former president, director and shareholder. The value of these services
was assessed as $38,958. No gain or loss was recognized on the
settlement.
8. Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
8
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
Notes to Financial Statements, Continued
For the period from incorporation on August 24, 1998 to August 31, 1999
(Expressed in United States dollars)
- --------------------------------------------------------------------------------
9. Subsequent events
(a) A special meeting of shareholders was held in October, 1999 to elect a
new Board of Directors, change the name of the Company from Euro
Industries Ltd. to Destiny Media Technologies Inc. and approve a
company stock option plan. The terms of a stock option plan were
approved providing for the granting of 355,000 stock options to
officers, directors and employees at a price of $3.00 per share
expiring in five years.
(b) On October 20, 1999, 600,000 common shares were issued for the purchase
of Destiny Software Productions Ltd. ("Destiny"). Destiny is a
high-tech development company that develops video and audio compression
software and to a lesser extent design and development of computer
games. The transaction will be recorded under the purchase method of
accounting. The Company's interest in the net assets acquired,
expressed in Canadian dollars, at assigned values are expected to be as
follows:
Cash $ 496,000
Other current assets 41,000
Capital assets 114,000
Intellectual property 250,000
Products under development 155,000
Goodwill and other intangibles 40,000
Acquired in process research and development 40,000
Current liabilities (30,000)
Long-term liabilities (1,105,000)
- ------------------------------------------------------------ ---------------
Acquisition cost $ 1,000
- ------------------------------------------------------------ ---------------
Consideration
600,000 common shares $ 1,000
- ------------------------------------------------------------ ---------------
These above indicated values for net assets are considered preliminary
estimates only and are subject to change. They are based on the
acquiree's August 31, 1999 financial statements.
9
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
Notes to Financial Statements, Continued
For the period from incorporation on August 24, 1998 to August 31, 1999
(Expressed in United States dollars)
- --------------------------------------------------------------------------------
9. Subsequent events, continued
(b) continued
The pro forma consolidated statement of operations for the year ended
August 31, 1999 is as follows:
(Unaudited)
Revenues $ 15,678
Operating expenses 519,238
- ------------------------------------------------------ ---------------
Loss for the year $ 503,560
- ------------------------------------------------------ ---------------
(c) On November 9, 1999, the Company completed a private placement
financing. The Company sold 617,000 common shares at a price of Cdn
$1.86 for gross proceeds of Cdn $1,147,620. The Company intends to use
the proceeds to repay loans payable and to continue the development
work on its products.
10
<PAGE>
(A-2) Destiny Software Production Inc.
- -------------------------------------
Consolidated Financial Statements: August 31, 1999
- ---------------------------------------------------
DESTINY SOFTWARE PRODUCTIONS INC.
Consolidated Financial Statements
August 31, 1999
INDEX
Page
----
Auditors' Report 1
Consolidated Financial Statements
Consolidated Balance Sheet 2
Consolidated Statement of Operations and Deficit 3
Consolidated Statement of Cash Flows 4
Notes to Consolidated Financial Statements 5
<PAGE>
AUDITORS' REPORT TO THE DIRECTORS
We have audited the consolidated balance sheet of Destiny Software Productions
Inc. as at August 31, 1999 and the consolidated statements of operations and
deficit and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at August 31, 1999
and the results of its operations and its cash flows for the year then ended in
accordance with generally accepted accounting principles in Canada.
Significant measurement differences to United States accounting principles are
explained and quantified in note 13.
/s/KPMG LLP
KPMG LLP
Chartered Accountants
Richmond, Canada
October 22, 1999
1
<PAGE>
<TABLE>
DESTINY SOFTWARE PRODUCTIONS INC.
Consolidated Balance Sheet
August 31, 1999 with comparative figures for 1998
(Expressed in Canadian Dollars)
- -----------------------------------------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 495,922 $ -
Accounts receivable 21,348 1,761
Income taxes receivable - 46,048
Prepaids 19,526 -
- ----------------------------------------------------- -------------------- --------------------
536,796 47,809
Capital assets (note 5) 114,091 -
Products under development (note 4) 155,452 -
Goodwill (note 4) 23,960 -
- ----------------------------------------------------- -------------------- --------------------
$ 830,299 $ 47,809
- ----------------------------------------------------- -------------------- --------------------
Liabilities and Shareholder's Deficiency
Current liabilities
Cheques written in excess of funds on deposit $ - $ 17,157
Line of credit - 46,435
Accounts payable and accrued liabilities 18,248 3,913
Current portion on long-term debt (note 6) 11,515 -
- ----------------------------------------------------- -------------------- --------------------
29,763 67,505
Long-term debt (note 6) 218,574 -
Due to Destiny Media Technologies Inc. (note 7) 886,897 -
Shareholder's deficiency
Share capital (note 8) 100 100
Deficit (305,035) (19,796)
- ----------------------------------------------------- -------------------- --------------------
(304,935) (19,696)
Commitments (note 10)
Uncertainty due to the Year 2000 Issue (note 11)
Subsequent event (note 12)
- ----------------------------------------------------- -------------------- --------------------
$ 830,299 $ 47,809
- ----------------------------------------------------- ==================== ====================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
<TABLE>
DESTINY SOFTWARE PRODUCTIONS INC.
Consolidated Statement of Operations and Deficit
Year ended August 31, 1999 with comparative figures for 1998 (Expressed in
Canadian Dollars)
- ----------------------------------------------------------------------------------------
1999 1998
- ----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Revenue
Sales $ 13,117 $ 4,080
Rental income 1,200 -
Interest income 1,361 2,141
- ---------------------------------------------- -------------------- --------------------
15,678 6,221
Expenses
Advertising and promotion 15,170 3,284
Amortization 41,424 5,750
Bank charges and interest 666 4,294
Consulting 2,500 6,345
Financing 14,194 -
Management salaries 73,250 -
Office and miscellaneous 10,673 5,433
Professional fees 10,258 3,412
Rent 23,153 2,200
Repairs and maintenance 1,036 -
Research and development (recovery) 33,591 (15,765)
Setup costs 10,583 -
Subcontracts 8,786 5,893
Telephone and communications 13,011 3,643
Wages and benefits 42,622 -
- ---------------------------------------------- -------------------- --------------------
300,917 24,489
- ---------------------------------------------- -------------------- --------------------
Loss before the undernoted (285,239) (18,268)
Other income (expenses)
Debt forgiveness - 25,000
Write-off of goodwill - (77,625)
- ---------------------------------------------- -------------------- --------------------
- (52,625)
- ---------------------------------------------- -------------------- --------------------
Loss before income taxes (285,239) (70,893)
Income tax expense (recovery) - (8,134)
- ---------------------------------------------- -------------------- --------------------
Net loss (285,239) (62,759)
Retained earnings (deficit), beginning of year (19,796) 42,963
- ---------------------------------------------- -------------------- --------------------
Deficit, end of year $ (305,035) $ (19,796)
- ---------------------------------------------- ==================== ====================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
DESTINY SOFTWARE PRODUCTIONS INC.
Consolidated Statement of Cash Flows
Year ended August 31, 1999 with comparative figures for 1998 (Expressed in
Canadian Dollars)
- -------------------------------------------------------------------------------------------------------------------
1999 1998
- -------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
Cash provided by (used in)
Operations
Net loss $ (285,239) $ (62,759)
Items not affecting cash
Amortization on capital assets 19,224 5,750
Debt forgiveness - (25,000)
Write-off of goodwill - 77,625
Amortization of projects under development 22,200 -
Changes in operating assets and liabilities
Accounts receivable (15,441) 6,084
Accounts payable and accrued liabilities 11,821 1,858
Income taxes receivable 46,048 1,952
Prepaid expenses (19,526) -
- ------------------------------------------------------------------------- -------------------- --------------------
(220,913) 5,510
Investments
Capital asset purchases (131,806) -
Cash acquired on acquisition 45,336 -
- ------------------------------------------------------------------------- -------------------- --------------------
(86,470) 79,577
Financing
Shareholder loans - (49,049)
Due to Destiny Media Technologies Inc. 886,897 -
Repayment of promissory note (20,000) -
Issuance of long-term debt - 25,000
Line of credit (46,435) 19,635
- ------------------------------------------------------------------------- -------------------- --------------------
820,462 (4,414)
- ------------------------------------------------------------------------- -------------------- --------------------
Increase in cash 513,079 1,096
Cash, beginning of year (17,157) (18,253)
- ------------------------------------------------------------------------- -------------------- --------------------
Cash, end of year $ 495,922 $ (17,157)
- ------------------------------------------------------------------------- -------------------- --------------------
Supplementary disclosure of non-cash financing and investing activities:
Promissory note issued for acquisition $ 20,000 $ -
- ------------------------------------------------------------------------- ==================== ====================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
DESTINY SOFTWARE PRODUCTIONS INC.
Notes to Consolidated Financial Statements
Year ended August 31, 1999
(Expressed in Canadian Dollars)
- --------------------------------------------------------------------------------
1. Organization
Destiny Software Productions Inc. (the "Company") was incorporated under
the Company Act of British Columbia on July 14, 1992.
The Company is a high tech development company that develops video and
audio compression software and to a lesser extent designs and development
computer games. All sales of its product and services are considered to be
in this industry segment.
2. Future operations
During the year ended August 31, 1999, the Company incurred a loss of
$285,239 and used cash for operating activities of $220,913. From inception
of the business on July 14, 1992, the Company has incurred cumulative
losses of $305,035.
These consolidated financial statements have been prepared on the going
concern basis under which an entity is considered to be able to realize its
assets and satisfy its liabilities in the ordinary course of business.
Operations to date have been primarily financed by long-term debt and
advances from Destiny Media Technologies Inc. The Company's future
operations are dependent upon continued support of the creditors and the
shareholder, the achievement of profitable operations, the successful
completion of management's plan to obtain additional equity financing or
the sale of Company assets. There can be no assurances that the Company
will be successful in any of these areas. The 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 the Company be unable to continue as a going concern.
3. Significant accounting policies
(a) Basis of presentation
These consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the Canada and present the
financial position, results of operations and cash flows of the Company
and its wholly owned subsidiary, Wonderfall Productions Inc., which was
incorporated under the Company Act (British Columbia) on September 10,
1996. All material inter-company balances and transactions have been
eliminated.
(b) Cash and cash equivalents
Cash and cash equivalents include highly liquid investments, such as
term deposits, having original maturities of three months or less at
the date of acquisition, that are readily convertible to contracted
amounts of cash.
5
<PAGE>
DESTINY SOFTWARE PRODUCTIONS INC.
Notes to Consolidated Financial Statements, Continued
Year ended August 31, 1999
(Expressed in Canadian Dollars)
- --------------------------------------------------------------------------------
3. Significant accounting policies, continued
(c) Research and development costs
Research costs are expensed as incurred. Development costs are expensed
as incurred unless they meet certain criteria under generally accepted
accounting principles for deferral and amortization. Software and
related development costs, after the establishment of technological
feasibility and commercial viability, are capitalized until the product
is available for general release to customers. Amortization is provided
on a product by product basis over the estimated economic life of the
product, not to exceed three years. Amortization commences when the
product is available for general release to customers. All development
costs incurred to date have been expensed as incurred as they have not
met the criteria for capitalization under generally accepted accounting
principles.
(d) Revenue recognition
The Company recognizes revenue when title has passed to the customer,
the collectibility of the consideration is reasonably assured and the
Company has no significant remaining performance obligations. An
allowance for estimated future returns is recorded at the time revenue
is recognized.
(e) Capital assets
Capital assets are carried at cost less accumulated amortization.
Amortization is calculated annually as follows:
Furniture and fixtures Declining balance 20%
Computer equipment Declining balance 30%
Computer software Straight-line 50%
Leasehold improvements Straight-line Lease-term
(f) Products under development
Products under development are carried at cost less accumulated
amortization. Amortization is provided on a straight-line basis over
two years.
(g) Goodwill
Goodwill arising on the acquisition of subsidiary companies is carried
at cost less accumulated amortization. Amortization is calculated on a
straight-line basis over three years.
(h) Use of estimates
The preparation of financial statements under generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses
during the reporting period. Actual amounts may differ from these
estimates. Significant areas requiring the use of management estimates
relate to valuation of its capital assets and goodwill.
6
<PAGE>
DESTINY SOFTWARE PRODUCTIONS INC.
Notes to Consolidated Financial Statements, Continued
Year ended August 31, 1999
(Expressed in Canadian Dollars)
- --------------------------------------------------------------------------------
3. Significant accounting policies, continued
(i) Foreign currency
Transactions denominated in foreign currencies are translated into
Canadian dollars at the rate prevailing at the time of the
transactions.
At the balance sheet date, monetary assets and liabilities denominated
in a foreign currency are translated at the current rate of exchange.
Exchange gains and losses arising on translation or settlement of
foreign currency denominated monetary items are included in the
determination of net income for the current period.
(j) Income taxes
The Company follows the asset and liability method of accounting for
income taxes. Deferred tax assets and liabilities are recognized based
on the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date. At August 31, 1999, the gross deferred tax assets have
been offset by a full valuation allowance as management does not
consider that it is more likely than not that such assets will be
realized in the carry-forward period.
4. Acquisition
On May 31, 1999, the Company acquired all of the issued and outstanding
shares of Wonderfall Productions Inc. through the issuance of a promissory
note in the amount of $20,000. The acquisition has been accounted for using
the purchase method of accounting and the results of operations since the
date of acquisition have been included in the consolidated statement of
operations and deficit.
The total purchase price of the acquisition was $20,000. The Company's
interest in the net assets acquired is as follows:
Cash $ 45,336
GST receivable 4,146
Fixed assets 1,509
Products under development 177,652
Goodwill 23,960
Liabilities assumed (232,603)
- ---------------------------------------------------- ---------------------
$ 20,000
- ---------------------------------------------------- --------------------
7
<PAGE>
DESTINY SOFTWARE PRODUCTIONS INC.
Notes to Consolidated Financial Statements, Continued
Year ended August 31, 1999
(Expressed in Canadian Dollars)
- --------------------------------------------------------------------------------
5. Capital assets
- --------------------------------------------------------------------------------
1999
Accumulated Net Book
Cost Depreciation Value
- --------------------------------------------------------------------------------
Furniture and fixtures $ 27,629 $ 2,722 $ 24,907
Computer equipment 93,700 14,055 79,645
Computer software 8,329 2,082 6,247
Leasehold improvements 3,657 365 3,292
- -------------------------------- -------------- --------------- ----------------
$ 133,315 $ 19,224 $ 114,091
- -------------------------------- -------------- --------------- ----------------
<TABLE>
6. Long-term debt
<S> <C>
Due to Canadian Film Development Corp.
The loan payable, to a maximum amount of $160,725, is
non-interest bearing and is repayable in twelve monthly
instalments of $13,394 commencing September 30, 2001 $ 125,544
Due to Canadian Film Development Corp.
The loan payable, to a maximum amount of $75,000 is the earlier of the
first day of production work of a final version for marketing
purposes or the sale transfer or other disposition of the production.
