Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form S-8
Registration Statement
Under
The Securities Act of 1933
ETERNAL TECHNOLOGIES GROUP, INC.
(Exact name of registrant as specified in its charter)
Nevada 62-1655508
- ------------------------------------- ---------------------
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
Suite 04-06, 28/F Block A. Innotech Tower,
235 Nanjing Rd. Heping
District, Tianjin, PRC 300100 300052
- ----------------------------- -------------------------
(Address of Principal Executive Offices) (Zip Code)
2006 Stock Option Plan
2006 Stock Grant Plan
Registration of 800,000 shares previously
issued as compensation
Copy to:
Hank Vanderkam
Incorp Services, Inc. Vanderkam & Associates
3155 E. Patrick Lane #1 1301 Travis, #1200
Las Vegas, NV 89120 Houston, Texas 77002
(702) 866-2500 (713) 547-8900
- ----------------------------
(Name, address and telephone
number of agent for service)
Approximate date of proposed sales pursuant to the plan: From time to time after
the effective date of this Registration Statement.
CALCULATION OF REGISTRATION FEE
================================ =============== =================== ===================== ================
Proposed maximum Proposed maximum Amount of
Title of securities Amount to be offering price per aggregate offering registration
to be registered registered share (1) price fee
- -------------------------------- --------------- ------------------- --------------------- ----------------
Common Stock, $.001 par value 4,400,000 $0.62 2,728,000 291.90
================================ =============== =================== ===================== ================
(1) This Registration Statement covers (i) 3,000,000 shares of Common Stock
(the "Common Stock"), $0.001 par value per share, of Eternal
Technologies Group, Inc. ("Eternal")(the "Registrant") issuable
pursuant to the 2006 Stock Option Plan (the "2006 Option Plan") (ii)
600,000 shares of Common Stock issuable pursuant to the Eternal
Technologies Group, Inc. Stock Compensation Plan and (iii) the
registration of 800,000 shares previously issued as compensation. In
addition, pursuant to Rule 416(c) under the Securities Act of 1933, as
amended (the "Securities Act") this Registration Statement covers an
indeterminable number of additional shares of Common Stock as may
hereafter be offered or issued pursuant to the Plans, to prevent
dilution resulting from stock splits, stock dividends or similar
transactions effected without receipt of consideration.
(2) Calculated in accordance with Rule 457(c) solely for the purpose of
determining the registration fee. The offering price is based on the
closing price as reported on the Nasdaq Electronic Bulletin Board on
November 27, 2006 under the symbol "ETLT".
This Registration Statement contains two parts. The first part contains a
prospectus pursuant to Form S-3 (in accordance with Section C of the General
Instructions to the Form S-8) which covers reoffers and resales of "restricted
securities" and/or "control securities" (as such terms are defined in Section C
of the General Instructions to Form S-8) of the Company. This reoffer prospectus
relates to up to 3,000,000 shares of Common Stock under the Stock Option Plan
(ii) 600,000 shares of Common Stock under the 2006 Compensation Plan, that have
been or may be issued to certain officers and employees directors of the Company
pursuant to the Plan and (iii) 800,000 shares that have been previously issued
to employers as compensation. The second part of this Registration Statement
contains Information Required in the Registration Statement pursuant to Part II
of Form S-8. The Form S-8 portion of this Registration Statement will be used
for offers of shares of Common Stock of the Agreement, and the 2006 Stock Option
Agreement.
PART I
INFORMATION REQUIRED IN SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION
The document(s) containing the information specified in Part I of
Form S-8 will be sent or given to participants in the Plans as specified by Rule
428(b)(1) under the Securities Act. Such documents are not being filed with the
Securities and Exchange Commission, but constitute, along with the documents
incorporated by reference into this Registration Statement, a prospectus that
meets the requirements of Section 10(a) of the Securities Act.
ITEM 2. REGISTRATION INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
The Company will furnish without charge to each person to whom the
prospectus is delivered, upon the written or oral request of such person, a copy
of any and all of the documents incorporated by reference in Item 3 of Part II
of this Registration Statement, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference to the information that
is incorporated). Those documents are incorporated by reference in the Section
10(a) prospectus. Requests should be directed to Eternal Technologies Group,
Inc., Suite 04-06, 28/F Block A. Innotech Tower, 235 Nanjing Rd.Heping District,
Tianjin, PRC 300100: attention Wei Jianhseng.
The resale prospectus referred to above follows this page.
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PROSPECTUS
ETERNAL TECHNOLOGIES GROUP, INC.
4,400,000 SHARES OF COMMON STOCK
(par value $0.001 per share)
This prospectus relates to up to 4,400,000 shares (the "Shares") of common
stock, par value $0.001 per share, of Eternal Technologies Group, Inc., a Nevada
corporation (the "Company" or "Eternal") which may be offered and sold from time
to time by certain stockholders of the Company (the "Selling Stockholders") who
have acquired or will acquire such Shares pursuant to stock options and stock
grants issued or issuable under the (i) the 2006 Stock Option Plan dated October
12, 2006; (ii) the 2006 Stock Compensation Agreement dated October 15, 2006
collectively referred to herein as the "Plans" and 800,000 shares previously
issued to various employees as compensation.
The Company will not receive any of the proceeds from sales of the Shares by any
of the Selling Stockholders. The Shares may be offered from time to time by any
or all of the Selling Stockholders (and their donees and pledgees) through
ordinary brokerage transactions, in negotiated transactions or in other
transactions, at such prices as he or she may determine, which may relate to
market prices prevailing at the time of sale or be a negotiated price. See "Plan
of Distribution." All costs, expenses and fees in connection with the
registration of the Shares will be borne by the Company. Brokerage commissions
and similar selling expenses, if any, attributable to the offer or sale of the
Shares will be borne by the Selling Stockholder (or their donees and pledgees).
Each Selling Stockholder and any broker executing selling orders on behalf
of a Selling Stockholder may be deemed to be an "underwriter" as defined in the
Securities Act of 1933, as amended (the "Securities Act"). If any broker-dealers
are used to effect sales, any commissions paid to broker-dealers and, if
broker-dealers purchase any of the Shares as principals, any profits received by
such broker-dealers on the resale of the Shares, may be deemed to be
underwriting discounts or commissions under the Securities Act. In addition, any
profits realized by the Selling Stockholders may be deemed to be underwriting
commissions.
Our common stock is quoted on the OTC Bulletin Board Service under the
symbol "ETLT.OB" On November 16, 2006, the average of the bid and ask closing
price of our common stock was $0.555 per share.
See "Risk Factors" on page 3 hereof for a discussion of certain factors
that should be carefully considered by prospective purchasers.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is November 27, 2006.
You should rely only on the information included in or incorporated by reference
into this prospectus or information we have referred to in this prospectus. We
have not authorized anyone to provide you with information that is different.
This prospectus may only be used where it is legal to sell these securities.
