U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
EKNOWLEDGE GROUP, INC.
(Name of Small Business Issuer in its Charter)
Nevada SEC File Number: 333-62286 911982250
(State or jurisdiction of I.R.S. Employer
Incorporation) Identification No.
1520 W. Sixth Street, Suite 101, Corona, CA 92882, 909-372-2800 (Address
and telephone number of Registrant's principal executive offices and principal
place of business)
Employee Stock Incentive Plan for the Year 2002 Non-Employee Directors and
Consultants Retainer Stock Plan for the Year 2002 (Full title of the Plans)
Doug Ansell, 3675 Pecos-McLeod, Suite
1400, Las Vegas, NV 89232-3881
(Name and address of agent for service)
(702) 866-2500
(Telephone number, including area code, of agent for
service)
CALCULATION OF REGISTRATION FEE
Title of Amount to be Proposed Proposed Amount of
Securities Registered Maximum Aggregate Registration
to be Offering Offering Fee
Registered Price Per Price
Share (1)
Common Stock 5,000,000 $0.09 (2) $450,000 $ 41.40
Common Stock 2,750,000 $0.09 (3) $247,500 22.77
(1) The Offering Price is used solely for purposes of estimating the
registration fee pursuant to Rule 457(h) promulgated pursuant to the Securities
Act of 1933.
(2) This Offering Price per Share is established pursuant to the option exercise
price set forth in the Employee Stock Incentive Plan for the Year 2002, set
forth in Exhibit 4.1 to this Form S-8.
(3) This Offering Price per Share is established pursuant to the stock price set
forth in the Non-Employee Directors and Consultants Retainer Stock Plan for the
Year 2002, set forth in Exhibit 4.2 to this Form S-8.
Part I
Information Required in the Section 10(a) Prospectus
Item 1. Plan Information.
See Item 2 below.
Item 2. Registrant Information and Employee Plan Annual Information.
The documents containing the information specified in Part I, Items 1 and 2,
will be delivered to each of the participants in accordance with Form S-8 and
Rule 428 promulgated under the Securities Act of 1933. The participants shall be
provided a written statement notifying them that upon written or oral request
they will be provided, without charge, (i) the documents incorporated by
reference in Item 3 of Part II of the registration statement, and (ii) other
documents required to be delivered pursuant to Rule 428(b). The statement will
inform the participants that these documents are incorporated by reference in
the Section 10(a) prospectus, and shall include the address (giving title or
department) and telephone number to which the request is to be directed.
Part II
Information Required in the Registration Statement
Item 3. Incorporation of Documents by Reference.
The following are hereby incorporated by reference:
(a) The Registrant's report on Form 10-KSB for the year ended December 31,
2001, filed April 17, 2002
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year including the Form 10-QSB
for Quarter ended March 31, 2002, filed on May 20, 2002.
Item 4. Description of Securities.
Not applicable.
Item 5. Interest of Named Experts and Counsel.
Other than as set forth below, no named expert or counsel was hired on a
contingent basis, will receive a direct or indirect interest in the small
business issuer, or was a promoter, underwriter, voting trustee, director,
officer, or employee of the Registrant.
Item 6. Indemnification of Directors and Officers.
Our bylaws do not contain a provision entitling any director or executive
officer to indemnification against its liability under the Securities Act of
1933. The Nevada Revised Statutes allow a company to indemnify our officers,
directors, employees, and agents from any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, except under certain circumstances. Indemnification may only
occur if a determination has been made that the officer, director, employee, or
agent acted in good faith and in a manner, which such person believed to be in
the best interests of EKnowledge Group, Inc.. A determination may be made by the
shareholders; by a majority of the directors who were not parties to the action,
suit, or proceeding confirmed by opinion of independent legal counsel; or by
opinion of independent legal counsel in the event a quorum of directors who were
not a party to such action, suit, or proceeding does not exist.
Provided the terms and conditions of these provisions under Nevada law are met,
officers, directors, employees, and agents of EKnowledge Group, Inc. may be
indemnified against any cost, loss, or expense arising out of any liability
under the '33 Act. Insofar as indemnification for liabilities arising under the
'33 Act may be permitted to directors, officers and controlling persons of
EKnowledge Group, Inc.. EKnowledge Group, Inc. has been advised that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy and is, therefore, unenforceable.
The Nevada Revised Statutes, stated herein, provide further for permissive
indemnification of officers and directors.
A. NRS 78.7502 Discretionary and mandatory indemnification of officers,
directors, employees and agents: General provisions.
1. A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, except an
action by or in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he acted in good faith and in a manner
which he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent, does not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including amounts paid in
settlement and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner which he reasonably believed to be in or not opposed
to the best interests of the corporation. Indemnification may not be made for
any claim, issue or matter as to which such a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which the action or
suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is
fairly and reasonably entitled to indemnity for such expenses as the court deems
proper.
3. To the extent that a director, officer, employee or agent of a corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections 1 and 2, or in defense of any claim, issue
or matter therein, the corporation shall indemnify him against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the defense.
B. NRS 78.751 Authorization required for discretionary indemnification;
advancement of expenses; limitation on indemnification and advancement of
expenses.
1. Any discretionary indemnification under NRS 78.7502 unless ordered by a court
or advanced pursuant to subsection 2, may be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made:
(a) By the stockholders;
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to the action, suit or proceeding;
(c) If a majority vote of a quorum consisting of directors who were not parties
to the action, suit or proceeding so orders, by independent legal counsel in a
written opinion; or
(d) If a quorum consisting of directors who were not parties to the action, suit
or proceeding cannot be obtained, by independent legal counsel in a written
opinion.
2. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding, upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to
advancement of expenses to which corporate personnel other than directors or
officers may be entitled under any contract or otherwise by law.
3. The indemnification and advancement of expenses authorized in NRS
78.7502 or ordered by a court pursuant to this section:
(a) Does not exclude any other rights to which a person seeking indemnification
or advancement of expenses may be entitled under the articles of incorporation
or any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, for either an action in his official capacity or an action in another
capacity while holding his office, except that indemnification, unless ordered
by a court pursuant to or for the advancement of expenses made pursuant to
subsection 2, may not be made to or on behalf of any director or officer if a
final adjudication establishes that his acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action.
(b) Continues for a person who has ceased to be a director, officer, employee or
agent and inures to the benefit of the heirs, executors and administrators of
such a person.
C. NRS 78.752 Insurance and other financial arrangements against liability of
directors, officers, employees and agents.
1. A corporation may purchase and maintain insurance or make other financial
arrangements on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any liability asserted
against him and liability and expenses incurred by him in his capacity as a
director, officer, employee or agent, or arising out of his status as such,
whether or not the corporation has the authority to indemnify him against such
liability and expenses.
2. The other financial arrangements made by the corporation pursuant to
subsection 1 may include the following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a security
interest or other lien on any assets of the corporation.
(d) The establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to this subsection may provide protection
for a person adjudged by a court of competent jurisdiction, after exhaustion of
all appeals therefrom, to be liable for intentional misconduct, fraud or a
knowing violation of law, except with respect to the advancement of expenses or
indemnification ordered by a court.
3. Any insurance or other financial arrangement made on behalf of a person
pursuant to this section may be provided by the corporation or any other person
approved by the board of directors, even if all or part of the other person's
stock or other securities is owned by the corporation.
