UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
EKNOWLEDGE GROUP, INC.
(Exact name of registrant as specified in its charter)
Nevada 76-040898
(I.R.S. Employer
(State or other jurisdiction of incorporation or organization)
Identification No.)
1520 W. Sixth Street, Suite 101, Corona, CA 92882
--------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
2001 STOCK COMPENSATION PLAN
(Full title of the plan)
Karl Rodriquez
34700 Pacific Coast Hwy, Suite 303
Capistrano Beach, CA 92624
(909) 372-2800
(Name, address and telephone number of agent for service)
CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------
Title of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Offering Price Aggregate Offering Registration
Registered Per Share Price Fee
- ---------------------------------------------------------------------------------------
$0.001 par value 3,138,000 $0.34 $1,066,920 $281.67
Common Stock
- ---------------------------------------------------------------------------------------
Totals 3,138,000 $0.34 $1,066,920 $281.67
- ---------------------------------------------------------------------------------------
(1) In addition, pursuant to Rule 416(c) under the Securities Act of 1933, this
registration statement also covers an indeterminate amount of interests to be
offered or sold pursuant to the employee benefit plan described herein.
(2) The proposed maximum offering price per share of Common Stock and the
proposed maximum aggregate offering price are calculated solely for the purpose
of determining the registration fee pursuant to Rule 457(h) under the Securities
Act of 1933. The fee for the shares being registered is based on a price of
$0.34 per share, which was the average bid and asked prices of the Company's
Common Stock in over-the-counter trading on May 22, 2001.
1
PROPSECTUS
EKNOWLEDGE GROUP, INC.
1520 W. Sixth Street, Suite 101, Corona, CA 92882
(909) 372-2800
(3,138,000 SHARES OF COMMON STOCK)
This Prospectus relates to the offer and sale by EKNOWLEDGE GROUP ("EKNO"),
a Nevada corporation (the "Company") of shares of its Common Stock, $0.001 par
value (the "Common Stock") pursuant to its 2001 STOCK COMPENSATION PLAN whereby
certain individuals receive stock options to stimulate their involvement and
continued involvement in the Company. The Company is registering hereunder and
then issuing upon receipt of adequate consideration therefore to its employees,
officers, directors or consultants shares of the Common Stock in consideration
for services rendered of to be rendered and payments made under the 2001 STOCK
COMPENSATION PLAN.
The Common Stock is not subject to any restriction on transferability.
Recipients of shares other than persons who are affiliate of the Company within
the many of the Securities Act of 1933 (the "Act") may sell all or part of the
shares in any way permitted by law including sales in the over-the-counter
market at prevailing prices at the time of such sale. Shares registered
hereunder are being sold to both affiliates and non-affiliates of the Company.
An affiliate is, summarily, any director, executive officer or controlling
shareholder of the Company. The affiliates of the Company may become subject to
Section 16(b) of the Securities Act of 1934, as amended (the "Exchange Act")
which would limit their discretion in transferring the shares acquired in the
Company. If the individual who is not now an affiliate becomes an affiliate of
the Company in the future; he would then be subject to Section I(b) of the
Exchange Action (See General Information - Restrictions on Resale).
The Company's Common Stock is listed on the OTC Bulletin Board under the
symbol EKNO.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is May 29, 2001.
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This Prospectus is not part of any Registration Statement which was filed and
been effective under the Securities Act of 1933 as amended (the Act) and does
not contain all of the information set forth in the Registration Statement,
certain portions of which have seen offered pursuant to the rules and
regulations promulgated by the U.S. Securities and Exchange Commission (the
"Commission") under the Securities Act. The statements in this Prospectus as to
the contents of any contracts or other documents filed as an exhibit to either
the Registration Statement or other filings of the Company with the Commission
are qualified in their entirety by the reference thereto. A copy of any document
or part thereof incorporated by reference in this Prospectus but not delivered
herewith will be furnished without charge upon written or oral request. Requests
should be addressed to: EKNOWLEDGE GROUP, INC., 1520 W. Sixth Street, Suite 101,
Corona, CA 92882 telephone (909) 372-2800.
The Company is subject to the reporting requirements of the Exchange Act and in
accordance therewith files reports and other information with the Commission.
These reports as well as the proxy statements, information statements and other
information filed by the Company under the Exchange Act may be reviewed and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street N.C. Washington D.C. 20549. Copies may be obtained at the
prescribed rates. In addition the Common Stock is quoted on the automated
quotation system maintained by the National Association of Securities Dealers,
Inc. (NASD). Thus copies of these reports, proxy statements, information
statements and other information may also be examined at the offices of the NASD
at 1735 K Street N.C. Washington DC 20549.
No person has been authorized to give any information or to make any
representation, other than those contained in this Prospectus, and if given or
made, such other information or representation must not be relied upon as having
been authorized by the Company. This Prospectus does not constitute an offer or
a solicitation by anyone in any state in which such is not authorized or in
which the person making such is not qualified or to any one to whom it is
unlawful to make an offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder shall under
any circumstances create any implication that there has not been a change in the
affairs of the Company since the date hereof.
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PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION
GENERAL INFORMATION
THE COMPANY
The Company has its principal offices at EKNOWLEDGE GROUP, INC., 1520 W. Sixth
Street, Suite 101, Corona, CA 92882.
PURPOSES
The Common Stock will be issued by the Company pursuant to its 2001 STOCK
COMPENSATION PLAN, which has been approved by the Board of Directors of the
Company (the "Board of Directors"). The 2001 STOCK COMPENSATION PLAN is hoped to
provide a method whereby the Company's current employees and officers and
non-employee directors and consultants may be stimulated and allow the Company
to secure and retain highly qualified employees and officers and non-employee
directors and consultants, thereby advancing the interests of the Company, and
all of its shareholders. A copy of the 2001 STOCK COMPENSATION PLAN has been
filed as an exhibit to this Registration Statement.
COMMON STOCK
The Board has authorized the issuance of up to 3,138,000 shares of the
Common stock pursuant to the Company's 2001 STOCK COMPENSATION PLAN upon
effectiveness of this registration Statement.
THE COMPANY 2001 STOCK COMPENSATION PLAN
The Company has established a 2001 STOCK COMPENSATION PLAN which awards
stock options in an effort to further compensate its existing employees and
officers and non-employee directors and consultants, secure their continued
employment effort, and attract highly qualified employee's and consultants as
they are needed.