As the date of repayment is not determinable,
the entire balance has been classified as long-term 70,000
Loan payable
These funds were received in exchange for a 5.0% equity position
in one of the Company's games. The value of this interest is
indeterminable at this time 11,515
Loan payable
Amount is non-interest bearing, with no fixed repayment terms. The
balance is not to be paid in the next twelve months and accordingly
has been classified as long-term 23,030
- ----------------------------------------------------------------------------------- ----------------
230,089
Less current portion (11,515)
- ----------------------------------------------------------------------------------- ----------------
$ 218,574
- ----------------------------------------------------------------------------------- ----------------
</TABLE>
8
<PAGE>
DESTINY SOFTWARE PRODUCTIONS INC.
Notes to Consolidated Financial Statements, Continued
Year ended August 31, 1999
(Expressed in Canadian Dollars)
- --------------------------------------------------------------------------------
6. Long-term debt, continued
Principal repayments over the next five years are as follows:
2000 $ 11,515
2001 70,000
2002 125,544
2003 -
2004 -
Thereafter 23,030
- -------------------------------------------------------------
$ 230,089
- -------------------------------------------------------------
7. Due to Destiny Media Technologies Inc.
The amount due to Destiny Media Technologies Inc. is unsecured,
non-interest bearing and has no specified repayment terms (see note 12). As
the lender has advised the Company in writing that they will not demand
payment in the next 12 months, accordingly, the amount has been classified
as long term.
8. Common stock
- --------------------------------------------------------------------------------
1999 1998
- --------------------------------------------------------------------------------
(unaudited)
Authorized
10,000 Common shares
- --------------------------------------------------------------------------------
Issued
100 Common shares $ 100 $ 100
- --------------------------------------------------------------------------------
9. Income taxes
To August 31, 1999, the Company has incurred losses for income tax purposes
in Canada of approximately $432,600, which are available to reduce income
for tax purposes through the year 2006.
10. Commitments
The Company is committed to minimum lease payments totalling approximately
$52,000 for its premises. The Company's lease expires in April 2000 and
management has yet to re-negotiate new lease terms.
9
<PAGE>
DESTINY SOFTWARE PRODUCTIONS INC.
Notes to Consolidated Financial Statements, Continued
Year ended August 31, 1999
(Expressed in Canadian Dollars)
- --------------------------------------------------------------------------------
11. Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize
the year 2000 as 1900 or some other date, resulting in errors when
information using year 2000 dates is processed. In addition, similar
problems may arise in some systems which use certain dates in 1999 to
represent something other than a date. The effects of the Year 2000 Issue
may be experienced before, on, or after January 1, 2000, and, if not
addressed, the impact on operations and financial reporting may range from
minor errors to significant systems failure which could affect an entity's
ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
12. Subsequent event
On October 20, 1999, the Company was acquired by Destiny Media Technologies
Inc. ("Destiny Media") (note 7). This completed a transaction on which a
letter of intent was entered into on June 16, 1999. The transaction
involved the issuance of 600,000 shares of Destiny Media to the shareholder
of the Company for all outstanding shares of the Company, in addition to
Destiny Media completing certain financing commitments.
13. United States Accounting Principles
The Company's financial statements presented herein have been prepared in
accordance with Canadian generally accepted accounting principles ("GAAP").
There are no material reconciling items between United States GAAP and
Canadian GAAP that affect net earnings or total assets or liabilities and
shareholders' equity.
Under Canadian GAAP, development costs incurred through operations are
deferred and amortized only if stringent criteria for deferral are met. If
these conditions are met, the costs are capitalized as products under
development. Under U.S. GAAP, research and development expenditures are
expensed as incurred. Under U.S. GAAP, costs of producing product masters
should be capitalized and amortized on a product by product basis or the
straight-line method over the remaining estimated economic life of the
product including the period being reported on. Equipment used in research
and development is capitalized if it has an alternate future use. All
research and development costs were expensed under Canadian GAAP as at
August 31, 1999 as the criteria for deferral were not met, therefore,
resulting in no differences under U.S. GAAP.
10
<PAGE>
(A-3) Destiny Media Technologies Inc.
- ------------------------------------
Pro Forma Consolidated Financial Statements (Unaudited): August 31, 1999
- -------------------------------------------------------------------------
DESTINY MEDIA TECHNOLOGIES INC.
Pro Forma Consolidated Financial Statements
(Unaudited)
August 31, 1999
INDEX
Page
----
Financial Statements
Pro Forma Consolidated Balance Sheet 1
Pro Forma Consolidated Statement of Loss 2
Notes to Pro Forma Consolidated Financial Statements 3
<PAGE>
<TABLE>
DESTINY MEDIA TECHNOLOGIES INC.
Pro Forma Consolidated Balance Sheet
(Unaudited)
As at August 31, 1999
(Expressed in Canadian dollars)
- -------------------------------------------------------------------------------------------------------------------
Pro forma
adjustments
and
Destiny eliminating
Media Destiny entries Pro forma
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash $ - $ 495,922 $ - $ 495,922
Accounts receivable - 21,348 - 21,348
Prepaids - 19,526 - 19,526
- --------------------------------------- ------------------ ----------------- ----------------- ----------------
- 536,796 - 536,796
Capital assets - 114,091 - 114,091
Loan receivable 886,897 - (886,897) -
Investment in subsidiaries 904 - (904) -
Intellectual property - - 166,667 166,667
Products under development - 155,452 - 155,452
Goodwill - 23,960 10,667 34,627
- --------------------------------------- ------------------ ----------------- ----------------- ----------------
$ 887,801 $ 830,299 $ (710,467) $ 1,007,633
- --------------------------------------- ================== ================= ================= ================
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities
Accounts payable and accrued
liabilities $ - $ 18,248 $ - $ 18,248
Loans payable 886,897 - - 886,897
Current portion of long-term
debt - 11,515 - 11,515
- --------------------------------------- ------------------ ----------------- ----------------- ----------------
886,897 29,763 - 916,660
Loan payable - 886,897 (886,897) -
Long-term debt - 218,574 - 218,574
- --------------------------------------- ------------------ ----------------- ----------------- ----------------
886,897 1,135,234 (886,897) 1,135,234
Stockholders' equity (deficiency)
Common stock 9,056 100 (100) 9,056
Additional paid-in capital 81,503 - - 81,503
Deficit (89,655) (305,035) 176,530 (218,160)
- --------------------------------------- ------------------ ----------------- ----------------- ----------------
904 (304,935) 176,430 (127,601)
- --------------------------------------- ------------------ ----------------- ----------------- ----------------
$ 887,801 $ 830,299 $ (710,467) $ 1,007,633
- --------------------------------------- ================== ================= ================= ================
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
1
<PAGE>
<TABLE>
DESTINY MEDIA TECHNOLOGIES INC.
Pro Forma Consolidated Statement of Loss
(Unaudited)
Year ended August 31, 1999
(Expressed in Canadian dollars)
- ---------------------------------------------------------------------------------------------------------------
Pro forma
adjustments
and
Destiny eliminating
Media Destiny entries Pro forma
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue
Sales $ - $ 13,117 $ - $ 13,117
Rental income - 1,200 - 1,200
Interest income - 1,361 - 1,361
- -------------------------------------- ------------------ ---------------- ------------------- ----------------
- 15,678 - 15,678
Expenses
Advertising and promotion - 15,170 - 15,170
Amortization - 41,424 88,666 130,090
Bank charges and interest - 666 - 666
Consulting - 2,500 - 2,500
Financing 1,808 14,194 - 16,002
Management salaries 58,703 73,250 - 131,953
Office and miscellaneous 14,125 10,673 - 24,798
Professional fees 2,965 10,258 - 13,223
Rent 12,054 23,153 - 35,207
Repairs and maintenance - 1,036 - 1,036
Research and development - 33,591 - 33,591
Setup costs - 10,583 - 10,583
Subcontracts - 8,786 - 8,786
Telephone and telecommunications - 13,011 - 13,011
Wages and benefits - 42,622 - 42,622
Write-off of in process research and
development - - 40,000 40,000
- -------------------------------------- ------------------ ---------------- ------------------- ----------------
89,655 300,917 128,666 519,238
- -------------------------------------- ------------------ ---------------- ------------------- ----------------
Net loss $ (89,655) $ (285,239) $ (128,666) $ (503,560)
- -------------------------------------- ================== ================ =================== ================
</TABLE>
See accompanying notes to pro forma consolidated financial statements.
2
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
Year ended August 31, 1999
(Expressed in Canadian dollars)
- --------------------------------------------------------------------------------
1. Proposed arrangement and basis of presentation
The pro forma consolidated financial statements give effect to the proposed
acquisition of Destiny Software Productions Inc. ("Destiny") by Destiny
Media Technologies Inc. ("Destiny Media") assuming the transaction had been
completed as at and for the year ended August 31, 1999. The acquisition was
subsequently completed by the issuance of 600,000 common shares of Destiny
Media in exchange for all of the outstanding shares of Destiny.
The pro forma consolidated financial statements should be read in
conjunction with the August 31, 1999 audited financial statements and other
information referred to in the registration statement. It has been compiled
from the audited financial statements of Destiny Media as at and for the
period ended from the date of incorporation on August 24, 1998 to August
31, 1999 and Destiny as at and for the year ended August 31, 1999.
The proposed transaction has been recorded under the purchase method of
accounting by Destiny Media as they are considered the acquirer for
accounting purposes.
2. Pro forma adjustments
(i) Pro forma consolidated balance sheet
The pro forma consolidated balance sheet has been compiled assuming the
transactions relating to the proposed purchase occurred on August 31,
1999 and gives effect to the following:
(a) The issuance of 600,000 common shares of Destiny Media for the
acquisition of Destiny.
(b) The Company's interest in the net assets acquired at assigned
values are expected to be as follows:
Cash $ 496,000
Other current assets 41,000
Capital assets 114,000
Intellectual property 250,000
Products under development 155,000
Goodwill and other intangibles 40,000
Acquired in process research and development 40,000
Current liabilities (30,000)
Long-term liabilities (1,105,000)
- --------------------------------------------------------------------------------
$ 1,000
- --------------------------------------------------------------------------------
3
<PAGE>
DESTINY MEDIA TECHNOLOGIES INC.
Notes to Pro Forma Consolidated Financial Statements, Continued
(Unaudited)
Year ended August 31, 1999
(Expressed in Canadian dollars)
- --------------------------------------------------------------------------------
2. Pro forma adjustments, continued
(i) Pro forma consolidated balance sheet, continued
(b) The Company's interest in the net assets acquired at assigned
values are expected to be as follows, continued:
The above indicated values for net assets are considered
preliminary estimates only and are subject to change. They are
based on the acquiree's August 31, 1999 financial statements.
Amortization of goodwill and intellectual property will be
calculated on a straight-line basis over three years and will
commence in the year 2000.
(ii)Pro forma consolidated statement of loss
The pro forma consolidated statement of loss gives effect to the
transactions described above as if they had occurred on September 1,
1998.
4
Exhibit 3.(I)
STATE OF COLORADO
DEPARTMENT OF
STATE
CERTIFICATE
I, DONETTA DAVIDSON, SECRETARY OF THE STATE OF
COLORADO
HEREBY CERTIFY THAT
ACCORDING TO THE RECORDS OF THIS OFFICE
DESTINY MEDIA TECHNOLOGIES INC.
(COLORADO CORPORATION)
FILE # 19981153867 WAS FILED IN THIS OFFICE ON August 24, 1998 AND HAS COMPLIED
WITH THE APPLICABLE PROVISIONS OF THE LAWS OF THE STATE OF COLORADO AND ON THIS
DATE IS IN GOOD STANDING AND AUTHORIZED AND COMPETENT TO TRANSACT BUSINESS OR TO
CONDUCT ITS AFFAIRS WITHIN THIS STATE.
Dated: November 15, 1999
/s/ Donetta Davidson
--------------------
SECRETARY OF STATE
<PAGE>
Mail to: Secretary of State
Corporations Section
1560 Broadway, Suits 200
Denver, CO 80202
(303) 824-2251
Fax (303) 894-2242
MUST BE TYPED
FILING FEE: $23.00
MUST SUBMIT TWO COPIES
Please include a typed
self-addressed envelope
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Euro Industries Ltd.
SECOND: The following amendment to the Articles of incorporation was adopted on
Oct 12, 1999, as prescribed by the Colorado Business Corporation Act, in the
manner marked with an X below:
No shares have been issued or Directors Elected - Action by Incorporators
No shares move been issued but Directors Elected - Action by Directors
Such amendment was adopted by the board of directors where shares have
been issued.
X Such amendment was adopted by a vote of the shareholders The number of
shares voted for the amendment was sufficient for approval.
See Exhibit A attached hereto and incorporated by reference.
If these amendments are to have a delayed effective date, Please list that date:
Not Applicable
(Not to exceed ninety (90) days from the date of filing)
THIRD: The manner if not set forth in such amendment, in which any exchange,
reclassification or cancellation of issued shares provided for in the amendment
shall be effected, is as follows: Not Applicable
FOURTH: The manner In which such amendment effects a change In the amount of
stated capital, and the amount of stated capital as changed by such amendment,
is as follows: Not Applicable
Euro Industries Ltd.
By: Oct. 19
Its President and CEO
<PAGE>
EXHIBIT A
(Attached to the Articles of Amendment to the
Articles of Incorporation of Euro Industries Ltd.)
The Articles of incorporation of Euro industries Ltd. are amended as
follows:
I. The First Article is amended in its entirety to read as follows:
"FIRST: The name of the corporation is Destiny Media Technologies Inc."
<PAGE>
19981153867 C
$50.00
SECRETARY OF STATE
08-24-1998 16:23:33
ARTICLES OF INCORPORATION
OF
EURO INDUSTRIES LTD.
The undersigned, who, if a natural person, is eighteen years of age or
older, hereby establishes a corporation pursuant to the Colorado Business
Corporation Act as amended and adopts the following Articles of incorporation:
FIRST: The name of the corporation is Euro Industries Ltd.
SECOND: The corporation shall have and may exercise all of the rights,
powers and privileges now or hereafter conferred upon corporations organized
under the laws of Colorado. In addition, the corporation may do everything
necessary, suitable or proper for the accomplishment of any of its corporation
purposes. The corporation may conduct part or all of its business in any part of
Colorado, the United States or the world and may hold, purchase, mortgage, lease
and convey real and personal property in any of such places.
THIRD: (a) The aggregate number of shares which the corporation shall
have authority to issue is 100,000,000 shares of common stock. The shares of
this class of common stock shall have unlimited voting rights and shall
constitute the sole voting group of the corporation, except to the extent any
additional voting group or groups may hereafter be established in accordance
with the Colorado Business Corporation Act. The shares of this class shall also
be entitled to receive the net assets of the corporation upon dissolution.
(b) Each shareholder of record shall have one vote for each share
of stock standing in his name on the books of the corporation and entitled to
vote, except that in the election of directors each shareholder shall have as
many votes for each share held by him as there are directors to be elected and
for whose election the shareholder has a right to vote. Cumulative voting shall
not be permitted in the election of directors or otherwise.
(c) Unless otherwise ordered by a court of competent
jurisdiction, at all meetings of shareholders a majority of the shires of a
voting group entitled to vote at such meeting, represented in person or by
proxy, shall constitute a quorum of that voting group.