This prospectus is not an offer to sell, or a solicitation of an offer to buy,
in any state where the offer or sale is prohibited. The information in this
prospectus is accurate on the date of this prospectus and may become obsolete
later. Neither the delivery of this prospectus, nor any sale made under this
prospectus will, under any circumstances, imply that the information in this
prospectus is correct as of any date after the date of this prospectus.
References to "the Company," "Eternal," "we" or "us" refer to Eternal
Technologies Group, Inc.
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TABLE OF CONTENTS
Page
4
RISK FACTORS
FORWARD-LOOKING STATEMENTS 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 7
COMPANY OVERVIEW 8
USE OF PROCEEDS 11
SELLING STOCKHOLDERS 11
DESCRIPTION OF SECURITIES 13
PLAN OF DISTRIBUTION 13
WHERE YOU CAN FIND MORE INFORMATION 15
INTERESTS OF NAMED EXPERTS AND COUNSEL 15
RISK FACTORS
Prospective purchasers of the common stock should consider carefully the
following risk factors relating to the business of the Company, together with
the information and financial data set forth elsewhere in this prospectus or
incorporated herein by reference, prior to making an investment decision. This
prospectus contains forward-looking statements within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. Such statements are
indicated by words or phrases such as "anticipate," "estimate," "project,"
"management believes," "we believe" and similar words or phrases. Such
statements are based on current expectations and are subject to risks,
uncertainties and assumptions. Certain of these risks are described below.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially from
those anticipated, estimated or projected.
RISKS RELATED TO ETERNAL
An investment in our common stock involves certain risks. Prospective
investors should carefully review the following factors, together with the other
information contained in this prospectus, prior to making a decision to invest
in our common stock. The future trading price of shares of our common stock will
be affected by the performance of our business relative to, among other things,
competition, market conditions and general economic and industry conditions.
Risks Related to Our Financial Condition and Our Business
Our success depends on our management team and other key personnel, the loss of
any of whom could disrupt our business operations
Our future success will depend in substantial part on the continual
service of our senior management including Mr. Ji Jun Wu, our Chairman and Mr.
Jian Sheng Wei, our Chief Executive Officer. The loss of the services of either
of our key personnel could impede implementation of our business plan and result
in reduced profitability. We do not carry key person life insurance on any of
our officers or employees. Our future success will also depend on the continued
ability to attract, retain and motivate highly qualified technical sales and
marketing customer support, financial, accounting and managerial personnel.
Because of the rapid growth of the economy in China, competition for qualified
personnel in Beijing and Tianjin is intense. If we cannot retain our key
personnel or attract, assimilate or retain qualified personnel in the future,
our business operations could be disrupted.
4
We May Lose Any Technological Advantage Because Biotechnology Changes Rapidly
The biotechnology field, is characterized by rapid technological
progress and intense competition. As a result, we may not realize the expected
benefits of our strategy. Businesses, academic institutions, governmental
agencies, and other public and private research organizations are conducting
research to develop technologies that may compete with our existing and our
proposed products. It is possible that competitors could acquire or develop
technologies that would render our technologies obsolete or noncompetitive. If
we cannot access the same technologies at an acceptable price, or at all, our
business operations could be disrupted.
Likewise, the medical equipment field is also characterized by rapid
technology changes and intense competition. As a result, we may not realize the
expected benefits of our strategy. Businesses, academic institutions,
governmental agencies, and other public and private research organizations are
conducting research to develop technologies that may compete with our existing
and our proposed products. It is possible that competitors could acquire or
develop technologies that would render our technologies obsolete or
noncompetitive. If we cannot access the same technologies at an acceptable
price, or at all, our business operations could be disrupted.
Risks Related to Operations in China
Substantially all of our assets are located in China and all of our
revenue is derived from our operations in China. Accordingly, our results of
operations and prospects are subject, to a significant extent, to the economic,
political and legal developments in China.
China's Economic, Political and Social Conditions, as Well as Government
Policies, could Affect our Business
While China's economy has experienced significant growth in the past
twenty years, growth has been uneven, both geographically and among various
sectors of the economy. The Chinese government has implemented various measures
to encourage economic growth and guide the allocation of resources. Some of
these measures benefit the overall economy of China, but may also have a
negative effect on us. For example, our operating results and financial
condition may be adversely affected by the government control over capital
investments or changes in tax regulations which presently gives us a tax
holiday.
The economy of China has been transitioning from a planned economy to a
more market-oriented economy. In recent years the Chinese government has
implemented measures emphasizing the utilization of market forces for economic
reform and the reduction of state ownership of productive assets and the
establishment of sound corporate governance in business enterprises. Still a
substantial portion of productive assets in China are owned by the Chinese
government. In addition, the Chinese government continues to play a significant
role in regulating industry development by imposing industrial policies. It also
exercises significant control over China's economic growth through the
allocation of resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy and providing preferential treatment to
particular industries or companies.
Government Control of Currency Conversion may Adversely Affect our Operations
and Financial Results
We receive substantially all of our revenues in Renminbi, which is not
a freely convertible currency. A portion of these revenues must be converted
into other currencies to meet our foreign currency obligations. These foreign
currency-denominated obligations include:
o payment for equipment and materials purchased offshore; including embryos
and
Fluctuation of the Renminbi Could Materially Affect our Financial Condition and
Results of Operations
On January 1, 1994, the PRC government introduced a single rate of exchange of
Renminbi ("Rmb") against United States Dollar ("US$") as quoted daily by the
People's Bank of China (the "Unified Exchange Rate"). On July 21, 2005, Rmb was
revalued from Rmb 8.28 to Rmb8.11 for US$1 following the removal of the peg to
the US dollar and pressure for the United States. The Peoples Bank of China also
announced that the Renminbi would be pegged to a basket of foreign currencies,
rather then being strictly tied to the US dollar and would trade within a narrow
0.3% band against this basket of currencies, which is dominated by the US
dollar, Euro, Japanese Yen and South Korean Won, with a smaller proportion made
up of the British pound, Thai Baht and Russian Ruble. No representation is made
that the Rmb amounts have been, or could be, converted into US$ at that rate.
This quotation of exchange rates does not imply free convertibility of Rmb to
other foreign currencies. All foreign exchange transactions continue to take
place either through the Bank of China or other banks authorized to buy and sell
foreign currencies at the exchange rate quoted by the People's Bank of China.
Approval of foreign currency payments by the People's Bank of China or other
institutions requires submitting a payment application form together with
suppliers' invoices, shipping documents and signed contracts.
5
The PRC Legal System has Inherent Uncertainties that Could Limit the Legal
Protections Available to You
Substantially all of our assets and operations are in China and our
principal operating subsidiaries are organized under the laws of China. The
Chinese legal system is based on written statutes. Prior court decisions may be
cited for reference but have limited precedential value. However, because these
laws and regulations are relatively new, and because of the limited volume of
published cases and their non-binding nature, interpretation and enforcement of
these laws and regulations involve uncertainties. The direct enforcement by our
shareholders of any rights of shareholders in respect of violations of corporate
governance procedures may be limited. Unlike in the United States, under
applicable laws of China, shareholders do not have the right to sue the
directors, supervisors, officers or other shareholders on behalf of the
corporation to enforce a claim against such party or parties that the
corporation has failed to enforce itself. Our shareholders may have to rely on
other means to enforce directly their rights, such as through administrative
proceedings. Chinese laws and regulations do not distinguish among minority,
affiliated and unaffiliated shareholders in terms of their rights and
protections. In addition, our minority shareholders may not have the same
protections afforded to them by companies incorporated under the laws of the
United States.