NO RESTRICTIONS ON TRANSFER
Upon the exercise of an option, that individual will become the record and
beneficial owners of the shares of Common Stock upon issuance and delivery and
are entitled to all of the rights of ownership, including the right to vote any
shares awarded and to receive ordinary cash dividends on the Common Stock.
TAX TREATMENT TO THE INDIVIDUAL WHO EXERCISES THE OPTION
The individuals receiving shares of common stock pursuant to the exercises
of an option or options at an exercise price below the fair market value of the
shares on the date of exercise, the difference between the exercise price and
the fair market value of the stock on the date of exercise may be deemed
ordinary income for federal income tax purposes. The recipient is urged to
4
consult his tax advisor on this matter. Further, if any recipient is an
"affiliate", Section 16(b) of the Exchange Act is applicable and will affect the
issue of taxation.
TAX TREATMENT TO THE COMPANY
The amount of income recognized by any recipient hereunder in accordance
with the foregoing discussion may be an expense deductible by the Company for
federal income tax purposes of the taxable year of the Company during which the
recipient recognizes income.
RESTRICTIONS OF RESALES
In the event that an affiliate of the Company acquires shares of Common
Stock hereunder, the affiliate will be subject to Section 16(b) of the Exchange
Act. Further, in the event that any affiliate acquiring shares hereunder has
sold or sells any shares of Common Stock in the six months preceding or
following the receipt of shares hereunder, any so called "profit", as computed
under Section 16(b) of the Exchange Act, would be required to be disgorged from
the recipient to the Company. Services rendered have been recognized as valid
consideration for the "purchase" of shares in connection with the "profit"
computation under Section 16(b) of the Exchange Act. The Company has agreed that
for the purpose of any "profit" computation under 16(b) the price paid for the
common stock issued to affiliates is equal to the value of services rendered.
Shares of common Stock acquired hereunder by persons other than affiliates are
not subject to Section 16(b) of the Exchange Act.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
A copy of any document or part hereof incorporated by reference in this
Registration Statement but not delivered with this Prospectus or any document
required to be delivered pursuant to Rule 428(b) under the Securities Act will
be furnished without charge upon written or oral request. Requests should be
addressed to: EKNOWLEDGE GROUP, INC., 1520 W. Sixth Street, Suite 101, Corona,
CA 92882 telephone (909) 372-2800.
5
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by EKNOWLEDGE, INC. (the "Company") under the
Securities Exchange Act of 1934 (the "Exchange Act") are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31,2000;
(b) All other reports filed by the Company pursuant to Section 13(a)
or 15(d) of the Exchange Act since December 31, 2000; and
(c) The description of the Company's Common Stock contained in the
Company's Registration Statement filed with the SEC under the Exchange Act and
subsequent amendments and reports filed to update such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date of this Registration Statement and
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 in this
Registration Statement and to be a part hereof from the date of the filing of
such documents.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Registration
Statement to the extent that a statement contained in a subsequently filed
document which is also incorporated by reference herein modified or superseded
such statement.
Item 4. DESCRIPTION OF SECURITIES
Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's by-laws, in accordance with the Nevada Statutes, provide
that to the extent he/she is otherwise fairly and reasonably entitled thereto,
the Company shall indemnify a Director or Officer, a former Director or Officer,
or a person who acts or acted at the Company's request as a Director or Officer
of a body corporate of which the Corporation is or was a shareholder or creditor
(or a person who undertakes or has undertaken any liability on behalf of the
Company or any such body corporate and his heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonably incurred by him in respect of any
6
civil, criminal or administrative action or proceeding to which he is made a
party by reason of being or having been a Director or Officer of the Company or
such body corporate, if
(a) he acted honestly and in good faith with a view to the best
interests of the Company; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he had reasonable grounds for believing
that his conduct was lawful.
The Nevada Statutes provide that directors shall not be personally liable
to the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the directors'
duty of loyalty to the Company or its shareholders, (ii) for acts or omissions
not in good faith or which involved intentional misconduct or a knowing
violation of law, (iii) for authorizing a distribution that is unlawful, or (iv)
for any transaction from which the director derived an improper personal
benefit. Such provision protects directors against personal liability for
monetary damages for breaches of their duty of care.
The Company may purchase and maintain insurance for the benefit of its
Directors and Officers as such, as the Board of directors may from time to time
determine.
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
Item 8. EXHIBITS
Exhibit No. Description
4 Not Required
5 Opinion of Tracy R. Neal regarding the legality
of the securities registered.*
10 2001 Stock Compensation Plan*
15 Not Required
23.1 Consent of Tracy R. Neal, special counsel to
registrant, filed as a part of Exhibit 5 hereof.*
23.2 Consent of Merdinger, Fruchter, Rosen & Corso,
PC, Certified Public Accountants*
27 Not Required
28 Not Required
29 Not Required
*Filed herewith
7
Item 9. UNDERTAKINGS
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) 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 any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) 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.
(5) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other that the payment by the Company of expenses incurred or
paid by a director, officer, or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person of the Company in the successful
defense of that action suit, or proceeding) is asserted by such director,
officer, or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
8
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 or amendment to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Corona, State of California, on the 29th day of
May, 2001.
EKNOWLEDGE GROUP, INC.
By: /s/ Gary Saunders
Gary Saunders
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
By: /s/ Eric Fronk
Eric Fronk, Chief Financial Officer
Dated: May 29, 2001
By: /s/ Paul Donion
Paul Donion, President and Chief Operating Officer
Dated: May 29, 2001
By: /s/ Gary Saunders
Gary Saunders, Board of Directors
Dated: May 29, 2001
By: /s/ Scott Hildebrandt
Scott Hildebrandt, Board of Directors
Dated: May 29, 2001
By: /s/ Christopher DeSantis
Christopher DeSantis, Board of Directors
Dated: May 29, 2001
By: /s/ Wayne Saunders
Wayne Saunders, Board of Directors
Dated: May 29, 2001
9
EXHIBIT INDEX
Exhibit No. Description
4 Not Required
5 Opinion of Tracy R. Neal regarding the legality of
the securities registered.*
10 2001 Stock Compensation Plan*
15 Not Required
23.1 Consent of Tracy R. Neal, special counsel to registrant,
filed as a part of Exhibit 5 hereof.*
23.2 Consent of Merdinger, Fruchter, Rosen & Corso, PC*
27 Not Required
28 Not Required
29 Not Required
*Filed herewith.