FOURTH: The number of directors of the corporation shall be fixed by
the bylaws, or if the bylaws fail to fix such a number, then by resolution
adopted from time to time by the board of directors. One director shall
constitute the initial board of directors. The following
<PAGE>
person is elected to serve as the corporation's initial director until the first
annual meeting of shareholders of until his successor is duly elected and
qualified:
Name Address
Carman Parente 204-3980 Inlet Cr.
North Vancouver
British Columbia
Canada V70 2P9
FIFTH: The meet address of the initial registered office of the
corporation is 1560 Broadway, Denver, Colorado. The name of the initial
registered Agent of the corporation at such address is Corporation Service
Company.
SIXTH: The address of the initial principal office of the corporation
is 204-3980 Inlet Cr., North Vancouver, British Columbia, Canada V7G 2P9.
SEVENTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the corporation and the same
are in furtherance of and not in limitation or exclusion of the powers conferred
by laws.
(a) Conflicting Interest Transactions. As used in this paragraph,
"conflicting interest transaction" means any of the following: (i) a loan or
other assistance by the corporation to a director of the corporation or to an
entity in which a director of the corporation is a director or officer or has a
financial interest; (ii) a guaranty by the corporation of an obligation of a
director of the corporation or of an obligation of an entity in which a director
of the corporation is a director or officer or has a financial interest; or
(iii) a contract or transaction between the corporation and a director of the
corporation or between the corporation and an entity in which a director of the
corporation is a director or officer or has a financial interest. To the full
extent permitted by Colorado law, no conflicting interest transaction shall be
void or voidable, be enjoined, be set aside, or give rise to an award of damages
or other sanctions in a proceeding by a shareholder or by or in the right of the
corporation, solely because the conflicting interest transaction involves a
director of the corporation or in entity in which a director of the corporation
is a director or officer or has a financial interest, or solely because the
director is present at or participates In the meeting of the corporation's board
of directors or of the committee of the board of directors which authorizes,
approves or ratifies a conflicting interest transaction, or solely because the
director's vote is counted for such purpose if; (A) the material facts as to the
director's relationship or interest and as to the conflicting interest
transaction are disclosed or are known to the board of directors or the
committee, and the board of directors or committee in good faith authorizes,
approves or ratifies the conflicting interest transaction by the
2
<PAGE>
affirmative vote of a majority of the disinterested directors. even though the
disinterested directors are less than a quorum., or (B) the material facts as to
the director's relationship or interest and as to the conflicting interest
transaction are disclosed or am known to the shareholders entitled to vote
thereon, and the conflicting interest transaction is specifically authorized,
approved or ratified in good faith by a vote of the shareholders, or (C) a
conflicting interest transaction is fair as to the corporation as of the time it
is authorized, approved or ratified in good faith by a vote of the shareholders;
or (D) a conflicting interest transaction is fair as to the corporation as of
the time it is authorized, approved or ratified by the board of directors, a
committee thereof, or the shareholders. Common or interested directors may be
counted In determining the presence of a quorum at a meeting of the board of
directors or of a committee which authorizes, approves or ratifies the
conflicting interest transaction.
(b) Indemnification. The corporation shall indemnify, to the
maximum extent permitted by Colorado law, any person who is or was a director,
officer, agent, fiduciary or employee of the corporation 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 the corporation's request. The corporation shall further
have the authority to the maximum extent permitted by Colorado law to purchase
and maintain insurance providing such indemnification
(c) Limitation on Director's Liability. No director of this
corporation shall have any personal liability for monetary damages to the
corporation or its shareholders for breach of his fiduciary duty as a director,
except that this provision shall not eliminate or limit the personal liability
of a director to the corporation or its shareholders for monetary damages for
any breach, act, omission or transaction as to which the Colorado Business
Corporation Act (as in effect from time to time) prohibits expressly the
elimination or limitation of liability. Nothing contained herein will be
construed to deprive any director of his right to all defenses ordinarily
available to a director nor will anything herein be construed to deprive any
director of any right he may have for contribution from any other director or
other person.
3
<PAGE>
EIGHTH: The name and address of the incorporator is:
Scott M. Reed
1919 14th Street, Suite 330
Boulder, Colorado 80302
DATED 24th day of August, 1998.
/s/Scott M. Reed
-----------------------
Incorporator
Corporation Service Company hereby consents to the appointment as the
initial registered agent for Euro Industries Ltd.
/s/ Patricia Moore
-----------------------
Initial Registered Agent
4
Exhibit 3.(II)
BYLAWS
OF
EURO INDUSTRIES LTD
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. OFFICES ........................................................ 1
ARTICLE II. SHAREHOLDERS ............................................ 1
Section 1. Annual Meeting .......................................... 1
Section 2. Special Meetings ........................................ 2
Section 3. Place of Meeting ........................................ 2
Section 4. Notice of Meeting ....................................... 2
Section 5. Fixing of Record Date ................................... 3
Section 6. Voting Lists ............................................ 4
Section 7. Recognition Procedure for Beneficial Owners ............. 4
Section 8. Quorum and Manner of Acting ............................. 5
Section 9. Proxies ................................................. 5
Section 10. Voting of Shares ........................................ 6
Section 11. Corporation's Acceptance of Votes ....................... 7
Section 12. Informal Action by Shareholders ......................... 8
Section 13. Meetings by Telecommunication ........................... 8
ARTICLE III. BOARD OF DIRECTORS ...................................... 8
Section 1. General Powers .......................................... 8
Section 2. Number, Qualifications and Tenure ....................... 8
Section 3. Vacancies ............................................... 9
Section 4. Regular Meetings ........................................ 9
Section 5. Special Meetings ........................................ 9
Section 6. Notice .................................................. 9
Section 7. Quorum .................................................. 10
Section 8. Manner of Acting ........................................ 10
Section 9. Compensation ............................................ 10
Section 10. Presumption of Assent ................................... 10
Section 11. Committees .............................................. 11
Section 12. Informal Action by Directors ............................ 11
Section 13. Telephonic Meetings ..................................... 11
Section 14. Standard of Care ........................................ 12
ARTICLE IV. OFFICERS AND AGENTS ............................ 12
Section 1. General ................................................. 12
Section 2. Appointment and Term of Office .......................... 12
ii
<PAGE>
Section 3. Resignation and Removal.................................. 13
Section 4. Vacancies................................................ 13
Section 5. President................................................ 13
Section 6. Vice Presidents.......................................... 14
Section 7. Secretary................................................ 14
Section 8. Treasurer................................................ 14
ARTICLE V. STOCK.................................................... 15
Section 1. Certificates............................................. 15
Section 2. Consideration for Shares................................. 16
Section 3. Lost Certificates........................................ 16
Section 4. Transfer of Shares....................................... 16
Section 5. Transfer Agent, Registrars and Paying Agents ............ 17
ARTICLE VI. INDEMNIFICATION OF CERTAIN PERSONS ...................... 17
Section 1. Indemnification.......................................... 17
Section 2. Right to Indemnification................................. 18
Section 3. Effect of Termination of Action.......................... 18
Section 4. Groups Authorized to Make Indemnification Determination.. 18
Section 5. Court-Ordered Indemnification ........................... 19
Section 6. Advance of Expenses ..................................... 19
Section 7. Additional Indemnification to Certain Persons Other
Than Directors..................................... 20
Section S. Witness Expenses......................................... 20
Section 9. Report to Shareholders................................... 20
ARTICLE VII. PROVISION OF INSURANCE................................... 20
Section 1. Provision of Insurance .................................. 20
ARTICLE VIII. MISCELLANEOUS............................................ 21
Section 1. Seal .................................................... 21
Section 2. Fiscal Year ............................................. 21
Section 3. Amendments .............................................. 21
Section 4. Receipt of Notices by the Corporation ................... 21
Section 5. Gender .................................................. 21
Section 6. Conflicts ............................................... 21
Section 7. Definitions ............................................. 21
iii
<PAGE>
BYLAWS
OF
EURO INDUSTRIES LTD.
ARTICLE I.
OFFICES
The principal office of the corporation shall be designated from time
to time by the corporation and may be within or outside the State of Colorado.
The corporation may have such other offices, either within or outside
the State of Colorado, as the board of directors may designate or as the
business of the corporation may require from time to time.
The registered office of the corporation required by the Colorado
Business Corporation Act to be maintained in Colorado may be, but need not be,
identical with the principal office, and the address of the registered office
may be changed from time to time by the board of directors.
ARTICLE II.
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held each year on a date and at a time fixed by the board of directors of the
corporation (or by the president in the absence of action by the board of
directors), for the purpose of electing directors and for the transaction of
such other business as may come before the meeting. If the election of directors
is not held on the day fixed as provided herein for any annual meeting of the
shareholders, or any adjournment thereof, the board of directors shall cause the
election to be held at a special meeting of the shareholders as soon thereafter
as it may conveniently be held.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper can of or proper demand for a special
meeting and notice of the special meeting was not given within thirty days after
the date of the call or the date the last of the demands necessary to require
calling of the meeting was received by the corporation pursuant to C.R.S. ss.
7-107-102(1)(b), or the special meeting was not held in accordance with the
notice.
1
<PAGE>
Section 2. Special Meetings. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors. The president shall call a special
meeting of the shareholders if the corporation receives one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by holders of shares representing at least ten percent of
all the votes entitled to be cast on any issue proposed to be considered at the
meeting.
Section 3. Place of Meeting. The board of directors may designate any
place, either within or outside Colorado, as the place for any annual meeting or
any special meeting called by the board of directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or outside Colorado, as the place for such meeting. If no
designation is made, or if a special meeting is called other than by the board,
the place of meeting shall be the principal office of the corporation.
Section 4. Notice of Meeting. Written notice stating the place, date,
and hour of the meeting shall be given not less than ten nor more than sixty
days before the date of the meeting, except that (i) if the number of authorized
shares is to be increased, at least thirty days' notice shall be given, or (ii)
if any other longer notice period is required by the Colorado Business
Corporation Act, such longer period of notice shall be applicable. The secretary
shall be required to give such notice only to shareholders entitled to vote at
the meeting except as otherwise required by the Colorado Business Corporation
Act.
Notice of a special meeting shall include a description of the purpose
or purposes of the meeting. Notice of an annual meeting need not include a
description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity which
this corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the corporation, or (v) any other purpose for which a statement
of purpose is required by the Colorado Business Corporation Act. Notice shall be
given personally or by mail, private carrier, telegraph, teletype,
electronically transmitted facsimile or other form of wire or wireless
communication by or at the direction of the president, the secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed and if in a comprehensible form, such notice
shall be deemed to be given and effective when deposited in the United States
mail, addressed to the shareholder at his address as it appears in the
corporation's current record of shareholders, with postage prepaid. If notice is
given other than by mail, and provided that such notice is in a comprehensible
form, the notice is given and effective on the date actually received by the
shareholder.
If requested by the person or persons lawfully calling such meeting,
the secretary shall give notice thereof at corporate expense. No notice need be
sent to any shareholder if three successive notices mailed to the last known
address of such shareholder have been returned as
2
<PAGE>
undeliverable until such time as another address for such shareholder is made
known to the corporation by such shareholder. In order to be entitled to receive
notice of any meeting, a shareholder shall advise the corporation in writing of
any change in such shareholder's mailing address as shown on the corporation's
books and records.
When a meeting is adjourned to another date, time or place, notice need
not be given of the new date, time or place if the new date, time or place of
such meeting is announced before adjournment at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact any
business which may have been transacted at the original meeting. If the
adjournment is for more than 120 days, or if a new record date is fixed for the
adjourned meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time
and date of the meeting by a writing signed by such shareholder. Such waiver
shall be delivered to the corporation for filing with the corporate records, but
this delivery and filing shall not be conditions to the effectiveness of the
waiver. Further, by attending a meeting either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of the
meeting unless the shareholder objects at the beginning of the meeting to the
holding of the meeting or the transaction of business at the meeting because of
lack of notice or defective notice. By attending the meeting, the shareholder
also waives any objection to consideration at the meeting of a particular matter
not within the purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, or (iii)
demand a special meeting, or to make a determination of shareholders for any
other proper purpose, the board of directors may fix a future date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the day before the notice of the meeting is
given to shareholders, or the date on which the resolution of the board of
directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting. Unless otherwise specified when the record
date is fixed, the time of day for such determination shall be as of the
corporation's close of business on the record date.
Notwithstanding the above, the record date for determining the
shareholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation. The record date
3
<PAGE>
for determining shareholders entitled to demand a special meeting shall be the
date of the earliest of any of the demands pursuant to which the meeting is
called.
Section 6. Voting Lists. After a record date is fixed for a
shareholders' meeting, the secretary shall make, at the earlier of ten days
before such meeting or two business days after notice of the meeting has been
given, a complete list of the shareholders entitled to be given notice of such
meeting or any adjournment thereof. The list shall be arranged by voting groups
and within each voting group by class or series of shares, shall be in
alphabetical order within each class or series, and shall show the address of
and the number of shares of each class or series held by each shareholder. For
the period beginning the earlier of ten days prior to the meeting or two
business days after notice of the meeting is given and continuing through the
meeting and any adjournment thereof, this list shall be kept on file at the
principal office of the corporation, or at a place (which shall be identified in
the notice) in the city where the meeting will be held. Such list shall be
available for inspection on written demand by any shareholder (including for the
purpose of this Section 6 any holder of voting trust certificates) or his agent
or attorney during regular business hours and during the period available for
inspection. The original stock transfer books shall be prima facie evidence as
to who are shareholders entitled to examine such list or to vote at any meeting
of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
4
<PAGE>
Section 8. Quorum and Manner of Acting. A majority of the votes
entitled to be cast on a matter by a voting group represented in person or by
proxy, shall constitute a quorum of that voting group for action on the matter.
If less than a majority of such votes are represented at a meeting, a majority
of the votes so represented may adjourn the meeting from time to time without
further notice, for a period not to exceed 120 days for any one adjournment. If
a quorum is present at such adjourned meeting, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
shareholders present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, unless the meeting is adjourned and a
new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of
directors by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group opposing
the action, unless the vote of a greater number or voting by classes is required
by law or the articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy by signing an appointment form or similar writing, either
personally or by his duly authorized attorney-in-fact. A shareholder may also
appoint a proxy by transmitting or authorizing the transmission of a telegram,
teletype, or other electronic transmission providing a written statement of the
appointment to the proxy, a proxy solicitor, proxy support service organization,
or other person duly authorized by the proxy to receive appointments as agent
for the proxy, or to the corporation. The transmitted appointment shall set
forth or be transmitted with written evidence from which it can be determined
that the shareholder transmitted or authorized the transmission of the
appointment. The proxy appointment form or similar writing shall be filed with
the secretary of the corporation before or at the time of the meeting. The
appointment of a proxy is effective when received by the corporation and is
valid for eleven months unless a different period is expressly provided in the
appointment form or similar writing.
Any complete copy, including an electronically transmitted facsimile,
of an appointment of a proxy may be substituted for or used in lieu of the
original appointment for any purpose for which the original appointment could be
used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
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The death or incapacity of the shareholder appointing a proxy does not affect
the right of the corporation to accept the proxy's authority unless notice of
the death or incapacity is received by the secretary or other officer or agent
authorized to tabulate votes before the proxy exercises his authority under the
appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's
authority appearing on the appointment form, the corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
Section 10. Voting of Shares. Each outstanding share, regardless of
class, shall be entitled to one vote, except in the election of directors, and
each fractional share shall be entitled to a corresponding fractional vote on
each matter submitted to a vote at a meeting of shareholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the articles of incorporation as permitted by the Colorado Business
Corporation Act. Cumulative voting shall not be permitted in the election of
directors or for any other purpose.