4. In the absence of fraud:
(a) The decision of the board of directors as to the propriety of the terms and
conditions of any insurance or other financial arrangement made pursuant to this
section and the choice of the person to provide the insurance or other financial
arrangement is conclusive; and
(b) The insurance or other financial arrangement:
(1) Is not void or voidable; and
(2) Does not subject any director approving it to personal liability for his
action, even if a director approving the insurance or other financial
arrangement is a beneficiary of the insurance or other financial arrangement.
5. A corporation or its subsidiary which provides self-insurance for itself or
for another affiliated corporation pursuant to this section is not subject to
the provisions of Title 57 of NRS.
6. The Registrant, with approval of the Registrant's Board of Directors, has
obtained directors' and officers' liability.
Item 7. Exemption from Registration Claimed.
Not applicable.
Item 8. Exhibits.
The Exhibits required by Item 601 of Regulation S-B, and an index thereto, are
attached.
Item 9. Undertakings.
The undersigned registrant hereby undertakes:
(a) (1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this 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.
(b) 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.
(e) To deliver or cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial information
required to be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim financial
information
(h) That 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.
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
authorize, in the City of Corona, California, May 31, 2002.
EKnowledge Group, Inc.
By: /s/ Gary S. Saunders
Gary S. Saunders, Chief Executive Officer,
Chairman of the Board
Special Power of Attorney
The undersigned constitute and appoint Gary S. Saunders their true and lawful
attorney-in-fact and agent with full power of substitution, for him and in his
name, place, and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Form S-8 Registration
Statement, and to file the same with all exhibits thereto, and all documents in
connection therewith, with the U.S. Securities and Exchange Commission, granting
such attorney-in-fact the full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that such attorney-in-fact may
lawfully do or cause to be done by virtue hereof.
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:
Signature Title Date
/s/ Gary S. Saunders, Chief Executive Officer, May 31, 2002
Gary S. Saunders Secretary, Chairman of the
Board
/s/ Christopher DeSantis Director May 31, 2002
Christopher DeSantis
/s/ Wayne W. Saunders Director May 31, 2002
Wayne W. Saunders
/s/ Scott K. Hildebrandt Director May 31, 2002
Scott K. Hildebrandt
EXHIBIT INDEX
Exhibit Description
No.
4.1 Employee Stock Incentive Plan for Year 2002 (see below).
4.2 Non-Employee Directors and Consultants Retainer Stock Plan for
the Year 2002 (see below).
5 Opinion Re: Legality (see below).
23 Consent of Counsel (see below).
23.1 Consent of Accountants (see below).
24 Special Power of Attorney (see signature page).
EX-4.1
EMPLOYEE STOCK INCENTIVE PLAN
EKNOWLEDGE GROUP, INC.
EMPLOYEE STOCK INCENTIVE PLAN FOR THE YEAR 2002
1. GENERAL PROVISIONS
1.1 Purpose.
The Employee Stock Incentive Plan for the Year 2002 (the "Plan") is intended to
allow designated officers, employees and certain non- employees (all of whom are
sometimes collectively referred to herein as "Employees") EKnowledge Group,
Inc., a Nevada corporation ("EKnowledge Group, Inc.") and its Subsidiaries (as
that term is defined below) which it may have from time to time (EKnowledge
Group, Inc. and such Subsidiaries are referred to herein as the "Company") to
receive certain options ("Stock Options") to purchase EKnowledge Group, Inc.
common stock, one tenth of one cent ($0.001) par value ("Common Stock"), and to
receive grants of Common Stock subject to certain restrictions ("Awards"). As
used in this Plan, the term "Subsidiary" shall mean each corporation which is a
"subsidiary corporation" of EKnowledge Group, Inc. within the meaning of Section
424(f) of the Internal Revenue Code of 1986, as amended (the "Code"). The
purpose of this Plan is to provide Employees with equity-based compensation
incentives to make significant and extraordinary contributions to the long-term
growth and performance of the Company, and to attract and retain Employees.
1.2 Administration.
1.2.1 The Plan shall be administered by the Compensation Committee (the
"Committee") of, or appointed by, the Board of Directors of EKnowledge Group,
Inc. (the "Board"). The Committee shall select one of its members as Chair- man
and shall act by vote of a majority of a quorum, or by unanimous written
consent. A majority of its members shall constitute a quorum. The Committee
shall be governed by the provisions of EKnowledge Group, Inc. Bylaws and of
Nevada law applicable to the Board, except as otherwise provided herein or
determined by the Board.
1.2.2 The Committee shall have full and complete authority, in its discretion,
but subject to the express provisions of the Plan: to approve the Employees
nominated by the management of the Company to be granted Awards or Stock
Options; to determine the number of Awards or Stock Options to be granted to an
Employee; to determine the time or times at which Awards or Stock Options shall
be granted; to establish the terms and conditions upon which Awards or Stock
Options may be exercised; to remove or adjust any restrictions and conditions
upon Awards or Stock Options; to specify, at the time of grant, provisions
relating to exercisability of Stock Options and to accelerate or otherwise
modify the exercisability of any Stock Options; and to adopt such rules and
regulations and to make all other determinations deemed necessary or desirable
for the administration of the Plan. All interpretations and constructions of the
Plan by the Committee, and all of its actions hereunder, shall be binding and
conclusive on all persons for all purposes.
1.2.3 The Company hereby agrees to indemnify and hold harmless each Committee
member and each employee of the Company, and the estate and heirs of such
Committee member or employee, against all claims, liabilities, expenses,
penalties, damages or other pecuniary losses, including legal fees, which such
Committee member or employee, his or her estate or heirs may suffer as a result
of his or her responsibilities, obligations or duties in connection with the
Plan, to the extent that insurance, if any, does not cover the payment of such
items. No member of the Committee or the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Award or Stock
Option granted pursuant to the Plan.
1.3 Eligibility and Participation.
Employees eligible under the Plan shall be approved by the Committee from those
Employees who, in the opinion of the management of the Company, are in positions
which enable them to make significant contributions to the long-term performance
and growth of the Company. In selecting Employees to whom Stock Options or
Awards may be granted, consideration shall be given to factors such as
employment position, duties and responsibilities, ability, productivity, length
of service, morale, interest in the Company and recommendations of supervisors.
1.4 Shares Subject to the Plan.
The maximum number of shares of Common Stock that may be issued pursuant to the
Plan shall be Five million (5,000,000) subject to adjustment pursuant to the
provisions of paragraph 4.1. If shares of Common Stock awarded or issued under
the Plan are reacquired by the Company due to a forfeiture or for any other
reason, such shares shall be cancelled and thereafter shall again be available
for purposes of the Plan. If a Stock Option expires, terminates or is cancelled
for any reason without having been exercised in full, the shares of Common Stock
not purchased thereunder shall again be available for purposes of the Plan.