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EXHIBIT 5
LETTERHEAD OF TRACY R. NEAL
May 22, 2001
EKNOWLEDGE GROUP
1520 W. Sixth Street, Suite 101
Corona, CA 92882
Gentlemen,
We refer to the Registration Statement on Form S-8 (the
"Registration Statement") to be filed by EKNOWLEDGE GROUP, INC. ("Company") with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"). The Registration Statement relates to an aggregate of
3,138,000 shares of the Common Stock of the Company, par value $0.001 per share
(the "Shares") pursuant to the 2001 Stock Compensation Plan.
As special counsel for the Company, we have examined such corporate
records, documents and such question of law as we have considered necessary or
appropriate for purposes of this opinion and, upon the basis of such
examination, advise you that in our opinion, all necessary corporate proceedings
by the Company have been duly taken to authorize the issuance of the Shares and
that the Shares being registered pursuant to the Registration Statement, when
issued will be duly authorized, legally issued, fully paid and non-assessable.
This opinion does not cover any matters related to any re-offer or re-sale of
the shares by and Plan Beneficiaries, once properly and legally issued pursuant
to the Plan as described in the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. This consent is not to be construed as an admission that
we are a person whose consent is required to be filed with the Registration
Statement under the provisions of the Act. This opinion is not to be used,
circulated, quoted or otherwise referred to for any other purpose without our
prior written consent. This opinion is based on our knowledge of the law and
facts as of the date hereof. This opinion does not address or relate to any
specific state securities laws. We assume no duty to communicate with the
Company in respect to any matter which comes to our attention hereafter.
Cordially,
By: /s/ TRACY R. NEAL
Tracy R. Neal
11
EXHIBIT 10
EKNOWLEDGE GROUP, INC.
2001 STOCK COMPENSATION PLAN
ARTICLE I
INTRODUCTION
1.1 ESTABLISHMENT. EKNOWLEDGE GROUP, INC., a Nevada corporation, ("EKNO")
hereby establishes the 2001 Stock Compensation Plan (the "Plan"), which permits
the grant of stock options, restricted stock awards, stock appreciation rights,
stock units, and other stock grants (the "options") to certain directors and key
employees of EKNO, and certain independent contractors, including both
individuals and companies, providing certain services to EKNO.
1.2 PURPOSES. The purposes of the Plan are (a) to provide directors and key
employees selected for participation in the Plan with added incentives to
continue in the service of EKNO; (b) to create in such directors and employees a
more direct interest in the success of the operations of EKNO by relating
compensation to the achievement of long-term corporate economic objectives; (c)
to attract and retain directors and key employees by providing an opportunity
for investment in EKNO; (d) to obtain services for EKNO from independent
contractors, for services, including, but not limited to, advertising, public
relations, consulting, at reduced compensation or at rates and/or on terms which
are otherwise negotiated favorably to EKNO.
1.3 EFFECTIVE DATE. The effective date of the Plan shall be the Effective
Date, which is the date on which it was approved by the Board of Directors of
EKNO.
ARTICLE II
DEFINITIONS
Throughout the Plan, except when the context indicates otherwise, the
masculine gender shall include the feminine, and the use of any term in the
singular shall include the plural. The following terms shall have the meanings
set forth:
"Affiliated Company" shall mean any corporation or other entity (including
without limitation a partnership) that is affiliated with EKNO through stock
ownership or otherwise and is treated as a common employer under sections 414(b)
and 414(c) of the Code, including, without limitation, any parent or subsidiary
of EKNO as defined in section 424 of the Code.
"EKNO" shall mean EKNOWLEDGE GROUP, INC., a Nevada corporation, and any
Affiliated Company.
"Award" shall mean an Option, a Restricted Stock Award, a Stock
Appreciation Right, a Stock Unit, a grant of Shares pursuant to article XI, or
another issuance of Shares hereunder.
"Board" shall mean the board of directors of EKNO.
A "Change in Control" shall mean the occurrence of any of the following:
(a) a "person" (within the meaning of section 13(d) of the Securities Exchange
Act of 1934, as amended ("Exchange Act")) becomes the "beneficial owner" (as
12
defined in Rule 13d-3 promulgated thereunder) of Shares or capital stock of EKNO
or EKNO's successor having 30 percent or more of the total number of votes that
may be cast for the election of directors or (b) individuals who are directors
of EKNO at the beginning of a 24-month period cease to constitute at least
two-thirds of all directors at any time during such period.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Disabled" or "Disability" shall have the meaning set forth in section
22(e)(3) of the Code.
"Effective Date" shall have the meaning set forth in section 1.3.
"Eligible Parties" shall mean directors and key employees of EKNO, and
Independent Contractors of EKNO.
"Fair Market Value" of a Share shall mean its fair market value as
determined by the Committee in good faith in accordance with section 422 of the
Code.
"Incentive Option" shall mean an Option designated as such and granted in
accordance with section 422 of the Code.
"Independent Contractors" shall mean certain third parties, including both
individuals and companies, that are neither directors nor key employees of EKNO,
and who provide certain services to EKNO, including, but not limited to,
advertising, public relations, marketing, and consulting, on an on-going
contractual basis for reduced, or otherwise favorably-negotiated compensation,
part of which is based on the Options.
"Non-Qualified Option" shall mean any Option other than an Incentive
Option.
"Option" shall mean a right to purchase Shares at a stated or formula price
for a specified period of time and shall be either an Incentive Option or a
Non-Qualified Option.
"Option Holder" shall mean a Participant who has been granted one or more
Options.
"Option Price" shall mean the price at which Shares subject to an Option
may be purchased, as determined in accordance with section 7.2(b).
"Participant" shall mean key employees, directors, consultants and
suppliers of the Company and any of its subsidiaries, as the Committee in its
sole discretion determines to be significantly responsible for the success and
future growth and profitability of the Company and whom the Committee may
designate from time to time to receive Stock Options under the Plan. Designation
of a participant in any year shall not require the Committee to designate such
person to receive a Stock Option in any other year or, once designated, to
receive the same type or amount of Stock Option as granted to the participant in
any other year. The Committee shall consider such factors as it deems pertinent
in selecting participants and in determining the type and amount of their
respective Stock Options.
13
"Plan" shall mean this 2001 Stock Compensation Plan.
"Restricted Stock Award" shall mean an Award of Shares granted pursuant to
article VIII that is subject to restrictions imposed in article VIII.
"Share" shall mean a share of the Common Stock, par value $0.01 per share,
of EKNO.
"Stock Appreciation Right" shall mean the right, granted by the Committee
pursuant to the Plan, to receive a payment equal to the increase in the Fair
Market Value of a Share subsequent to the grant of such right. A Stock
Appreciation Right may entitle a Participant to receive a number of Shares
(without any payment to EKNO, except for applicable withholding taxes), cash, or
Shares and cash, as determined by the Committee in accordance with section 10.3.