The admission of China into the World Trade Organization could lead to increased
foreign competition
As a result of China becoming a member of the WTO, import restrictions on
both agricultural products and pharmaceuticals are expected to be gradually
reduced. The WTO also requires China to lower its import tariffs as a condition
for membership. Reduced import restrictions and/or lower tariffs may lead to
increased imports of foreign products and therefore lead to increased
competition in the domestic agricultural products and pharmaceuticals markets.
6
FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements, including
information about or related to our future results, certain projections and
business trends. Assumptions relating to forward-looking statements involve
judgments with respect to, among other things, future economic, competitive and
market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond our control. When
used in this prospectus, the words "estimate," "project," "intend," "believe,"
"expect" and similar expressions are intended to identify forward-looking
statements. Although we believe that our assumptions underlying the
forward-looking statements are reasonable, any or all of the assumptions could
prove inaccurate, and we may not realize the results contemplated by the
forward-looking statements. Management decisions are subjective in many respects
and susceptible to interpretations and periodic revisions based upon actual
experience and business developments, the impact of which may cause us to alter
our business strategy or capital expenditure plans that may, in turn, affect our
results of operations. In light of the significant uncertainties inherent in the
forward-looking information included in this prospectus, you should not regard
the inclusion of such information as our representation that we will achieve any
strategy, objectives or other plans. The forward-looking statements contained in
this prospectus speak only as of the date of this prospectus, and we have no
obligation to update publicly or revise any of these forward-looking statements.
These and other statements, which are not historical facts, are based
largely upon our current expectations and assumptions and are subject to a
number of risks and uncertainties that could cause actual results to differ
materially from those contemplated by such forward-looking statements. These
risks and uncertainties include, among others, our planned effort to redeploy
our assets and use our cash and cash equivalent assets to enhance stockholder
value following the sale of substantially all of our electronic commerce
business, which represented substantially all of our revenue generating
operations and related assets, and the risks and uncertainties set forth in the
section headed "Risk Factors" of this prospectus. The Company cannot guarantee
its future performance.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange
Commission (the "Commission") are incorporated by reference into this
Registration Statement and are made a part hereof:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2005.
(b) All other reports filed pursuant to Section 13(a) or 15(d) of
the Exchange Act since the end of the fiscal year covered by
the Annual Report referred to in Item 3(a) above, including,
but not limited to, the Company's quarterly reports on Form
10-QSB through the fiscal quarter ended September 30, 2006
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act
of 1934, as amended, prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which deregisters
all securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of the filing of such
reports and documents.
7
ITEM 1. DESCRIPTION OF BUSINESS
General
Eternal Technologies Group, Inc. is engaged in agricultural genetics and medical
equipment manufacturing and distribution operating in the People's Republic of
China. We focus on the development and application of advanced animal husbandry
techniques to produce improved food products, the development, manufacturing and
marketing of medical equipment and technologies used in the detection and
prevention of breast cancer in humans.
Our agricultural genetics/animal husbandry operations are concentrated in the
application of advanced embryonic biotechnology techniques with the objective
being to shorten the development time for animal development resulting in
increased output and profitability and reduced use of animal feed. Since 2000,
we have utilized our advanced breeding techniques and marketed fine bred animal
embryos, breeding stock and breeding services to develop larger, stronger and
healthier sheep. In the fourth quarter of 2003, we began the production and sale
of lamb meat and began application of our advanced breeding techniques to the
breeding of higher-yielding purebred Holstein dairy cattle.
Our development, manufacturing and marketing of medical equipment and medical
technologies are focused in the development of breast cancer detection
technology with the objective of earlier detection. The Company manufactures a
device which , if widely accepted, could substantially decrease the costs and
therefore increase the availability of breast cancer detection in many areas in
Asia. We entered this industry in October of 2005 with the acquisition of the
assets of E-Sea Biomedical Engineering Co. International, Ltd.
Our principal executive offices are located at Suite 04-06, 28/F Block A.
Innotech Tower, 235 Nanjing Rd.Heping District, Tianjin, PRC 300100 and our
telephone number is 011-86-22-2721-7020.
History and Development of the Company
Our operations are conducted through our wholly-owned subsidiaries, Eternal
Technology Group Ltd. ("Eternal - BVI"), a British Virgin Islands company, and
its subsidiaries and E-Sea Biomedical Engineering Co. International Ltd., also a
BVI company.
We acquired Eternal - BVI in December 2002 (the "Reorganization"). Under the
terms of the Exchange Agreement, we issued 22,050,000 shares of our common stock
to the shareholders of Eternal Technologies - BVI in exchange for all of the
issued and outstanding shares of Eternal - BVI. In conjunction with the
Reorganization our common shares were reverse split on a one (1) for six (6)
basis and we changed our name from Waterford Sterling Corporation to Eternal
Technologies Group, Inc., ("Eternal") We ceased our prior operations and caused
the officers and directors of Eternal Technologies - BVI to be appointed as the
officers and directors of Eternal in place of the pre-Reorganization officers
and directors. As a result of the Reorganization, we adopted as our primary
business the operations of Eternal - BVI and the shareholders of Eternal - BVI
acquired approximately 85% of our post-Reorganization outstanding shares.
Eternal - BVI was incorporated in the British Virgin Islands in March 2000. In
May 2000, Eternal - BVI acquired 100% of Willsley Company Limited. Willsley is a
holding company that owns 100% of Inner Mongolia Aershan Agriculture & Husbandry
Technology Co., Ltd. ("Aershan Agriculture"). Aershan Agriculture owns a cattle
herd, conducts breeding operations and owns a farm in Innner Mongolia which it
leases to a Chinese company for approximately $572,000 per year.
As of the fourth quarter of 2005 we acquired certain assets, subject to certain
liabilities of E-Sea Biomedical Engineering Co. International, Ltd. E-Sea's
principal activities are the manufacture, sale and licensing of medical devices
used to detect breast cancer.
Our current agricultural operations are focused on developing superior livestock
breeds in order to improve the quality and yield of livestock in China as well
as the profitability of livestock operations. We initially imported embryos from
Australia and the United States, but are utilizing our facilities and expertise
to develop a herd of "carrier animals" to produce a domestic supply of embryos,
hereby eliminating our dependence on third party foreign embryo suppliers and
reducing the cost of embryos. Under this program, we transfer fine-breed sheep
and dairy cattle embryos into recipient animals and sell the pregnant animals to
customers with the offspring serving as breeding or commercial stock.