In the election of directors each record holder of stock shall be
entitled to vote all of his votes for as many persons as there are directors to
be elected. At each election of directors, that number of candidates equaling
the number of directors to be elected, having the highest number of votes cast
in favor of their election, shall be elected to the board of directors.
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of
redemption is mailed to the holders and a sum sufficient to redeem the shares
has been deposited with a bank, trust company or other financial institution
under an irrevocable obligation to pay the holders the redemption price on
surrender of the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the
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shareholder. If the name signed on a vote, consent, waiver, proxy appointment or
proxy appointment revocation does not correspond to the name of a shareholder,
the corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to
be that of an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator,
executor, guardian or conservator representing the shareholder and, if the
corporation requests, evidence of fiduciary status acceptable to the corporation
has been presented with respect to the vote, consent, waiver, proxy appointment
or proxy appointment revocation;
(iii) the name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation requests,
evidence of this status acceptable to the corporation has been presented with
respect to the vote, consent, waiver, proxy appointment or proxy appointment
revocation;
(iv) the name signed purports to be that of a pledgee, beneficial
owner or attorney-in-fact of the shareholder and, if the corporation requests,
evidence acceptable to the corporation of the signatory's authority to sign for
the shareholder has been presented with respect to the vote, consent, waiver,
proxy appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of the
co-tenants or fiduciaries, and the person signing appears to be acting on behalf
of all the co-tenants or fiduciaries; or
(vi) he acceptance of the vote, consent, waiver, proxy
appointment or proxy appointment revocation is otherwise proper under rules
established by the corporation that are not inconsistent with this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section is
liable in damages for the consequences of the acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent
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(or counterparts thereof) that sets forth the action so taken is signed by all
of the shareholders entitled to vote with respect to the subject matter thereof
and received by the corporation. Such consent shall have the same force and
effect as a unanimous vote of the shareholders and may be stated as such in any
document. Action taken under this Section 12 is effective as of the date the
last writing necessary to effect the action is received by the corporation,
unless all of the writings specify a different effective date, in which case
such specified date shall be the effective date for such action. If any
shareholder revokes his consent as provided for herein prior to what would
otherwise be the effective date, the action proposed in the consent shall be
invalid. The record date for determining shareholders entitled to take action
without a meeting is the date the corporation first receives a writing upon
which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of the
shareholders may participate in an annual or special shareholders' meeting by,
or the meeting may be conducted through the use of, any means of communication
by which all persons participating in the meeting may hear each other during the
meeting. A shareholder participating in a meeting by this means is deemed to be
present in person at the meeting.
ARTICLE III.
BOARD OF DIRECTORS
Section 1. General Powers. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of its board of directors, except as otherwise
provided in the Colorado Business Corporation Act or the articles of
incorporation.
Section 2. Number, Qualifications and Tenure. The number of directors
of the corporation shall be fixed from time to time by the board of directors,
within a range of no less than one or more than five, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. A director shall be a natural person who is eighteen years
of age or older. A director need not be a resident of Colorado or a shareholder
of the corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Colorado Business Corporation Act. Any director may be removed by the
shareholders of the voting group that elected the director, with or without
cause, at a meeting
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called for that purpose. The notice of the meeting shall state that the purpose
or one of the purposes of the meeting is removal of the director. A director may
be removed only if the number of votes cast in favor of removal exceeds the
number of votes cast against removal.
Section 3. Vacancies. Any director may resign at any time by giving
written notice to the secretary. Such resignation shall take effect at the time
the notice is received by the secretary unless the notice specifies a later
effective date. Unless otherwise specified in the notice of resignation, the
corporation's acceptance of such resignation shall not be necessary to make it
effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders at a special meeting called
for that purpose or by the board of directors. If the directors remaining in
office constitute fewer than a quorum of the board, the directors may fill the
vacancy by the affirmative vote of a majority of all the directors remaining in
office. If elected by the directors, the director shall hold office until the
next annual shareholders' meeting at which directors are elected. If elected by
the shareholders, the director shall hold office for the unexpired term of his
predecessor in office; except that, if the director's predecessor was elected by
the directors to fill a vacancy, the director elected by the shareholders shall
hold office for the unexpired term of the last predecessor elected by the
shareholders.
Section 4. Regular Meetings. A regular meeting of the board of
directors shall be held without notice immediately after and at the same place
as the annual meeting of shareholders. The board of directors may provide by
resolution the time and place, either within or outside Colorado, for the
holding of additional regular meetings without other notice.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or any one director. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or outside Colorado, as the place for holding
any special meeting of the board of directors called by them, provided that no
meeting shall be called outside the State of Colorado unless a majority of the
board of directors has so authorized.
Section 6. Notice. Notice of the date, time and place of any special
meeting shall be given to each director at least two days prior to the meeting
by written notice either personally delivered or mailed to each director at his
residence or business address, or by notice transmitted by private courier,
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be given and
to be effective on the earlier of (i) five days after such notice is deposited
in the United States mail, properly addressed, with first class postage prepaid,
or (ii) the date shown on the return receipt, if mailed by registered or
certified mail return receipt requested, provided that the return receipt is
signed by the director to whom the notice is addressed. If notice is given by
telex, electronically transmitted facsimile or other similar form of wire or
wireless communication, such notice shall be deemed to be given and to be
effective when sent, and with respect to a telegram, such notice shall be deemed
to be given and to be effective when the telegram is delivered to the telegraph
company. If a director has designated in writing one or more reasonable
addresses or facsimile
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numbers for delivery of notice to him, notice sent by mail, telegraph, telex,
electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records, but such
delivery and filing shall not be conditions to the effectiveness of the waiver.
Further, a director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless at the beginning of the meeting, or
promptly upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by the
board of directors pursuant to Article III, Section 2 or, if no number is fixed,
a majority of the number in office immediately before the meeting begins, shall
constitute a quorum for the transaction of business at any meeting of the board
of directors. If less than such majority is present at a meeting, a majority of
the directors present may adjourn the meeting from time to time without further
notice, for a period not to exceed sixty days at any one adjournment.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 9. Compensation. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 10. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors or committee of the board at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless (i) the director objects at the beginning of the
meeting, or promptly upon his arrival, to the holding of the meeting or the
transaction of business at the meeting and does not thereafter vote for or
assent to any action taken at the meeting, (ii) the director contemporaneously
requests that his dissent or abstention as to any specific action taken be
entered in the minutes of the meeting, or (iii) the director causes written
notice of his dissent or abstention as to any specific action to be received by
the presiding officer of the meeting before its adjournment or by the secretary
promptly after the adjournment of the meeting. A director may dissent to a
specific action at a meeting, while assenting to others. The right to dissent to
a specific action taken at a meeting of the board of
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directors or a committee of the board shall not be available to a director who
voted in favor of such action.
Section 11. Committees. By resolution adopted by a majority of all the
directors in office when the action is taken, the board of directors may
designate from among its members an executive committee and one or more other
committees, and appoint one or more members of the board of directors to serve
on them. To the extent provided in the resolution, each committee shall have all
the authority of the board of directors, except that no such committee shall
have the authority to (i) authorize distributions, (ii) approve or propose to
shareholders actions or proposals required by the Colorado Business Corporation
Act to be approved by shareholders, (iii) fill vacancies on the board of
directors or any committee thereof, (iv) amend the articles of incorporation,
(v) adopt, amend or repeal the bylaws, (vi) approve a plan of merger not
requiring shareholder approval, (vii) authorize or approve the reacquisition of
shares unless pursuant to a formula or method prescribed by the board of
directors, or (viii) authorize or approve the issuance or sale of shares, or
contract for the sale of shares or determine the designations and relative
rights, preferences and limitations of a class or series of shares, except that
the board of directors may authorize a committee or officer to do so within
limits specifically prescribed by the board of directors. The committee shall
then have fall power within the limits set by the board of directors to adopt
any final resolution setting forth all preferences, limitations and relative
rights of such class or series and to authorize an amendment of the articles of
incorporation stating the preferences, limitations and relative rights of a
class or series for filing with the Secretary of State under the Colorado
Business Corporation Act.
Sections. 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees and their members
appointed under this Section 11.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the board of
directors or a member of the committee in question with his responsibility to
conform to the standard of care set forth in Article III, Section 14 of these
bylaws.
Section 12. Informal Action by Directors. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board of directors may be taken without a meeting if a written consent
(or counterparts thereof) that sets forth the action so taken is signed by all
of the directors entitled to vote with respect to the action taken. Such consent
shall have the same force and effect as a unanimous vote of the directors or
committee members and may be stated as such in any document. Unless the consent
specifies a different effective time or date, action taken under this Section 12
is effective at the time or date the last director signs a writing describing
the action taken, unless, before such time, any director has revoked his consent
by a writing signed by the director and received by the president or the
secretary of the corporation.
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Section 13. Telephonic Meetings. The board of directors may permit any
director (or any member of a committee designated by the board) to participate
in a regular or special meeting of the board of directors or a committee thereof
through the use of any means of communication by which all directors
participating in the meeting can hear each other during the meeting. A director
participating in a meeting in this manner is deemed to be present in person at
the meeting.
Section 14.Standard of Care. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the corporation or its
shareholders for any action he takes or omits to take as a director if, in
connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom a director is entitled to rely are (i)
one or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters presented, (ii)
legal counsel, public accountant, or other person as to matters which the
director reasonably believes to be within such person's professional or expert
competence, or (iii) a committee of the board of directors on which the director
does not serve if the director reasonably believes the committee merits
confidence.
ARTICLE IV.
OFFICERS AND AGENTS
Section 1. General. The officers of the corporation shall be a
president, one or more vice presidents, a secretary and a treasurer, each of
whom shall be appointed by the board of directors and shall be a natural person
eighteen years of age or older. One person may hold more than one office. The
board of directors or an officer or officers so authorized by the board may
appoint such other officers, assistant officers, committees and agents,
including a chairman of the board, assistant secretaries and assistant
treasurers, as they may consider necessary. Except as expressly prescribed by
these bylaws, the board of directors or the officer or officers authorized by
the board shall from time to time determine the procedure for the appointment of
officers, their authority and duties and their compensation, provided that the
board of directors may change the authority, duties and compensation of any
officer who is not appointed by the board.
Section 2. Appointment and Term of Office. The officers of the
corporation to be appointed by the board of directors shall be appointed at each
annual meeting of the board held
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after each annual meeting of the shareholders. If the appointment of officers is
not made at such meeting or if an officer or officers are to be appointed by
another officer or officers of the corporation, such appointments shall be made
as determined by the board of directors or the appointing person or persons.
Each officer shall hold office until the first of the following occurs: his
successor shall have been duly appointed and qualified, his death, his
resignation, or his removal in the manner provided in Section 3.
Section 3. Resignation and Removal. An officer may resign at any time
by giving written notice of resignation to the president, secretary or other
person who appoints such officer. The resignation is effective when the notice
is received by the corporation unless the notice specifies a later effective
date.
Any officer or agent may be removed at any time with or without cause
by the board of directors or an officer or officers authorized by the board.
Such removal does not affect the contract rights, if any, of the corporation or
of the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring, may
be filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors, or
officer or officers authorized by the board of directors, may remove the officer
at any time before the effective date and may fill the resulting vacancy.
Section 5. President. The president shall preside at all meetings of
shareholders and all meetings of the board of directors unless the board of
directors has appointed a chairman, vice chairman, or other officer of the board
and has authorized such person to preside at meetings of the board of directors.
Subject to the direction and supervision of the board of directors, the
president shall be the chief executive officer of the corporation, and shall
have general and active control of its affairs and business and general
supervision of its officers, agents and employees. Unless otherwise directed by
the board of directors, the president shall attend in person or by substitute
appointed by him, or shall execute on behalf of the corporation written
instruments appointing a proxy or proxies to represent the corporation, at all
meetings of the stockholders of any other corporation in which the corporation
holds any stock. On behalf of the corporation, the president may in person or by
substitute or by proxy execute written waivers of notice and consents with
respect to any such meetings. At all such meetings and otherwise, the president,
in person or by substitute or proxy, may vote the stock held by the corporation,
execute written consents and other instruments with respect to such stock, and
exercise any and all rights and powers incident to the ownership of said stock,
subject to the instructions, if any, of the board of directors. The president
shall have custody of the treasurer's bond, if any. The president shall have
such additional authority and duties as are appropriate
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and customary for the office of president and chief executive officer, except as
the same may be expanded or limited by the board of directors from time to time.
Section 6. Vice Presidents. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if more than one, the vice presidents in the order
designated by the board of directors, of if the board makes no such designation,
then the vice president designated by the president, or if neither the board nor
the president makes any such designation, the senior vice president as
determined by first election to that office), shall have the powers and perform
the duties of the president.
Section 7. Secretary. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors without a meeting, a record of all actions taken by a
committee of the board of directors in place of the board of directors on behalf
of the corporation, and a record of all waivers of notice of meetings of
shareholders and of the board of directors or any committee thereof, (ii) see
that all notices are duly given in accordance with the provisions of these
bylaws and as required by law, (iii) serve as custodian of the corporate records
and of the seal of the corporation and affix the seal to all documents when
authorized by the board of directors, (iv) keep at the corporation's registered
office or principal place of business a record containing the names and
addresses of all shareholders in a form that permits preparation of a list of
shareholders arranged by voting group and by class or series of shares within
each voting group, that is alphabetical within each class or series and that
shows the address of, and the number of shares of each class or series held by,
each shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past three years to shareholders as a group or
to the holders of any class or series of shares as a group, a list of the names
and business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (viii) in general, perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him by the
president or by the board of directors. Assistant secretaries, if any, shall
have the same duties and powers, subject to supervision by the secretary. The
directors and/or shareholders may however respectively designate a person other
than the secretary or assistant secretary to keep the minutes of their
respective meetings.
Any books, records, or minutes of the corporation may be in written
form or in any form capable of being converted into written form within a
reasonable time.
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Section 8. Treasurer. The treasurer shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. Subject to the limits imposed by the board of directors,
he shall receive and give receipts and acquittances for money paid in on account
of the corporation, and shall pay out of the corporation's funds on hand all
bills, payrolls and other just debts of the corporation of whatever nature upon
maturity. He shall perform all other duties incident to the office of the
treasurer and, upon request of the board, shall make such reports to it as may
be required at any time. He shall, if required by the board, give the
corporation a bond in such sums and with such sureties as shall be satisfactory
to the board, conditioned upon the faithful performance of his duties and for
the restoration to the corporation of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation. He shall have such other powers and perform such other
duties as may from time to time be prescribed by the board of directors or the
president. The assistant treasurers, if any, shall have the same powers and
duties, subject to the supervision of the treasurer.
The treasurer shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate system of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
ARTICLE V.