"Stock Option Agreement" shall mean Stock Options evidenced by an agreement
(which need not be identical) in such form as the Committee may from time to
time approve; PROVIDED, HOWEVER, that in the event of any conflict between the
provisions of the Plan and any such agreement, the provisions of the plan shall
prevail.
"Stock Unit" shall mean a measurement component equal to the Fair Market
Value of a Share on the date of determination.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Board of Directors. Members of the
Board of Directors shall be appointed from time to time by the Board, shall
serve at the pleasure of the Board, and may resign at any time upon written
notice to the Board. Consistent with the Plan, the Board of Directors, in its
sole discretion, shall select Participants from among the Eligible Parties,
shall determine Awards, the number of Stock Units, Stock Appreciation Rights, or
Shares to be subject to Awards, and the time at which Awards are to be made,
shall fix the Option Price and the period and manner in which an Option becomes
exercisable, and shall establish the duration and nature of the restrictions in
Restricted Stock Awards, the terms and conditions applicable to Stock Units, and
such other terms and requirements of the compensation incentives under the Plan
as the Board of Directors may deem necessary or desirable. The Board of
Directors shall determine the form or forms of the agreements with Participants
that evidence the particular provisions, terms, conditions, rights, and duties
of EKNO and the Participants with respect to Awards, which provisions need not
be identical except as may be provided herein. The Board of Directors may from
time to time adopt such rules and regulations to carry out the purposes of the
Plan as it may deem proper and in the best interests of EKNO. The Board of
Directors in its sole discretion may correct any defect, supply any omission, or
reconcile any inconsistency in the Plan or in any agreement entered into
hereunder in the manner and to the extent it deems expedient. No member of the
Board of Directors shall be liable for any action or determination made in good
faith. The determinations, interpretations, and other actions of the Board of
Directors pursuant to the Plan shall be binding and conclusive for all purposes.
14
ARTICLE IV
SUBJECT SHARES
4.1 NUMBER. The number of Shares that are authorized for issuance under the
Plan shall not exceed 3,138,000. This number may be increased from time to time
by the Board, or if, in the opinion of counsel to EKNO, shareholder approval is
required. Shares that may be issued upon exercise of Options or Stock
Appreciation Rights or that are issued with respect to Stock Units or as
Restricted Stock Awards, incentive compensation, or other grants under the Plan
shall reduce the number of Shares available for issuance under the Plan. EKNO
shall at all times during the term of the Plan and while any Options or Stock
Units are outstanding reserve as authorized but unissued at least the number of
Shares from time to time required under the Plan. Any Shares subject to an
Option that expires or is terminated or canceled before exercise shall become
available again for issuance under the Plan.
4.2 ADJUSTMENTS FOR STOCK SPLIT, STOCK DIVIDEND, ETC. If at any time EKNO
increases or decreases the number of Shares outstanding or changes the rights
and privileges of such Shares through the payment of a stock dividend, the
making of any other distribution payable in Shares, a stock split, subdivision,
consolidation, or combination of Shares, or a reclassification or
recapitalization involving the Shares, then the numbers, rights, and privileges
of Shares as to which Awards may be granted and Shares then subject to an
outstanding Award shall be increased, decreased, or changed in like manner as if
such Shares had been issued and outstanding (as determined by the Board of
Directors in its sole discretion).
4.3 OTHER DISTRIBUTIONS AND CHANGES. If at any time (a) EKNO distributes
with respect to the Shares assets or securities of persons other than EKNO
(excluding cash or distributions described in section 4.3), or (b) EKNO grants
to the holders of its Shares generally rights to subscribe pro rata for
additional Shares or other securities of EKNO, or (c) any other change (except
as described in section 4.2) occurs in the number or kind of outstanding Shares
or other securities into which the Shares are changed or for which they are
exchanged, and if the Board of Directors in its discretion determines that such
event equitably requires an adjustment in the number or kind of Shares subject
to an Award, an adjustment in an Option Price, or the taking of other action by
the Board of Directors, including, without limitation, the setting aside of
property for delivery to the Participant upon the exercise of an Option or the
full vesting of an Award, then such adjustments shall be made and such other
action shall be taken by the Board of Directors and shall be effective for all
purposes and on each outstanding Award affected. Notwithstanding the foregoing
and pursuant to section 8.3, a Participant holding Shares received as a
Restricted Stock Award shall have the right to receive all amounts, including
cash and property of any kind, distributed with respect to the Shares upon
becoming a holder of record of the Shares.
4.4 GENERAL ADJUSTMENT RULES. No adjustment or substitution provided for in
this article IV shall require EKNO to issue a fractional Share, and the total
substitution or adjustment with respect to each Award shall be limited by
deleting any fractional Share. In such case, the total Option Price for Shares
then subject to an Option shall remain unchanged, but the Option Price per Share
shall be equitably adjusted by the Board of Directors to reflect the greater or
lesser number of Shares or other securities into which the Shares subject to the
Option may have been changed. Appropriate adjustments shall be made to other
15
Awards to reflect any such substitution or adjustment. All adjustments under
this article IV shall be made by the Board of Directors, whose determination
shall be final and binding upon all parties.
ARTICLE V
CORPORATE REORGANIZATION
5.1 REORGANIZATION. Upon the occurrence of any of the following events, if
the notice provided in section 5.2 has been given, the Plan and all outstanding
Options shall terminate and be of no further force and effect, and all other
outstanding Awards shall be treated in accordance with sections 5.2 and 5.3,
without the necessity for any additional action by the Board or EKNO:
(a) the merger or consolidation of EKNO with or into another
corporation or other reorganization (other than a reorganization under the
United States Bankruptcy Code) of EKNO (other than a consolidation, merger, or
reorganization in which EKNO is the surviving corporation and which does not
result in any reclassification or change of outstanding Shares);
(b) the sale or conveyance of the property of EKNO as an entirety or
substantially as an entirety (other than a sale or conveyance in which EKNO
continues as holding company of an entity or entities that conduct the business
or business formerly conducted by EKNO); or
(c) the dissolution or liquidation of EKNO.