8
We utilize our fine-breed livestock embryos and our breeding and biotech
expertise to offer a range of livestock breeding services and products,
including sale of embryos, artificial insemination and embryo transplant
services, both at our facilities and on-site, and related products and services
designed to improve production, quality and profitability of Chinese livestock
operators.
In late 2003, we began implementation of a mutton production and sale program
focused on the processing and sale of mutton from our higher yielding, higher
quality genetically engineered stock. Because of changes in government relations
to plowing in Inner Mongolia, we have concluded that we have impediments to the
ongoing economic use of our farm for grazing. Accordingly, we have leased the
farm to a Chinese firm for fifteen years. This firm intends to raise trees for
lumber on the property.
Our current medical operations are centered around E-Sea and expanding our
market in China, both through the sales of our medical detection devices and
leasing them on a per usage basis. We are also exploring acquisitions to expand
and complement the E-Sea line of medical equipment.
Historically, our business has been highly seasonal with nearly all of our
revenues being generated in the fourth quarter. While our business will remain
seasonal it should be less cyclical in the future because of the sale of lamb
meat, embryo transfers to dairy cattle and the acquisition of E-Sea thereby
making our overall business less seasonal.
Medical Equipment Operations E-Sea
The Company manufactures and sells a medical device known as a "Three-operator
Mammary Gland Detecting System." This device is used to examine persons and
detect early stage breast cancer. The Company anticipates wide acceptance of
this product as it is a low cost alternative to expensive and often times
unavailable mammography.
Facility. The company manufactures and sells the medical equipment from a
facility in Shenzhen, PRC. The facility is approximately nine-thousand square
feet and contains manufacturing machinery, workspace, and administrative
offices.
Marketing. Our senior management team handles sales and marketing for our
medical equipment products. Our management team communicates with medical
service providers, clinics and other institutions to assure that potential
clients are aware of our product and the product capabilities. We may evaluate
the adoption of more formal marketing, advertising and sales programs as
necessary in the future.
Potential Acquisitions
We intend to evaluate various potential acquisitions of companies and facilities
in order to expand the scope of our operations and accelerate our growth.
Specifically, we intend to evaluate the acquisition of companies or facilities
to provide feedlot, dairy processing, slaughterhouse and meat processing, animal
fattening and similar capabilities. However, there are no current agreements to
purchase any companies or facilities.
Competition
Both the agriculture and medical industries are highly competitive. While animal
genetics is a relatively new field in China several large foreign companies such
as Smithfield Foods, Inc. of the United States and Sumitomo Corporation of Japan
have entered the market and compete with us in the development and delivery of
advanced animal husbandry products and services. Likewise in the medical device
field, companies such as Siemens and General Electric have entered the market
and competed with us. These companies have a substantial advantage due to their
size and the name recognition each enjoys.
9
Increased competition in the agriculture industry could have a material adverse
effect on us, as our competitors may have far greater financial and other
resources available to them and possess extensive manufacturing, distribution
and marketing capabilities far greater than those we possess.
Intellectual Property
There can be no assurance that third parties will not assert intellectual
property infringement claims against us in the future with respect to current or
future products and technologies. We are responsible for defending against
charges of infringement of third party intellectual property rights by our
actions and products and such assertion may require us to refrain from the sale
of our products, enter into royalty arrangements or undertake costly litigation.
Further, challenges may be instituted by third parties as to the validity,
enforceability and infringement of our patents.
Our adherence to industry standards with respect to our products limits our
opportunities to provide proprietary features that may be protected. In
addition, the laws of various countries in which our products may be sold may
not protect our products and intellectual property rights to the same extent as
the laws of the United States of America.
Governmental Regulation
Our business and the agriculture industry in general is subject to extensive
laws and regulations, including environmental laws and regulations. As such, we
may be required to make large expenditures to comply with environmental and
other governmental regulations.
Under these laws and regulations, we could be liable for personal injuries,
property damage, discharge of hazardous materials, remediation and clean-up
costs and other environmental damages. Failure to comply with these laws and
regulations also may result in the suspension or termination of our operations
and subject us to administrative, civil and criminal penalties. Moreover, these
laws and regulations could change in ways that substantially increase our
operating costs.
The Chinese regulatory scheme, in general, and the regulation of the agriculture
and medical equipment industries in particular, is not well defined and is
subject to substantial uncertainty. With China's entry in the WTO, China has
implemented numerous changes to its existing laws and regulations.
Chinese laws impacting our animal husbandry operations relate primarily to
health and safety regulations covering food products and environmental
regulations covering waste products and other land use regulations. Food product
regulations generally govern the safety of products in the food chain and the
handling of those products. We believe that we are in compliance with all
existing food and environmental regulations applicable to our animal husbandry
operations. Because many of those regulations are new and evolving, we must
continually monitor the interpretation, enforcement and modification to those
regulations to assure ongoing compliance.
Our medical equipment operations are subject to extensive regulation by the
Chinese government and, to the extent that we may market our pharmaceutical
products outside of China, other governments. Chinese medical equipment
regulation is evolving and subject to much uncertainty. Under current
regulations, the Chinese equivalent of the United States Food And Drug
Administration is responsible for monitoring, and promulgating regulations with
respect to, the review of clinical safety and efficacy trial, market approval of
equipment and effectiveness claims, manufacturing practices, and similar
matters. Failure to comply with market rules could result in fines, penalties or
other adverse consequences.
Employees
As of December 31, 2005, we had 68 full-time employees, including employees
performing administrative functions and animal husbandry services and farming
functions. Third parties perform bioscience research and related services on a
contract basis. The employees are not covered by a collective bargaining
agreement, and we do not anticipate that any of our future employees will be
covered by any such agreement.
10
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of the common stock
which may be sold pursuant to this prospectus for the respective accounts of the
Selling Stockholders. The Company, however, will derive proceeds from the sale
of stock to Selling Stockholders and upon the exercise of the options granted to
Selling Stockholders. All such proceeds will be available to the Company for
working capital and general corporate purposes. No assurances can be given,
however, as to when or if any or all of the options will be exercised.
SELLING STOCKHOLDERS
This prospectus relates to Shares that are being registered for reoffers
and resales by Selling Stockholders who have acquired or may acquire Shares
pursuant to each of the Plans. The Selling Stockholders may resell any or all of
the Shares at any time they choose while this prospectus is effective.
Executive officers and directors, their family members, trusts for their
benefit, or entities that they own, that acquire common stock under the Plans
may be added to the Selling Stockholder list below by a prospectus supplement
filed with the Commission. The number of Shares to be sold by any Selling
Stockholder under this prospectus also may be increased or decreased by a
prospectus supplement. Non-affiliates who purchased restricted securities, as
these terms are defined in rule 144(a) under the Securities Act, under any of
our employee benefit plans and who are not named below may use this prospectus
for the offer or sale of their common stock if they hold 1,000 shares or less.
Although a person's name is included in the table below, neither that person nor
we are making an admission that the named person is our "affiliate."