2. PROVISIONS RELATING TO STOCK OPTIONS
2.1 Grants of Stock Options.
The Committee may grant Stock Options in such amounts, at such times, and to
such Employees nominated by the management of the Company as the Committee, in
its discretion, may determine. Stock Options granted under the Plan shall
constitute "incentive stock options" within the meaning of Section 422 of the
Code, if so designated by the Committee on the date of grant. The Committee
shall also have the discretion to grant Stock Options which do not constitute
incentive stock options, and any such Stock Options shall be designated
non-statutory stock options by the Committee on the date of grant. The aggregate
fair market value (determined as of the time an incentive stock option is
granted) of the Common Stock with respect to which incentive stock options are
exercisable for the first time by any Employee during any one calendar year
(under all plans of the Company and any parent or subsidiary of the Company) may
not exceed the maximum amount permitted under Section 422 of the Code (currently
one hundred thousand dollars ($100,000.00)). Non- statutory stock options shall
not be subject to the limitations relating to incentive stock options contained
in the preceding sentence. Each Stock Option shall be evidenced by a written
agreement (the "Option Agreement") in a form approved by the Committee, which
shall be executed on behalf of the Company and by the Employee to whom the Stock
Option is granted, and which shall be subject to the terms and conditions of
this Plan. In the discretion of the Committee, Stock Options may include
provisions (which need not be uniform), authorized by the Committee in its
discretion, that accelerate an Employee's rights to exercise Stock Options
following a "Change in Control," upon termination of such Employee employment by
the Company without "Cause" or by the Employee for "Good Reason," as such terms
are defined in paragraph 3.1 hereof. The holder of a Stock Option shall not be
entitled to the privileges of stock ownership as to any shares of Common Stock
not actually issued to such holder.
2.2 Purchase Price.
The purchase price ("Exercise Price") of shares of Common Stock subject to each
Stock Option ("Option Shares") shall be not less than sixty-five percent (65%)
of the fair market value of the Common Stock on the date of exercise. For an
employee holding greater than ten percent (10%) of the total voting power of all
stock of the Company, either Common or Preferred, the Exercise Price of an
incentive stock option shall be at least one hundred and ten percent (110%) of
the fair market value of the Common Stock on the date of the grant of the
option.
2.3 Option Period.
The Stock Option period (the "Term") shall commence on the date of grant of the
Stock Option and shall be ten (10) years or such shorter period as is determined
by the Committee. Each Stock Option shall provide that it is exercisable over
its term in such periodic installments as the Committee in its sole discretion
may determine. Such provisions need not be uniform. Section 16(b) of the
Exchange Act exempts persons normally subject to the reporting requirements of
Section 16(a) of the Exchange Act ("Section 16 Reporting Persons") pursuant to a
qualified employee stock option plan from the normal requirement of not selling
until at least six (6) months and one day from the date the Stock Option is
granted.
2.4 Exercise of Options.
2.4.1 Each Stock Option may be exercised in whole or in part (but not as to
fractional shares) by delivering it for surrender or endorsement to the Company,
attention of the Corporate Secretary, at the principal office of the Company,
together with payment of the Exercise Price and an executed Notice and Agreement
of Exercise in the form prescribed by paragraph 2.4.2. Payment may be made (i)
in cash, (ii) by cashier's or certified check, (iii) by surrender of previously
owned shares of the Company's Common Stock valued pursuant to paragraph 2.2 (if
the Committee authorizes payment in stock in its discretion), (iv) by
withholding from the Option Shares which would otherwise be issuable upon the
exercise of the Stock Option that number of Option Shares equal to the exercise
price of the Stock Option, if such withholding is authorized by the Committee in
its discretion, or (v) in the discretion of the Committee, by the delivery to
the Company of the optionee's promissory note secured by the Option Shares,
bearing interest at a rate sufficient to prevent the imputation of interest
under Sections 483 or 1274 of the Code, and having such other terms and
conditions as may be satisfactory to the Committee.
2.4.2 Exercise of each Stock Option is conditioned upon the agreement of the
Employee to the terms and conditions of this Plan and of such Stock Option as
evidenced by the Employee's execution and delivery of a Notice and Agreement of
Exercise in a form to be determined by the Committee in its discretion. Such
Notice and Agreement of Exercise shall set forth the agreement of the Employee
that: (a) no Option Shares will be sold or otherwise distributed in violation of
the Securities Act of 1933 (the "Securities Act") or any other applicable
federal or state securities laws, (b) each Option Share certificate may be
imprinted with legends reflecting any applicable federal and state securities
law restrictions and conditions, (c) the Company may comply with said securities
law restrictions and issue "stop transfer" instructions to its Transfer Agent
and Registrar without liability, (d) if the Employee is a Section 16 Reporting
Person, the Employee will furnish to the Company a copy of each Form 4 or Form 5
filed by said Employee and will timely file all reports required under federal
securities laws, and (e) the Employee will report all sales of Option Shares to
the Company in writing on a form prescribed by the Company.
2.4.3 No Stock Option shall be exercisable unless and until any applicable
registration or qualification requirements of federal and state securities laws,
and all other legal requirements, have been fully complied with. The Company
will use reasonable efforts to maintain the effectiveness of a Registration
Statement under the Securities Act for the issuance of Stock Options and shares
acquired hereunder, but there may be times when no such Registration Statement
will be currently effective. The exercise of Stock Options may be temporarily
suspended without liability to the Company during times when no such
Registration Statement is currently effective, or during times when, in the
reasonable opinion of the Committee, such suspension is necessary to preclude
violation of any requirements of applicable law or regulatory bodies having
jurisdiction over the Company. If any Stock Option would expire for any reason
except the end of its term during such a suspension, then if exercise of such
Stock Option is duly tendered before its expiration, such Stock Option shall be
exercisable and exercised (unless the attempted exercise is withdrawn) as of the
first day after the end of such suspension. The Company shall have no obligation
to file any Registration Statement covering resales of Option Shares.
2.5 Continuous Employment.
Except as provided in paragraph 2.7 below, an Employee may not exercise a Stock
Option unless from the date of grant to the date of exercise such Employee
remains continuously in the employ of the Company. For purposes of this
paragraph 2.5, the period of continuous employment of an Employee with the
Company shall be deemed to include (without extending the term of the Stock
Option) any period during which such Employee is on leave of absence with the
consent of the Company, provided that such leave of absence shall not exceed
three (3) months and that such Employee returns to the employ of the Company at
the expiration of such leave of absence. If such Employee fails to return to the
employ of the Company at the expiration of such leave of absence, such
Employee's employment with the Company shall be deemed terminated as of the date
such leave of absence commenced. The continuous employment of an Employee with
the Company shall also be deemed to include any period during which such
Employee is a member of the Armed Forces of the United States, provided that
such Employee returns to the employ of the Company within ninety (90) days (or
such longer period as may be prescribed by law) from the date such Employee
first becomes entitled to discharge. If an Employee does not return to the
employ of the Company within ninety (90) days (or such longer period as may be
prescribed by law) from the date such Employee first becomes entitled to
discharge, such Employee's employment with the Company shall be deemed to have
terminated as of the date such Employee's military service ended.
2.6 Restrictions on Transfer.
Each Stock Option granted under this Plan shall be transferable only by will or
the laws of descent and distribution. No interest of any Employee under the Plan
shall be subject to attachment, execution, garnishment, sequestration, the laws
of bankruptcy or any other legal or equitable process. Each Stock Option granted
under this Plan shall be exercisable during an Employee's lifetime only by such
Employee or by such Employee's legal representative.