5.2 REQUIRED NOTICE. At least 30 days' written notice of an event described
in section 5.1 shall be given by EKNO to each Option Holder and Participant
unless (a) in the case of events described in sections 5.1(a) and 5.1(b), EKNO
or the successor or purchaser shall make adequate provision for the assumption
of the outstanding Options or the substitution of new options on comparable
terms, except that an Option Holder shall have the right thereafter to purchase
the kind and amount of securities or property or cash receivable upon such event
by a holder of the number of Shares that would have been received upon exercise
of the Option immediately prior to the occurrence of such event (assuming that
such holder failed to exercise any rights of election and received per Share the
kind and amount of property received per Share by the holders of a majority of
the non-electing Shares) or (b) EKNO or the successor or purchaser shall make
adequate provision for the adjustment of outstanding Awards other than Options
so that such Awards shall entitle the Participant to receive the kind and amount
of securities or property or cash receivable upon such event by a holder of the
number of Shares that would have been received with respect to such Award
immediately prior to the occurrence of such event (assuming that such holder
failed to exercise any rights of election and received per share the kind and
amount of property received per Share by the holders of a majority of the
non-electing Shares). This article V shall similarly apply to successive
mergers, consolidations, reorganizations, sales, or conveyances. Notice shall be
deemed to have been given when delivered personally to a Participant or when
mailed to a Participant by certified mail, postage prepaid, at such
Participant's address last known to EKNO.
5.3 ACCELERATION OF EXERCISE. Participants notified in accordance with
section 5.2 may exercise their Options at any time before the occurrence of the
event requiring the giving of notice (but subject to occurrence of such event),
regardless of whether all conditions of exercise relating to length of service,
attainment of financial performance goals, or otherwise have been satisfied.
Upon the giving of notice in accordance with section 5.2, all restrictions with
respect to Restricted Stock Awards and other Awards shall lapse immediately, all
16
Stock Units shall become payable immediately, and all Stock Appreciation Rights
shall become exercisable. Any Options, Stock Appreciation Rights, or Stock Units
that are not assumed or substituted under section 5.2(a) or 5.2(b) and that have
not been exercised prior to the event described in section 5.1 shall
automatically terminate upon the occurrence of such event.
5.4 LIMITATION ON PAYMENTS. If this article V would result in the receipt
by any Participant of a payment within the meaning of section 280G of the Code
and the regulations promulgated thereunder and if the receipt of such payment
(together with any other payment) by any Participant would, in the opinion to
counsel to EKNO, result in the payment by such Participant of any excise tax
provided for in section 4999 of the Code, then the amount of such payment shall
be reduced to the extent required, in the opinion of independent tax counsel, to
prevent the imposition of such excise tax, except that the Committee, in its
sole discretion, may authorize the payment of all or part of the amount of such
reduction to the Participant.
ARTICLE VI
PARTICIPATION
Participants shall be those Eligible Parties who, in the judgment of the
Committee, are performing, or during the term of their incentive arrangement
will perform, vital services in the management, operation, and development of
EKNO or an Affiliated Company and contribute significantly, or are expected to
contribute significantly, to the achievement of long-term corporate economic
objectives, and/or, additionally in the case of independent contractors, furnish
services to EKNO at reduced rates or on other terms which are significantly
favorable to EKNO. Participants may be granted from time to time one or more
Awards, except that the grant of each Award shall be separately approved by the
Committee, and receipt of one Award shall not result in automatic receipt of any
other Award. Upon determination by the Committee that an Award is to be granted
to a Participant, written notice shall be given specifying the terms,
conditions, rights, and duties related thereto. Each Participant shall, if
required by the Committee, enter into an agreement with EKNO, in such form as
the Committee shall determine consistent with the Plan specifying such terms,
conditions, rights, and duties. Awards shall be deemed to be granted as of the
date specified in the grant resolution of the Committee, which date shall be the
date of any related agreement with the Participant. In the event of any
inconsistency between the Plan and any such agreement, the provisions of the
Plan shall govern.
ARTICLE VII
OPTIONS
7.1 GRANT OF OPTIONS. Coincident with or following designation for
participation in the Plan, a Participant may be granted one or more Options. The
Committee in its sole discretion shall designate whether an Option is an
Incentive Option or a Non-Qualified Option. The Committee may grant both an
Incentive Option and a Non-Qualified Option to a Participant at the same time or
at different times. Incentive Options and NonQualified Options, whether granted
at the same time or at different times, shall be deemed to have been awarded in
separate grants and shall be clearly identified, and in no event shall the
exercise of one Option affect the right to exercise any other Option or affect
the number of Shares for which any other Option may be exercised, except as
provided in section 7.2(b).
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7.2 OPTION CERTIFICATE. Each Option granted under the Plan shall be
evidenced by an Option Certificate, incorporating and conforming to the
following:
(a) Price. The price at which each Share may be purchased shall be
determined in each case by the Committee and set forth in the Option
Certificate, but in no event shall the price be less than 100 percent of the
Fair Market Value of the Shares on the date of grant.
(b) Duration of Options; Restrictions on Exercise. Each Option Certificate
shall state the period, as determined by the Committee, within which the Option
may be exercised. Such period shall end no more than ten years from the date the
Option is granted. The Option Certificate shall also set forth such restrictions
on exercise of the Option during such period, if any, as may be determined by
the Committee. No Option may be exercised for at least six months after the date
of grant. Each Option shall become exercisable over such period of time, if any,
or upon such events, as may be determined by the Committee.
(c) Termination of Service, Death, Disability, etc. The Committee may
specify the period, if any, after which an Option may be exercised following
termination of the Option Holder's employment or service as a director, or as an
independent contractor. The effect of this section 7.2(d) shall be limited to
determining the consequences of a termination, and nothing in this section
7.2(d) shall restrict or otherwise interfere with EKNO's discretion with respect
to the termination of any individual's employment or of any independent
contractor's contract, or the shareholders' discretion with respect to the
election of directors. If the Committee does not otherwise specify, the
following shall apply:
(i) If the employment, service or independent contract of the Option
Holder terminates for any reason other than death or Disability within six
months after the date the Option is granted or if the employment, contract, or
service of the Option Holder is terminated within the Option Period for "cause,"
as determined by EKNO, the Option shall thereafter be void for all purposes. As
used in this section 7.2(d), "cause" shall mean a gross violation, as determined
by EKNO, of EKNO's established policies and procedures or willful misconduct.
(ii) The Option may be exercised by the Option Holder if he becomes
Disabled, and the Option may be exercised by the persons specified in section
7.2(d)(iv) if the Option Holder dies, within one year following his Disability
(except that exercise shall occur during the duration of the Option), but not
thereafter. In any such case, the Option may be exercised only as to Shares as
to which it had become exercisable on or before the date of the termination of
the Option Holder's employment because of Disability or death.