Each of the Selling Stockholders is an employee or director of the
Company. The following table sets forth:
* the name and principal position or positions over the past three years with
the Company of each Selling Stockholder; * the number of shares of common stock
each Selling Stockholder beneficially owned as of November 15, 2006; * the
number of shares of common stock acquired by each Selling Stockholder in
connection with stock options and stock grants
pursuant to the Plans and being registered under this Registration
Statement, some or all of which shares may be sold pursuant to this
prospectus; and
* the number of shares of common stock and the percentage, if 1% or more, of
the total class of common stock outstanding to be beneficially owned by each
Selling Stockholder following this offering, assuming the sale pursuant to
this offering of all shares acquired by such Selling Stockholder in
connection with grants pursuant the Plans and registered under this
Registration Statement.
There is no assurance that any of the Selling Stockholders will sell any
or all of the shares offered by them under this Registration Statement. The
address of each Selling Stockholder is Suite 04-06, 28/F Block A. Innotech
Tower, 235 Nanjing Rd.Heping District, Tianjin, PRC 300100.
Name of Seller Relationship to the Company Number of Shares Shares to be Number of Shares to
-------------- --------------------------- be Beneficially
Beneficially Owned After the
Owned (1) Sold (2) Offering
--------- -------- --------
Jijun Wu 1,810,000 30,000 1,780,000
Chairman of the Board
Jiansheng Wei President, Chief Executive 683,000 30,000 653,000
Officer and Director
Zheng Shen Chief Financial Officer - 30,000 -
Yuguo Chang - 30,000 -
Director
Mike Zhang Director - 100,000 -
Kemei Wu Employee - 120,000 -
Wengui Yao Employee - 120,000 -
Shitian Wang Employee - 90,000 -
Yuan Tian Employee - 90,000 -
Chunrui Yang Employee - 30,000 -
Shengli Han Employee - 90,000 -
Liming Ou Employee - 30,000 -
Tielian Liu Employee - 30,000 -
Hongcui Yu Employee - 60,000 -
Zuwu Peng Employee - 30,000 -
Zhong Luo Employee - 30,000 -
Chun Yang Employee - 30,000 -
11
Yongkang Lin Employee - 20,000 -
Yuanfang Nie Employee - 20,000 -
Wenjin Ding Employee - 20,000 -
Wenping Zhang Employee - 20,000 -
Zhizhang Li Employee - 20,000 -
Detian Zhang Employee - 20,000 -
Wenyuan Liao Employee - 20,000 -
Kun Chen Employee - 20,000 -
Kexin Guo Employee - 20,000 -
Youlan Xian Employee - 20,000 -
Yongxiang Dong Employee - 100,000 -
Xin Wang Employee - 100,000 -
Zhiwei Lin Employee - 80,000 -
Qiang Li Employee - 80,000 -
Qiquang Zheng Employee - 80,000 -
Baoxin Tian Employee - 120,000 -
Zhenyu Qin Employee - 60,000 -
Xuefeng Xing Employee - 50,000 -
Xiaoguo Wang Employee - 80,000 -
Chucheng Gong Employee - 50,000 -
Huaan Zhang Employee - 50,000 -
Peng Zhang Employee - 80,000 -
Yuhuang Ye Employee - 50,000 -
Hong Jiang Employee - 30,000 -
Dejin Wen Advisor - 250,000 -
Wenfang Wu Advisor - 60,000 -
Anguo Lv Advisor - 30,000 -
Hongling Liu Advisor - 100,000 -
Wei Zhang Advisor - 100,000 -
Yi Mu Advisor - 80,000 -
Shenming Zheng Advisor - 30,000 -
Jianhui Tian Advisor - 30,000 -
Tian Zhou Advisor - 30,000 -
Danzhong Zhao Advisor - 50,000 -
Qian Cao Advisor - 60,000 -
Juanhong Sun Advisor - 100,000 -
Bai Cai Advisor - 100,000 -
Shida Zhang Advisor - 200,000 -
Jie Zhong Advisor - 200,000 -
Jinping Feng Advisor - 150,000 -
Zhuohui Ding Advisor - 50,000 -
Yulang Zhang Advisor - 600,000 -
1) Based on share ownership as of November 24, 2006. As used in this
table, a beneficial owner of a security includes any person who,
directly or indirectly, through contract, arrangement, understanding,
relationship or otherwise has or shares (a) the power to vote, or
direct the voting of, such security or (b) investment power which
includes the power to dispose, or to direct the disposition of, such
security. In addition, a person is deemed to be the beneficial owner
of a security if that person has the right to acquire beneficial
ownership of such security within 60 days.
12
2) Assume the sale of all shares being registered by this Prospectus.
DESCRIPTION OF SECURITIES
General
Our authorized capital stock consists of 95,000,000 shares of common
stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par
value $0.001 per share. The following summary of the material matters relating
to our common stock is qualified in its entirety by reference to our certificate
of incorporation and bylaws.
Common Stock
As of November 27, 2006, there were 40,567,300 shares of our common
stock outstanding.
The holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of our shareholders, including
the election of directors, and do not have cumulative voting rights. Holders of
our common stock are entitled to receive ratably such dividends, if any, as may
be declared by our board of directors out of legally available funds. Upon our
liquidation, dissolution or winding up, the holders of our common stock will be
entitled to share ratably in the net assets legally available for distribution
to our shareholders after the payment of all our debts and other liabilities.
The holders of our common stock have no preemptive or conversion rights or other
subscription rights and there are no redemption or sinking fund provisions
applicable to our common stock. All outstanding shares of our common stock are
fully paid and nonassessable.
PLAN OF DISTRIBUTION
The Selling Stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of our common stock
or interests in shares of our common stock received after the date of this
prospectus from a Selling Stockholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or
otherwise dispose of any or all of their shares of our common stock or interests
in shares of our common stock on any stock exchange, market or trading facility
on which the shares are traded or in private transactions. These dispositions
may be at fixed prices, at prevailing market prices at the time of sale, at
prices related to the prevailing market price, at varying prices determined at
the time of sale, or at negotiated prices.
The Selling Stockholders may use any one or more of the following methods
when disposing of shares or interests therein:
* market transactions in accordance with the rules of the OTC Electronic
Quotation Service or any other available markets or exchanges;
* ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
* block trades in which the broker-dealer will attempt to sell the shares
as agent, but may position and resell a portion of the block as principal to
facilitate the transaction;
* purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
* an exchange distribution in accordance with the rules of the
applicable exchange;
* privately negotiated transactions;
* short sales entered into after the date of this prospectus;
13
* through the writing or settlement of options or other hedging \
transactions, whether through an options exchange or otherwise;
* distributions to the partners and/or members of the Selling
Stockholders;
* redemptions or repurchases of interests owned by partners and/or
members of the Selling Stockholders;
* broker-dealers may agree with the Selling Stockholders to sell a
specified number of such shares at a stipulated price per share;
* a combination of any such methods of sale; and
* any other method permitted pursuant to applicable law.