2.7 Termination of Employment.
2.7.1 Upon an Employee's Retirement, Disability (both terms being defined below)
or death, (a) all Stock Options to the extent then presently exercisable shall
remain in full force and effect and may be exercised pursuant to the provisions
thereof, including expiration at the end of the fixed term thereof, and (b)
unless otherwise provided by the Committee, all Stock Options to the extent not
then presently exercisable by such Employee shall terminate as of the date of
such termination of employment and shall not be exercisable thereafter.
2.7.2 Upon the termination of the employment of an Employee with the Company for
any reason other than the reasons set forth in paragraph 2.7.1 hereof, (a) all
Stock Options to the extent then presently exercisable by such Employee shall
remain exercisable only for a period of ninety (90) days after the date of such
termination of employment (except that the ninety (90) day period shall be
extended to twelve (12) months if the Employee shall die during such ninety (90)
day period), and may be exercised pursuant to the provisions thereof, including
expiration at the end of the fixed term thereof, and (b) unless otherwise
provided by the Committee, all Stock Options to the extent not then presently
exercisable by such Employee shall terminate as of the date of such termination
of employment and shall not be exercisable thereafter.
2.7.3 For purposes of this Plan:
(a) "Retirement" shall mean an Employee's retirement from the employ of the
Company on or after the date on which such Employee attains the age of
sixty-five (65) years; and
(b) "Disability" shall mean total and permanent incapacity of an Employee, due
to physical impairment or legally established mental incompetence, to perform
the usual duties of such Employee's employment with the Company, which
disability shall be determined: (i) on medical evidence by a licensed physician
designated by the Committee, or (ii) on evidence that the Employee has become
entitled to receive primary benefits as a disabled employee under the Social
Security Act in effect on the date of such disability.
3. PROVISIONS RELATING TO AWARDS
3.1 Grant of Awards.
Subject to the provisions of the Plan, the Committee shall have full and
complete authority, in its discretion, but subject to the express provisions of
this Plan, to (i) grant Awards pursuant to the Plan, (ii) determine the number
of shares of Common Stock subject to each Award ("Award Shares"), (iii)
determine the terms and conditions (which need not be identical) of each Award,
including the consideration (if any) to be paid by the Employee for such Common
Stock, which may, in the Committee's discretion, consist of the delivery of the
Employee's promissory note meeting the requirements of paragraph 2.4.1, (iv)
establish and modify performance criteria for Awards, and (v) make all of the
determinations necessary or advisable with respect to Awards under the Plan.
Each award under the Plan shall consist of a grant of shares of Common Stock
subject to a restriction period (after which the restrictions shall lapse),
which shall be a period commencing on the date the award is granted and ending
on such date as the Committee shall determine (the "Restriction Period"). The
Committee may provide for the lapse of restrictions in installments, for
acceleration of the lapse of restrictions upon the satisfaction of such
performance or other criteria or upon the occurrence of such events as the
Committee shall determine, and for the early expiration of the Restriction
Period upon an Employee's death, Disability or Retirement as defined in
paragraph 2.7.3, or, following a Change of Control, upon termination of an
Employee's employment by the Company without "Cause" or by the Employee for
"Good Reason," as those terms are defined herein. For purposes of this Plan:
"Change of Control" shall be deemed to occur (a) on the date the Company first
has actual knowledge that any person (as such term is used in Sections 13(d) and
14(d) (2) of the Exchange Act) has become the beneficial owner (as defined in
Rule 13(d)-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing forty percent (40%) or more of the combined voting
power of the Company's then outstanding securities, or (b) on the date the
shareholders of the Company approve (i) a merger of the Company with or into any
other corporation in which the Company is not the surviving corporation or in
which the Company survives as a subsidiary of another corporation, (ii) a
consolidation of the Company with any other corporation, or (iii) the sale or
disposition of all or substantially all of the Company's assets or a plan of
complete liquidation.
"Cause," when used with reference to termination of the employment of an
Employee by the Company for "Cause," shall mean:
(a) the Employee's continuing willful and material breach of his or her duties
to the Company after he or she receives a demand from the Chief Executive of the
Company specifying the manner in which he or she has willfully and materially
breached such duties, other than any such failure resulting from Disability of
the Employee or his or her resignation for "Good Reason," as defined herein; or
(b) the conviction of the Employee of a felony; or
(c) the Employee's commission of fraud in the course of his or her employment
with the Company, such as embezzlement or other material and intentional
violation of law against the Company; or
(d) the Employee's gross misconduct causing material harm to the Company.
"Good Reason" shall mean any one or more of the following, occurring following
or in connection with a Change of Control and within ninety (90) days prior to
the Employee's resignation, unless the Employee shall have consented thereto in
writing:
(a) the assignment to the Employee of duties inconsistent with his or her
executive status prior to the Change of Control or a substantive change in the
officer or officers to whom he or she reports from the officer or officers to
whom he or she reported immediately prior to the Change of Control; or
(b) the elimination or reassignment of a majority of the duties and
responsibilities that were assigned to the Employee immediately prior to the
Change of Control; or
(c) a reduction by the Company in the Employee's annual base salary as in
effect immediately prior to the Change of Control; or
(d) the Company's requiring the Employee to be based anywhere outside a 35-mile
radius from his or her place of employment immediately prior to the Change of
Control, except for required travel on the Company's business to an extent
substantially consistent with the Employee's business travel obligations
immediately prior to the Change of Control; or
(e) the failure of the Company to grant the Employee a performance bonus
reasonably equivalent to the same percentage of salary the Employee normally
received prior to the Change of Control, given comparable performance by the
Company and the Employee; or
(f) the failure of the Company to obtain a satisfactory Assumption Agreement (as
defined in paragraph 4.12 of the Plan) from a successor, or the failure of such
successor to perform such Assumption Agreement.
3.2 Incentive Agreements.
Each Award granted under the Plan shall be evidenced by a written agreement (an
"Incentive Agreement") in a form approved by the Committee and executed by the
Company and the Employee to whom the Award is granted. Each Incentive Agreement
shall be subject to the terms and conditions of the Plan and other such terms
and conditions as the Committee may specify.
3.3 Waiver of Restrictions.
The Committee may modify or amend any Award under the Plan or waive any
restrictions or conditions applicable to such Awards; provided, however, that
the Committee may not undertake any such modifications, amendments or waivers if
the effect thereof materially increases the benefits to any Employee, or
adversely affects the rights of any Employee without his or her consent.
3.4 Terms and Conditions of Awards.
3.4.1 Upon receipt of an Award of shares of Common Stock under the Plan, even
during the Restriction Period, an Employee shall be the holder of record of the
shares and shall have all the rights of a shareholder with respect to such
shares, subject to the terms and conditions of the Plan and the Award.
3.4.2 Except as otherwise provided in this paragraph 3.4, no shares of Common
Stock received pursuant to the Plan shall be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of during the Restriction Period
applicable to such shares. Any purported disposition of such Common Stock in
violation of this paragraph 3.4.2 shall be null and void.