(iii) If the Option Holder is no longer a director of EKNO or employed
by EKNO or an Affiliated Company, or an independent contractor of EKNO during
the duration of the Option for any reason other than "cause," Disability or
death, and such termination occurs more than six months after the Option is
granted, the Option may be exercised by the Option Holder within three (3)
months following the date of such termination (except that such exercise shall
occur during the duration of the Option) but not thereafter. In any such case,
the Option may be exercised only as to the shares as to which the Option had
18
become exercisable on or before the date of termination of employment.
(iv) If the Option Holder dies during the duration of the Option while
still employed or under contract or within the one-year period referred to in
section 7.2(d)(ii) or the three-month period referred to in section 7.2(d)(iii),
the Option may be exercised by those entitled to do so under the Option Holder's
will or by the laws of descent and distribution.
(d) Transferability. No Option shall be transferable by the Option Holder
except by will or the laws of descent and distribution. Each Option is
exercisable during the Option Holder's lifetime only by him, or in the event of
Disability or incapacity, by his guardian or legal representative.
(e) Consideration for Grant of Option. Each Option Holder agrees to remain
in the service of EKNO as a director or in the employment of EKNO, or as an
independent contractor, at the pleasure of EKNO, for a continuous period of at
least one year after the date the Option is granted, and in the case of an
employee at the salary rate in effect on the date of the Option Certificate or
at such changed rate as may be fixed from time to time by EKNO. Nothing in this
paragraph shall limit or impair EKNO's right to terminate the employment of any
employee or independent contractor or the shareholders' rights with respect to
the election of directors.
(f) Manner of Exercise. An Option shall be exercised by delivery to EKNO of
written notice specifying the number of Shares with respect to which such Option
is exercised. The purchase of such Shares shall take place at the principal
offices of EKNO within 30 days following delivery of such notice, at which time
the Option Price of the Shares with respect to which the Option is exercised
shall be paid in full by any of the methods set forth below or a combination
thereof. Except as set forth in the next sentence, the Option shall be exercised
when the Option Price for the number of Shares as to which the Option is
exercised is paid to EKNO in full. If the Option Price is paid by means of a
broker's loan transaction as described in section 7.2(h)(iv), in whole or in
part, the closing of the purchase of the Shares under the Option shall take
place (and the Option shall be treated as exercised) on the date on which, and
only if, the sale of Shares upon which the broker's loan was based has been
closed and settled, unless the Option Holder makes an irrevocable written
election at the time of exercise of the Option to have the exercise treated as
fully effective for all purposes upon receipt of the Option Price by EKNO,
regardless of whether the sale of the Shares by the broker is closed and
settled. A properly executed certificate or certificates representing the Shares
shall be delivered to or at the direction of the Option Holder upon payment
therefor. If Options on less than all Shares subject to an Option are exercised,
EKNO shall deliver a new Option Certificate evidencing the Option on the
remaining Shares.
(g) Payment. The Option Price for the Shares as to which the Option is
exercised shall be paid by any of the following methods or any combination of
the following methods at the election of the Option Holder, or by any other
method approved by the Committee upon the request of the Option Holder:
(i) in cash;
(ii) by certified, cashier's check, or other check acceptable to EKNO,
payable to the order of EKNO;
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(iii) by delivery of certificates representing a number of Shares then
owned by the Option Holder, the Fair Market Value of which on the date of
delivery of the certificates at least equals the Option Price for the Shares as
to which the Option is exercised, properly endorsed for transfer to EKNO, except
that no Option may be exercised by delivery to EKNO of certificates representing
Shares held by the Option Holder for less than six months; or
(iv) by delivery of a properly executed notice of exercise, together
with irrevocable instructions to a broker to deliver to EKNO promptly the amount
of the proceeds of the sale of all or part of the Shares or of a loan from the
broker to the Option Holder in an amount sufficient to pay the Option Price for
the Shares as to which the Option is exercised.
(h) Date of Grant. An Option shall be deemed to be granted on the date
specified in the grant resolution of the Committee.
(i) Issuance of Additional Option. If an Option Holder pays all or part of
the exercise price of an Option with Shares, or pays all or any part of the
applicable withholding taxes with respect to the exercise of an Option with
Shares that has been held by the Option Holder for more than a period (no
shorter than six months) to be determined by the Committee, the Committee in its
sole discretion may grant to such Option Holder a new Option covering the number
of shares of Shares used to pay such exercise price or withholding tax. The new
Option shall have an Option Price per Share equal to the Fair Market Value of a
Share on the date of exercise of the exercised Option and shall encompass the
same terms and conditions as the exercised option, except as otherwise provided
by the Committee in its sole discretion.
7.3 RESTRICTIONS ON INCENTIVE OPTIONS. The aggregate Fair Market Value of
the Shares with respect to which Incentive Options are exercisable for the first
time by an Option Holder in any calendar year, under the Plan or otherwise,
shall not exceed $100,000. For this purpose, the Fair Market Value of the Shares
shall be determined as of the date of grant of the Option. Incentive Options
granted to an Option Holder who is the holder of record of 10 percent or more of
the outstanding capital stock of EKNO shall have an Option Price equal to 110
percent of the Fair Market Value of the Shares on the date of grant of the
Option, and the Option Period for any such Option shall not exceed five years.
7.4 SHAREHOLDER PRIVILEGES. No Option Holder shall have any rights as a
shareholder with respect to any Shares subject to an Option until the Option
Holder becomes the holder of record of such Shares. No adjustments shall be made
for dividends or other distributions or other rights as to which there is a
record date preceding the date such Option Holder becomes the holder of record
of such Shares, except as provided in article IV.
ARTICLE VIII
RESTRICTED STOCK AWARDS
8.1 GRANT. Coincident with or following designation for participation in
the Plan, the Committee may grant a Participant one or more Restricted Stock
Awards as may be determined by the Committee.