STOCK
Section 1. Certificates. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by the president, a vice president, the secretary or an assistant
secretary. In case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, such certificate may nonetheless be issued by the
corporation with the same effect as if he were such officer at the date of its
issue. The names of the owners of the certificates, the number of shares, and
the date of issue shall be entered on the books of the corporation. Each
certificate representing shares shall state upon its face:
(i) That the corporation is organized under the laws of Colorado;
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(ii) The name of the person to whom issued;
(iii) The number and class of the shares and the designation of
the series, if any, that the certificate represents;
(iv) The par value, if any, of each share represented by the
certificate;
(v) If the corporation is authorized to issue different classes
of shares or different series within a class, the certificate shall contain a
conspicuous statement, on the front or the back, that the corporation will
furnish to the shareholder, on request in writing and without charge,
information concerning the designations, preferences, limitations, and relative
rights applicable to each class, the variations in preferences, limitations, and
rights determined for each series, and the authority of the board of directors
to determine variations for future classes or series; and
(vi) Any restrictions imposed by the corporation upon the
transfer of the shares represented by the certificate.
If shares are not represented by certificates, within a reasonable time
following the issue or transfer of such shares, the corporation shall send the
shareholder a complete written statement of all of the information required to
be provided to holders of uncertificated shares by the Colorado Business
Corporation Act.
Section 2. Consideration for Shares. Certificates or uncertificated
shares shall not be issued until the shares represented thereby are fully paid.
The board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment for
shares of the corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
Section 3. Lost Certificates. In case of the alleged loss, destruction
or mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary
16
<PAGE>
stamps as may be required by law and evidence of compliance with all applicable
securities laws and other restrictions, the corporation shall issue a new
certificate to the person entitled thereto, and cancel the old certificate.
Every such transfer of stock shall be entered on the stock books of the
corporation which shall be entered on the stock books of the corporation which
shall be kept at its principal office or by the person and the place designated
by the board of directors.
Except as otherwise expressly provided in Article 11, Sections 7 and
11, and except for the assertion of dissenters' rights to the extent provided in
Article 113 of the Colorado Business Corporation Act, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as the
owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or rights
deriving from such shares on the part of any person other than the registered
holder, including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares on the part of any person other
than the registered holder, including without limitation any purchaser, assignee
or transferee of such shares or rights deriving from such shares, unless and
until such other person becomes the registered holder of such shares, whether or
not the corporation shall have either actual or constructive notice of the
claimed interest of such other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board may
at its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Colorado. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI.
INDEMNIFICATION OF CERTAIN PERSONS
Section 1. Indemnification. For purposes of Article VI, a "Proper
Person" means any person (including the estate or personal representative of a
director) who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or informal, by
reason of the fact that he is or was a director, officer, employee, fiduciary or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, fiduciary or agent of any
foreign or domestic profit or nonprofit corporation or of any partnership, joint
venture, trust, profit or nonprofit unincorporated association, limited
liability company, or other enterprise or employee benefit plan. The corporation
shall indemnify any Proper Person 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 connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 4 of this
Article that he conducted himself in good faith and that he reasonably believed
(i) in the case of conduct in his official capacity with the corporation, that
his conduct was in the corporation's
17
<PAGE>
best interests, or (ii) in all other cases (except criminal cases), that his
conduct was at least not opposed to the corporation's best interests, or (iii)
in the case of any criminal proceeding, that he had no reasonable cause to
believe his conduct was unlawful. Official capacity means, when used with
respect to a director, the office of director and, when used with respect to any
other Proper Person, the office in a corporation held by the officer or the
employment, fiduciary or agency relationship undertaken by the employee,
fiduciary, or agent on behalf of the corporation. Official capacity does not
include service for any other domestic or foreign corporation or other person or
employee benefit plan.
A director's conduct with respect to an employee benefit plan for a
purpose the director reasonably believed to be in the interests of the
participants in or beneficiaries of the plan is conduct that satisfies the
requirements in (ii) of this Section 1. A director's conduct with respect to an
employee benefit plan for a purpose that the director did not reasonably believe
to be in the interests of the participants in or beneficiaries of the plan shall
be deemed not to satisfy the requirement of this section that he conduct himself
in good faith.
No indemnification shall be made under this Article VI to a Proper
Person with respect to any claim, issue or matter in connection with a
proceeding by or in the right of a corporation in which the Proper Person was
adjudged liable to the corporation or in connection with any proceeding charging
that the Proper Person 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 this Section in connection with a proceeding brought by or In the right of
the corporation shall be limited to reasonable expenses, including attorneys'
fees, incurred in connection with the proceeding.
Section 2. Right to Indemnification. The corporation shall indemnify
any Proper Person who was wholly successful, on the merits or otherwise, in
defense of any action, suit, or proceeding as to which he was entitled to
indemnification under Section 1 of this Article VI against expenses (including
attorneys' fees) reasonably incurred by him in connection with the proceeding
without the necessity of any action by the corporation other than the
determination in good faith that the defense has been wholly successful.
Section 3. Effect of Termination of Action. The termination of any
action, suit or proceeding by judgment, order, settlement or conviction, or upon
a plea of nolo contendere or its equivalent shall not of itself create a
presumption that the person seeking indemnification did not meet the standards
of conduct described in Section 1 of this Article VI. Entry of a judgment by
consent as part of a settlement shall not be deemed an adjudication of
liability, as described in Section 2 of this Article VI.
Section 4. Groups Authorized to Make Indemnification Determination.
Except where there is a right to indemnification as set forth in Sections 1 or 2
of this Article or where indemnification is ordered by a court in Section 5, any
indemnification shall be made by the corporation only as determined in the
specific case by a proper group that indemnification of the Proper Person is
permissible under the circumstances because he has met the applicable standards
18
<PAGE>
of conduct set forth in Section I of this Article. This determination shall be
made by the board of directors by a majority vote of those present at a meeting
at which a quorum is present, which quorum shall consist of directors not
parties to the proceeding ("Quorum"). If a Quorum cannot be obtained, the
determination shall be made by a majority vote of a committee of the board of
directors designated by the board, which committee shall consist of two or more
directors not parties to the proceeding, except that directors who are parties
to the proceeding may participate in the designation of directors for the
committee. If a Quorum of the board of directors cannot be obtained and the
committee cannot be established, or even if a Quorum is obtained or the
committee is designated and a majority of the directors constituting such Quorum
or committee so directs, the determination shall be made by (i) independent
legal counsel selected by a vote of the board of directors or the committee in
the manner specified in this Section 4 or, if a Quorum of the full board of
directors cannot be obtained and a committee cannot be established, by
independent legal counsel selected by -a majority vote of the full board
(including directors who are parties to the action) or (ii) a vote of the
shareholders.
Authorization of indemnification and advance of expenses shall be made
in the same manner as the determination that indemnification or advance of
expenses is permissible except that, if the determination that indemnification
or advance of expenses is permissible is made by independent legal counsel,
authorization of indemnification and advance of expenses shall be made by the
body that selected such counsel.
Section 5. Court-Ordered Indemnification. Any Proper Person may apply
for indemnification to the court conducting the proceeding or to another court
of competent jurisdiction for mandatory indemnification under Section 2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If a court determines that the Proper Person is
entitled to indemnification under Section 2 of this Article, the court shall
order indemnification, including the Proper Person's reasonable expenses
incurred to obtain court-ordered indemnification. If the court determines that
such Proper Person is fairly and reasonably entitled to indemnification in view
of all the relevant circumstances, whether or not he met the standards of
conduct set forth in Section 1 of this Article or was adjudged liable in the
proceeding, the court may order such indemnification as the court deems proper
except that if the Proper Person has been adjudged liable, indemnification shall
be limited to reasonable expenses incurred in connection with the proceeding and
reasonable expenses incurred to obtain court-ordered indemnification.
Section 6. Advance of Expenses. Reasonable expenses (including
attorneys' fees) incurred in defending an action, suit or proceeding as
described in Section 1 may be paid by the corporation to any Proper Person in
advance of the final disposition of such action, suit or proceeding upon receipt
of (i) a written affirmation of such Proper Person's good faith belief that he
has met the standards of conduct prescribed by section 1 of this Article VI,
(ii) a written undertaking, executed personally or on the Proper Person's
behalf, to repay such advances if it is ultimately determined that he did not
meet the prescribed standards of conduct (the undertaking shall be an unlimited
general obligation of the Proper Person but need not be secured and may be
accepted without reference to financial ability to make repayment), and (iii) a
determination
19
<PAGE>
is made by the proper group (as described in Section 4 of this Article VI) that
the facts as then known to the group would not preclude indemnification.
Determination and authorization of payments shall be made in the same manner
specified in Section 4 of this Article VI.
Section 7. Additional Indemnification to Certain Persons Other Than
Directors. In addition to the indemnification provided to officers, employees,
fiduciaries or agents because of their status as Proper Persons under this
Article, the corporation may also indemnify and advance expenses to them if they
are not directors of the corporation to a greater extent than is provided in
these bylaws, if not inconsistent with public policy, and if provided for by
general or specific action of its board of directors or shareholders or by
contract.
Section 8. Witness Expenses. The sections of this Article VI do not
limit the corporation's authority to pay or reimburse expenses incurred by a
director in connection with an appearance as a witness in a proceeding at a time
when he has not been made a named defendant or respondent in the proceeding.
Section 9. Report to Shareholders. Any indemnification of or advance of
expenses to a director in accordance with this Article VI, if arising out of a
proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
ARTICLE VII.
PROVISION OF INSURANCE
Section 1. Provision of Insurance. By action of the board of directors,
notwithstanding any interest of the directors in the action, the corporation may
purchase and maintain insurance, in such scope and amounts as the board of
directors deems appropriate, on behalf of any person who is or was a director,
officer, employee, fiduciary or agent of the corporation, or who, while a
director, officer, employee, fiduciary or agent of the corporation, is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee fiduciary or agent of any other foreign or domestic
corporation or of any partnership, joint venture, trust, profit or nonprofit
unincorporated association, limited liability company, other enterprise or
employee benefit plan, against any liability asserted against, or incurred by,
him in that capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under.
the provisions of Article VI or applicable law. Any such insurance may be
procured from any insurance company designated by the board of directors of the
corporation, whether such insurance company is formed under the laws of Colorado
or any other jurisdiction of the United States or elsewhere, including any
insurance company in which the corporation has an equity interest or any other
interest, through stock ownership or otherwise.
20
<PAGE>
ARTICLE VIII.
MISCELLANEOUS
Section 1. Seal. The board of directors may adopt a corporate seal,
which shall be circular in form and shall contain the name of the corporation
and the words, "Seal, Colorado. "
Section 2. Fiscal Year. The fiscal year of the corporation shall be as
established by the board of directors.
Section 3. Amendments. The board of directors shall have power, to the
maximum extent permitted by the Colorado Business Corporation Act, to make,
amend and repeal the bylaws of the corporation at any regular or special meeting
of the board unless the shareholders, in making, amending or repealing a
particular bylaw, expressly provide that the directors may not amend or repeal
such bylaw. The shareholders also shall have the power to make, amend or repeal
the bylaws of the corporation at any annual meeting or at any special meeting
called for that purpose.
Section 4. Receipt of Notices by the Corporation. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (1) at
the registered office of the corporation in Colorado; (2) at the principal
office of the corporation (as that office is designated in the most recent
document filed by the corporation with the secretary of state for Colorado
designating a principal office) addressed to the attention of the secretary of
the corporation; (3) by the secretary of the corporation wherever the secretary
may be found; or (4) by any other person authorized from time to time by the
board of directors or the president to receive such writings, wherever such
person is found.
Section 5. Gender. The masculine gender is used in these bylaws as a
matter of convenience only and shall be interpreted to include the feminine and
neuter genders as the circumstances indicate.
Section 6. Conflicts. In the event of any irreconcilable conflict
between these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
Section 7. Definitions. Except as otherwise specifically provided in
these bylaws, all terms used in these bylaws shall have the same definition as
in the Colorado Business Corporation Act.
21
Exhibit 4
SHARE PURCHASE AGREEMENT (DESTINY SHARES)
THIS AGREEMENT made as of and dated for reference the 15th day of June, 1999
AMONG:
STEVE VESTERGAARD, businessman, of Suite 950, 555 West
Hastings Street, Vancouver, British Columbia, V6B 4N4
(the "Vendor")
AND:
EURO INDUSTRIES LTD., a Colorado corporation having its
registered and records offices at 1919, 14th Street, Boulder,
Colorado, 80302, U.S.A. and having an office and place of
business at Suite 402, 625 Howe Street, Vancouver, British
Columbia, V6C 2T6
(the "Purchaser")
AND:
DESTINY SOFTWARE PRODUCTIONS INC., a British Columbia company
having its registered and records offices at Suite 500 North
Tower, 5811 Cooney Road, Richmond, British Columbia, V6X 3MI
(the "Company")
WITNESSES THAT WHEREAS:
A. The Vendor is the registered and beneficial owners of all the Shares;
B. The Vendor desires to sell the Shares to the Purchaser on the terms and
conditions set forth herein and the Purchaser desires to purchase the
Shares on the terms and conditions hereinafter set forth;
THEREFORE, in consideration of the premises, the mutual covenants and agreements
herein set forth, and the sum of $10 now paid by the Purchaser to each of the
Company and the Vendor (the receipt and sufficiency of which is hereby
acknowledged by each of the Company and the Vendor), the Company and the Vendor
hereby covenant and agree with the Purchaser as follows:
<PAGE>
1.0 INTERPRETATION
1.1 Definitions In this Agreement, the following words and phrases shall
have the meanings set forth after each:
(a) "Assets" means all property and assets of the Company, real and
personal, tangible and intangible, and wheresoever situate,
including without limitation the assets described in the
Financial Statements and Schedule 1. I (a) hereto
(b) "Closing" means the completion of the transactions
contemplated by this Agreement, "Closing Time" means 2:00 p.m.