In connection with the sale of our common stock or interests therein, the
Selling Stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of our
common stock in the course of hedging the positions they assume with the selling
stockholders. The Selling Stockholders may also sell shares of our common stock
short and deliver these securities to close out their short positions, or loan
or pledge our common stock to broker-dealers that in turn may sell these
securities. The Selling Stockholders may also enter into option or other
transactions with broker-dealers or other financial institutions or the creation
of one or more derivative securities which require the delivery to such
broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction).
Short selling occurs when a person sells shares of stock which the person
does not yet own and promises to buy stock in the future to cover the sale. The
general objective of the person selling the shares short is to make a profit by
buying the shares later, at a lower price, to cover the sale. Significant
amounts of short selling, or the perception that a significant amount of short
sales could occur, could depress the market price of our common stock. In
contrast, purchases to cover a short position may have the effect of preventing
or retarding a decline in the market price of our common stock, and together
with the imposition of the penalty bid, may stabilize, maintain or otherwise
affect the market price of our common stock. As a result, the price of our
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued at any time.
These transactions may be effected on the OTC Pink Sheets Electronic Quotation
Service or any other available markets or exchanges.
The aggregate proceeds to the Selling Stockholders from the sale of our
common stock offered by them will be the purchase price of our common stock less
discounts or commissions, if any. Each of the Selling Stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of our common stock to be made directly
or through agents. We will not receive any of the proceeds from this offering.
The Selling Stockholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided that they meet the criteria and conform to the requirements of that
rule.
The Selling Stockholders and any underwriters, broker-dealers or agents
that participate in the sale of our common stock or interests therein may be
"underwriters" within the meaning of Section 2(11) of the Securities Act. Any
discounts, commissions, concessions or profits they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act.
Selling Stockholders who are "underwriters" within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.
To the extent required, the shares of our common stock to be sold, the
names of the Selling Stockholders, the respective purchase prices and public
offering prices, the names of any agents, dealers or underwriters, any
applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a
post-effective amendment to the registration statement that includes this
prospectus.
14
In order to comply with the securities laws of some states, if applicable,
our common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers. In addition, in some states our common stock may
not be sold unless it has been registered or qualified for sale or an exemption
from registration or qualification requirements is available and is complied
with.
We have advised the Selling Stockholders that the anti-manipulation rules
of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the Selling Stockholders and their affiliates.
In addition, we will make copies of this prospectus (as it may be supplemented
or amended from time to time) available to the Selling Stockholders for the
purpose of satisfying the prospectus delivery requirements of the Securities
Act. The Selling Stockholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act, and
in accordance therewith we are required to file periodic reports, proxy
statements and other information with the Commission. Such reports, proxy
statements and other information filed by us can be inspected and copied at the
Commission's Public Reference Room located at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at the prescribed rates. The Commission also maintains a
site on the World Wide Web that contains reports, proxy and information
statements and other information regarding registrants that file electronically.
The address of such site is http://www.sec.gov. Please call 1-800-SEC-0330 for
further information on the operation of the Commission's Public Reference Room.
Our common stock is quoted on the OTC Bulletin Board under the symbol
"ETLT.OB."
With respect to our common stock, this prospectus omits certain
information that is contained in the registration statement on file with the
Commission, of which this prospectus is a part. For further information with
respect to us and our common stock, reference is made to the registration
statement, including the exhibits incorporated therein by reference or filed
therewith. Statements herein contained concerning the provisions of any document
are not necessarily complete and, in each instance, reference is made to the
copy of such document filed as an exhibit or incorporated by reference to the
registration statement. The registration statement and the exhibits may be
inspected without charge at the offices of the Commission or copies thereof
obtained at prescribed rates from the public reference section of the Commission
at the addresses set forth above.
You should rely on the information contained in this prospectus and in the
registration statement as well as other information you deem relevant. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. This prospectus is an offer to sell, or a
solicitation of offers to buy, securities only in jurisdictions where offers and
sales are permitted. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or any sale or exchange of securities, however, we have a duty
to update that information while this prospectus is in use by you where, among
other things, any facts or circumstances arise which, individually or in the
aggregate, represent a fundamental change in the information contained in this
prospectus or any material information with respect to the plan of distribution
was not previously disclosed in the prospectus or there is any material change
to such information in the prospectus. This prospectus does not offer to sell or
solicit any offer to buy any securities other than our common stock to which it
relates, nor does it offer to buy any of these securities in any jurisdiction to
any person to whom it is unlawful to make such offer or solicitation in such
jurisdiction.
INTERESTS OF NAMED EXPERTS AND COUNSEL
The validity of the shares of Eternal common stock offered by this prospectus
will be passed on by Vanderkam & Associates, as counsel to Eternal. Hank
Vanderkam, Vanderkam & Associates has been granted 250,000 options under the
Plan. In addition to these shares, Mr. Vanderkam also owns 819,876 shares of the
Company's common stock.
15
RESALE PROSPECTUS
ETERNAL TECHNOLOGIES GROUP, INC.
Shares of Common Stock, par value $0.001 per share
November 27, 2006
No dealer, salesperson or other person is authorized to give any information or
to represent anything not contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is an offer to sell
only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation, eliminate the personal
liability of directors to the Company or its stockholders for monetary damages
for breach of fiduciary duty to the extent permitted by Nevada law. The
Company's Bylaws provide that the Company shall have the power to indemnify its
officers and directors to the extent permitted by Nevada law. Nevada law
authorizes a corporation to indemnify directors, officers, employees or agents
of the corporation in non-derivative suits if such party acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interest
of the corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful, as determined in
accordance with Nevada law.
The provisions affecting personal liability do not abrogate a
director's fiduciary duty to the Company and its shareholders, but eliminate
personal liability for monetary damages for breach of that duty. The provisions
do not, however, eliminate or limit the liability of a director for failing to
act in good faith, for engaging in intentional misconduct or knowingly violating
a law, for authorizing the illegal payment of a dividend or repurchase of stock,
for obtaining an improper personal benefit, for breaching a director's duty of
loyalty, which is generally described as the duty not to engage in any
transaction which involves a conflict between the interest of the Company and
those of the director, or for violations of the federal securities laws.
The provisions regarding indemnification provide, in essence, that the
Company will indemnify its directors against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding arising out of the
director's status as a director of the Company, including actions brought by or
on behalf of the Company (shareholder derivative actions). The provisions do not
require a showing of good faith. Moreover, they do not provide indemnification
for liability arising out of willful misconduct, fraud, or dishonesty, for
"short-swing" profits violations under the federal securities laws, for the
receipt of illegal remuneration or if the director received a benefit in money,
property or services to wich the director is not legally entitled. The
provisions also do not provide indemnification for any liability to the extent
such liability is covered by insurance.
The provisions also limit or indemnify against liability resulting from
grossly negligent decisions including grossly negligent business decisions
relating to attempts to change control of the Company.
EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
EXHIBITS
4.1 2006 Stock Option Plan
4.2 2006 Stock Compensation Plan
5.1 Opinion and consent of Vanderkam & Associates re: the legality of the
shares being registered
23.1 Consent of Vanderkam & Associates (included in Exhibit 5.1)
23.2 Consent of Ham Langston & Brezina LLC
16
UNDERTAKINGS
(a) The registrant hereby undertakes:
(1) To file, during any period in which offers or sells
are being made, a post-effective amendment to this
registration statement to include any material
information with respect to the plan of distribution
not previously disclosed in the registration
statement or any material change to such information
in the registration statement.
(2) That, for the purpose of determining liability under
the Securities Act of 1933, each post-effective
amendment shall be treated as a new registration
statement of the securities offered, and the offering
of the securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at
the end of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tianjin, PRC on the 27th day of November, 2006.
ETERNAL TECHNOLOGIES GROUP, INC.
By: /s/ JiJun Wu
---------------------------------
JiJun Wu, Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signatures Title Date
/s/ Wu JiJun November 27, 2006
- ------------
Wu JiJun Chairman and Director
/s/ Wei Jiansheng November 27, 2006
----------------
Wu JiJun CEO and Director
/s/ Zhu Shien
Zhu Shien Director November 27, 2006
/s/ Yuguo Cheng
Yuguo Cheng Director November 27, 2006
/s/ Genchang Li
Genchang Li Director November 27, 2006
/s/ Shicheng Fu
Shicheng Fu Director November 27, 2006
/s/ Mike Zhang Director November 27, 2006
- --------------
Mike Zhang
18
ETERNAL TECHNOLOGIES GROUP, INC.
OPTION PLAN OF 2006
(Passed by Board of the Company on 17 July 2006)
(Effective October 12, 2006)
1 amount of issuing shares
The company will issue up to 3,000,000 free trading shares which shall be
purchased by the qualified people. 2 the qualification of purchasing shares for
staff
(1) The staff and employees, who have worked in the company or
subsidiaries for at least one year (joined the company before August
25th, 2005), have right to join the option plan.
(2) Members staying in the board of directors above one year,
consultants, experts, scholars, and the staff working in foreign office
of the company have the right to join the option plan. 3 the principal
of holding a share Staff shall voluntarily purchase shares in range and
account according to this plan, and pay by cash in set time. 4
allocations of rated shares
(1) Directors, consultants, experts serving for company, scholars
(including direct relatives) shall purchase shares worth at most
US$60,000.
(2) Senior management staff shall purchase shares worth at most
US$80,000.
(3) Junior or below management staff shall purchase shares
worth at most US$50,000.
(4) Another staff and employees shall purchase shares worth at most
US$30,000.
(5) If the mounts of registering exceed the total of rated shares, the
company shall reduce in proportion.
5 Staffs shall go to Finance Department to register before 31 July 2006.
6 The price of issuing will be priced according to 90% of average closing price
of ten transaction days before the shares are issued.
7 payments After the share is priced, staff shall pay to Finance Department
according to the situation of overall arrangement. The periods of payment are
three days (not postponing on weekend or holiday). If staff shall not pay in set
date, they will be regarded as abandoning the right of purchasing shares.
8 the voucher of payment The voucher of payment with seal of the company is
regarding as the formal receipt. After the formal shares are issued, staff shall
exchange the receipt for the share.
9 The expenses concerning the execution of issuing shares are defrayed by the
company. The cash which is exchanged by shares will belong to the capitals of
company.
10 The right to interpretation of this plan is authorized by the board of the
company.
19
ETERNAL TECHNOLOGIES GROUP, INC.
2006 STOCK COMPENSATION PLAN
1. Purpose. The purpose of this Eternal Technologies Group, Inc. 2006
Compensation Plan ("Plan") is to encourage ownership of common stock, $.001 par
value ("Common Stock"), of Eternal Technologies Group, Inc., a Nevada
corporation (the "Company"), by eligible employees, consultants and directors of
the Company and its Affiliates and to provide an incentive for such employees,
consultants and directors who render services to exert maximum effort for the
business success of the Company and strengthen the identification of employees,
consultants and directors with the shareholders.
2. Administration.
2.1 Administration by the Board or the Compensation Committee.
This Plan shall be administered by the Board of Directors (the "Board") unless
the Board establishes a committee comprised of one or more of its members to
carry out such administration, in which case administration of the Plan shall be
by a Compensation Committee (the "Committee") designated by the Board of the
Company, which shall also designate the Chairman of the Committee.
2.2 Board or Committee Action. The Board, or the Committee as
appropriate, shall hold its meetings at such times and places as it may be
determine. A majority of the members of such Board or Committee shall constitute
a quorum, and all determinations of the Board or Committee shall be made by not
less than a majority of its members. Any decision or determination reduced to
writing and signed by a majority of the members shall be fully effective as if
it had been made by a majority vote of its members at a meeting duly called and
held. The Board or Committee may designate the Secretary of the Company or other
Company employees to assist the Board or Committee in the administration of this
Plan, and may grant authority to such persons to execute award agreements or
other documents on behalf of the Board or the Committee and the Company. Any
duly constituted committee of the Board satisfying the qualifications of this
Section 2 may be appointed as the Committee.
2.3 Expenses. All expenses and liabilities incurred by the
Board or the Committee in the administration of this Plan shall be borne by the
Company. The Board or the Committee may employ attorneys, consultants,
accountants or other persons.
3. Stock Reserved. The aggregate number of shares of Common Stock that
may be optioned under this Plan is 600,000. The shares subject to this Plan
shall consist of authorized but unissued shares of Common Stock and such number
of shares shall be and is hereby reserved for compensation for such purpose. Any
of such shares which may remain unallocated at the termination of this Plan
shall cease to be reserved for the purpose of this Plan, but until termination
of this Plan or the termination of the last of the compensation grants under
this Plan, whichever last occurs, the Company shall at all times reserve a
sufficient number of shares to meet the requirements of this Plan.
20
4. Eligibility. The persons eligible to participate in this Plan as a
recipient of the stock compensation shall include only employees, consultants
and directors of the Company or its Affiliates at the time the compensation
award is granted. An employee director or consultant who has been granted
compensation shares hereunder may be granted additional shares, if the Board or
the Committee, as appropriate, shall so determine.
5. Grant of Compensation Shares.
The Board or Committee, as appropriate, shall have sole and
absolute discretionary authority (i) to determine, authorize, and designate
those employees, consultants and directors of the Company or its Affiliates who
are to receive compensation shares under this Plan and, (ii) to determine the
number of shares of Common Stock to be covered by such grants.
6. Compliance With Other Laws and Regulations. This Plan and the grant
of compensation shares thereunder, and the obligation of the Company to deliver
shares under such compensation grants shall be subject to all applicable federal
and state laws, rules and regulations and to such approvals by any governmental
or regulatory agency as may be required. The Company shall not be required to
issue or deliver any certificates for shares of Common Stock prior to the
completion of any registration or qualification of such shares under any federal
or state law or issuance of any ruling or regulation of any government body
which the Company shall, in its sole discretion, determine to be necessary or
advisable.