8.2 RESTRICTIONS. A Restricted Stock Award shall be subject to such
restrictions, including, without limitation a Participant's continuous service
as a director or continuous employment by EKNO or an Affiliated Company, or an
20
independent contractor's continuous service as a third-party service provider,
for a restriction period specified by the Committee or the attainment of
specified performance goals and objectives determined by the Committee with
respect to such Award. The Committee in its sole discretion may require
different periods of employment or contractual obligations or different
performance goals and objectives with respect to different Participants, to
different Restricted Stock Awards, or to separate, designated portions of the
Shares comprising a Restricted Stock Award. In the event of the death or
Disability of a Participant, or the retirement of a Participant in accordance
with EKNO's established retirement policy, all employment period and other
restrictions applicable to a Restricted Stock Award shall lapse with respect to
a pro rata portion of such Restricted Stock Award based on the ratio between the
number of full months of employment completed at the time of termination of
employment from the grant of the Restricted Stock Award and the total number of
months of employment required for such Restricted Stock Award to be fully
nonforfeitable, and such portion of the Restricted Stock Award shall become
fully nonforfeitable. The remaining portion of such Restricted Stock Award shall
be forfeited and immediately returned to EKNO. In the event of a Participant's
termination of employment for any other reason, any Restricted Stock Awards as
to which the employment period or other restrictions have not been satisfied (or
waived or accelerated as provided herein) shall be forfeited, and all Shares
related thereto shall be immediately returned to EKNO.
8.3 PRIVILEGES OF A SHAREHOLDER; TRANSFERABILITY. A Participant shall have
all voting, dividend, liquidation, and other rights with respect to Shares
received a Restricted Stock Award under this article VIII upon his becoming the
holder of record of such Shares, except that the Participant's right to sell,
encumber, or otherwise transfer such Shares shall be subject to the limitations
of section 13.2.
8.4 ENFORCEMENT OF RESTRICTIONS. The Committee shall cause a legend to be
placed on the certificates evidencing Shares issued pursuant to a Restricted
Stock Award referring to the restrictions provided by sections 8.2 and 8.3 and,
in addition, may in its sole discretion require the Participant to keep the
certificates evidencing such Shares, duly endorsed, in the custody of EKNO or a
third party while the restrictions remain in effect.
ARTICLE IX
STOCK UNITS
Coincident with or following designation for participation in the Plan, the
Committee may grant a Participant one or more Stock Units as may be determined
by the Committee. The number of Stock Units, the goals and objectives to be
satisfied with respect to each grant of Stock Units, the time and manner of
payment for each Stock Unit, and the other terms and conditions applicable to a
grant of Stock Units shall be determined by the Committee.
ARTICLE X
STOCK APPRECIATION RIGHTS
10.1 GRANT. Coincident with or following designation for participation in
the Plan, the Committee may grant a Participant one or more Stock Appreciation
Rights as may be determined by the Committee. The Committee shall determine at
the time of grant the period during which the Stock Appreciation Right may be
exercised, which period may not commence until six months after the date of
grant.
21
10.2 EXERCISE. If a Stock Appreciation Right is issued in tandem with an
Option, except as may otherwise be provided by the Committee, the Stock
Appreciation Right shall be exercisable during the period that its related
Option is exercisable. A Participant desiring to exercise a Stock Appreciation
Right shall give written notice stating the proportion of Shares and cash that
the Participant desires to receive pursuant to the Stock Appreciation Right
exercised. Within 30 days after receipt of the notice, EKNO shall deliver to the
Participant a certificate or certificates for Shares and/or a cash payment in
accordance with section 10.3. The date on which EKNO receives the written notice
shall be deemed the exercise date.
10.3 NUMBER OF SHARES OR AMOUNT OF CASH. Subject to the discretion of the
Committee to substitute cash for Shares or Shares for cash, the number of Shares
to be issued pursuant to the exercise of a Stock Appreciation Right shall be
determined by dividing (a) the total number of Shares as to which the Stock
Appreciation Right is exercised, multiplied by the amount by which the Fair
Market Value of a Share on the exercise date exceeds the Fair Market Value of a
Share on the date of grant of the Stock Appreciation Right, by (b) the Fair
Market Value of a Share on the exercise date. Fractional shares shall not be
issued, and in lieu thereof a cash adjustment shall be paid. In lieu of issuing
Shares upon the exercise of a Stock Appreciation Right, the Committee in its
sole discretion may elect to pay the cash equivalent of the Fair Market Value of
the Shares on the exercise date for any or all Shares that would otherwise be
issuable upon exercise of the Stock Appreciation Right.
10.4 EFFECT OF EXERCISE. If a Stock Appreciation Right is issued in tandem
with an Option, the exercise of the Stock Appreciation Right or the related
Option shall result in an equal reduction in the number of corresponding Stock
Appreciation Rights and Shares subject to the related Option.
10.5 TERMINATION OF EMPLOYMENT. Upon a Participant s termination of service
as an employee or a director, or an independent contractor of EKNO, any Stock
Appreciation Rights then held by such Participant shall be exercisable within
the time periods, and upon the same conditions with respect to the reasons for
termination of employment, as are specified in section 7.2(d) with respect to
Options.
ARTICLE XI
OTHER STOCK GRANTS
From time to time during the duration of this Plan, the Committee in its
sole discretion may adopt one or more incentive compensation arrangements for
Participants pursuant to which the Participants may acquire shares of Shares by
purchase, outright grant, or otherwise. Any such arrangements shall be subject
to the general provisions of this Plan, and all Shares issued pursuant to such
arrangements shall be issued under this Plan.
ARTICLE XII
CHANGE IN CONTROL
Upon a Change in Control, (a) all Options shall become immediately
exercisable in full during the remaining duration thereof and shall remain so,
whether or not the Option Holders remain directors or employees of EKNO or an
Affiliated Company, or independent contractors of EKNO, (b) all restrictions
with respect to outstanding Restricted Stock Awards shall immediately lapse, (c)
22
all Stock Units shall become immediately payable, and (d) all other Awards shall
immediately become exercisable or shall vest, as the case may be, without any
further action or passage of time.
ARTICLE XIII
RIGHTS OF PARTICIPANTS
13.1 EMPLOYMENT AS EMPLOYEE OR INDEPENDENT CONTRACTOR. Nothing contained in
the Plan or any Award shall confer upon any Participant any right with respect
to the continuation of his employment by EKNO or an Affiliated Company, or as an
independent contractor or EKNO, or interfere in any way with the right of EKNO
or an Affiliated Company, subject to the terms of any separate employment
agreement or independent contractor agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Award.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute a termination of employment shall be determined by the
Committee at the time.
13.2 TRANSFERABILITY. No right or interest of any Participant in an Award
shall be assigned or transferred during the lifetime of the Participant,
voluntarily or involuntarily, or subjected to any lien, directly or indirectly,
by operation of law, or otherwise, including execution, levy, garnishment,
attachment, pledge, or bankruptcy. In the event of a Participant's death, his
rights and interests in Awards shall, to the extent provided in the Plan, be
transferable by will or the laws of descent and distribution, and payment of any
amounts due under the Plan shall be made to, and exercise of any Options may be
made by, the Participant's legal representatives, heirs, or legatees. If in the
opinion of the Committee a person entitled to payments or to exercise rights
with respect to the Plan is disabled from caring for his affairs because of
mental condition, physical condition, or age, payment due such person may be
made to, and such rights shall be exercised by, such person's guardian,
conservator, or other legal personal representative upon furnishing the
Committee with evidence satisfactory to the Committee of such status.