and "Closing Date" means June 15, 1999 or such other date as
may be agreed upon in writing by the parties hereto;
(c) "Directors" means those persons holding the positions of
directors of the Company on the Closing Date;
(d) "Financial Statements" means the Company's interim financial
statements dated May 28, 1999, consisting of a balance sheet
and statements of income, retained earnings and changes in
financial position, copies of which are attached hereto as
Schedule 1. I (d);
(e) "Lease" means that certain lease agreement for the lease of
premises located at Suite 950, 555 West Hastings Street
pursuant to which the Company pays approximately $4,965 per
month for rent;
(f) "Material Contract" means a subsisting commitment, contract,
agreement, instrument, lease or other obligation to which the
Company is a party or by which it is bound, or to which it or
its assets are subject, pursuant to which the Company has
payment obligations exceeding $ 1,000 on the Closing Date or
which has a term of or will continue in existence for a period
in excess of one year after the Closing Date;
(g) "Person" includes an individual, corporation, body corporate,
partnership, joint venture, association, trust or
unincorporated organization or any trustee, executor,
administrator or other legal representative thereof;
(h) "Purchase Price" means US$600.00;
<PAGE>
(i) "Shares" means I 00 common shares without par value in the
capital of the Company;
(j) "Vendor's Solicitors" means the law firm McRae Holmes & King,
of 1300-11 11 West Georgia Street, Vancouver, British Columbia
(Attention: Mr. Terrence E. King);
1.2 Schedules The following are the schedules to this Agreement:
Schedule 1.1(a) Assets
Schedule 1.1(d) Financial Statement
Schedule 3.1(u) Material Contracts
Schedule 3.1(as) Banks, Trust Companies
1.3 Interpretation For the purposes of this Agreement, except as otherwise
expressly provided herein:
(a) "this Agreement" means this Agreement, including the Schedules
hereto, as it may from time to time be supplemented or amended
and in effect;
(b) all references in this Agreement to a designated "Section",
"paragraph", "subparagraph" or other subdivision, or to a
Schedule to this Agreement, unless otherwise specifically
stated;
(c) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not
to any particular Section, paragraph, subparagraph or other
subdivision or Schedule;
(d) the singular of any term includes the plural and vice versa a
and the use of any term is equally applicable to any gender
and, where applicable, a body corporate;
(e) the word "or" is not exclusive and the word "including" is not
limiting (whether or onto non-limiting language such as
"without limitation" or "but not limited to" or other words of
similar import is used with reference thereof);
(f) any words used herein shall, unless otherwise defined herein
or unless there is something in the subject matter or context
inconsistent therewith, have the meanings ascribed to such
words in the Company Act;
(g) all accounting there not otherwise defined have the meanings
assigned to them in accordance with generally accepted
accounting principles applicable in Canada and applied on a
basis consistent with prior years;
(h) except as otherwise provided, any reference to a statute
includes and is a reference to such statute and to the
regulations made pursuant thereto with all amendments made
thereto and in force from time to time, and to any statute or
regulations that may be passed with have the effect of
supplementing or superseding such statue or such regulations;
(i) where the phrase "to the best of the knowledge of" or phrases
of so similar import are used in this Agreement, it shall be a
requirement that the Person or Persons in respect of whom
<PAGE>
the phrase is used shall have made such due enquiries as are
reasonably necessary to enable such Person to make the
statement or disclosure;
(j) the headings to the sections and subsections of this Agreement
are inserted for convenience only and do not form a part of
this Agreement and are not intended to interpret, define or
limit the scope, extent or intent of this Agreement or any
provision hereof,
(k) any reference to a corporate entity includes and is also a
reference to any corporate entity that is a successor to such
entity;
(1) the language in all parts of this Agreement shall in all cases
be construed as a whole and neither strictly for nor strictly
against any of the parties;
(m) the representations, warranties, covenants and agreements
contained in this Agreement shall not merge in the Closing and
shall continue in full force and effect from and after the
Closing Date;
(n) all references to money in this Agreement and in the Financial
Statements are or shall be to money in lawful money of Canada
unless otherwise specified herein; and if it is necessary to
convert money from another currency to lawful money of Canada,
such money shall be converted to lawful money of Canada as at
the Closing Date.
2.0 SALE AND PURCHASE OF SHARES
---------------------------
2.1 Based on and relying on the representations and warranties set forth in
Sections 3 and 4, on the Closing Date the Purchaser will purchase the Shares and
will pay the Purchase Price therefore, and the Vendor will sell and transfer the
Shares to the Purchaser free and clear of all liens, charges, security
interests, encumbrances and adverse claims whatsoever, all on the terms and
conditions hereinafter set forth.
2.2 The Closing of the sale and purchase of the Shares shall take place at the
offices of the Vendor's Solicitors at 1300-1 1 11 West Georgia Street,
Vancouver, B.C., at the Closing Time on the Closing Date.
2.3 At the Closing the Vendor will deliver or cause to be delivered to the
Purchaser the documents set forth in subsection 5.1(e) hereof and such other
documents as the Purchaser may reasonably require to perfect the purchase and
sale contemplated hereby.
2.4 The Pur6haser will pay and satisfy the Purchase Price at the Closing by
issuing 600,000 common shares with a par value of $0.001 (United States funds)
each to and in the name of the Vendor at a deemed price of $0.001 (United States
funds) each.
3.0 REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Vendor's' Representations and Warranties In order to induce the Purchaser to
enter into and consummate this Agreement, the Vendor and the Company jointly and
severally represent and warrant to
<PAGE>
and covenant with the Purchaser, with the intent that the Purchaser shall rely
upon same in purchasing the Shares, as follows:
(a) Organization and Good Standing of the Company - The Company is
duly incorporated and is validly existing and in good standing
with respect to the filing of annual returns under the laws of
the jurisdiction in which it was incorporated, and has all
necessary corporate power, authority and capacity to own its
property and Assets and to carry on its business as presently
conducted; and neither the nature of the business of the Company
nor the location or character of the property owned or leased by
it requires that the Company be registered or otherwise
qualified or to be in good standing in any other jurisdiction;
(b) Capitalization of Company - The authorized capital of the
Company consists of 10,000 common shares without par value,
and the Shares constitute all of the issued and outstanding
share capital of the Company;
(c) Title - The Vendor is the legal and beneficial owner of and
has good and marketable title to all of the Shares, free of
all liens, charges, security interests, encumbrances and
adverse claims whatsoever, and all of the Shares have been
duly and validly allotted and issued and are outstanding as
fully paid and non-assessable shares in the capital of the
Company;
(d) Absence of Options, etc. - No Person has any agreement, option
or right, contingent or absolute, or any arrangement capable
of becoming an agreement, option or right, or which with the
passage of time or the occurrence of any event could become an
agreement, option or right, at law or in equity:
(i) to require the Company to allot or issue any further
or other shares in its capital or any other security
convertible or exchangeable into shares in its
capital, or to convert or exchange any currently
outstanding securities into or for shares in the
capital of the Company;
(ii) for the issue or allotment of any of the authorized
but unissued shares in the capital of the Company;
(iii) to require the Company to purchase, redeem or
otherwise acquire any of the Shares; or
(iv) to acquire the Shares or any of them, or to require
the Vendor to sell, transfer, assign, pledge, charge,
mortgage or in any other way dispose of or encumber
any of the Shares other than pursuant to this
Agreement;
(e) Authority -The Vendor has due and sufficient right and authority to
enter into this Agreement on the terms and conditions herein set forth
and to transfer legal and beneficial title and ownership of the Shares
to the Purchaser;
(f) Agreement Valid - This Agreement constitutes a legal, valid and binding
obligation of the Vendor, the Vendor is not a party to or bound by or
subject to any indenture, mortgage, lease, agreement, instrument,
statute, regulation, order, judgment, decree or law which would be
violated, contravened or breached by or under which any default would
occur as a result of
<PAGE>
the execution and delivery by the Vendor of this Agreement or the
performance by the Vendor of any of the terms hereof, including without
limitation any triggering event under any law governing the division of
assets, and there is no shareholders' agreement between the Vendor and
the Company;
(g) Residency of Vendor - The Vendor is not a "non-resident" of Canada
within the meaning of Section 116 of the Income Tax Act;
(h) Absence of Undisclosed Liabilities - Except to the extent previously
disclosed to the Purchaser in writing, the Company does not and will
not at the Closing Time have any outstanding indebtedness or any
liabilities or obligations (whether accrued, absolute, contingent or
otherwise);
(i) Financial Statements - The Financial Statements:
(i) are in accordance with the books and accounts of the
Company as at May 28, 1999;
(ii) are true and correct, and present fairly the
financial position of the Company, including its
assets and liabilities, as at May 28, 1999;
(iii) have been prepared in accordance with generally
accepted accounting principles applicable in Canada
and on a basis consistent with prior years; and
since May 28, 1999, there has not been:
(i) any one or more changes in the condition or
operations of the business, assets or financial
affairs of the Company which are, individually or in
the aggregate, materially adverse; or
(ii) any damage, destruction or loss, labour trouble or
other event, development or condition, of any
character (whether or not covered by insurance) which
is not generally known or which has not been
disclosed in writing to the Purchaser, which has or
may materially and adversely affect the business,
Assets or future prospects of the Company;
Accuracy of Records - All material financial transactions of the
Company have been accurately recorded in the books and records of the
Company and such books and records fairly present the financial
position and the corporate affairs of the Company, including without
limitation all material contracts and all material financial
transactions;
(k) Absence of Unusual Transactions - Since May 28, 1999, the Company has not:
(i) transferred, assigned, sold or otherwise disposed of
any of its assets;
(ii) incurred or assumed any obligation or liability
(absolute or contingent) except loans totaling
approximately $108,461;
(iii) issued or sold any shares in its capital stock or any
warrants, bonds, debentures or other corporate
securities or issued, granted or delivered any right,
option or other commitment for the issuance of any
such or other securities;
<PAGE>
(iv) paid any obligation or liability (absolute or
contingent) other than current liabilities in the
ordinary and normal course of business;
(v) declared or made, or committed itself to make, any
payment of any dividend or other distribution in
respect of any of its assets or its shares or
purchased or redeemed any of its shares or split,
consolidated or reclassified any of its shares;
(vi) entered into any material commitment or transaction
not in the ordinary and usual course of its business;
(vii) waived or surrendered any right of substantial value;
(viii) made any gift of money or of any property or assets
to any person;
(ix) purchased or leased any real or personal property
otherwise than pursuant to the Lease;
(x) amended or changed or taken any action to amend or
change its constating documents;
(xi) paid or agreed to pay any wage, salary, management
fee, pension, bonus, share of profits or other
similar benefit to any director, employee or officer
or former director, employee or officer of the
Company;
(xii) made payments of any kind to or on behalf of the
Vendor or any affiliate or associate of the Vendor or
under any management agreement with the Company, save
and except business-related expenses in the ordinary
course of business;
(xiii) mortgaged, pledged, subjected to lien, granted a
security interest in or otherwise encumbered any of
its Assets;
(xiv) made or authorized any capital expenditures;
(xv) authorized or agreed or otherwise have become
committed to do any of the foregoing;
(xvi) had exercised against it, in whole or in part, any
right, option or commitment for the issuance of any
of its securities, including without limitation, any
directors or employee stock options;
(xvii) carried on business other than in the ordinary
course;
(l) Title to Assets - The Company has good and marketable title to
all of its Assets free and clear of all liens, charges,
encumbrances, security interests and adverse claims
whatsoever, and none of the Company's Assets are in the
possession of or under the control of any other person;
<PAGE>
(m) Assets - The Company has previously provided to the Purchaser
in writing a true and complete list of all Assets owned by the
Company and all other personal and real property, and all
fixtures, in the possession or custody of the Company which,
as of the Closing Date, will be leased or held by the Company
under lease, license or similar arrangement, and accurately
describes such Assets, leases, licenses and other similar
arrangements;
(n) No Agreement - There is no agreement, option, understanding or
commitment, or any right or privilege capable of becoming an
agreement, for the purchase from the Company of its business
or any of its Assets other than in the usual and ordinary
course of the Company's business, and the Company is not a
party to or bound by any contract or commitment to pay any
royalty, licence fee or management fee otherwise than as
previously disclosed to the Purchaser;
(o) Condition of Assets - All plant, machinery, facilities and
equipment used by the Company in connection with its business
are in good operating condition and in a good state of
maintenance and repair for plant, machinery, facilities and
equipment of similar age relative to the standards of
maintenance and repair maintained by other companies carrying
on similar business in Canada;
(p) Personal Property Leases - The Company has no leases, licenses
or similar arrangements in respect of personal property;
(q) Work Orders - There are no outstanding work orders or similar
requirements issued by any building, fire, health, labour or
police authorities or from any other federal, provincial or
municipal authority and there are no matters under discussion
with any such authorities relating to work orders or similar
requirements;
(r) Real Property - The Company is not party to or bound by any
leases of real property (written or oral) other than the
Lease, and the Lease is free and clear of any and all liens,
charges and encumbrances of any nature and kind whatsoever;
(s) Real Property Lease Payments - All rental and other payments
required to be paid by the Company pursuant to the Lease have
been duly and regularly paid and the Company is not in default
of any provision of the Lease;
(t) Material Contracts - Schedule 3. 1 (u) to this Agreement is a
true and correct description of each Material Contract of the
Company, and other than as set forth in the schedules to this
Agreement, the Company is not party to or bound by any
Material Contract or commitment, whether oral or written;
(u) Material Contracts in Full Force - The Material Contracts are
all in full force and effect and unamended, no material
default exists in respect thereof on the part of any of the
other parties thereto, and the Vendor is not aware of any
intention on the part of any of the other parties to such
Material Contracts to terminate or materially alter any such
Material Contracts;
<PAGE>
(v) Bonding, etc. - The Company has not provided bonding or other
financial security arrangements in connection with any
contracts, arrangements or transactions with any person;
(w) Employees, Etc. - The Company is not a party to or bound by
any contract of employment, contract of service or contract
for service, or any pension plan, commission arrangement,
profit sharing plan, bonus plan or other similar arrangement,
whether oral, written or implied, except its arrangement with
the Vendor;
(x) Other Service Contracts - The Company does not have any
contracts, agreements, pension plans, severance packages,
commission arrangements, profit sharing plans, bonus plans or
other similar arrangements, whether oral, written or implied,
with lessors, lessees, licensees, managers, accountants,
suppliers, agents, distributors, officers, directors, lawyers
or others that cannot be terminated without penalty on not
more than one-week's notice;
(y) Liability For Employee Damages - The Company is not now liable
for any damages to any former employee, including without
limitation damages resulting from any violation of any
applicable employment law or employment agreement, and the
Company is not now liable or aware of any potential liability
to any current or former employee;
(z) Absence of Other Interest - The company does not own shares in
other securities of, or have an interest in the assets or
business of, any other Person, but pursuant to an agreement of
even date herewith made with Ed Kolic, Wonderfall Productions
Inc. ("Wonderfall"), the Company has agreed to purchase all of
the issued and outstanding shares in the capital of
Wonderfall, subject, inter alia, to the completion of the
transactions contemplated by this Agreement, for $20,000.