7. Taxes. The Company may make such provisions as it may deem
appropriate for the withholding of any taxes which it determines is required in
connection with any compensation shares granted under this Plan.
8. No Right to Employment. Employees shall be considered to be in the
employment of the Company so long as they remain employees of the Company or its
Affiliates. Any questions as to whether and when there has been a termination of
such employment and the cause of such termination shall be determined by the
Board or the Committee, and its determination shall be final. Nothing contained
herein shall be construed as conferring upon the Employee issued compensation
shares the right to continue in the employ of the Company or its Affiliates, nor
shall anything contained herein be construed or interpreted to limit the
"employment at will" relationship between the Employee and the Company or its
Affiliates.
9. Liability of Company for Non-Issuance of Shares and Tax
Consequences. The Company and any Affiliates that are in existence or hereafter
come into existence shall not be liable to a Grantee of Compensation shares or
other persons as to the non-issuance or sale of shares as to which the Company
has been unable to obtain from any regulatory body having jurisdiction the
authority deemed by the Company's counsel to be necessary to the lawful issuance
and sale of any shares hereunder.
10. Effectiveness and Expiration of Plan. This Plan shall be effective
on the date of adoption by the Board.
21
11. Non-Exclusivity of this Plan. The adoption by the Board shall not
be construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable.
12. Governing Law. This Plan and any agreements hereunder shall be
interpreted and construed in accordance with the laws of the State of Nevada and
applicable federal law.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption
of the foregoing by directors of the Company, Eternal Technologies Group, Inc.
has caused these presents to be duly executed in its name and behalf by its
proper officers thereunto duly authorized as of this 12 day of October, 2006.
ETERNAL TECHNOLOGIES GROUP, INC.
ATTEST:
By:___________________________
________________________________ Name: Jijun Wu
Zhai Rui, Secretary Title: Chairman
22
Vanderkam & Associates
1301 Travis, #1200
Houston, TX 77002
713-547-8900 phone
713-547-8910 facsimile
November 27, 2006
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Eternal Technologies Group, Inc.
Registration Statement on Form S-8
Gentlemen:
We have acted as special counsel to Eternal Technologies Group, Inc., a
Nevada corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") pertaining to
the registration by the Company under the Securities Act of 1933, as amended, of
an aggregate of 4,400,000 shares (the "Shares") of the Company's common stock
(the "Common Stock"), $0.001 par value per share, pursuant to (i) the Company's
2006 Stock Option Plan 3,000,000 shares (ii) the 2006 Stock Compensation Plan
(600,000 shares) collectively referred to herein as the "Plans" and (iii)
800,000 shares previously issued to various employees as compensation.
We have made such legal and factual examinations and inquiries, including
an examination of originals or copies certified or otherwise identified to our
satisfaction of such documents, corporate records and instruments, as we have
deemed necessary or appropriate for purposes of this opinion. In our
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents submitted to us as originals, and the conformity to authentic
original documents of all documents submitted to us as copies.
We have relied, without independent investigation, upon a certificate from
the Company's Chief Executive Officer as to certain factual and other matters
including that the number of shares which the Company is authorized to issue in
its Certificate of Incorporation, as amended, exceeds by at least the number of
shares which may be issued in connection with the Plans, the sum of (i) the
number of shares of the Company's Common Stock outstanding, (ii) the number of
shares of the Company's Common Stock held as treasury shares, and (iii) the
number of shares of the Company's Common Stock which the Company is obligated to
issue (or has otherwise reserved for issuance for any purposes), and we have
assumed for purposes of our opinion herein that such condition will remain true
at all future times relevant to this opinion. We have also assumed that the
Company will cause certificates representing Shares issued in the future to be
properly executed and delivered and will take all other actions appropriate for
the due and proper issuance of such Shares. We have assumed for purposes of this
opinion that options issued under the Plans, the Shares issuable upon exercise
of such options and Shares issued pursuant to the 2006 Stock Compensation Plan
and the 800,000 shares previously issued have been duly authorized by all
necessary corporate action on the part of the Company and such options and
Shares of restricted stock have been duly authorized and granted under the
Plans. We express no opinion regarding any shares reacquired by the Company
after initial issuance.
We are members of the Bar of the State of Texas and are not admitted to practice
law in any other jurisdiction. We do not hold ourselves out as being conversant
with, and express no opinion as to, the laws of any jurisdiction other than the
laws of the State of Texas, the General Corporation Law of the State of Nevada,
and laws of the United States of America.
Subject to the limitations stated in this letter, and subject further to
the following limitations, it is our opinion that the Shares issued or issuable
by the Company, under and in accordance with all of the provisions of the Plans,
will, upon delivery thereof and receipt by the Company of all and adequate
consideration owed to the Company therefor (assuming such consideration exceeds
the par value therefor), be validly issued, fully paid and non-assessable.
The foregoing assumes that the aforesaid Registration Statement will
become and remain effective under the Securities Act of 1933, as amended, prior
to any offering of the Shares pursuant to the terms thereof and will be amended,
as appropriate, and that there will be compliance with all applicable state
securities laws in connection with the offering of such securities, as well as
compliance with the terms of the offering set forth in the Registration
Statement.
This opinion is rendered solely for your benefit and may not be relied
upon by any other person or entity. This opinion is provided to you as of the
date hereof. We undertake no, and hereby disclaim any obligation to advise you
of any change in any matter set forth herein. Without our prior written consent,
this opinion may not be quoted in whole or in part or otherwise referred to in
any report or document furnished to any person or entity.
We consent to the filing of this letter as an exhibit to the Registration
Statement. In giving this consent, we do not thereby admit that we are within
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Vanderkam & Associates
23
CONSENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
As independent certified public accountants, we hereby consent to the
incorporation by reference in the Registration Statement on Form S-8 of our
report dated May 6, 2005, except for the effect of the matters discussed in Note
20 as to which the date is May 19, 2006, relating to the consolidated financial
statements of Eternal Technologies Group, Inc. which report appears in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2005, and
to all references to this firm included in such Registration Statement.
/s/ Thomas Leger & Co. LLP
Thomas Leger & Co. LLP
Date: November 21, 2006
CONSENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Eternal Technologies Group, Inc. and Subsidiaries
Suite 04-06, 28/F Block A
Innotech Tower, 235 Nanjing Road
Heping District, Tianjin, PRC 300100
As the Registrant's independent registered public accounting firm, we hereby
consent to the incorporation by reference in this Registration Statement on Form
S-8 of our report, dated May 18, 2006 relating to the financial statements of
Eternal Technologies Group, Inc. and Subsidiaries which appears in the
Registrant's Annual Report on Form 10-KSB for the year ended December 31, 2005
and to all references to our Firm included in this Registration Statement on
Form S-8.
/s/ Ham Langston & Brezina LLC
Ham Langston & Brezina LLC
Date: November 22, 2006
Houston, Texas