3.4.3 If an Employee's employment with the Company terminates prior to the
expiration of the Restriction Period for an Award, subject to any provisions of
the Award with respect to the Employee's death, Disability or Retirement, or
Change of Control, all shares of Common Stock subject to the Award shall be
immediately forfeited by the Employee and reacquired by the Company, and the
Employee shall have no further rights with respect to the Award. In the
discretion of the Committee, an Incentive Agreement may provide that, upon the
forfeiture by an Employee of Award Shares, the Company shall repay to the
Employee the consideration (if any) which the Employee paid for the Award Shares
on the grant of the Award. In the discretion of the Committee, an Incentive
Agreement may also provide that such repayment shall include an interest factor
on such consideration from the date of the grant of the Award to the date of
such repayment.
3.4.4 The Committee may require under such terms and conditions as it deems
appropriate or desirable that (i) the certificates for Common Stock delivered
under the Plan are to be held in custody by the Company or a person or
institution designated by the Company until the Restriction Period expires, (ii)
such certificates shall bear a legend referring to the restrictions on the
Common Stock pursuant to the Plan, and (iii) the Employee shall have delivered
to the Company a stock power endorsed in blank relating to the Common Stock.
4. MISCELLANEOUS PROVISIONS
4.1 Adjustments Upon Change in Capitalization.
4.1. The number and class of shares subject to each outstanding Stock Option,
the Exercise Price thereof (but not the total price), the maximum number of
Stock Options that may be granted under the Plan, the minimum number of shares
as to which a Stock Option may be exercised at any one time, and the number and
class of shares subject to each outstanding Award, shall be proportionately
adjusted in the event of any increase or decrease in the number of the issued
shares of Common Stock which results from a split-up or consolidation of shares,
payment of a stock dividend or dividends exceeding a total of five percent (5%)
for which the record dates occur in any one fiscal year, a recapitalization
(other than the conversion of convertible securities according to their terms),
a combination of shares or other like capital adjustment, so that (i) upon
exercise of the Stock Option, the Employee shall receive the number and class of
shares such Employee would have received had such Employee been the holder of
the number of shares of Common Stock for which the Stock Option is being
exercised upon the date of such change or increase or decrease in the number of
issued shares of the Company, and (ii) upon the lapse of restrictions of the
Award Shares, the Employee shall receive the number and class of shares such
Employee would have received if the restrictions on the Award Shares had lapsed
on the date of such change or increase or decrease in the number of issued
shares of the Company.
4.1.2 Upon a reorganization, merger or consolidation of the Company with one or
more corporations as a result of which EKnowledge Group, Inc. is not the
surviving corporation or in which EKnowledge Group, Inc. survives as a
wholly-owned subsidiary of another corporation, or upon a sale of all or
substantially all of the property of the Company to another corporation, or any
dividend or distribution to shareholders of more than ten percent (10%) of the
Company's assets, adequate adjustment or other provisions shall be made by the
Company or other party to such transaction so that there shall remain and/or be
substituted for the Option Shares and Award Shares provided for herein, the
shares, securities or assets which would have been issuable or payable in
respect of or in exchange for such Option Shares and Award Shares then
remaining, as if the Employee had been the owner of such shares as of the
applicable date. Any securities so substituted shall be subject to similar
successive adjustments.
4.2 Withholding Taxes.
The Company shall have the right at the time of exercise of any Stock Option,
the grant of an Award, or the lapse of restrictions on Award Shares, to make
adequate provision for any federal, state, local or foreign taxes which it
believes are or may be required by law to be withheld with respect to such
exercise ("Tax Liability"), to ensure the payment of any such Tax Liability. The
Company may provide for the payment of any Tax Liability by any of the following
means or a combination of such means, as determined by the Committee in its sole
and absolute discretion in the particular case: (i) by requiring the Employee to
tender a cash payment to the Company, (ii) by withholding from the Employee's
salary, (iii) by withholding from the Option Shares which would otherwise be
issuable upon exercise of the Stock Option, or from the Award Shares on their
grant or date of lapse of restrictions, that number of Option Shares or Award
Shares having an aggregate fair market value (determined in the manner
prescribed by paragraph 2.2) as of the date the withholding tax obligation
arises in an amount which is equal to the Employee's Tax Liability or (iv) by
any other method deemed appropriate by the Committee. Satisfaction of the Tax
Liability of a Section 16 Reporting Person may be made by the method of payment
specified in clause (iii) above only if the following two conditions are
satisfied:
(a) the withholding of Option Shares or Award Shares and the exercise of the
related Stock Option occur at least six months and one day following the date of
grant of such Stock Option or Award; and
(b) the withholding of Option Shares or Award Shares is made either
(i) pursuant to an irrevocable election ("Withholding Election") made by such
Employee at least six months in advance of the withholding of Options Shares or
Award Shares, or (ii) on a day within a ten-day "window period" beginning on the
third business day following the date of release of the Company's quarterly or
annual summary statement of sales and earnings.
Anything herein to the contrary notwithstanding, a Withholding Election may be
disapproved by the Committee at any time.
4.3 Relationship to Other Employee Benefit Plans.
Stock Options and Awards granted hereunder shall not be deemed to be salary or
other compensation to any Employee for purposes of any pension, thrift,
profit-sharing, stock purchase or any other employee benefit plan now maintained
or hereafter adopted by the Company.
4.4 Amendments and Termination.
The Board of Directors may at any time suspend, amend or terminate this Plan. No
amendment, except as provided in paragraph 2.8, or modification of this Plan may
be adopted, except subject to stockholder approval, which would: (a) materially
increase the benefits accruing to Employees under this Plan, (b) materially
increase the number of securities which may be issued under this Plan (except
for adjustments pursuant to paragraph 4.1 hereof), or (c) materially modify the
requirements as to eligibility for participation in the Plan.
4.5 Successors in Interest.
The provisions of this Plan and the actions of the Committee shall be binding
upon all heirs, successors and assigns of the Company and of Employees.
4.6 Other Documents.
All documents prepared, executed or delivered in connection with this Plan
(including, without limitation, Option Agreements and Incentive Agreements)
shall be, in substance and form, as established and modified by the Committee;
provided, however, that all such documents shall be subject in every respect to
the provisions of this Plan, and in the event of any conflict between the terms
of any such document and this Plan, the provisions of this Plan shall prevail.
4.7 No Obligation to Continue Employment.
This Plan and grants hereunder shall not impose any obligation on the Company to
continue to employ any Employee. Moreover, no provision of this Plan or any
document executed or delivered pursuant to this Plan shall be deemed modified in
any way by any employment contract between an Employee (or other employee) and
the Company.
4.8 Misconduct of an Employee.
Notwithstanding any other provision of this Plan, if an Employee commits fraud
or dishonesty toward the Company or wrongfully uses or discloses any trade
secret, confidential data or other information proprietary to the Company, or
intentionally takes any other action materially inimical to the best interests
of the Company, as determined by the Committee, in its sole and absolute
discretion, such Employee shall forfeit all rights and benefits under this Plan.
4.9 Term of Plan.
This Plan was adopted by the Board effective May 31, 2002. No Stock Options or
Awards may be granted under this Plan after May 31, 2012.
4.10 Governing Law.
This Plan shall be construed in accordance with, and governed by, the laws of
the State of Nevada.
4.11 Approval.
No Stock Option shall be exercisable, or Award granted, unless and until the
Directors of the Company have approved this Plan and all other legal
requirements have been fully complied with.