(aa) Absence of Guarantees - The Company is not a party to or bound
by any guarantee, indemnification, surety or similar
obligation, and the Company has no indemnity or contingent or
indirect obligation with respect to the obligation of any
other Person (including any obligation to service the debt of
or otherwise acquire an obligation of another Person or to
supply funds to, or otherwise maintain any working capital or
other balance sheet condition of any other Person);
(ab) Absence of Conflicting Agreements - The Company is not party
to, bound by or subject to any indenture, mortgage, lease,
agreement, instrument, judgment or decree which would be
violated or breached by, or under which default would occur or
which could be terminated, cancelled or accelerated, in whole
or in part, as a result of the execution and delivery of this
Agreement or the consummation of any of the transactions
provided herein;
(ac) Insurance - The Company does not maintain any policies of
insurance in force;
(ad) Litigation - There is no basis for and there are no actions,
suits, litigation, investigation, arbitration proceeding,
governmental proceeding or other proceedings (including
appeals and applications for review) outstanding, pending,
threatened against or involving, affecting or possibly
affecting the Vendor, the Company, the Shares or the Assets,
or any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, officer,
instrumentality or arbitrator, which, if determined adversely
<PAGE>
to the Vendor or the Company, as the case may be, might
adversely affect the ability of the Vendor to enter into this
Agreement or to consummate the transactions contemplated
hereby, or adversely affect title to any of the Assets or the
Shares, or the Company's ability to dispose of the Assets or
any of them, in its sole discretion;
(ae) Breach of Law - The Company is not in breach of any laws,
ordinances, statutes, regulations, by-laws, orders or decrees
to which it is subject or which apply to it and which may
materially adversely affect its business, assets or affairs,
or the Shares or the ability of the Purchaser to resell the
Shares;
(af) Copies of Agreements, Etc. - True, correct and complete copies
of all mortgages, leases, material contracts, agreements,
instruments and other documents listed in the Schedules to
this Agreement have been delivered to the Purchaser;
(ag) Corporate Records - To the best of the knowledge and belief of
the Vendor, the Company has kept the records required to be
kept by the Company Act and any other applicable corporate
legislation, and such records are kept in the Company's minute
book and are complete and accurate;
(ah) Absence of Approvals Required - No authorization, approval,
order, license, permit or consent of any governmental
authority, regulatory body or court, and no registration,
declaration or filing by the Vendor or the Company with any
such governmental authority, regulatory body or court is
required in order for the Vendor:
(i) to incur the obligations expressed to be incurred by
the Vendor pursuant to this Agreement;
(ii) to execute and deliver all of the documents and
instruments to be delivered by the Vendor pursuant to
this Agreement;
(iii) to duly perform and observe the terms and provisions
of this Agreement; and
(iv) to render this Agreement legal, valid, binding and
enforceable in accordance with its terms;
(ai) Permits and Licenses - The Company holds all permits,
licenses, consents and authorities issued by any government or
governmental authority, or any municipal, regional or other
authority, or any subdivision thereof, including, without
limitation, any governmental department, commission, bureau,
board or administrative agency, which are necessary or
desirable in connection with the conduct and operation of the
Company's business and the ownership or leasing of its assets
and the conduct and operation of the Company's business as the
same are now owned, leased, conducted or operated is not in
breach of or in default under any term or condition of any
thereof;
(aj) Filings - The Company:
(i) has duly filed in a timely manner:
(A) all income tax returns required to be filed and all
such returns; and
<PAGE>
(B) all goods and services tax forms, sales tax forms,
corporation capital tax forms and returns, and all
other reports and information required to be filed
with all applicable government authorities, agencies
or regulatory bodies;
and all of such forms have been completed accurately and
correctly in all respects
(ii) has paid all assessments and reassessments and all
other taxes, governmental charges (including all
federal, provincial and local taxes, assessments,
reassessments or other imposts in respect of its
income, business, assets or property) and all
interest, fines and penalties thereon with respect to
the Company for all previous fiscal years and all
required installments for the current fiscal year;
(iii) has provided adequate reserves for all taxes for the
periods covered by, and such reserves are reflected
in the materials previously supplied by the Vendor to
the Purchaser;
(iv) has withheld from each payment made to each of its
employees the amounts required to be withheld
pursuant to applicable laws or regulations, and has
paid the same to the proper receiving authorities,
except for amounts collected but not yet required to
be paid to such receiving authorities;
(v) the Company has paid all goods and services taxes and all
sales taxes collected by it to the proper receiving
authority, except for amounts so collected but not yet
required to be paid to such receiving authority;
and there is no agreement, waiver or other arrangement providing
for an extension of time with respect to the filing of any tax
return, or payment of any tax, governmental charge or deficiency
by the Company nor is there any action, suit, proceeding,
investigation or claim now threatened or pending against the
Company in respect of, or discussions underway with any
governmental authority relating to, any such tax or governmental
charge or deficiency;
(ak) Additional Tax Matters - The Company has not:
(i) made any tax election with respect to the acquisition
or disposition of any property;
(ii) acquired or had the use of any property from a person
with whom it was not dealing at arms length other
than at fair market value; or
(iii) disposed of anything to a person with whom it was not
dealing at arm's length for proceeds less than the
fair market value thereof;
(al) Absence of Contingent Tax Liabilities - The Company has no
contingent tax liabilities, nor are there any grounds which
would prompt a reassessment by any taxing authority, including
aggressive treatment of income and expenses in filing earlier
tax returns;
(am) Statements Attached to Tax Returns - The financial statements
and schedules attached to the corporate income tax returns as
filed by the Company for each of its taxation
<PAGE>
years reflect and disclose all transactions to which the
Company was party as required by applicable taxation laws and
all of the transactions to which the Company was or is a party
are reflected or disclosed in such financial statements and
schedules and the corporate income tax returns and schedules
have been duly and accurately completed as required by such
laws;
(an) Trade Marks, etc. - The Company has no trade marks, trade
names, trade secrets, patents and copyrights, domestic or
foreign, registered or unregistered, and no trade marks are
required for the proper carrying on of the Company's business;
(ao) Indebtedness to Vendor - Except for the payment of salaries
and reimbursement for out-of-pocket expenses in the ordinary
course and except for amounts reflected in the Financial
Statements and other Schedules hereto, the Company will not at
Closing be indebted to the Vendor or any director, officer or
employee of the Company or any affiliate or associate of any
of them, on any account whatsoever;
(ap) No Withheld Information - No information relating to the
Company or its business which is known to the Vendor or which
on reasonable inquiry ought to be known to the Vendor, and
which would materially affect a purchaser for value of the
Shares or their decision to purchase the Shares, has been
withheld from the Purchaser;
(aq) Compliance with Laws - The business of the Company is not
being conducted in contravention of any law, rule or
regulation, or any order of any court or other body having
jurisdiction, and the Shares have been allotted and issued to
the Vendor, and will be sold and transferred to the Purchaser,
in compliance with all applicable laws, rules and regulations;
(ar) Conduct of Business - Except as otherwise contemplated or
permitted by this Agreement, during the period from the date
of this Agreement to the Closing Time, the Vendor will cause
the Company to conduct the Company's business in the ordinary
and normal course thereof and not, without the prior written
consent of the Purchaser, enter into any transaction which
would constitute a breach of the representations, warranties
or agreements contained herein;
(as) Banking - Schedule 3. 1 (as) is a true and complete list
showing:
(i) the name and location of each bank, trust company or
other institution with which the Company has an
account or safety deposit box, and the names or
designations of all persons authorized to draw
thereon or to have access thereto; and
(ii) the name of each person holding a general or special
power of attorney from the Company and the terms
thereof;
(at) No other Knowledge - The Vendor has no information or
knowledge of any facts relating to the Company or its
business which, if known to the Purchaser, might reasonably
be expected to deter the Purchaser from completing the
transactions contemplated hereby;
<PAGE>
and the Vendor and the Company jointly and severally covenant, represent and
warrant to and in favour of and with the Purchaser that all of the
representations and warranties set forth in this Section 3.1 shall be true and
correct at the Closing Time as if made on that date.
3.2 Other Representations. All statements contained in any certificate or other
instrument delivered by or on behalf of the Vendor pursuant hereto or in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Vendor and the Company hereunder, as the
case may be.
3.3 Survival The representations and warranties of the Vendor and the Company
contained in this Agreement shall survive the Closing and the payment of the
Purchase Price and, notwithstanding the Closing and the payment of the Purchase
Price, notwithstanding any investigations or enquiries made by the Purchaser
prior to the Closing and notwithstanding the waiver of any condition by the
Purchaser, the representations, warranties, covenants and agreements of the
Vendor and the Company shall (except where otherwise specifically provided in
this Agreement) survive the Closing and shall continue in full force and effect
for a period of three years from the Closing Date for all matters except income
tax liability or other tax matters. With respect to income tax liability of the
Company or other tax matters, the representations, warranties, covenants and
agreements of the Vendor and the Company shall survive the Closing and continue
in full force and effect for three years after the Closing Date.
3.4 Reliance The Vendor and the Company acknowledge and agree that the Purchaser
has entered into this Agreement relying on the warranties and representations
and other terms and conditions of this Agreement notwithstanding any independent
searches or investigations that may be undertaken by or on behalf of the
Purchaser and that no information which is now known or should be known or which
may hereafter become known to the Purchaser or its officers, directors or
professional advisers shall limit or extinguish the Purchaser's right to
indemnification hereunder.
4.0 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
-----------------------------------------------
4.1 Representations and Warranties In order to induce the Vendor to enter into
and to consummate the transactions contemplated by this Agreement, the Purchaser
hereby represents and warrants to the Vendor that:
(a) Authority Relative to Agreement - The Purchaser has all
necessary corporate power, authority and capacity to enter
into this Agreement and to perform its obligations hereunder,
and the execution and delivery of this Agreement has been duly
authorized by all necessary corporate action on the part of
the Purchaser;
(b) Binding Agreement - This Agreement will, when delivered,
constitute a valid and binding obligation of the Purchaser;
(c) No Breach - The Purchaser is not a party to, bound by or
subject to any indenture, mortgage, lease, agreement,
instrument, statute, regulation, order, judgment, decree or
law which would be violated, contravened or breached by or
under which any default would occur as a result of the
execution and delivery by the Purchaser of this Agreement or
the performance by the Purchaser of any of the terms hereof;
and
(d) Financing - The Purchaser has the ability to obtain financing
for the business of the Company in an amount not less than
$595,950 by issuing shares at prices not less than $1.50
(United States funds);
and the Purchaser covenants, represents and warrants with and in favour of the
Vendor that all of the representations and warranties set forth in this Section
4.1 shall be true and correct at the Closing Time as if made on that date.
4.2 Survival The representations and warranties of the Purchaser contained in
this Agreement shall survive the Closing and the purchase of the Shares and,
notwithstanding the Closing and the purchase of the Shares, the representations
and warranties of the Purchaser shall continue in full force and effect for the
benefit of the Vendor for a period of two years from the Closing Date.
4.3 Reliance The Purchaser acknowledges and agrees that the Vendor has entered
into this Agreement relying on the warranties and representations and other
terms and conditions of this Agreement notwithstanding any independent searches
or investigations that may be undertaken by or on behalf of the Vendor and that
no information which is now known or should be known or which may hereafter
become known to the Vendor or his professional advisers shall limit or
extinguish the right to indemnification hereunder.
5.0 CONDITIONS PRECEDENT
--------------------
5.1 All obligations of the Purchaser under this Agreement are subject to the
fulfillment, on or before the Closing Date, of each of the following conditions:
(a) Truth and Accuracy of Representations of the Vendor at Closing
- The representations and warranties of the Vendor made in
Article 3 shall be true and correct in all material respects
as at the Closing and with the same effect as if made at and
as of the Closing and the Vendor has complied in all material
respects with his obligations and covenants hereunder;
(b) Performance of Obligations - The Vendor shall have caused the
Company to have performed and complied with all the
obligations to be performed and complied with by the Company;
(c) Absence of Injunctions, etc. - No injunction or restraining
order of any Court or administrative tribunal of competent
jurisdiction shall be in effect prohibiting the transactions
contemplated hereby and no action or proceeding shall have
been instituted or be pending before any Court or
administrative tribunal to restrain or prohibit the
transactions between the parties contemplated hereby;
(d) Absence of Change of Conditions - No event shall have occurred
or condition or state of facts of any character shall have
arisen or legislation (whether by statute, rule, regulation,
by-law or otherwise) shall have been introduced which might
reasonably be expected to have a materially adverse effect
upon the financial condition, results of operations or
business prospects of the Company;
<PAGE>
(e) Closing Documentation - The Purchaser shall have received from
the Vendor and, where applicable, the Company the following
closing documentation:
(i) share certificates representing the Shares issued in
the name of the Vendor, duly endorsed for transfer to
the Purchaser;
(ii) a certified copy of resolutions of the directors of
the Company authorizing the transfer of the Shares,
the registration of the Shares in the name of the
Purchaser and the issuance of the share certificates
representing the Shares registered in the name of the
Purchaser;
(iii) share certificates registered in the name of the
Purchaser, signed by a director-of the Company,
representing the Shares;
(iv) a certified copy of the register of members of the
Company showing the Purchaser as the registered owner
of the Shares and the sole shareholder of the
Company;
(v) all other necessary consents, waivers (including
waivers of pre-emptive rights), and authorizations
required to enable the transfer of the Shares to the
Purchaser as provided for in this Agreement;
(vi) all such instruments of transfer, duly executed,
which, in the opinion of the Purchaser acting
reasonably, are necessary to effect and evidence the
transfer of the Shares to the Purchaser free and
clear of all liens, charges and encumbrances
whatsoever;
(f) Due Diligence - The Purchaser's due diligence procedures having
confirmed to the satisfaction of the Purchaser, acting
reasonably, the accuracy of the Financial Statements; and
(g) Legal Opinion - The Purchaser having received an opinion
satisfactory to it and to the Purchaser's Solicitors from the
Vendor's Solicitors as at the Closing Date as to the due
incorporation of the Company, as to the good standing of the
Company and as to the due authorization, execution and delivery
of this Agreement by the Vendor.
5.2 The conditions set forth in this Article 5 are for the exclusive benefit of
the Purchaser and may be waived by the Purchaser in writing in whole or in part
on or before the Closing Date. Notwithstanding any such waiver, the completion
of the purchase and sale contemplated by this Agreement by the Purchaser shall
not prejudice or affect in any way the rights of the Purchaser in respect of the
warranties and representations of the Vendor set forth in Article 3 of this
Agreement, and the representations and warranties of the Vendor set forth in
Article 3 of this Agreement shall survive the Closing and payment of the
Purchase Price.
5.3 The Vendor covenants and agrees to forthwith, upon request, execute and
deliver, or cause to be executed and delivered, such further and other deeds,
documents, assurances and instructions as may reasonably be required by the
Purchaser or its counsel.
<PAGE>
5.4 The obligation of the Vendor to complete the sale of Shares hereunder shall
be subject to the satisfaction of or compliance with, at or before the Closing
Time, each of the following conditions precedent:
(a) Truth and Accuracy of Representations of the Purchaser at
Closing Time - All of the representations and warranties of
the Purchaser set forth in Article 4 hereof shall be true and
correct in all material respects as at the Closing Time and
with the same effect as if made at and as of the Closing Time;
(b) Purchase Price - The Purchase Price shall have been paid in
accordance with Article 2.
5.5 The conditions set forth in this Article 5 are for the exclusive benefit of
the Vendor and may be waived by the Vendor in writing in whole or in part on or
before the Closing Date. Notwithstanding any such waiver, completion of the
purchase and sale contemplated by this Agreement by the Vendor shall not
prejudice or affect in any way the rights of the Vendor in respect of the
warranties and representations of the Purchaser set forth in Article 4 of this
Agreement, and the representations and warranties of the Purchaser set forth in
Article 4 of this Agreement shall survive for a period of two years from the
date hereof.
6.0 BUY-BACK PROVISIONS
-------------------
6.1 Vendor's Buy-Back Option The Purchaser hereby grants to the Vendor the right
and option (the "Destiny Buy-back Option") to purchase all of the Shares back
from the Purchaser for US$600.00 in the aggregate on the following terms and
conditions:
(a) the Destiny Buy-back Option will be exercisable if and only if
Closing occurs and the Company has not, within 60 days next
following Closing, received at least $250,000 from private
placements of its shares after Closing at prices not less than
US$1.50 per share;
(b) the Destiny Buy-back Option will become exercisable sixty days
after Closing;
(c) the Destiny Buy-back Option will be exercisable from and after
the time specified in clause 6. 1 (b) to and including the
120th day next following the Closing Date, and will expire at
the end of that period;
(d) the Destiny Buy-back Option may be exercised by notice in
writing to the Purchaser accompanied by payment of the
exercise price in the form of cash, a certified cheque or a
bank draft; and
(e) the Destiny Buy-back Option may be assigned by the Vendor by
notice in writing to the Purchaser if the proposed assignee
agrees in writing to be bound by the terms of this Agreement,
including without limitation section 6.2.