13.3 NO PLAN FUNDING. Obligations to Participants under the Plan shall not
be funded, trusteed, insured, or secured in any manner. Participants shall have
no security interest in any assets of EKNO or any Affiliated Company and shall
be only general creditors of EKNO.
ARTICLE XIV
GENERAL
14.1 INVESTMENT REPRESENTATIONS. EKNO may require any Participant, as a
condition of exercising an Option or a Stock Appreciation Right or receiving a
Restricted Stock Award, Stock Unit, or grant of Shares, to give written
assurances in substance and form satisfactory to EKNO that he is acquiring the
Shares for his own account for investment purposes and not with a present
intention of selling or otherwise distributing the same and to such other effect
as EKNO deems necessary or appropriate in order to comply with applicable
securities laws.
14.2 SECURITIES LAWS. (a) Each Award shall be subject to the requirement that,
if at any time EKNO determines that the listing, registration, or
23
qualification of the Shares subject to such Award upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental or regulatory body, is necessary as a condition of or in connection
with the issuance or purchase of Shares thereunder, such Award may not be
accepted or exercised in whole or in part unless such listing, registration,
qualification, consent, or approval has been effected or obtained on conditions
acceptable to the Committee. Nothing herein shall be deemed to require EKNO to
apply for or to obtain such listing, registration, or qualification.
(b) If a Participant is an officer or director of EKNO within the meaning
of section 16 of the Exchange Act, then to the extent that section 16 is
applicable, Awards shall be subject to all conditions required under Rule 16b-3
or any successor rule to qualify the Award for an exemption from the provisions
of section 16(b). Such conditions shall be set forth in the agreement with the
Participant which describes the Award.
14.3 CHANGES IN ACCOUNTING RULES. Notwithstanding any other provision of
the Plan to the contrary, if, during the term of the Plan, any changes in the
financial or tax accounting rules applicable to Awards occurs which, in the sole
judgment of the Committee, may have a material adverse effect on the reported
earnings, assets, or liabilities of EKNO, the Committee shall have the right and
power to modify as necessary any then outstanding Awards as to which the
applicable employment or other restrictions have not been satisfied.
14.4 OTHER EMPLOYEE BENEFITS. The amount of any compensation deemed to be
received by a Participant as a result of the exercise of an Option or Stock
Appreciation Right, the sale of shares received upon such exercise, the vesting
of any Restricted Stock Award, distributions with respect to Stock Units, or the
grant of Shares shall not constitute "earnings" or "compensation" with respect
to which any other employee benefits of such Participant are determined,
including without limitation benefits under any pension, profit sharing, life
insurance, or salary continuation plan.
14.5 PLAN AMENDMENT, MODIFICATION, AND TERMINATION. The Committee may at
any time terminate, and from time to time may amend or modify the Plan, except
that no amendment or modification may become effective without approval of the
shareholders if shareholder approval is required to enable the Plan to satisfy
any applicable statutory or regulatory requirements, or if EKNO on the advice of
counsel determines that shareholder approval is otherwise necessary or
desirable. No amendment, modification, or termination of the Plan shall
adversely affect any Award theretofore granted without the consent of the
Participant holding such Award.
14.6 WITHHOLDING. (a) Requirement. EKNO's obligation to deliver Shares upon
the exercise of any Option or Stock Appreciation Right, the vesting of any
Restricted Stock Award, payment with respect to Stock Units, or a grant of
Shares shall be subject to the Participant's satisfaction of all applicable
federal, state, and local income and other tax withholding requirements.
(b) Withholding with Shares. At the time an Award is granted, the Committee
in its sole discretion may grant the Participant an election to pay all or part
of such tax withholding by electing to transfer to EKNO, or to have EKNO
withhold from Shares otherwise issuable to the Participant, Shares
having a Fair Market Value on the date of withholding equal to the amount
required to be withheld or such lesser amount as may be elected by the
Participant. All elections shall be subject to the approval or disapproval of
24
the Committee. Any such election by a Participant (a) shall be made prior to the
date of withholding, (b) shall be irrevocable, and (c) if the Participant is an
officer or director of EKNO within the meaning of section 16 of the Exchange Act
of 1934, then to the extent that section 16 is applicable, the Participant shall
satisfy the requirements of section 16 and any applicable rules thereunder.
(c) Withholding for Non-Qualified Options. Upon exercise of a Non-
Qualified Option, the Option Holder shall make appropriate arrangements with
EKNO to provide for the amount of additional withholding required by sections
3102 and 3402 of the Code and applicable state income tax laws, including
payment of such taxes through delivery of Shares or by withholding Shares to be
issued under the Option.
(d) Withholding for Incentive Options. If an Option Holder makes a
disposition (as defined in section 424(c) of the Code) of any Shares acquired
pursuant to the exercise of an Incentive Option before the expiration of two
years from the date on which the Incentive Option was granted or prior to the
expiration of one year from the date on which the Option was exercised, the
Option Holder shall send written notice to EKNO at its principal office of the
date of such disposition, the number of Shares disposed of, the amount of
proceeds received from such disposition, and any other information relating to
such disposition as EKNO may reasonably request. The Option Holder shall then
make appropriate arrangements with EKNO to provide for the amount of additional
withholding, if any, required by sections 3102 and 3402 of the Code and
applicable state income tax laws.
14.7 GOVERNING LAW. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Nevada.
14.8 DURATION. Unless sooner terminated by the Board, the Plan shall
terminate on May 22, 2002, and no Award shall be made after such termination.
Awards outstanding at the time of Plan termination may continue to be exercised,
or become free of restrictions, or be paid in accordance with their terms.
EKNOWLEDGE GROUP, INC.
By: /s/ Gary Saunders
Gary Saunders
Chief Executive Officer
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EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in the Form S-8
Registration Statement of our report dated March 13, 2001 included in EKNOWLEDGE
GROUP, INC.'s Form 10-KSB for the year ended December 31, 2000 and to all
references to our Firm included in the Registration Statement.
/s/ MERDINGER, FRUCHTER, ROSEN &
CORSO, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
May 22, 2001
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