4.12 Assumption Agreements.
The Company will require each successor, (direct or indirect, whether by
purchase, merger, consolidation or otherwise), to all or substantially all of
the business or assets of the Company, prior to the consummation of each such
transaction, to assume and agree to perform the terms and provisions remaining
to be performed by the Company under each Incentive Agreement and Stock Option
and to preserve the benefits to the Employees thereunder. Such assumption and
agreement shall be set forth in a written agreement in form and substance
satisfactory to the Committee (an "Assumption Agreement"), and shall include
such adjustments, if any, in the application of the provisions of the Incentive
Agreements and Stock Options and such additional provisions, if any, as the
Committee shall require and approve, in order to preserve such benefits to the
Employees. Without limiting the generality of the foregoing, the Committee may
require an Assumption Agreement to include satisfactory undertakings by a
successor:
(a) to provide liquidity to the Employees at the end of the Restriction Period
applicable to Common Stock awarded to them under the Plan, or on the exercise of
Stock Options;
(b) if the succession occurs before the expiration of any period specified in
the Incentive Agreements for satisfaction of performance criteria applicable to
the Common Stock awarded thereunder, to refrain from interfering with the
Company's ability to satisfy such performance criteria or to agree to modify
such performance criteria and/or waive any criteria that cannot be satisfied as
a result of the succession;
(c) to require any future successor to enter into an Assumption Agreement; and
(d) to take or refrain from taking such other actions as the Committee may
require and approve, in its discretion.
The Committee referred to in this paragraph 4.12 is the Committee appointed by a
Board of Directors in office prior to the succession then under consideration.
4.13 Compliance With Rule 16b-3.
Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3. To the extent that any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.
IN WITNESS WHEREOF, this Plan has been executed effective as of the 30th day of
May, 2002.
EKnowledge Group, Inc.
By: /s/ Gary S. Saunders
Gary S. Saunders,
Chief Executive Officer
EX-4.2
NON-EMPLOYEE DIRECTORS AND CONSULTANTS RETAINER STOCK
PLAN FOR THE YEAR 2002
EKNOWLEDGE GROUP, INC.
NON-EMPLOYEE DIRECTORS AND CONSULTANTS
RETAINER STOCK PLAN FOR THE YEAR 2002
1. Introduction.
This plan shall be known as "EKnowledge Group, Inc.'s Non-Employee Directors and
Consultants Retainer Stock Plan for the Year 2002" is hereinafter referred to as
the "Plan". The purposes of the Plan are to enable EKnowledge Group, Inc., a
Nevada corporation ("Company"), to promote the interests of the Company and its
shareholders by attracting and retaining non-employee Directors and Consultants
capable of furthering the future success of the Company and by aligning their
economic interests more closely with those of the Company's shareholders, by
paying their retainer or fees in the form of shares of the Company's common
stock, par value one tenth of one cent ($0.001) per share ("Common Stock").
2. Definitions.
The following terms shall have the meanings set forth below:
"Board" means the Board of Directors of the Company.
"Change of Control" has the meaning set forth in Section 12(d).
"Code" means the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder. References to any provision of the Code or rule or
regulation thereunder shall be deemed to include any amended or successor
provision, rule or regulation.
"Committee" means the committee that administers the Plan, as more fully defined
in Section 13.
"Common Stock" has the meaning set forth in Section 1.
"Company" has the meaning set forth in Section 1.
"Deferral Election" has the meaning set forth in Section 6.
"Deferred Stock Account" means a bookkeeping account maintained by the Company
for a Participant representing the Participant's interest in the shares credited
to such Deferred Stock Account pursuant to Section 7.
"Delivery Date" has the meaning set forth in Section 6.
"Director" means an individual who is a member of the Board of Directors of the
Company.
"Dividend Equivalent" for a given dividend or other distribution means a number
of shares of Common Stock having a Fair Market Value, as of the record date for
such dividend or distribution, equal to the amount of cash, plus the fair market
value on the date of distribution of any property, that is distributed with
respect to one share of Common Stock pursuant to such dividend or distribution;
such fair market value to be determined by the Committee in good faith.
"Effective Date" has the meaning set forth in Section 3.
"Exchange Act" has the meaning set forth in Section 13(b).
"Fair Market Value" means the mean between the highest and lowest reported sales
prices of the Common Stock on the NYSE Composite Tape or, if not listed on such
exchange, on any other national securities exchange on which the Common Stock is
listed or on NASDAQ on the last trading day prior to the date with respect to
which the Fair Market Value is to be determined.
"Participant" has the meaning set forth in Section 4.
"Payment Time" means the time when a Stock Retainer is payable to a Participant
pursuant to Section 5 (without regard to the effect of any Deferral Election).
"Stock Retainer" has the meaning set forth in Section 5.
"Third Anniversary" has the meaning set forth in Section 6.
3. Effective Date of the Plan.
The Plan was adopted by the Board effective May 31, 2002 ("Effective Date").
4. Eligibility.
Each individual who is a Director or Consultant on the Effective Date and each
individual who becomes a Director or Consultant thereafter during the term of
the Plan, shall be a participant ("Participant") in the Plan, in each case
during such period as such individual remains a Director or Consultant and is
not an employee of the Company or any of its subsidiaries. Each credit of shares
of Common Stock pursuant to the Plan shall be evidenced by a written agreement
duly executed and delivered by or on behalf of the Company and a Participant, if
such an agreement is required by the Company to assure compliance with all
applicable laws and regulations.
5. Grants of Shares.
Commencing on the Effective Date, the amount for service to directors or
consultants shall instead be payable in shares of Common Stock ("Stock
Retainer") pursuant to this Plan at the deemed issuance price of one tenth of
one cent ($0.001) per Share.
6. Deferral Option.
From and after the Effective Date, a Participant may make an election (a
"Deferral Election") on an annual basis to defer delivery of the Stock Retainer
specifying which one of the following way the Stock Retainer is to be delivered:
(a) on the date which is three years after the Effective Date for which it was
originally payable ("Third Anniversary"), (b) on the date upon which the
Participant ceases to be a Director or Consultant for any reason ("Departure
Date") or (c) in five equal annual installments commencing on the Departure Date
("Third Anniversary" and "Departure Date" each being referred to herein as a
"Delivery Date"). Such Deferral Election shall remain in effect for each
Subsequent Year unless changed, provided that, any Deferral Election with
respect to a particular Year may not be changed less than six (6) months prior
to the beginning of such Year and provided, further, that no more than one
Deferral Election or change thereof may be made in any Year.
Any Deferral Election and any change or revocation thereof shall be made by
delivering written notice thereof to the Committee no later than six (6) months
prior to the beginning of the Year in which it is to be effected; provided that,
with respect to the Year beginning on the Effective Date, any Deferral Election
or revocation thereof must be delivered no later than the close of business on
the thirtieth (30th) day after the Effective Date.
7. Deferred Stock Accounts.
The Company shall maintain a Deferred Stock Account for each Participant who
makes a Deferral Election to which shall be credited, as of the applicable
Payment Time, the number of shares of Common Stock payable pursuant to the Stock
Retainer to which the Deferral Election relates. So long as any amounts in such
Deferred Stock Account have not been delivered to the Participant under Section
8, each Deferred Stock Account shall be credited as of the payment date for any
dividend paid or other distribution made with respect to the Common Stock, with
a number of shares of Common Stock equal to (a) the number of shares of Common
Stock shown in such Deferred Stock Account on the record date for such dividend
or distribution multiplied by (b) the Dividend Equivalent for such dividend or
distribution.