6.2 If the Vendor exercises the Destiny Buy-back Option, the Vendor will pay
to the Purchaser an amount equal to the legal (on a solicitor and own
client basis) and out-of-pocket expenses incurred by the Purchaser in
connection with the negotiation, drafting, execution and delivery of
this Agreement and the performance of the Purchaser's rights and
obligations hereunder, including
<PAGE>
without limitation reasonable out-of-pocket expenses incurred by the
Purchaser to obtain equity financing after Closing.
7.0 EXAMINATIONS AND WAIVERS
------------------------
7.1 Access for Investigation The Company and the Vendor shall permit the
Purchaser and its employees, agents, legal counsel, accountants and other
representatives, between the date hereof and the Closing Date, to have access
during normal business hours to the premises and to all books, accounts, records
and other data of the Company (including, without limitation, all corporate,
accounting and tax records and any electronic or computer-accessed data) and to
the properties and assets of the Company; and the Company will furnish and
require that the Company's principal bankers, appraisers and independent
auditors and other advisors furnish to the Purchaser such financial data and
other information with respect to the business and Assets of the Company as the
Purchaser shall from time to time reasonably request to enable confirmation of
the matters warranted in Article 3 hereof.
7.2 Non-disclosure of Purchase Price Before and after Closing, the Vendor will
not disclose the Purchase Price, except as reasonably required for income tax
and other reporting requirements.
8.0 INDEMNITIES
-----------
8.1 Indemnification of Purchaser by Vendor Subject to the limitations set out in
paragraph 8.2:
(a) the Vendor covenants and agrees with the Purchaser to
indemnify the Purchaser against all liabilities, claims,
demands, actions, causes of action, damages, losses, costs and
expenses (including legal fees on a solicitor and his own
client basis) suffered or incurred by the Purchaser, directly
or indirectly, by reason of or arising out of-
(i) any warranties or representations on the part of the
Vendor set forth in Section 3.1 being untrue;
(ii) any breach of any agreement, term or covenant on the
part of the Vendor made or to be observed or
performed pursuant hereto;
(a) the Company covenants and agrees with the Purchaser to
indemnify the Purchaser against all liabilities, claims,
demands, actions, causes of action, damages, losses, costs and
expenses (including legal fees on a solicitor and his own
client basis) suffered or incurred by the Purchaser, directly
or indirectly, by reason of or arising out of-
(i) any warranties or representations on the part of the
Vendor set forth in Section 3.2 being untrue;
(ii) any breach of any agreement, term or covenant on the
part of the vendor made or to be observed or
performed pursuant hereto;
which liabilities, claims, demands, actions, cause s of action, damages, losses,
costs and expenses are collectively referred to as the "Purchaser's Losses".
<PAGE>
8.2 Vendor's Limitations The indemnity obligations of the Vendor pursuant to
Section 8.1 shall be limited in the following respects:
(a) the Vendor shall be liable for Purchaser's Losses in respect
of which a claim for indemnity is made by the Purchaser on or
before the applicable expiry dates for the survival of the
Vendor's representations and warranties as set out in
paragraph 3.4; and
(b) the Vendor's indemnity obligations shall be limited to the
Purchase Price.
8.3 Indemnification of Vendor Subject to the limitations set out in paragraph
8.2, the Purchaser covenants and agrees with the Vendor to indemnify the Vendor
against all liabilities, claims, demands, actions, causes of action, damages,
losses, costs or expenses (including legal fees on a solicitor and his own
client basis) suffered or incurred by the Vendor, directly or indirectly, by
reason of or arising out of-
(a) any warranties or representations on the part of the Purchaser
set forth in Section 4.1 of this Agreement being untrue;
(b) a breach of any agreement, term or covenant on the part of the
Purchaser made or to be observed or performed pursuant hereto;
which liabilities, claims, demands, actions, causes of action, damages, losses,
costs and expenses are collectively referred to as "Vendor's Losses".
8.4 Limitation The indemnity obligations of the Purchaser pursuant to paragraph
8.4 shall be limited in that the Purchaser shall only be liable for Vendor's
Losses in respect of which a claim for indemnity is made by the Vendor within
two years of the Closing Date;
8.5 Claims Under Vendor's Indemnity If any claim is made by any Person against
the Purchaser in respect of which the Purchaser may incur or suffer damages,
losses, costs or expenses that might reasonably be considered to be subject to
the indemnity obligation of the Vendor as provided in paragraph 8.1, the
Purchaser will notify the Vendor as soon as reasonably practicable of the nature
of such claim and the Vendor shall be entitled (but not required) to assume the
defence of any suit brought to enforce such claim. The defence of any such claim
(whether assumed by the Vendor or not) shall be through legal counsel and shall
be conducted in a manner acceptable to the Purchaser and the Vendor, acting
reasonably, and no settlement may be made by the Vendor or the Purchaser without
the prior written consent of the others. If the Vendor assumes the defence of
any claim, then the Purchaser and the Purchaser's counsel shall co-operate with
the Vendor and his counsel in the course of the defence, such co-operation to
include using reasonable best efforts to provide or make available to the Vendor
and his counsel documents and information and witnesses for attendance at
examinations for discovery and trials. The reasonable legal fees and
disbursements and other costs of such defence shall, from and after such
assumption, be home by the Vendor. If the Vendor assumes the defence of any
claim and the Purchaser retains additional counsel to act on its behalf, the
Vendor and his counsel shall co-operate with the Purchaser and its counsel, such
co-operation to include using reasonable best efforts to provide or make
available to the Purchaser and its counsel documents and information and
witnesses for attendance at examinations for discovery and trials. All fees and
disbursements of such additional counsel shall be paid by the Purchaser. If the
Vendor and the Purchaser are or become parties to the same action, and the
representation of all parties by the same counsel would be inappropriate due to
a conflict of interest, then the Purchaser and the Vendor shall be represented
by separate counsel and, subject to the indemnity
<PAGE>
obligations of the Vendor as set out in Section 8. 1, the costs associated with
the action shall be home by the party incurring such costs.
8.7 Claims Under Purchaser's Indemnity If any claim is made by any Person
against the Vendor in respect of which the Vendor may incur or suffer damages,
losses, costs or expenses that might reasonably be considered to be subject to
the indemnity obligation of the Purchaser as provided in paragraph 8.4, the
Vendor will notify the Purchaser as soon as reasonably practicable of the nature
of such claim and the Purchaser shall be entitled (but not required) to assume
the defence of any suit brought to enforce such claim. The defence of any such
claim (whether assumed by the Purchaser or not) shall be through legal counsel
and shall be conducted in a manner acceptable to the Vendor and the Purchaser,
acting reasonably, and no settlement may be made by the Purchaser or the Vendor
without the prior written consent of the others. If the Purchaser assumes the
defence of any claim, the Vendor and the Vendor's counsel shall co-operate with
the Purchaser and its counsel in the course of the defence, such co-operation to
include using reasonable best efforts to provide or make available to the
Purchaser and its counsel documents and information and witnesses for attendance
at examinations for discovery and trials. The reasonable legal fees and
disbursements and other costs of such defence shall be home by the Purchaser. If
the Purchaser assumes the defence of any claim and the Vendor retains additional
counsel to act on his behalf, then the Purchaser and its counsel shall
co-operate with the Vendor and their counsel, such co-operation to include using
reasonable best efforts to provide or make available to the Vendor and his
counsel documents and information and witnesses for attendance at examinations
for discovery and trials. All fees and disbursements of such additional counsel
shall be paid by the Vendor. If the Purchaser and the Vendor are to become
parties to the same action, and the representation of all parties by the same
counsel would be inappropriate due to a conflict of interest, then the Vendor
and the Purchaser shall be represented by separate counsel and, subject to the
indemnity obligations of the Purchaser as set out in paragraph 8.4, the costs
associated with the action shall be home by the party incurring such costs.
9.0 GENERAL
-------
9.1 Expenses All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses.
9.2 Time Time shall be of essence hereof.
9.3 Notices Any notice or other writing required or permitted to be given
hereunder or for the purposes hereof shall be sufficiently given if delivered or
telecopied to the party to whom it is given or if mailed, by prepaid registered
mail, addressed to such party at:
(a) if to the Purchaser at:
Suite 402, 625 Howe Street Vancouver, B.C., V6C 2T6
Fax: (604) 602-6619
(b) if to the Vendor at:
Suite 950, 555 West Hastings Street Vancouver, B.C., V6B 4N4
Fax: (604) 609-0611
with a copy to the Vendors' Solicitors at:
<PAGE>
13 00, 1111 West Georgia Street
Vancouver, B.C., V6E 4M3
Fax: (604) 681-1307
or at such other address as the party to whom such writing is to be given shall
have last notified to the party giving the same in the manner provided in this
section. Any notice mailed as aforesaid shall be deemed to have been given and
received on the fifth business day next following the date of its mailing unless
at the time of mailing or within five business days thereafter there occurs a
postal interruption which could have the effect of delaying the mail in the
ordinary course, in which case any notice shall only be effectively given if
actually delivered or sent by telecopier. Any notice delivered or telecopied to
the party to whom it is addressed shall be deemed to have been given and
received on the day it was delivered; provided that if such day is not a
business day then the notice shall be deemed to have been given and received on
the business day next following such day.
9.4 Governing Law This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia and the parties
hereto submit and attorn to the jurisdiction of the Courts of the Province of
British Columbia.
9.5 Severability If any one or more of the provisions contained in this
Agreement should be invalid, illegal or unenforceable in any respect in any
jurisdiction, the validity, legality and enforceability of such provision or
provisions shall not in any way be affected or impaired thereby in any
jurisdiction and the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby, unless in either case as a result of such determination this Agreement
would fail in its essential purpose.
9.6 Entire Agreement This Agreement constitutes the entire agreement between the
parties hereto and supersedes all prior agreements and understandings, oral or
written, by and between any of the parties hereto with respect to the subject
matter hereof.
9.7 Further Assurances The parties hereto shall with reasonable diligence do all
such things and provide all such reasonable assurances as may be required to
consummate the transactions contemplated hereby, and each party hereto shall
provide such further documents or instruments required by the other party as may
be reasonably necessary or desirable to effect the purpose of this Agreement and
carry out its provisions whether before or after the Closing Date.
9.8 Enurement This Agreement and each of the terms and provisions hereof shall
enure to the benefit of and being upon the parties hereto and their respective
heirs, executors, administrators, personal representatives, successors and
assigns.
9.9 Counterparts This Agreement may be executed in as many counterparts as may
be necessary or by facsimile and each such agreement or facsimile so executed
shall be deemed to be an original and
<PAGE>
such counterparts together shall constitute one and the same instrument. IN
WITNESS WHEREOF the parties have duly executed this Agreement as of the day and
year first above written.
The corporate seal of EURO INDUSTRIES
LTD. was hereunto affixed in the presence of-
- ---------------------------------------- ----------------------------------
Authorized Signatory CARMAN PARENTE
- ---------------------------------------- ----------------------------------
Position
SIGNED, SEALED AND DELIVERED in the Presence of:
- ---------------------------------------- ----------------------------------
Signature of Witness STEVE VESTERGAARD
- ----------------------------------------
Address
- ----------------------------------------
Occupation
The corporate seal of DESTINY SOFTWARE
PRODUCTIONS INC. was hereunto affixed in
the presence of:
- ---------------------------------------- ----------------------------------
Authorized Signatory, STEVE VESTERGAARD
- ----------------------------------------
Position
This is page 22 of a Share Purchase Agreement dated 1999 among Steven
Vestergaard as vendor, Euro
<PAGE>
DESTINY ASSETS:
o 4 computers AMD K62,128 Mb
o 1 Compaq server rack
o Misc. Office Furniture and workstations
o 1 imac
o all source code and libraries, artwork,, specifications, music and
other audio from software developed by Destiny
o all rights to: Creepers (DOS), Creepers (Amiga), Solitaire's Journey
(Amiga), Origanmo (DOS), Blood Bowl (DOS), Time Out Sports Baseball
(Windows), Time Out Sports Basketball (Windows), Dark Seed II
(Windows), Dark Seed II (Mac), Sports Illustrated Baseball (Windows)
o Skygames prototype, Seuss Crane prototype
o Internet casino prototype
o Internet tools: chat planet, email client, telnet client, internet
phone
o Radio Destiny receiver, Destiny Station broadcaster, Destiny MP3 player
o Audio compression technology (DNY format)
o Video compression technology (in development)
<PAGE>
Schedule 1. I (d)
Financial Statements of Destiny Software Productions Ltd.
<PAGE>
Destiny Software Productions Inc.
Balance Sheet
As of May 28,1999
May 28,'99
ASSETS
Current Assets
Chequing/Savings
1080 - Royal Bank 1054501 -12,350.68
Total Chequing/Savings -12,350.68
Other Current Assets
1580 - Prepaid Expenses 13,273.50
Total Other Current Assets 13,273.50
Total Current Assets 922.82
Fixed Assets
1610 - Computer Hardware NET
1612 - Computer Hardware 18,691.22
Total 1610 - Computer Hardware NET 18,691.22
1620 - Computer Software NET
1622 - Computer Software 2,845.75
Total 1620 - Computer Software NET 2,845.75
1630 - Furniture & Equipment NET
1632 - Furniture & Equipment 7,656.39
Total 1630 - Furniture & Equipment NET 7,656.39
1640. Leasehold Improvements NET
1642 - Leasehold Improvements 674.00
Total 1640 - Leasehold Improvements NET 674.00
Total Fixed Assets 29,867.36
Other Assets
1700 - DTMB
1725 - DTMB Marketing 6,582.88
Total 1700 - DTMB 6,582.88
1750 - MP3
1765 - MP3 Interface Design 2,000.00
1776 - MP3 - Programming 7,015.34
Total 1750 - MP3 9,015.34
1800 - WEB Clip
1815 - WEB Clip - Programming 2,655.00
Total 1800 - WEB Clip 2,655.00
Total Other Assets 18,253.22
TOTAL ASSETS 49,043.40
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Credit Cards
2010 - Royal Bank LOC 1,435.00
2020 - Royal Bank VISA -107.25
Total Credit Cards 1,327.75
Other Current Liabilities
2090 - AP and Accrued Liabilities 3,858.00
2210 - GST Owing (Refund) -4,023.52
Total Other Current Liabilities -165.52
Total Current Liabilities 1,162.23
Long Term Liabilities
2300 - Due to Shareholder 55.00
2310 - Shareholder Loans lu8,461.00
Total Long Term Liabilities 108,516.00
Total Liabilities 109,678.23
<PAGE>
Schedule 3.1(u)
Material Contracts
None
<PAGE>
Schedule 3.1(as)
Banking Information
Royal Bank of Canada
10201 King George Highway
Surrey, B.C.
Account No. 105-450-1
Authorized Signatory: Steve Vestergaard
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<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> AUG-24-1998
<PERIOD-END> AUG-31-1998
<CASH> 594,236
<SECURITIES> 0
<RECEIVABLES> 0
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<CURRENT-ASSETS> 594,236
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0
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<NET-INCOME> (59,500)
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