8. Delivery of Shares.
(a) The shares of Common Stock in a Participant's Deferred Stock Account with
respect to any Stock Retainer for which a Deferral Election has been made
(together with dividends attributable to such shares credited to such Deferred
Stock Account) shall be delivered in accordance with this Section 8 as soon as
practicable after the applicable Delivery Date. Except with respect to a
Deferral Election pursuant to Section 6(c), or other agreement between the
parties, such shares shall be delivered at one time; provided that, if the
number of shares so delivered includes a fractional share, such number shall be
rounded to the nearest whole number of shares. If the Participant has in effect
a Deferral Election pursuant to Section 6(c), then such shares shall be
delivered in five equal annual installments (together with dividends
attributable to such shares credited to such Deferred Stock Account), with the
first such installment being delivered on the first anniversary of the Delivery
Date; provided that, if in order to equalize such installments, fractional
shares would have to be delivered, such installments shall be adjusted by
rounding to the nearest whole share. If any such shares are to be delivered
after the Participant has died or become legally incompetent, they shall be
delivered to the Participant's estate or legal guardian, as the case may be, in
accordance with the foregoing; provided that, if the Participant dies with a
Deferral Election pursuant to Section 6(c) in effect, the Committee shall
deliver all remaining undelivered shares to the Participant's estate
immediately. References to a Participant in this Plan shall be deemed to refer
to the Participant's estate or legal guardian, where appropriate.
(b) The Company may, but shall not be required to, create a grantor trust or
utilize an existing grantor trust (in either case, "Trust") to assist it in
accumulating the shares of Common Stock needed to fulfill its obligations under
this Section 8. However, Participants shall have no beneficial or other interest
in the Trust and the assets thereof, and their rights under the Plan shall be as
general creditors of the Company, unaffected by the existence or nonexistence of
the Trust, except that deliveries of Stock Retainers to Participants from the
Trust shall, to the extent thereof, be treated as satisfying the Company's
obligations under this Section 8.
9. Share Certificates; Voting and Other Rights.
The certificates for shares delivered to a Participant pursuant to
Section 8 above shall be issued in the name of the Participant, and from and
after the date of such issuance the Participant shall be entitled to all rights
of a shareholder with respect to Common Stock for all such shares issued in his
or her name, including the right to vote the shares, and the Participant shall
receive all dividends and other distributions paid or made with respect thereto.
10. General Restrictions.
(a) Notwithstanding any other provision of the Plan or agreements made pursuant
thereto, the Company shall not be required to issue or deliver any certificate
or certificates for shares of Common Stock under the Plan prior to fulfillment
of all of the following conditions:
(i) Listing or approval for listing upon official notice of issuance of
such shares on the New York Stock Exchange, Inc., or such other securities
exchange as may at the time be a market for the Common Stock;
(ii) Any registration or other qualification of such shares under any state or
federal law or regulation, or the maintaining in effect of any such registration
or other qualification which the Committee shall, upon the advice of counsel,
deem necessary or advisable; and
(iii) Obtaining any other consent, approval, or permit from any state or federal
governmental agency which the Committee shall, after receiving the advice of
counsel, determine to be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Company from adopting other
or additional compensation arrangements for the Participants.
11. Shares Available.
Subject to Section 12 below, the maximum number of shares of Common Stock which
may in the aggregate be paid as Stock Retainers pursuant to the Plan is Two
Million Seven Hundred and Fifty Thousand (2,750,000). Shares of Common Stock
issueable under the Plan may be taken from treasury shares of the Company or
purchased on the open market.
12. Adjustments; Change of Control.
(a) In the event that there is, at any time after the Board adopts the Plan, any
change in corporate capitalization, such as a stock split, combination of
shares, exchange of shares, warrants or rights offering to purchase Common Stock
at a price below its fair market value, reclassification, or recapitalization,
or a corporate transaction, such as any merger, consolidation, separation,
including a spin-off, or other extraordinary distribution of stock or property
of the Company, any reorganization (whether or not such reorganization comes
within the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Company (each of the foregoing a "Transaction"), in
each case other than any such Transaction which constitutes a Change of Control
(as defined below), (i) the Deferred Stock Accounts shall be credited with the
amount and kind of shares or other property which would have been received by a
holder of the number of shares of Common Stock held in such Deferred Stock
Account had such shares of Common Stock been outstanding as of the effectiveness
of any such Transaction, (ii) the number and kind of shares or other property
subject to the Plan shall likewise be appropriately adjusted to reflect the
effectiveness of any such Transaction and (iii) the Committee shall
appropriately adjust any other relevant provisions of the Plan and any such
modification by the Committee shall be binding and conclusive on all persons.
(b) If the shares of Common Stock credited to the Deferred Stock Accounts are
converted pursuant to Section 12(a) into another form of property, references in
the Plan to the Common Stock shall be deemed, where appropriate, to refer to
such other form of property, with such other modifications as may be required
for the Plan to operate in accordance with its purposes. Without limiting the
generality of the foregoing, references to delivery of certificates for shares
of Common Stock shall be deemed to refer to delivery of cash and the incidents
of ownership of any other property held in the Deferred Stock Accounts.
(c) In lieu of the adjustment contemplated by Section 12(a), in the event of a
Change of Control, the following shall occur on the date of the Change of
Control: (i) the shares of Common Stock held in each Participant's Deferred
Stock Account shall be deemed to be issued and outstanding as of the Change of
Control; (ii) the Company shall forthwith deliver to each Participant who has a
Deferred Stock Account all of the shares of Common Stock or any other property
held in such Participant's Deferred Stock Account; and (iii) the Plan shall be
terminated.
(d) For purposes of this Plan, Change of Control shall mean any of the following
events:
(i) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or
more of either (a) the then outstanding shares of common stock of the Company
("Outstanding Company Common Stock") or (b) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors ("Outstanding Company Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (a) any acquisition directly from the Company (excluding an acquisition
by virtue of the exercise of a conversion privilege unless the security being so
converted was itself acquired directly from the Company), (b) any acquisition by
the Company, (c) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (d) any acquisition by any corporation pursuant to a reorganization,
merger or consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (a), (b) and (c) of paragraph
(iii) of this Section 12(d) are satisfied; or
(ii) Individuals who, as of the date hereof, constitute the Board of the Company
(as of the date hereof, "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board; or
(iii) Approval by the shareholders of the Company of a reorganization, merger,
binding share exchange or consolidation, unless, following such reorganization,
merger, binding share exchange or consolidation (a) more than sixty percent
(60%) of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger, binding share exchange
or consolidation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger,
binding share exchange or consolidation in substantially the same proportions as
their ownership, immediately prior to such reorganization, merger, binding share
exchange or consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (b) no Person
(excluding the Company, any employee benefit plan (or related trust) of the
Company or such corporation resulting from such reorganization, merger, binding
share exchange or consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger, binding share exchange or consolidation,
directly or indirectly, twenty percent (20%) or more of the Outstanding Company
Common Stock or Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, twenty percent (20%) or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger, binding share exchange or
consolidation or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors and (c) at least a majority of the members of the board of directors
of the corporation resulting from such reorganization, merger, binding share
exchange or consolidation were members of the Incumbent Board at the time of the
execution of the initial agreement providing for such reorganization, merger,
binding share exchange or consolidation; or
(iv) Approval by the shareholders of the Company of (a) a complete liquidation
or dissolution of the Company or (b) the sale or other disposition of all or
substantially all of the assets of the Company, other than to a corporation,
with respect to which following such sale or other disposition, (x) more than
sixty percent (60%) of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (y) no Person
(excluding the Company and any employee benefit plan (or related trust) of the
Company or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, twenty percent
(20%) or more of the Outstanding Company Common Stock or Outstanding Company
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, twenty percent (20%) or more of, respectively, the then outstanding
shares of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (z) at least a majority of the
members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of assets of the
Company.
13. Administration; Amendment and Termination.
(a) The Plan shall be administered by a committee consisting of two members who
shall be the current directors of the Company or senior executive officers or
other directors who are not Participants as may be designated by the Chief
Executive Officer ("Committee"), which shall have full authority to construe and
interpret the Plan, to establish, amend and rescind rules and regulations
relating to the Plan, and to take all such actions and make all such
determinations in connection with the Plan as it may deem necessary or
desirable. (b) The Board may from time to time make such amendments to the Plan,
including to preserve or come within any exemption from liability under Section
16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as it may deem proper and in the best interest of the Company without further
approval of the Company's stockholders, provided that, to the extent required
under Nevada law or to qualify transactions under the Plan for exemption under
Rule 16b-3 promulgated under the Exchange Act, no amendment to the Plan shall be
adopted without further approval of the Company's stockholders and, provided,
further, that if and to the extent required for the Plan to comply with Rule
16b-3 promulgated under the Exchange Act, no amendment to the Plan shall be made
more than once in any six (6) month period that would change the amount, price
or timing of the grants of Common Stock hereunder other than to comport with
changes in the Internal Revenue Code of 1986, as amended, the Employee
Retirement Income Security Act of 1974, as amended, or the regulations
thereunder. The Board may terminate the Plan at any time by a vote of a majority
of the members thereof.
14. Miscellaneous.
(a) Nothing in the Plan shall be deemed to create any obligation on the part of
the Board to nominate any Director for reelection by the Company's shareholders
or to limit the rights of the shareholders to remove any Director.
(b) The Company shall have the right to require, prior to the issuance or
delivery of any shares of Common Stock pursuant to the Plan, that a Participant
make arrangements satisfactory to the Committee for the withholding of any taxes
required by law to be withheld with respect to the issuance or delivery of such
shares, including without limitation by the withholding of shares that would
otherwise be so issued or delivered, by withholding from any other payment due
to the Participant, or by a cash payment to the Company by the Participant.
15. Governing Law.
The Plan and all actions taken thereunder shall be governed by and construed in
accordance with the laws of the State of Nevada.
EKnowledge Group, Inc.
By: /s/ Gary S. Saunders
Gary S. Saunders, Chief Executive Officer, Chairman of the Board
EX-5
OPINION RE: LEGALITY
Tolan Furusho, Esq.
2200 112th Avenue NE, Suite 200
Bellevue, WA 98004
(425) 452-8639
May 31, 2002
U.S. Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: EKnowledge Group, Inc. - Form S-8
Dear Sir/Madame:
I have acted as counsel to EKnowledge Group, Inc., a Nevada corporation
("Company"), in connection with its Registration Statement on Form S-8 relating
to the registration of Five Million (5,000,000) shares of its common stock
("Incentive Shares"), $0.001 par value per Incentive Share, which are issuable
pursuant to the Company's Employee Stock Incentive Plan for Year 2002, as well
as the registration of Two Million Seven Hundred and Fifty Thousdand shares
(2,750,000) shares of its common stock ("Stock Shares"), $0.001 par value per
Stock Share, which are issuable pursuant to the Company's Non-Employee Directors
and Consultants Stock Retainer Plan for the Year 2002.
In my representation I have examined such documents, corporate records, and
other instruments as have been provided to me for the purposes of this opinion,
including, but not limited to, the Articles of Incorporation, and all amendments
thereto, and Bylaws of the Company.
Based upon and in reliance on the foregoing, and subject to the qualifications
and assumptions set forth below, it is my opinion that the Company is duly
organized and validly existing as a corporation under the laws of the State of
Nevada, and that the Incentive Shares and the Stock Shares, when issued and
sold, will be validly issued, fully paid, and non-assessable.
My opinion is limited by and subject to the following:
(a) In rendering my opinion I have assumed that, at the time of each issuance
and sale of the Shares, the Company will be a corporation validly existing and
in good standing under the laws of the State of Nevada.
(b) In my examination of all documents, certificates and records, I have assumed
without investigation, the authenticity and completeness of all documents
submitted to me as originals, the conformity to the originals of all documents
submitted to me as copies and the authenticity and completeness of the originals
of all documents submitted to me as copies. I have also assumed the genuineness
of all signatures, the legal capacity of natural persons, the authority of all
persons executing documents on behalf of the parties thereto other than the
Company, and the due authorization, execution and delivery of all documents by
the parties thereto other than the Company. As to matters of fact material to
this opinion, I have relied upon statements and representations of
representatives of the Company and of public officials and have assumed the same
to have been properly given and to be accurate.
(c) My opinion is based solely on and limited to the federal laws of the United
States of America and the laws of Nevada. I express no opinion as to the laws of
any other jurisdiction.
Sincerely,
/s/ Tolan Furusho
Tolan Furusho, Esq.
EX-23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
eKnowledge Group, Inc. on Form S-8 of our report dated February 15, 2002,
appearing in the Annual Report on form 10-KSB of eKnowledge Group, Inc. for the
year ended December 31, 2001, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
MERDINGER, FRUCHTER, ROSEN & CORSO, P.C.
Certified Public Accountants
Los Angeles, California
May 30, 2002
EX-23.1
CONSENT OF COUNSEL
Tolan Furusho, Esq.
Law Offices of Tolan Furusho
2200 112th Avenue NE, Suite 200
Bellevue, WA 98004
(425) 785-6617
May 30, 2002
U.S. Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: EKnowledge Group, Inc. - Form S-8
Dear Sir/Madame:
I have acted as counsel to EKnowledge Group, Inc., a Nevada corporation
("Company"), in connection with its Registration Statement on Form S-8 relating
to the registration of Five Million (5,000,000) shares of its common stock
("Incentive Shares"), $0.001 par value per Incentive Share, which are issuable
pursuant to the Company's Employee Stock Incentive Plan for Year 2002, as well
as the registration of Two Million Seven Hundred and Fifty Thousdand shares
(2,750,000) shares of its common stock ("Stock Shares"), $0.001 par value per
Stock Share, which are issuable pursuant to the Company's Non-Employee Directors
and Consultants Stock Retainer Plan for the Year 2002. I hereby consent to all
references to my firm included in this Registration Statement, including the
opinion of legality.
Sincerely,
/s/ Tolan Furusho, Esq.
Tolan Furusho, Esq.
End of Filing